Small-Issue IDBs-Tax Policy in Search of a Focus

Although no cash actually changes hands, a significant portion of federal government resources are being used to subsidize the activities of households and private firms. This subsidy occurs rather indirectly, in the form of a loss to the U.S. Treasury when state and local governments are allowed to issue private-purpose tax-exempt bonds. According to the Congressional Budget Office, this tax loss to the federal government will total approximately $13 billion per year over the next five years. This amount is more than the federal government is expected to spend annually on highways through 1989, and more than it will spend in total for assistance to public transit systems, wastewater treatment, water resources, airports, air traffic control, and municipal water-supply systems.