According to Wikipedia, A tax expenditure program is government spending through the tax code.
Tax expenditures alter the horizontal and vertical equity of the basic tax system by allowing exemptions, deductions, or credits to select groups or specific activities.
The Congressional Budget and Impoundment Act of 1974 (CBA) defines tax expenditures as "those revenue losses attributable to provisions of the Federal tax laws which allow a special credit, a preferential rate of tax, or a deferral of tax liability" (Surrey 1985).
A tax expenditure is a special tax break. An example of a tax expenditure is the one for taxpayers who own their own home. These taxpayers can deduct the interest on their mortgage payments.
See http://en.wikipedia.org/wiki/Tax_expenditure
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