August 13, 2018

The United States tax code is filled with loopholes, deductions, exemptions, credits, and preferential rates; such preferences are known as tax expenditures. Many economists, policymakers, and analysts believe it would help the economy to do away with some or all of those tax breaks to make the code more simple, efficient, and fair.

Last year’s tax legislation was a key opportunity to do just that, but in addition to adding significantly to our national debt, the Tax Cuts and Jobs Act actually increased the number of tax breaks.

According to the Joint Committee on Taxation (JCT), prior to enactment of the Tax Cuts and Jobs Act, there were 216 tax expenditures; now 223 exist.

While the Tax Cuts and Jobs Act eliminated or modified some existing tax expenditures, it also created new ones. Notably, the legislation reduced two of the largest tax expenditures—the state local tax and mortgage interest deductions. However, it also expanded some tax expenditures such as the Child Tax Credit and created new provisions such as the deduction for pass-through business income.

All told, JCT estimates that between 2016 and 2017 the total cost of all tax expenditures stayed roughly the same at $1.5 trillion. The total value of tax expenditures remains large in comparison to important government programs. For example, we spend more on tax expenditures than we do on Medicare and Defense combined. Because the Tax Cuts and Jobs Act didn’t reduce the overall cost of tax expenditures, there is still an opportunity to simplify the tax code and reduce future deficits by examining remaining tax breaks.


Related: Five Things That We Have Learned Since The Tax Cuts Were Enacted


Want analysis to help you understand the latest fiscal news? Sign up for our bimonthly email newsletter.

Image credit: Photo by Justin Sullivan/Getty Images

Why Fiscal Issues Matter in the 2018 Election

This election season is a critical opportunity for candidates to talk to voters about solutions to put us on a better path.

FISCAL ISSUES ILLUSTRATED

This series of infographics helps put some of today's most pressing fiscal debates in context.