You Decide: Should tax expenditures be part of a budget or a budget deal?
Can something called “tax expenditures” be the silver bullet to avoid
a fiscal cliff and put the federal government on a better financial
footing? Maybe so! Some think tax expenditures are the key to any
budget deal in Washington.
So what exactly are tax expenditures? The term is somewhat misleading
because logic suggests it means types of spending that are taxed.
Instead, just the opposite is meant. Tax expenditures are certain
kinds of spending made by households and businesses that are not
subject to the federal income tax. So tax expenditures reduce the
amount of tax revenue available to the federal government.
To see how tax expenditures work, here’s a brief tutorial on the
federal income tax. The initial calculation of your federal income tax
comes from multiplying your taxable ...