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How Big Are Total Individual Income Tax Expenditures, and Who Benefits from Them?

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Publication Date: December 2008

Publisher(s): Tax Policy Center

Author(s): Eric Toder; Leonard E. Burman; Christopher Geissler

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

Topic: Banking and finance (Taxation and tax policy)

Keywords: Federal Budgets & Fiscal Policy; Tax Distribution and Economic Trends; Taxes and Social Programs; Budget Issues

Type: Report

Abstract:

Analysts often add up tax expenditures to estimate an aggregate cost, but those tallies are inaccurate because they ignore interactions among provisions. We estimate that interactions raise the cost of nonbusiness tax expenditures by 5 to 8 percent, depending on whether an AMT patch is in effect. In 2007, these tax expenditures totaled about $750 billion?5.5 percent of GDP. While tax expenditures benefit taxpayers in all income groups, high-income households gain more relative to income than low-income ones. Although the AMT eliminates some tax preferences, it increases overall tax expenditures because most AMT taxpayers face higher marginal tax rates.