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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 U.S. Tax code. 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 eight of the most expensive tax breaks for individuals and corporations; together, they accounted for two-thirds of the total annual cost of tax expenditures in 2019: