Trends in Tax Expenditures, 1985-2016

Research Report

Trends in Tax Expenditures, 1985-2016

September 16, 2011

Abstract

The landmark Tax Reform Act of 1986 greatly changed the cost of tax expenditures. The revenue lost to tax expenditures declined sharply after enactment of the 1986 Act, falling from nearly 9 percent of total GDP in fiscal year 1985 to 6 percent in 1988. Since then, tax expenditures have gradually increased as a share of GDP but have remained below the 1985 level. Furthermore, the composition of tax expenditures has changed significantly.

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