The Congressional Joint Committee on Taxation (JCT) released its new report on federal tax expenditures on December 7, 2015. This annual report shows the cost to Federal Treasury of tax expenditures, which are defined 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.”
One of the largest federal tax expenditures is the mortgage interest deduction (MID). JCT estimates the cost of the MID to be $77 billion in 2016 and $420 billion from 2015-2019. For some tax expenditures, including the MID, JCT provides data on how they are distributed by income. According to JCT, only 20% of all taxpayers benefit from the MID. Just 17% of those who benefit from the MID have incomes of $200,000 and above, but get 42% of the total expenditure. The 60% of those who benefit with incomes above $100,000 get 81% of the benefit. The 40% of taxpayers with incomes less than $100,000 who claim the MID get just 19% of the benefit.
The report also covers other housing related tax expenditures including the real estate tax deduction and the Low Income Housing Tax Credit.
Besides useful data, the report offers a comprehensive review of the concept of tax expenditures. Importantly, “tax expenditures (are) analogous to direct outlay programs and may be considered alternative means of accomplishing similar budget policy objectives. Tax expenditures are similar to direct spending programs that function as entitlements to those who meet the established statutory criteria.”
To read Estimates of Federal Tax Expenditures for Fiscal Years 2015-2019, go to https://www.jct.gov/publications.html?func=startdown&id=4858.