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Eliminating Tax Expenditures with Adverse Environmental Effects

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Publication Date: May 2007

Publisher(s): Tax Policy Center

Author(s): Eric Toder

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Banking and finance (Taxation and tax policy)

Keywords: Tax Policy; Taxes, the Budget, and the Economy; General Tax Policy; Savings

Type: Report


Tax expenditures are provisions in the U.S. federal tax code that provide special tax benefits for selected economic activities or taxpayers. A number of tax expenditures add to greenhouse gas emissions by encouraging production and consumption of fossil fuels. This policy brief examines four tax expenditures that increase consumption of fossil fuels. Eliminating or scaling back these and other tax expenditures that promote production and consumption of fossil fuels would reduce the budget deficit, promote economic efficiency, and be a first step toward making the tax law more environmentally friendly. However, the effects of the proposed tax reforms on greenhouse gas emissions would be small?so addressing tax expenditures can be only one part of a broader strategy to reduce climate change.