A Tax Expenditure is:

1
A Tax Expenditure is

• defined as revenue losses which allow a
  special exclusion, exemption, or deduction
  relative to normal income tax law (normal is
  left undefined and open to interpretation)1
• intended to measure those tax provisions that
  could have been spending programs instead of tax
  breaks

1. The official definition is in the
Congressional Budget and Impoundment Act of 1974
(Public Law 93-344), but its spirit was defined
by Stanley Surrey, who in 1967 instructed his
staff in the Treasury Office for Tax Policy to
list income tax preferences that were similar to
expenditure programs.
2
Tax Expenditure Budget

• The size and scope of tax expenditures, many of
  which are tax incentives for some behavior,
• e.g. mortgage interest deduction which
  encourages some to buy houses (and finance their
  purchases with debt).

3
Size of Government Spending Categories Compared
with Tax Expenditures, tax year 2007
Source TPC tax expenditure estimates, OMB
spending categories. 
4
Grew until TRA86, up again
Source Burman, Geissler, and Toder (2008)
at http//www.urban.org/publications/1001234.html
5
Selected tax expenditures, nominal dollars
Source Annual JCT tax expenditure estimates. 
6
Selected tax expenditures, relative to GDP
Source Annual JCT tax expenditure estimates, CBO
projections for GDP. 
7
See full paper at http//www.urban.org/publication
s/1001234.html
8
See full paper at http//www.urban.org/publication
s/1001234.html