ABSTRACT
Tax expenditures have become a larger and larger feature of nominal tax policy. This chapter discusses tax expenditures by defining them, discussing the political aspects of their existence, and inquiring into their economic value. Classifying tax losses as tax expenditures implies that there is an ideal or correct tax structure from which tax provisions deviate. Considerable controversy exists over whether there is such a structure. Supporters of the tax expenditure concept deny the implication. They argue that the concept merely forces recognition of another policy tool Congress may use to achieve government objectives. Exclusions and reduced rates create tax expenditures, as they are designed to benefit particular parties. As with income tax expenditures, the deviations from the normal tax could by accomplished by direct expenditures in the budget. In a review of tax expenditures, the General Accounting Office has suggested several ways Congress could give greater scrutiny and ultimately gain greater control.
