View TPC's Tax Topics page on tax expenditures.
Tax expenditures are revenue losses attributable to tax provisions that often result from the use of the tax code to promote social goals without incurring direct expenditures. Tax expenditures are implemented within the tax code primarily through the deduction of expenses, exclusion of certain income from the tax base, refundable and non-refundable credits that directly reduce tax liability, and reduced tax rates on income from specific sources. In many cases, tax expenditures are the equivalent of spending programs carried out through the tax code.
The Tax Reform Act of 1986 substantially reduced federal tax expenditures but Congress has added more tax expenditures over the intervening 25 years. Between 1990 and 2010, non-business tax expenditures grew from 4.6 percent of GDP to 6.5 percent.
The Tax Policy Center has estimated the distribution of individual income tax expenditures and examined options to restructure and reform individual tax expenditures or limit the aggregate benefits from tax expenditures to high-income taxpayers.