ABSTRACT
Tax expenditures have little to do with either tax collections or government expenditures. The term “tax expenditure” applies because such tax breaks serve policy objectives that governments could accomplish instead by means of regular spending programs. Governments sometimes include information on tax expenditures in budget and budget-related documents. The federal government’s report lists more than 160 tax expenditures in a variety of budget categories, including transportation, education, and national defense. Tax expenditures may also attempt to ease hardships, as when they produce lower taxes for those with high medical bills or when they exempt purchases of prescription drugs and medicines from sales taxes. Government practices vary in the degree to which they integrate tax expenditure information with the budget process and the budget document. The Congressional Budget Act of 1974 requires that the federal government include a list of tax expenditures each year in the federal budget.
