There are currently more than 200 tax expenditures, also known as tax breaks, which can take the form of exemptions, deductions, credits, and preferential rates written into the individual and corporate tax codes. In 2019, those breaks totaled nearly $1.5 trillion. To put that in perspective, that’s more than the government spends on Social Security, defense, or Medicare.
Tax expenditures should be a key part of any discussion about tax reform. Many economists believe that eliminating some or all tax breaks would benefit the economy by removing market distortions and simplifying the code.
Here are six of the most expensive tax breaks for individuals; together, they account for more than half of the annual cost of tax expenditures: