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Friday, February 11, 2011

Tax Expenditures and Income Tax Reform

There has been greater talk, including some op eds, on the need to reign in "tax expenditures" - tax rules that are not necessarily in the law to measure income, but to provide some type of subsidy or incentive, such as energy credits, or the mortgage interest deduction. The National Taxpayer Advocate's 2010 report notes that the roughly $1 trillion of tax expenditure means that everyone pays higher rates to help pay for this cost.

But, tax expenditure numbers should be approached carefully to know what the numbers mean and don't mean. I have a short article published today in the AICPA Tax Insider - Rethinking the Income Tax Calculation. It explains what a tax expenditure is and some of the cautions to exercise wen using this data.

Do you think Congress will start to reduce the number of tax expenditures as part of income tax reform?

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