Tax Breaks – Notes and Sources

April 18, 2014

Background

The Congressional Budget Act of 1974 defines tax expenditures as “revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.”

The 1974 law also mandates that estimates of these revenue losses be incorporated into the federal budget process and be published as part of the annual President’s budget request.

However, the Office of Management and Budget (OMB) does not provide times series data for these estimates in the same way that it does for spending and revenue data. Thus, National Priorities Project has compiled these historical estimates from 1974 forward into a single dataset for researchers. Though we refer to the numbers as tax breaks, they’re analogous to the tax expenditure estimates produced by the Treasury Department and published by OMB each year as part of the President’s Budget.

Dataset: Tax Break Costs, 1974 - Present

Data Dictionary

This dataset contains cost estimates for U.S. federal tax breaks dating back to 1974, the first year that such estimates were required as part of the annual budget.

Column NameColumn Definition

omb_cat

Tax expenditure's category as assigned by Office of Management and Budget (OMB)

name

Tax expenditure name

year

Fiscal year

corp

Amount of tax expenditure that benefits corporations (nominal dollars)

indv

Amount of tax expenditure that benefits individuals (nominal dollars)

total

Total amount of tax expenditure (nominal dollars)

gdp

Gross Domestic Product

gdp_price_index

 

GDP Chained Price Index (base year fiscal year 2015)

corp_adj

 

Amount of tax expenditure that benefits corporations (2015 dollars)

indv_adj

 

Amount of tax expenditure that benefits individuals (2015 dollars)

total_adj

 

Total amount of tax expenditure (2015 dollars)

percent_corp

 

% of corporate tax expenditures for the year

percent_gdp

 

tax expenditure as % of gross domestic product

percent_indv

 

% of individual tax expenditures for the year

percent_omb_cat

 

% of total OMB category expenditures for the year

percent_total

 

% of total tax expenditures for the year

percent_change

 

Tax expenditure % change from previous year

orig_name

If tax expenditure has been renamed, this is its previous name as found in the original OMB source document

Interpretation

The numbers that correspond to each listed tax break represent an estimated revenue loss. However, that estimated revenue loss isn’t necessarily equal to the additional money the Treasury would collect if the tax break was eliminated, because the estimates do not account for behavioral changes (also known as dynamic effects). Also, the estimates of revenue loss for each tax break aren’t additive, since the individual estimates were generated under the assumption that other parts of the tax code remain unchanged.

In other words, it’s complicated. The estimate methodology, the relationship between tax breaks and economic behavior, and relationship between individual tax breaks all affect how these numbers are created and how they should be interpreted. For more information, refer to the Tax Expenditures chapter of Analytical Perspectives, Budget of the United States Government.

Source Documents

To create this dataset, NPP first collected archived copies of the President’s budget requests dating back  to 1974. Budget requests from 1996 forward are available via the U.S. Government Printing Office. We pulled older requests from the Federal Reserve Archive.

When combining the tax expenditure estimates from 1974 forward into a single file, NPP used the most recent available estimate. These years and the table names we used from the budget request are listed below.

Dataset YearBudget Request YearTax Expenditure Table Name

1974

1976

Table F-1. Tax Expenditure Estimates, by Function

1975

1977

Table F-1. Tax Expenditure Estimates, by Function

1976

1978

Table F-1. Tax Expenditure Estimates, by Function

1977

1979

Table G-1. Tax Expenditure Estimates, by Function

1978

1980

Table G-1. Tax Expenditure Estimates, by Function

1979

1981

Table G-1. Tax Expenditure Estimates, by Function

1980

1982

Table G-1. Tax Expenditure Estimates, by Function

1981

1983

Table G-2. Revenue Loss Estimates for Tax Expenditures by Function

1982

1984

Table G-2. Revenue Loss Estimates for Tax Expenditures by Function

1983

1985

Table G-2. Revenue Loss Estimates for Tax Expenditures by Function

1984

1986

Table G-2. Revenue Loss Estimates for Tax Expenditures by Function

1985

1987

Table G-2. Revenue Loss Estimates for Tax Expenditures by Function

1986

1988

Table G-2. Revenue Loss Estimates for Tax Expenditures by Function

1987

1989

Table G-2. Revenue Loss Estimates for Tax Expenditures by Function

1988

1990

Table G-3. Revenue Loss Estimates for Tax Expenditures in the Income Tax

1989

1991

Table C-1. Estimates for Tax Expenditures in the Income Tax

1990

1992

Table XI-1. Estimates for Tax Expenditures in the Income Tax

1991

1993

Table 24-1. Estimate for Tax Expenditures in the Income Tax

1992

1994

Table 2-1. Estimates for Tax Expenditures in the Income tax

1993

1995

Table 6-2. Corporate and Individual Income Tax Revenue Loss Estimates for Tax Expenditures

1994

1996

Table 5-2. Corporate and Individual Income Tax Revenue Loss Estimates for Tax Expenditures

1995

1997

Table 5-2. Corporate and Individual Income Tax Revenue Loss Estimates for Tax Expenditures

1996

1999

Table 5-2. Corporate and Individual Income Tax Revenue Loss Estimates for Tax Expenditures

1997

1999

Table 5-2. Corporate and Individual Income Tax Revenue Loss Estimates for Tax Expenditures

1998

2000

Table 5-2. Corporate and Individual Income Tax Revenue Loss Estimates for Tax Expenditures

1999

2001

Table 5-2. Corporate and Individual Income Tax Revenue Loss Estimates for Tax Expenditures

2000

2002

Table 5-2. Corporate and Individual Income Tax Revenue Loss Estimates for Tax Expenditures

2001

2003

Table 6-2. Corporate and Individual Income Tax Estimates of Tax Expenditures

2002

2004

Table 6-2. Estimates of Tax Expenditures For the Corporate and Individual Income Taxes

2003

2005

Table 18-2. Estimates of Tax Expenditures For the Corporate and Individual Income Taxes

2004

2006

Table 19-2. Estimates of Tax Expenditures for the Corporate and Individual Income Taxes

2005

2007

Table 19-2. Estimates of Tax Expenditures for the Corporate and Individual Income Taxes

2006

2008

Table 19-2. Estimates of Tax Expenditures for the Corporate and Individual Income Taxes

2007

2009

Table 19-2. Estimates of Tax Expenditures for the Corporate and Individual Income Taxes

2008

2010

Table 19-2. Estimates of Tax Expenditures for the Corporate and Individual Income Taxes For Fiscal Years 2008-2014

2009

2011

Table 19-2. Estimates of Tax Expenditures for the Corporate and Individual Income Taxes For Fiscal Years 2009-2015

2010

2012

Table 17-2.  Estimates of Tax Expenditures for the Corporate and Individual Income Taxes For Fiscal Years 2010-2016

2011

2013

Table 17-2. Estimates of Tax Expenditures for the Corporate and Individual Income Taxes For Fiscal Years 2011-2017

2012

2014

Table 16-2. Estimates of Tax Expenditures for the Corporate and Individual Income Taxes For Fiscal Years 2012-2018

2013-19

2015

Table 14-2. Estimates of Tax Expenditures for the Corporate and Individual Income Taxes For Fiscal Years 2013-2019

Methodology

NPP converted each source PDF document to machine-readable format and merged the results into a single file. For each year and tax expenditure, we compiled the following:

  • Name
  • Category, as defined in the budget request
  • Estimated revenue loss from individual taxes
  • Estimated revenue loss from corporate taxes

Standardize Categories

The high-level tax expenditure categories have changed over the years. Where possible, we standardized these names to their most current designation.

OMB category names in this file generally represent one of the following:

Standardize Names

Tax expenditure names have changed over the years. Where possible, we standardized these names to their most current designation. The dataset also contains the original names of renamed tax expenditures for reference back to the source documents.

As with categories, we again used the 2005 GAO Compilation of Tax Expenditures Reported by the Treasury (1974 – 2004) as guidance for standardized tax expenditure names. Tax expenditure names represent one of the following:

  • The Name of Tax Expenditure from the GAO compilation OR
  • The most recent name of the tax expenditure as published by OMB in the President’s Budget Request.

Note: In a few instances, we were more conservative and chose not to use the suggested GAO naming suggestions. For example, that report combines Step-up basis of capital gains at death and Carryover basis of capital gains at death. Because step-up and carryover aren’t precisely the same thing, we chose not to consider these the same tax break for purposes of the time series dataset.

Calculations and Normalizations

We then augmented the tax break data by adding calculated columns such as inflation-adjusted dollar amounts and percentage of GDP. The GDP and price index data used for these calculations are part of the annual President’s Budget request (Historical Table Gross Domestic Product and Deflators Used in the Historical Tables)

Additional Data Notes

  • The Treasury did not report separate estimates for the individual and corporate income tax expenditures for fiscal years 1981 and 1982.
  • The numbers in this dataset do not include the refundable portion of tax credits (for example, they do not show the refundable portion of the Earned Income Tax Credit). The Treasury does not include refundable credits, as those are considered outlays.
  • The 1981 and 1982 estimates of seven tax expenditures were found in Table G-3 REVENUE LOSS ESTIMATES OF PROVISIONS PREVIOUSLY DESIGNATED "TAX EXPENDITURES"in the OMB Special Analysis G published in 1983. Although these seven tax provisions were previously classified as tax expenditures, they were designated “non tax expenditures” in 1981 and 1982. However, we’ve included them in this dataset for 1981 and 1982. These seven tax expenditures are:
    • Deferral of income from controlled foreign corporations.
    • Exclusion of payments in aid of construction of water, sewage, gas and electric utilities.
    • Deductibility of noncash patronage dividends and certain other items of cooperatives.
    • Exclusion of certain cost-sharing payments.
    • Reduced rates on the first $100,000 of corporate income.
    • Exclusion of scholarship and fellowship income.
    • Exclusion of public assistance benefits.

Data Visualization Notes

Tax Break Names

The Big Money in Tax Breaks data visualization is based on the dataset described above. The Who Benefits chart that breaks down tax benefits by income group comes from data provided by the Congressional Budget Office (CBO): The Distribution of Major Tax Expenditures in the Individual Income Tax System (Table 2, Distribution of Selected Major Tax Expenditures, by Income Group, 2013).

The CBO uses tax expenditure estimates from the Joint Committee on Taxation (JCT) to calculate distributional effects. Our tax estimates come from a different source (the OMB), and we combined them as follows to mimic the JCT classifications as closely as possible.

For simplicity, we also changed some tax break names for display on the visualization. The mapping of names used on the visualization to their OMB and JCT names follows:

Visualization Display NameJCT Tax Expenditure NameTreasury/OMB Tax Expenditure Name (including historical tax expenditures)

Exclusion of Employer-Sponsored Health Care

Employer-sponsored Health Insurance (including effects on payroll taxes)

Exclusion Of Employer Contributions For Medical Insurance Premiums And Medical Care (excluding effects on payroll taxes)

Deduction of Home Mortgage Interest

Mortgage Interest

Deductibility Of Mortgage Interest On Owner-Occupied Homes

Special Rate on Capital Gains and Dividends

Special Rate on Capital Gains and Dividends

Capital gains (except agriculture, timber, iron ore, and coal)

Capital gains exclusion of small corporation stock

Capital gains treatment of certain income

Capital gains treatment of certain timber income

Capital gains treatment of iron ore

Capital gains treatment of royalties on coal

Treatment of qualified dividends

Exclusion of Employer-Sponsored Retirement Plans

Net Pension Contributions and Earnings (including effects on payroll taxes)

Net exclusion of pension contribution and earnings: defined benefit employer plans

Net exclusion of pension contribution and earnings: defined contribution employer plans

Net exclusion of pension contributions and earnings: employer plans

Net exclusion of pension contribution and earnings: 401(K) plans

Net exclusion of pension contribution and earnings: Keogh plans

Exclusion of Capital Gains on Home Sales

Capital Gains Exclusion on Home Sales

Capital gains exclusion on home Deferral of capital gains on home sales

Exclusion of capital gains on home sales for persons age 55 and over Exclusion of capital gains on home sales for persons age 65 and over

 

Exclusion of Imputed Rental Income

n/a

Exclusion Of Net Imputed Rental Income

Deduction of State and Local Taxes

Deductions: State and Local Taxes

Deductibility Of Nonbusiness State And Local Taxes Other Than On Owner-Occupied Homes

Deferral of Corporate Income Earned Abroad

n/a

Deferral Of Income From Controlled Foreign Corporations

 

Deduction of Charitable Contributions

Deductions: Charitable Contributions

Deductibility Of Charitable Contributions, Other Than Education And Health

Deductibility of Charitable Contributions (Health)

Deductibility of Charitable Contributions (Education)

Deductibility of Charitable Contributions (Other Than Education)

Accelerated Depreciation

n/a

Accelerated Depreciation of Machinery and Equipment

Because the distributional effects in the visualization are derived from a different set of underlying tax expenditure estimates, it’s important not to apply the distributional percentages from CBO to the displayed dollar amounts. The distributional percentages are overlaid only for the purpose of showing the approximate share of the benefits from each tax expenditure that go to each income quintile.

Selected Major Tax Expenditures

The Who Benefits chart on the visualization’s un-rollover state shows the distributional effects of a selected group of 2013 tax breaks. The individual tax breaks that the CBO included to generate these estimates are:

  • Exclusion of employers’ contributions for health care, health insurance premiums, and long-term care insurance premiums*
  • Exclusion of net pension contributions and earnings*
  • Exclusion of capital gains on assets transferred at death
  • Exclusion of a portion of Social Security and Railroad retirement benefits
  • Deduction for mortgage interest on owner-occupied residences
  • Deduction of nonbusiness state and local government income, sales, real estate, and personal property taxes
  • Deduction of charitable contributions
  • Reduced rates on dividends and long-term capital gains
  • Earned income tax credit**
  • Child tax credit**

*Includes effect on payroll taxes 
**Includes effect on outlays