Congress uses the tax code to promote a broad range of policy objectives. Rather than directly spend government revenue on policy programs—or implement new regulation—Congress has enacted a series of tax provisions that effectively subsidize certain politically and socially desirable activities.
These “tax expenditures” take the form of deductions, exemptions, or credits to taxpayers who engage in the targeted activity. From a budgeting perspective, they are treated as foregone government revenue, rather than increased government expenditure.
Read the full brief here.
This briefing was published jointly by the Federal Reserve Bank of Boston and the Aspen Institute.