On March 18, 2019, the Office of Management and Budget released new tax expenditure estimates for the 2019–2028 budget window. Tax expenditures — which, generally, are the static revenue losses associated with credits, deductions, deferral of tax liability, exclusions, or exemptions — were estimated to be $16.8 trillion over the 2019–2028 budget window. These estimates are split across individual ($15.6 trillion; 93% of total tax expenditures) and corporate ($1.1 trillion; 7% of total tax expenditures) taxpayers. Figures 1 and 2 display the top 10 individual and corporate tax expenditures, respectively.

The largest individual tax expenditures were estimated to be (1) the exclusion of employer contributions for medical insurance premiums and medical care ($2.8 trillion; 18% of total tax expenditures), (2) the exclusion of net imputed rental income ($1.5 trillion; 10% of total tax expenditures), (3) capital gains (except agriculture, timber, iron ore, and coal) ($1.2 trillion; 7% of total expenditures), (4) defined contribution employer plans ($1.1 trillion; 7% of total tax expenditures), and (5) defined benefit employer plans ($0.8 trillion; 5% of total tax expenditures). These five tax expenditures account for $7.4 trillion, or 47% of individual tax expenditures and 44% of total tax expenditures.

The largest corporate tax expenditures were estimated to be (1) the reduced tax rate on active income controlled by foreign corporations ($0.4 trillion; 2% of total tax expenditures), (2) credit for increasing research activities ($0.2 trillion; 1% of total tax expenditures), (3) accelerated depreciation of machinery and equipment ($0.2 trillion; 1% of total tax expenditures), (4) deductions for foreign-derived intangible income derived from trade or business within the United States ($0.1 trillion; 1% of total tax expenditures), and (5) credit for low-income housing investments ($0.1 trillion; 1% of total tax expenditures). These five tax expenditures account for $1.0 trillion, or 86% of corporate tax expenditures and 6% of total tax expenditures.

Tax expenditures do not reflect estimates of the additional revenue to the federal government from repeal of the provisions. Tax expenditure estimates differ from revenue estimates in three key ways:

1. In contrast to revenue estimates, tax expenditure estimates do not account for the impact of taxpayer response to the repeal of the provision.
2. Tax expenditure estimates only reflect the cost of each provision by itself, and, thus, do not take into account possible interactions between tax expenditures.
3. Tax expenditure estimates compare current law with a fully phased in version of the baseline tax system. As a result, they differ from the revenue estimates for proposals that are phased in or that deal with changes in the timing of deductions or inclusions.

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