[Analytical Perspectives]
[Federal Receipts and Collections]
[5. Tax Expenditures]
[From the U.S. Government Printing Office, www.gpo.gov]
Tax expenditures are revenue losses due to preferential provisions of
the Federal tax laws, such as special exclusions, exemptions,
deductions, credits, deferrals, or tax rates. Tax expenditures are an
alternative to other Government policy instruments, such as direct
expenditures and regulations. The Congressional Budget Act of 1974
(Public Law 93-344) requires that a list of tax expenditures be included
in the budget.
Tax expenditures relating to the individual and corporate income taxes
are considered first in this chapter, followed by those relating to the
unified transfer tax. The supplement at the end of the chapter presents
major tax expenditures in the income tax ranked by revenue loss.
Tax expenditures are estimated for fiscal years 1995-2001 using three
methods of accounting: revenue loss, outlay equivalent, and present
value. The present value approach provides estimates of the revenue
losses for tax expenditures that involve deferrals of tax payments into
the future or have similar long-term effects.
TAX EXPENDITURES IN THE INCOME TAX
Tax Expenditure Estimates
The Treasury Department prepared all tax expenditure estimates
presented here based upon income tax law enacted as of December 31,
1995. Expired or repealed provisions are not listed if their revenue
effects result only from taxpayer activity occurring before fiscal year
1995.
The total revenue loss estimates for tax expenditures for fiscal years
1995-2001 are displayed by the budget's functional categories in table
5-1. Descriptions of the specific tax expenditure provisions follow the
tables of estimates and discussion of general features of the tax
expenditure concept.
As in prior years, two baseline concepts--the normal tax baseline and
the reference tax law baseline--are used to identify tax expenditures.
For the most part, the two concepts coincide. However, items treated as
tax expenditures under the normal tax baseline, but not the reference
tax law baseline, are indicated by the designation ``normal tax method''
in the tables. The revenue losses for these items are zero using the
reference tax rules. The alternative baseline concepts are discussed in
detail following the estimates.
Table 5-2 reports the respective portions of the total revenue losses
that arise under the individual and corporate income taxes. Listing
revenue loss estimates under the individual and corporate headings does
not imply that these categories of filers benefit from the special tax
provisions in proportion to the respective tax expenditure amounts
shown. Rather, these breakdowns show the specific tax accounts through
which the various provisions are cleared. The ultimate beneficiaries of
corporate tax expenditures, for example, could be stockholders,
employees, customers, or others, depending on the circumstances.
Table 5-6 at the end of this chapter ranks the major tax expenditures
by fiscal year 1997 revenue loss. This table merges several individual
entries provided in table 5-1; for example, table 5-6 contains one
merged entry for charitable contributions instead of the three separate
entries found in table 5-1.
[[Page 62]]
TABLE 5-1. TOTAL REVENUE LOSS ESTIMATES FOR TAX EXPENDITURES IN THE INCOME TAX
(In millions of dollars)
----------------------------------------------------------------------------------------------------------------
Total Revenue Loss
Provision -------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 1997-2001
----------------------------------------------------------------------------------------------------------------
National defense:
Exclusion of benefits and allowances
to armed forces personnel.......... 2,000 2,060 2,080 2,095 2,120 2,140 2,160 10,595
International affairs:
Exclusion of income earned abroad by
United States citizens............. 1,670 1,870 2,100 2,355 2,645 2,965 3,330 13,395
Exclusion of income of foreign sales
corporations....................... 1,400 1,500 1,600 1,700 1,800 1,900 2,000 9,000
Inventory property sales source
rules exception.................... 1,300 1,400 1,500 1,600 1,700 1,800 1,900 8,500
Interest allocation rules exception
for certain financial operations... 95 95 95 95 95 95 95 475
Deferral of income from controlled
foreign corporations (normal tax
method)............................ 1,700 1,800 2,000 2,200 2,400 2,600 2,900 12,100
General science, space, and
technology:
Expensing of research and
experimentation expenditures
(normal tax method)................ 1,635 1,740 1,840 1,945 2,065 2,190 2,320 10,360
Credit for increasing research
activities......................... 1,185 675 285 120 40 5 ....... 450
Suspension of the allocation of
research and experimentation
expenditures....................... 325 ....... ....... ....... ....... ....... ....... .........
Energy:
Expensing of exploration and
development costs:
Oil and gas....................... -300 -255 -165 -75 0 95 80 -65
Other fuels....................... 15 15 15 15 15 15 20 80
Excess of percentage over cost
depletion:
Oil and gas....................... 945 985 1,020 1,060 1,105 1,145 1,195 5,525
Other fuels....................... 120 120 125 140 140 155 155 715
Alternative fuel production credit.. 970 1,000 990 940 880 820 760 4,390
Exception from passive loss
limitation for working interests in
oil and gas properties............. 55 60 60 65 65 70 75 335
Capital gains treatment of royalties
on coal............................ 15 15 15 15 15 15 15 75
Exclusion of interest on State and
local IDBs for energy facilities... 175 180 180 175 175 165 160 855
New technology credit............... 140 140 145 155 165 175 185 825
Alcohol fuel credit\1\.............. 10 10 10 10 10 10 10 50
Tax credit and deduction for clean-
fuel burning vehicles and
properties......................... 65 65 65 75 80 85 90 395
Exclusion from income of
conservation subsidies provided by
public utilities................... 130 155 165 165 155 155 145 785
Natural resources and environment:
Expensing of exploration and
development costs, nonfuel minerals 35 35 35 35 35 35 35 175
Excess of percentage over cost
depletion, nonfuel minerals........ 220 225 235 240 245 245 255 1,220
Capital gains treatment of iron ore. 0 0 0 0 0 0 0 0
Special rules for mining reclamation
reserves........................... 50 50 50 50 50 50 50 250
Exclusion of interest on State and
local IDBs for pollution control
and sewage and waste disposal
facilities......................... 635 630 615 605 600 575 555 2,950
Capital gains treatment of certain
timber income...................... 15 15 15 15 15 15 15 75
Expensing of multiperiod timber
growing costs...................... 370 395 415 440 460 485 505 2,305
Investment credit and seven-year
amortization for reforestation
expenditures....................... 45 45 50 50 50 50 50 250
Tax incentives for preservation of
historic structures................ 125 125 120 115 115 110 105 565
Agriculture:
Expensing of certain capital outlays 70 65 65 65 70 70 70 340
Expensing of certain multiperiod
production costs................... 85 80 80 80 85 85 85 415
Treatment of loans forgiven solvent
farmers as if insolvent............ 10 10 10 10 10 10 10 50
Capital gains treatment of certain
income............................. 145 145 140 145 145 150 155 735
Commerce and housing:
Financial institutions and
insurance:
Exemption of credit union income.. 630 650 710 780 860 940 1,030 4,320
Excess bad debt reserves of
financial institutions........... 95 105 115 125 135 150 160 685
Exclusion of interest on life
insurance savings................ 9,905 10,670 11,470 12,340 13,260 14,255 14,950 66,275
Special alternative tax on small
property and casualty insurance
companies........................ 5 5 5 5 5 5 5 25
Tax exemption of certain insurance
companies........................ 235 240 245 255 260 280 300 1,340
Small life insurance company
deduction........................ 110 115 120 130 135 140 145 670
Housing:
Exclusion of interest on owner-
occupied mortgage subsidy bonds.. 1,810 1,810 1,770 1,710 1,655 1,605 1,540 8,280
Exclusion of interest on State and
local debt for rental housing.... 925 875 815 760 700 630 545 3,450
Deductibility of mortgage interest
on owner-occupied homes.......... 48,080 50,575 53,075 55,750 58,590 61,655 64,915 293,985
Deductibility of State and local
property tax on owner-occupied
homes............................ 15,275 16,070 16,860 17,710 18,615 19,590 20,620 93,395
Deferral of income from post 1987
installment sales................ 935 955 975 995 1,015 1,035 1,055 5,075
Deferral of capital gains on home
sales............................ 14,180 14,605 15,040 15,490 15,955 16,435 16,930 79,850
Exclusion of capital gains on home
sales for persons age 55 and over 5,160 5,185 5,075 5,465 5,280 5,755 5,480 27,055
Exception from passive loss rules
for $25,000 of rental loss....... 4,515 4,235 3,985 3,745 3,520 3,305 3,070 17,625
Accelerated depreciation on rental
housing (normal tax method)...... 1,045 1,170 1,305 1,485 1,675 2,165 2,455 9,085
Commerce:
Cancellation of indebtedness...... 105 70 40 15 0 -10 -5 40
Permanent exceptions from imputed
interest rules................... 150 150 155 155 160 160 160 790
Capital gains (other than
agriculture, timber, iron ore,
and coal) (normal tax method).... 7,125 7,000 6,920 7,035 7,195 7,385 7,560 36,095
Capital gains exclusion of small
corporation stock................ 0 0 0 5 30 70 110 215
[[Page 63]]
Step-up basis of capital gains at
death............................ 28,305 29,480 30,265 30,710 31,160 31,615 32,075 155,825
Carryover basis of capital gains
on gifts......................... 130 140 150 160 170 180 190 850
Ordinary income treatment of loss
from small business corporation
stock sale....................... 105 215 305 370 380 355 305 1,715
Accelerated depreciation of
buildings other than rental
housing (normal tax method)...... 7,440 6,735 5,720 4,590 3,410 2,420 1,600 17,740
Accelerated depreciation of
machinery and equipment (normal
tax method)...................... 24,460 27,160 29,500 31,210 33,030 33,575 32,240 159,555
Expensing of certain small
investments (normal tax method).. 1,815 1,520 1,120 795 600 320 155 2,990
Amortization of start-up costs
(normal tax method).............. 185 195 200 205 210 210 220 1,045
Graduated corporation income tax
rate (normal tax method)......... 4,105 4,435 4,730 5,015 5,345 5,710 6,085 26,885
Exclusion of interest on small
issue IDBs....................... 555 435 345 295 280 265 260 1,445
Deferral of gains from sale of
broadcasting facilities to
minority owned business.......... 285 ....... ....... ....... ....... ....... ....... .........
Treatment of Alaska Native
Corporations..................... 30 20 15 10 5 5 5 40
Transportation:
Deferral of tax on shipping
companies.......................... 20 20 20 20 20 20 20 100
Exclusion of reimbursed employee
parking expenses................... 1,215 1,255 1,290 1,330 1,370 1,410 1,455 6,855
Exclusion for employer-provided
transit passes..................... 35 50 60 70 85 100 120 435
Community and regional development:
Credit for low-income housing
investments........................ 2,260 2,600 2,945 3,270 3,500 3,595 3,445 16,755
Investment credit for rehabilitation
of structures (other than historic) 80 80 80 70 70 70 65 355
Exclusion of interest on IDBs for
airports, docks, and sports and
convention facilities.............. 855 910 965 1,025 1,090 1,145 1,205 5,430
Exemption of certain mutuals' and
cooperatives' income............... 50 50 50 55 55 60 60 280
Empowerment zones................... 250 330 385 425 450 475 490 2,225
Education, training, employment, and
social services:
Education:
Exclusion of scholarship and
fellowship income (normal tax
method).......................... 825 835 845 850 860 870 875 4,300
Exclusion of interest on State and
local student loan bonds......... 315 305 290 275 260 250 240 1,315
Exclusion of interest on State and
local debt for private nonprofit
educational facilities........... 770 795 830 870 910 955 990 4,555
Exclusion of interest on savings
bonds transferred to educational
institutions..................... 5 5 10 10 15 15 15 65
Parental personal exemption for
students age 19 or over.......... 820 825 835 870 905 955 1,015 4,580
Deductibility of charitable
contributions (education)........ 1,780 1,870 1,965 2,065 2,165 2,275 2,385 10,855
Exclusion of employer provided
educational assistance........... 100 ....... ....... ....... ....... ....... ....... .........
Training, employment, and social
services:
Targeted jobs credit.............. 395 325 60 40 20 5 ....... 125
Exclusion of employer provided
child care....................... 725 775 830 890 955 1,025 1,100 4,800
Exclusion of employee meals and
lodging (other than military).... 545 570 600 630 665 700 735 3,330
Credit for child and dependent
care expenses.................... 2,730 2,865 3,005 3,155 3,315 3,480 3,655 16,610
Credit for disabled access
expenditures..................... 160 160 165 165 165 170 170 835
Expensing of costs of removing
certain architectural barriers to
the handicapped.................. 20 20 20 20 20 20 20 100
Deductibility of charitable
contributions, other than
education and health............. 19,565 20,565 21,600 22,675 23,815 25,000 26,240 119,330
Exclusion of certain foster care
payments......................... 30 30 35 35 35 40 40 185
Exclusion of parsonage allowances. 265 285 300 320 345 365 390 1,720
Health:
Exclusion of employer contributions
for medical insurance premiums and
medical care....................... 59,440 64,520 70,490 77,040 84,125 91,620 99,925 423,200
Deductibility of medical expenses... 3,495 3,785 4,125 4,510 4,930 5,395 5,895 24,855
Exclusion of interest on State and
local debt for private nonprofit
health facilities.................. 1,535 1,595 1,675 1,750 1,845 1,935 2,015 9,220
Deductibility of charitable
contributions (health)............. 2,280 2,395 2,510 2,630 2,755 2,885 3,020 13,800
Tax credit for orphan drug research. 15 ....... ....... ....... ....... ....... ....... .........
Special Blue Cross/Blue Shield
deduction.......................... 125 140 100 170 185 220 280 955
Income security:
Exclusion of railroad retirement
system benefits.................... 430 445 450 455 460 465 470 2,300
Exclusion of workmen's compensation
benefits........................... 4,475 4,855 5,050 5,255 5,515 5,800 6,205 27,825
Exclusion of public assistance
benefits (normal tax method)....... 570 590 635 695 740 795 850 3,715
Exclusion of special benefits for
disabled coal miners............... 95 90 85 85 80 75 70 395
Exclusion of military disability
pensions........................... 130 130 130 130 130 130 130 650
Net exclusion of pension
contributions and earnings:
Employer plans.................... 52,070 55,370 55,770 56,205 56,625 57,045 57,470 283,115
Individual Retirement Accounts.... 7,720 7,830 7,940 8,335 8,420 8,455 8,490 41,640
Keogh plans....................... 3,315 3,345 3,580 3,780 3,935 4,090 4,240 19,625
Exclusion of employer provided death
benefits........................... 30 35 35 35 40 40 45 195
Exclusion of other employee
benefits:
Premiums on group term life
insurance........................ 2,880 3,020 3,170 3,325 3,485 3,660 3,865 17,505
Premiums on accident and
disability insurance............. 150 155 165 175 185 195 205 925
Income of trusts to finance
supplementary unemployment
benefits......................... 20 20 20 20 20 20 20 100
Special ESOP rules (other than
investment credit)................. 2,125 1,745 1,540 1,405 1,280 1,170 1,065 6,460
Additional deduction for the blind.. 25 25 25 25 25 30 30 135
Additional deduction for the elderly 1,305 1,320 1,340 1,355 1,365 1,375 1,385 6,820
[[Page 64]]
Tax credit for the elderly and
disabled........................... 50 55 55 60 60 65 65 305
Deductibility of casualty losses.... 800 445 465 490 515 540 570 2,580
Earned income credit\2\............. 4,920 5,670 6,250 6,460 6,820 7,105 7,510 34,145
Social Security:
Exclusion of social security
benefits:
OASI benefits for retired workers. 16,015 16,465 17,285 18,080 18,880 19,525 20,515 94,285
Disability insurance benefits..... 1,975 2,180 2,375 2,580 2,800 3,030 3,265 14,050
Benefits for dependents and
survivors........................ 3,630 3,820 4,030 4,245 4,470 4,695 4,935 22,375
Veterans benefits and services:
Exclusion of veterans disability
compensation....................... 2,665 2,820 2,985 3,160 3,335 3,515 3,720 16,715
Exclusion of veterans pensions...... 75 70 70 70 75 85 90 390
Exclusion of GI bill benefits....... 50 65 70 80 90 95 100 435
Exclusion of interest on State and
local debt for veterans housing.... 85 80 80 80 85 85 90 420
General purpose fiscal assistance:
Exclusion of interest on public
purpose State and local debt....... 12,700 13,175 13,775 14,455 15,195 15,905 16,535 75,865
Deductibility of nonbusiness State
and local taxes other than on owner-
occupied homes..................... 27,735 29,175 30,620 32,160 33,800 35,570 37,445 169,595
Tax credit for corporations
receiving income from doing
business in U.S. possessions....... 2,745 2,795 2,855 3,025 3,205 3,400 3,600 16,085
Interest:
Deferral of interest on savings
bonds.............................. 1,100 1,160 1,210 1,280 1,340 1,410 1,480 6,720
Addendum--Aid to State and local
governments:
Deductibility of:
Property taxes on owner-occupied
homes............................ 15,275 16,070 16,860 17,710 18,615 19,590 20,620 93,395
Nonbusiness State and local taxes
other than on owner-occupied
homes............................ 27,735 29,175 30,620 32,160 33,800 35,570 37,445 169,595
Exclusion of interest on:
Public purpose State and local
debt............................. 12,700 13,175 13,775 14,455 15,195 15,905 16,535 75,865
IDBs for certain energy facilities 175 180 180 175 175 165 160 855
IDBs for pollution control and
sewage and waste disposal
facilities....................... 635 630 615 605 600 575 555 2,950
Small-issue IDBs.................. 555 435 345 295 280 265 260 1,445
Owner-occupied mortgage revenue
bonds............................ 1,810 1,810 1,770 1,710 1,655 1,605 1,540 8,280
State and local debt for rental
housing.......................... 925 875 815 760 700 630 545 3,450
IDBs for airports, docks, and
sports and convention facilities. 855 910 965 1,025 1,090 1,145 1,205 5,430
State and local student loan bonds 315 305 290 275 260 250 240 1,315
State and local debt for private
nonprofit educational facilities. 770 795 830 870 910 955 990 4,555
State and local debt for private
nonprofit health facilities...... 1,535 1,595 1,675 1,750 1,845 1,935 2,015 9,220
State and local debt for veterans
housing.......................... 85 80 80 80 85 85 90 420
----------------------------------------------------------------------------------------------------------------
\1\In addition, the partial exemption from the excise tax for alcohol fuels results in a reduction in excise tax
receipts (in millions of dollars) as follows: 1995: $615; 1996: $645; 1997: $665; 1998: $685; 1999: $705;
2000: $730; and 2001: $750.
\2\The figures in the table indicate the effect of the earned income tax credit on receipts. The effect on
outlays (in millions of dollars) is as follows: 1995: $15,245; 1996: $18,655; 1997: $20,450; 1998: $21,255;
1999: $22,175; 2000: $23,210; and 2001: $24,115.
Note: Provisions with estimates denoted ``normal tax method'' have no revenue loss under the reference tax law
method.
All estimates have been rounded to the nearest $5 million.
Figures in table 5-1 are the arithmetic sums of corporate and individual income tax revenue loss estimates from
table 5-2, and do not reflect possible interactions across these two taxes.
[[Page 65]]
TABLE 5-2. CORPORATE AND INDIVIDUAL INCOME TAX REVENUE LOSS ESTIMATES FOR TAX EXPENDITURES
(In millions of dollars)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Revenue Loss
-----------------------------------------------------------------------------------------------------------------------------
Provision Corporations Individuals
-----------------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 1995 1996 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
National defense:
Exclusion of benefits and allowances to armed forces personnel.. ....... ....... ....... ....... ....... ....... ....... 2,000 2,060 2,080 2,095 2,120 2,140 2,160
International affairs:
Exclusion of income earned abroad by United States citizens..... ....... ....... ....... ....... ....... ....... ....... 1,670 1,870 2,100 2,355 2,645 2,965 3,330
Exclusion of income of foreign sales corporations............... 1,400 1,500 1,600 1,700 1,800 1,900 2,000 ....... ....... ....... ....... ....... ....... .......
Inventory property sales source rules exception................. 1,300 1,400 1,500 1,600 1,700 1,800 1,900 ....... ....... ....... ....... ....... ....... .......
Interest allocation rules exception for certain financial
operations..................................................... 95 95 95 95 95 95 95 ....... ....... ....... ....... ....... ....... .......
Deferral of income from controlled foreign corporations (normal
tax method).................................................... 1,700 1,800 2,000 2,200 2,400 2,600 2,900 ....... ....... ....... ....... ....... ....... .......
General science, space, and technology:
Expensing of research and experimentation expenditures (normal
tax method).................................................... 1,605 1,705 1,805 1,910 2,025 2,150 2,275 30 35 35 35 40 40 45
Credit for increasing research activities....................... 1,155 665 285 120 40 5 ....... 30 10 ....... ....... ....... ....... .......
Suspension of the allocation of research and experimentation
expenditures................................................... 325 ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... .......
Energy:
Expensing of exploration and development costs:
Oil and gas................................................... -225 -190 -125 -55 0 70 60 -75 -65 -40 -20 0 25 20
Other fuels................................................... 10 10 10 10 10 10 15 5 5 5 5 5 5 5
Excess of percentage over cost depletion:
Oil and gas................................................... 710 740 765 795 830 860 895 235 245 255 265 275 285 300
Other fuels................................................... 90 90 95 105 105 115 115 30 30 30 35 35 40 40
Alternative fuel production credit.............................. 820 850 840 800 750 700 650 150 150 150 140 130 120 110
Exception from passive loss limitation for working interests in
oil and gas properties......................................... ....... ....... ....... ....... ....... ....... ....... 55 60 60 65 65 70 75
Capital gains treatment of royalties on coal.................... ....... ....... ....... ....... ....... ....... ....... 15 15 15 15 15 15 15
Exclusion of interest on State and local IDBs for energy
facilities..................................................... 70 70 70 70 70 65 65 105 110 110 105 105 100 95
New technology credit........................................... 140 140 145 155 165 175 185 0 0 0 0 0 0 0
Alcohol fuel credit\1\.......................................... 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Tax credit and deduction for clean-fuel burning vehicles and
properties..................................................... 55 55 55 60 60 60 65 10 10 10 15 20 25 25
Exclusion from income of conservation subsidies provided by
public utilities............................................... 80 100 105 100 90 85 75 50 55 60 65 65 70 70
Natural resources and environment:
Expensing of exploration and development costs, nonfuel minerals 25 25 25 25 25 25 25 10 10 10 10 10 10 10
Excess of percentage over cost depletion, nonfuel minerals...... 165 170 175 180 185 185 190 55 55 60 60 60 60 65
Capital gains treatment of iron ore............................. ....... ....... ....... ....... ....... ....... ....... 0 0 0 0 0 0 0
Special rules for mining reclamation reserves................... 45 45 45 45 45 45 45 5 5 5 5 5 5 5
Exclusion of interest on State and local IDBs for pollution
control and sewage and waste disposal facilities............... 255 250 245 240 235 230 220 380 380 370 365 365 345 335
Capital gains treatment of certain timber income................ ....... ....... ....... ....... ....... ....... ....... 15 15 15 15 15 15 15
Expensing of multiperiod timber growing costs................... 210 225 235 250 260 275 285 160 170 180 190 200 210 220
Investment credit and seven-year amortization for reforestation
expenditures................................................... 20 20 20 20 20 20 20 25 25 30 30 30 30 30
Tax incentives for preservation of historic structures.......... 25 25 25 25 25 20 20 100 100 95 90 90 90 85
Agriculture:
Expensing of certain capital outlays............................ 10 10 10 10 10 10 10 60 55 55 55 60 60 60
Expensing of certain multiperiod production costs............... 10 10 10 10 10 10 10 75 70 70 70 75 75 75
Treatment of loans forgiven solvent farmers as if insolvent..... ....... ....... ....... ....... ....... ....... ....... 10 10 10 10 10 10 10
Capital gains treatment of certain income....................... ....... ....... ....... ....... ....... ....... ....... 145 145 140 145 145 150 155
Commerce and housing:
Financial institutions and insurance:
Exemption of credit union income.............................. 630 650 710 780 860 940 1,030 ....... ....... ....... ....... ....... ....... .......
Excess bad debt reserves of financial institutions............ 95 105 115 125 135 150 160 ....... ....... ....... ....... ....... ....... .......
Exclusion of interest on life insurance savings............... 275 295 320 340 375 400 415 9,630 10,375 11,150 12,000 12,885 13,855 14,535
Special alternative tax on small property and casualty
insurance companies.......................................... 5 5 5 5 5 5 5 ....... ....... ....... ....... ....... ....... .......
Tax exemption of certain insurance companies.................. 235 240 245 255 260 280 300 ....... ....... ....... ....... ....... ....... .......
Small life insurance company deduction........................ 110 115 120 130 135 140 145 ....... ....... ....... ....... ....... ....... .......
Housing:
Exclusion of interest on owner-occupied mortgage subsidy bonds 725 720 705 680 660 635 610 1,085 1,090 1,065 1,030 995 970 930
Exclusion of interest on State and local debt for rental
housing...................................................... 365 345 320 300 275 245 215 560 530 495 460 425 385 330
Deductibility of mortgage interest on owner-occupied homes.... ....... ....... ....... ....... ....... ....... ....... 48,080 50,575 53,075 55,750 58,590 61,655 64,915
Deductibility of State and local property tax on owner-
occupied homes............................................... ....... ....... ....... ....... ....... ....... ....... 15,275 16,070 16,860 17,710 18,615 19,590 20,620
Deferral of income from post 1987 installment sales........... 235 245 255 265 275 285 295 700 710 720 730 740 750 760
Deferral of capital gains on home sales....................... ....... ....... ....... ....... ....... ....... ....... 14,180 14,605 15,040 15,490 15,955 16,435 16,930
Exclusion of capital gains on home sales for persons age 55
and over..................................................... ....... ....... ....... ....... ....... ....... ....... 5,160 5,185 5,075 5,465 5,280 5,755 5,480
Exception from passive loss rules for $25,000 of rental loss.. ....... ....... ....... ....... ....... ....... ....... 4,515 4,235 3,985 3,745 3,520 3,305 3,070
Accelerated depreciation on rental housing (normal tax method) 660 735 820 945 1,080 1,495 1,730 385 435 485 540 595 670 725
[[Page 66]]
Commerce:
Cancellation of indebtedness.................................. ....... ....... ....... ....... ....... ....... ....... 105 70 40 15 0 -10 -5
Permanent exceptions from imputed interest rules.............. ....... ....... ....... ....... ....... ....... ....... 150 150 155 155 160 160 160
Capital gains (other than agriculture, timber, iron ore, and
coal) (normal tax method).................................... ....... ....... ....... ....... ....... ....... ....... 7,125 7,000 6,920 7,035 7,195 7,385 7,560
Capital gains exclusion of small corporation stock............ ....... ....... ....... ....... ....... ....... ....... 0 0 0 5 30 70 110
Step-up basis of capital gains at death....................... ....... ....... ....... ....... ....... ....... ....... 28,305 29,480 30,265 30,710 31,160 31,615 32,075
Carryover basis of capital gains on gifts..................... ....... ....... ....... ....... ....... ....... ....... 130 140 150 160 170 180 190
Ordinary income treatment of loss from small business
corporation stock sale....................................... ....... ....... ....... ....... ....... ....... ....... 105 215 305 370 380 355 305
Accelerated depreciation of buildings other than rental
housing (normal tax method).................................. 5,270 4,730 4,000 3,200 2,380 1,735 1,150 2,170 2,005 1,720 1,390 1,030 685 450
Accelerated depreciation of machinery and equipment (normal
tax method).................................................. 19,760 21,575 23,235 24,460 25,790 26,115 25,040 4,700 5,585 6,265 6,750 7,240 7,460 7,200
Expensing of certain small investments (normal tax method).... 1,120 930 685 500 385 220 135 695 590 435 295 215 100 20
Amortization of start-up costs (normal tax method)............ 85 90 90 95 95 95 100 100 105 110 110 115 115 120
Graduated corporation income tax rate (normal tax method)..... 4,105 4,435 4,730 5,015 5,345 5,710 6,085 ....... ....... ....... ....... ....... ....... .......
Exclusion of interest on small issue IDBs..................... 215 165 135 115 110 105 105 340 270 210 180 170 160 155
Deferral of gains from sale of broadcasting facilities to
minority owned business...................................... 285 ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... .......
Treatment of Alaska Native Corporations....................... 30 20 15 10 5 5 5 ....... ....... ....... ....... ....... ....... .......
Transportation:
Deferral of tax on shipping companies........................... 20 20 20 20 20 20 20 ....... ....... ....... ....... ....... ....... .......
Exclusion of reimbursed employee parking expenses............... ....... ....... ....... ....... ....... ....... ....... 1,215 1,255 1,290 1,330 1,370 1,410 1,455
Exclusion for employer-provided transit passes.................. ....... ....... ....... ....... ....... ....... ....... 35 50 60 70 85 100 120
Community and regional development:
Credit for low-income housing investments....................... 450 520 590 655 700 720 690 1,810 2,080 2,355 2,615 2,800 2,875 2,755
Investment credit for rehabilitation of structures (other than
historic)...................................................... 15 15 15 15 15 15 15 65 65 65 55 55 55 50
Exclusion of interest on IDBs for airports, docks, and sports
and convention facilities...................................... 345 365 390 415 440 460 485 510 545 575 610 650 685 720
Exemption of certain mutuals' and cooperatives' income.......... 50 50 50 55 55 60 60 ....... ....... ....... ....... ....... ....... .......
Empowerment zones............................................... 75 100 120 135 140 150 150 175 230 265 290 310 325 340
Education, training, employment, and social services:
Education:
Exclusion of scholarship and fellowship income (normal tax
method)...................................................... ....... ....... ....... ....... ....... ....... ....... 825 835 845 850 860 870 875
Exclusion of interest on State and local student loan bonds... 125 120 115 110 105 100 95 190 185 175 165 155 150 145
Exclusion of interest on State and local debt for private
nonprofit educational facilities............................. 310 320 335 350 365 385 400 460 475 495 520 545 570 590
Exclusion of interest on savings bonds transferred to
educational institutions..................................... ....... ....... ....... ....... ....... ....... ....... 5 5 10 10 15 15 15
Parental personal exemption for students age 19 or over....... ....... ....... ....... ....... ....... ....... ....... 820 825 835 870 905 955 1,015
Deductibility of charitable contributions (education)......... 170 180 190 200 210 220 230 1,610 1,690 1,775 1,865 1,955 2,055 2,155
Exclusion of employer provided educational assistance......... ....... ....... ....... ....... ....... ....... ....... 100 ....... ....... ....... ....... ....... .......
Training, employment, and social services:
Targeted jobs credit.......................................... 320 270 50 30 15 5 ....... 75 55 10 10 5 ....... .......
Exclusion of employer provided child care..................... ....... ....... ....... ....... ....... ....... ....... 725 775 830 890 955 1,025 1,100
Exclusion of employee meals and lodging (other than military). ....... ....... ....... ....... ....... ....... ....... 545 570 600 630 665 700 735
Credit for child and dependent care expenses.................. ....... ....... ....... ....... ....... ....... ....... 2,730 2,865 3,005 3,155 3,315 3,480 3,655
Credit for disabled access expenditures....................... 130 130 130 130 130 135 135 30 30 35 35 35 35 35
Expensing of costs of removing certain architectural barriers
to the handicapped........................................... 15 15 15 15 15 15 15 5 5 5 5 5 5 5
Deductibility of charitable contributions, other than
education and health......................................... 4,895 5,160 5,425 5,695 5,985 6,280 6,580 14,670 15,405 16,175 16,980 17,830 18,720 19,660
Exclusion of certain foster care payments..................... ....... ....... ....... ....... ....... ....... ....... 30 30 35 35 35 40 40
Exclusion of parsonage allowances............................. ....... ....... ....... ....... ....... ....... ....... 265 285 300 320 345 365 390
Health:
Exclusion of employer contributions for medical insurance
premiums and medical care...................................... ....... ....... ....... ....... ....... ....... ....... 59,440 64,520 70,490 77,040 84,125 91,620 99,925
Deductibility of medical expenses............................... ....... ....... ....... ....... ....... ....... ....... 3,495 3,785 4,125 4,510 4,930 5,395 5,895
Exclusion of interest on State and local debt for private
nonprofit health facilities.................................... 615 640 675 705 745 780 810 920 955 1,000 1,045 1,100 1,155 1,205
Deductibility of charitable contributions (health).............. 640 670 700 730 760 790 820 1,640 1,725 1,810 1,900 1,995 2,095 2,200
Tax credit for orphan drug research............................. 15 ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... .......
Special Blue Cross/Blue Shield deduction........................ 125 140 100 170 185 220 280 ....... ....... ....... ....... ....... ....... .......
Income security:
Exclusion of railroad retirement system benefits................ ....... ....... ....... ....... ....... ....... ....... 430 445 450 455 460 465 470
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Exclusion of workmen's compensation benefits.................... ....... ....... ....... ....... ....... ....... ....... 4,475 4,855 5,050 5,255 5,515 5,800 6,205
Exclusion of public assistance benefits (normal tax method)..... ....... ....... ....... ....... ....... ....... ....... 570 590 635 695 740 795 850
Exclusion of special benefits for disabled coal miners.......... ....... ....... ....... ....... ....... ....... ....... 95 90 85 85 80 75 70
Exclusion of military disability pensions....................... ....... ....... ....... ....... ....... ....... ....... 130 130 130 130 130 130 130
Net exclusion of pension contributions and earnings:
Employer plans................................................ ....... ....... ....... ....... ....... ....... ....... 52,070 55,370 55,770 56,205 56,625 57,045 57,470
Individual Retirement Accounts................................ ....... ....... ....... ....... ....... ....... ....... 7,720 7,830 7,940 8,335 8,420 8,455 8,490
Keogh plans................................................... ....... ....... ....... ....... ....... ....... ....... 3,315 3,345 3,580 3,780 3,935 4,090 4,240
Exclusion of employer provided death benefits................... ....... ....... ....... ....... ....... ....... ....... 30 35 35 35 40 40 45
Exclusion of other employee benefits:
Premiums on group term life insurance......................... ....... ....... ....... ....... ....... ....... ....... 2,880 3,020 3,170 3,325 3,485 3,660 3,865
Premiums on accident and disability insurance................. ....... ....... ....... ....... ....... ....... ....... 150 155 165 175 185 195 205
Income of trusts to finance supplementary unemployment
benefits..................................................... ....... ....... ....... ....... ....... ....... ....... 20 20 20 20 20 20 20
Special ESOP rules (other than investment credit)............... 2,125 1,745 1,540 1,405 1,280 1,170 1,065 ....... ....... ....... ....... ....... ....... .......
Additional deduction for the blind.............................. ....... ....... ....... ....... ....... ....... ....... 25 25 25 25 25 30 30
Additional deduction for the elderly............................ ....... ....... ....... ....... ....... ....... ....... 1,305 1,320 1,340 1,355 1,365 1,375 1,385
Tax credit for the elderly and disabled......................... ....... ....... ....... ....... ....... ....... ....... 50 55 55 60 60 65 65
Deductibility of casualty losses................................ ....... ....... ....... ....... ....... ....... ....... 800 445 465 490 515 540 570
Earned income credit\2\......................................... ....... ....... ....... ....... ....... ....... ....... 4,920 5,670 6,250 6,460 6,820 7,105 7,510
Social Security:
Exclusion of social security benefits:
OASI benefits for retired workers............................. ....... ....... ....... ....... ....... ....... ....... 16,015 16,465 17,285 18,080 18,880 19,525 20,515
Disability insurance benefits................................. ....... ....... ....... ....... ....... ....... ....... 1,975 2,180 2,375 2,580 2,800 3,030 3,265
Benefits for dependents and survivors......................... ....... ....... ....... ....... ....... ....... ....... 3,630 3,820 4,030 4,245 4,470 4,695 4,935
Veterans benefits and services:
Exclusion of veterans disability compensation................... ....... ....... ....... ....... ....... ....... ....... 2,665 2,820 2,985 3,160 3,335 3,515 3,720
Exclusion of veterans pensions.................................. ....... ....... ....... ....... ....... ....... ....... 75 70 70 70 75 85 90
Exclusion of GI bill benefits................................... ....... ....... ....... ....... ....... ....... ....... 50 65 70 80 90 95 100
Exclusion of interest on State and local debt for veterans
housing........................................................ 35 30 30 30 35 35 35 50 50 50 50 50 50 55
General purpose fiscal assistance:
Exclusion of interest on public purpose State and local debt.... 5,100 5,300 5,545 5,820 6,120 6,395 6,645 7,600 7,875 8,230 8,635 9,075 9,510 9,890
Deductibility of nonbusiness State and local taxes other than on
owner-occupied homes........................................... ....... ....... ....... ....... ....... ....... ....... 27,735 29,175 30,620 32,160 33,800 35,570 37,445
Tax credit for corporations receiving income from doing business
in U.S. possessions............................................ 2,745 2,795 2,855 3,025 3,205 3,400 3,600 ....... ....... ....... ....... ....... ....... .......
Interest:
Deferral of interest on savings bonds........................... ....... ....... ....... ....... ....... ....... ....... 1,100 1,160 1,210 1,280 1,340 1,410 1,480
Addendum--Aid to State and local governments:
Deductibility of:
Property taxes on owner-occupied homes........................ ....... ....... ....... ....... ....... ....... ....... 15,275 16,070 16,860 17,710 18,615 19,590 20,620
Nonbusiness State and local taxes other than on owner-occupied
homes........................................................ ....... ....... ....... ....... ....... ....... ....... 27,735 29,175 30,620 32,160 33,800 35,570 37,445
Exclusion of interest on:
Public purpose State and local debt........................... 5,100 5,300 5,545 5,820 6,120 6,395 6,645 7,600 7,875 8,230 8,635 9,075 9,510 9,890
IDBs for certain energy facilities............................ 70 70 70 70 70 65 65 105 110 110 105 105 100 95
IDBs for pollution control and sewage and waste disposal
facilities................................................... 255 250 245 240 235 230 220 380 380 370 365 365 345 335
Small-issue IDBs.............................................. 215 165 135 115 110 105 105 340 270 210 180 170 160 155
Owner-occupied mortgage revenue bonds......................... 725 720 705 680 660 635 610 1,085 1,090 1,065 1,030 995 970 930
State and local debt for rental housing....................... 365 345 320 300 275 245 215 560 530 495 460 425 385 330
IDBs for airports, docks, and sports and convention facilities 345 365 390 415 440 460 485 510 545 575 610 650 685 720
State and local student loan bonds............................ 125 120 115 110 105 100 95 190 185 175 165 155 150 145
State and local debt for private nonprofit educational
facilities................................................... 310 320 335 350 365 385 400 460 475 495 520 545 570 590
State and local debt for private nonprofit health facilities.. 615 640 675 705 745 780 810 920 955 1,000 1,045 1,100 1,155 1,205
State and local debt for veterans housing..................... 35 30 30 30 35 35 35 50 50 50 50 50 50 55
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\1\In addition, the partial exemption from the excise tax for alcohol fuels results in a reduction in excise tax receipts (in millions of dollars) as follows: 1995: $615; 1996: $645; 1997:
$665; 1998: $685; 1999: $705; 2000: $730; and 2001: $750.
\2\The figures in the table indicate the effect of the earned income tax credit on receipts. The effect on outlays (in millions of dollars) is as follows: 1995: $15,245; 1996: $18,655; 1997:
$20,450; 1998: $21,255; 1999: $22,175; 2000: $23,210; and 2001: $24,115.
Note: Provisions with estimates denoted ``normal tax method'' have no revenue loss under the reference tax law method.
All estimates have been rounded to the nearest $5 million.
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Interpreting Tax Expenditure Estimates
Tax expenditure revenue loss estimates do not necessarily equal the
increase in Federal revenues (or the reduction in budget deficits) that
would result from repealing the special provisions, for the following
reasons: