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A Survey on Tax Expenditures

1 min readBy: J. D. Foster, Ph.D.

Download Special Report No. 37

Special Report No. 37

Executive Summary A recent General Accounting Office (GAO) report suggested, by its title that “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. Expenditures Deserve More Scrutiny.” The GAO report may, in fact, encourage Congress to scrutinize 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 more carefully. At the same time, however, the debate on tax expenditures may encourage further debate on tax neutrality and tax surcharges. In conjunction with other ongoing work in tax policy, the tax expenditure debate may also provide an important dimension of any future tax reform effort.

Tax expenditures are calculated by both the Joint Tax Committee OTC) of Congress and by the Department of Treasury. As the GAO clearly states in its report, however, there is no consensus about what constitutes a tax expenditure. To investigate the question of what is a tax expenditure, the Tax Foundation mailed a survey to the Tax Directors, Tax Vice-Presidents, and Senior Partners of its contributing companies. This sample of America’s tax practitioners includes representatives from many different businesses in many different industries and from companies of many different sizes. This report discusses some of the issues surrounding tax expenditures and presents the results of the survey.