Tax Expenditure Estimation and Reporting: A Critical Review
We examine the measurement of tax expenditures, as well as review issues concerning the classification of tax expenditures generally. We use calculations from NBER's TAXSIM to illustrate some of the problems with the current methodology for estimating tax expenditures. Unlike most previous work on the topic, we focus on how features of the current tax system including the alternative minimum tax and sunset rules complicate and compromise the value of information provided by the tax expenditure budget.
We thank Daniel Feenberg for providing invaluable help with TAXSIM. We also thank Thomas Barthold, Timothy Dowd, Patrick Driessen, Edward Kleinbard, Gary Koenig, and attendees of the NBER Conference, "Incentive and Distributional Consequences of Tax Expenditures," for valuable comments. Nothing in this paper should be construed as reflecting the views of the National Association of Home Builders or its members. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.