Tax Expenditure Budget Before and After the Tax Reform Act of 1986

摘要

The Tax Reform Act of 1986 broadened the income tax base and drastically reduced tax rates. While these changes were designed to be revenue neutral, they led to significant reductions in government subsidies provided through tax expenditures. The findings in the paper indicate that the 1986 Act reduced tax expenditures by $190 billion or about 40% of what they would have been in the absence of tax reform. They also suggest that about 40% of this reduction can be attributed to base broadening and the remaining 60% to lower tax rates.