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There Are Over $1.2 Trillion of Tax Expenditures

1 min readBy: Andrew Lundeen, Scott Hodge

After the TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Reform Act of 1986, there were 119 tax preferences. By 2013, there were 169. In real dollar terms, the growth of tax expenditureTax expenditures are a departure from the “normal” tax code that lower the tax burden of individuals or businesses, through an exemption, deduction, credit, or preferential rate. Expenditures can result in significant revenue losses to the government and include provisions such as the earned income tax credit (EITC), child tax credit (CTC), deduction for employer health-care contributions, and tax-advantaged savings plans. s has been entirely on the individual side of the tax system since 1986. According to Treasury estimates, the tax expenditure budget grew from $844 billion (2013 dollars) in 1986 to $1.2 trillion in 2013, an increase of 44 percent. Over the same period, individual tax expenditures grew from $685 billion to $1.1 trillion. The biggest driver of this growth has been the cost of employer-provided health insurance. Meanwhile, corporate tax expenditures shrank from $159 billion in 1986 to $108 billion in 2013. Corporate tax expenditures are now less than 9 percent of the tax expenditure budget, which is lower than at any time since 1986.

For more charts like the one below, see the second edition of our chart book, Putting a Face on America's Tax Returns.