Tax Expenditures Compared with Outlays by Budget Function: Fact Sheet

Publication Date: January 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

Type:

Abstract:

The federal government carries out public policies through tax expenditures as well as direct expenditures and regulations. In fact, in some categories of federal activity, tax expenditures far exceed outlays. A tax expenditure is the estimated revenue loss from the corporate or individual income tax associated with special tax treatment. The outlay equivalent tax expenditure is the amount of budget outlays that would be required to provide taxpayers with the same after-tax income that would be received through the tax expenditure and hence is larger than the corresponding tax expenditure. As noted in the federal budget, the outlay-equivalent measure allows the cost of a tax expenditure to be compared with a direct federal outlay on a more even footing.