The Internal Revenue Service does not have enough data to identify who claims a tax expenditure and how much they claim, for nearly half the dollar value of all tax expenditures, or $492 billion out of $1 trillion, according to a new report by the Government Accountability Office.
Tax expenditures include special exemptions and exclusions from taxation, deductions, credits, deferrals of tax liability, and preferential tax rates that are exceptions from a “normal” tax. They represent a substantial federal commitment. An estimated $1 trillion in revenue was forgone through tax expenditures in fiscal year 2011—an estimate produced by totaling the Treasury Department estimates for each of the 173 tax expenditures reported in that year. The GAO contends that many tax expenditures are equivalent to spending through the Tax Code. For example, some tax expenditure programs are intended, like some spending programs, to encourage economic development in disadvantaged areas, finance postsecondary education, and stimulate research and development.
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