Corporate and individual tax expenditures are large in comparison to annual taxes collected, as well as to the government's major programs
March 04, 2014
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SOURCE: Office of Management and Budget, Budget of the United States Government, Fiscal Year 2015, March 2014. Compiled by PGPF.
NOTE: Figures are for 2013. Medicare spending is net of premiums and payments from the states. Those receipts were $93 billion in 2013. Income tax revenue includes both individual and corporate income tax receipts. Tax expenditures include deductions, credits, exclusions, and preferential rates, and the data reflects the effects on outlays, payroll, and excise taxes.

Tax expenditures — exemptions, deductions, credits, and other special provisions — allow households and corporations to reduce their tax liabilities. There are more than 150 tax expenditures written into the individual and corporate tax codes. All together they cost the government about $1.4 trillion each year, more than the budget of any agency or major spending program, including Social Security, Medicare, and the Department of Defense. Many tax breaks subsidize activities to encourage certain behaviors, just as government spending does. However, tax expenditures differ from direct spending programs in an important way. Direct appropriations for government programs are evaluated annually as part of the regular budget process, requiring the legislature to approve continued funding. Tax expenditures are not subject to the same annual review, making them far less transparent to the public than direct government spending.

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