Giving Compass' Take:

· Jacinth Jones at Urban Institute touches on tax expenditures and three main questions to ask when creating policy through the tax code.

· What are tax expenditures and who do they benefit?  How is effectiveness of tax expenditures measured? 

· Learn about the economic effects of federal tax changes.

At an estimated $1.5 trillion per year, tax expenditures are a significant drain on federal tax revenue, equal to 6–7 percent of gross domestic product. But what are they, exactly?

Tax expenditures are special provisions in the tax code—credits, deductions, exemptions, deferrals, or exclusions—that promote social, economic, and environmental policy goals. These policy goals span a range of issues, including homeownership, education, health care, retirement saving, and support for low-income working families.

Speaking on a recent episode of Urban’s podcast, Critical Value, senior fellow Frank Sammartinodescribed tax expenditures as “a major part of the federal government’s spending that doesn’t get measured as spending.” He added, “Some of the programs that operate through the tax code look a lot like spending programs, but because they’re run through the tax code, they have some features that you wouldn’t see in a normal spending program.”

Sammartino and Eric Toder, codirector of the Urban-Brookings Tax Policy Center, discussed these features of tax expenditures while pointing out that this sizable chunk of our nation’s spending deserves more scrutiny from policymakers and the public.

Read the full article about crafting policy through tax code by Jacinth Jones at Urban Institute.