Tax expenditures are exceptions to general provisions of the tax law that benefit selected activities or groups of taxpayers. Even though they often promote the same goals as spending programs, tax expenditures often receive less scrutiny than direct outlays. But at a cost of $1.4 trillion per year, they are an enormously important use of taxpayer resources.
At $1.4 trillion per year, tax expenditures are an enormously important way our government spends money. But these provisions in the tax code, like the home mortgage interest deduction and the earned income tax credit, often receive less scrutiny than direct spending for programs like Medicare or Social Security. Speaking to host Justin Milner, Institute fellow Frank Sammartino and codirector of the Urban-Brookings Tax Policy Center Eric Toder explain how tax expenditures work, who they benefit, and why taxpayers should pay more attention.