The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Tax Expenditures

  • Daniel N. Shaviro
Reference work entry


Labelling certain provisions in the tax law as tax expenditures has been criticized for lacking an ‘agreed conceptual model’ for distinguishing between integral tax rules and interpolations reflecting spending rather than tax policy. However, the tax expenditure concept can be reformulated as relying on a distinction between (a) the distributional goals that might underlie the use of a tax base such as income or consumption, and (b) allocative goals such as encouraging particular activities or investments. Tax expenditure estimates could be prepared using both measures, including negative tax expenditures (that is, tax penalties) as well as positive ones.


Consumption tax base Consumption taxation Haig–Simons income taxation Income tax base Tax expenditures Tax penalties Taxation of corporate profits Taxation of income 

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  6. United States Government. 2003. Tax expenditures. Ch. 6 in fiscal year 2003. Budget of the United States government. Analytical perspectives. Online. Available at Accessed 9 Feb 2007.

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Daniel N. Shaviro
    • 1
  1. 1.