Many of the tax breaks in the Federal tax code are classified as tax expenditures because, like many government spending programs, they subsidize particular economic activities or help particular groups of people. Tax expenditures contribute to the federal deficit, but don’t appear in the Federal budget and generally fly under the radar.
Although you rarely hear tax expenditures being discussed, they are huge: The Congressional Budget Office (CBO) expects 2017 tax expenditures to be 8% of GDP. This graph from the CBO shows just how big a deal they are by comparing them to other expenses and to sources of revenue:
You can see that tax expenditures dwarf defense spending, or Medicare spending, or Social Security spending. They are almost of the same magnitude as individual income tax revenues.
Tax expenditures are a big deal and worth understanding!Read More »Tax Expenditures Flying Under the Radar