By Robert S. McIntyre
Director, Citizens for Tax Justice
May 1996

Click here to see this analysis in PDF format.

Welcome to the on-line version of "The Hidden Entitlements," CTJ's publication outlining hundreds of billions of dollars in "hidden entitlements." buried deep in the federal tax code. Functionally equivalent to direct spending programs, far too many of these "tax expenditures" shower benefits on corporations and the rich at the expense of America's hard-working, taxpaying families.

Many of the new leaders in Congress like to pretend that tax loopholes for the well-heeled and the well-lobbied don't hurt the rest of us. But they're dead wrong.

In this new report, Citizens for Tax Justice details and analyzes the hundreds of government spending programs hidden in the tax code ­ programs that will cost $3.7 trillion over the next 7 years. It shows how some are targeted to industries with lots of political clout. How others are designed to give their biggest subsidies to people with the highest incomes. And how many send the wrong signals to businesses, investors and consumers, and thereby cost jobs and impede economic growth.

The special interests love their tax entitlements because they know full well that many could never survive the scrutiny that applies to the regular federal budget. Yet because they are embedded in the tax code, these programs go on spending our tax dollars, year in and year out, without serious review.

If America is serious about cutting the federal budget deficit, curbing waste and simplifying our tax laws, then it's time to bring the hidden entitlements, the corporate tax welfare and the upside-down subsidies out into the open.

This version of "The Hidden Entitlements" contains cost estimates for 1996-2002, and consists of full text and graphics from the printed version.

Table of Contents

PART I

An Overview of Tax Expenditures

Summary Tables

PART II

Tax Expenditures for Business & Investment

1. Accelerated depreciation
2. Capital Gains
  • Details on existing capital gains tax breaks
     28% maximum rate
     Indefinite deferral of tax on unrealized capital gains
     Capital gains tax breaks for gifts and inheritances
     Special additional industry­ specific capital gains tax breaks
     Other special capital gains breaks
  • Recently proposed capital gains tax changes
    • 3. Tax Breaks for multinational corporations
    4. Tax­exempt bonds
    5. Business meals and entertainment
    6. Mergers and acquisitions
    7. Insurance companies and products
  • Interest on life insurance savings
  • Small property and casualty insurance companies
  • Deduction of unpaid property loss reserves of property and casualty companies
  • Special treatment of life insurance company reserves
  • Insurance companies owned by tax­exempt organizations
  • Blue Cross and Blue Shield
    • 8. Oil, gas and energy tax breaks
  • Exploration and development costs
  • Percentage depletion
  • Oil and gas exception to passive loss limitation
  • Alternative fuel production credit
  • Alcohol fuel credit
  • New technology credits
  • Credit and deduction for clean­fuel vehicles and property
  • Exclusion of utility conservation subsidies
    • 9. Timber, agriculture, minerals
  • Exploration and development costs
  • Percentage depletion
  • Mining reclamation reserves
  • Expending multi­period timber growing costs
  • Credit and seven­year amortization for reforestation
  • Expending certain capital outlays
  • Expending multi­period livestock and crop production costs
  • Loans forgiven solvent farmers
    • 10. Financial institutions (non-insurance)
    11. Other business and investment tax breaks
  • Low­income housing credit
  • Employer Stock Ownership Plan (ESOP) provisions
  • Real property installment sales
  • Empowerment zones
  • Reduced corporate income tax rates for smaller corporations
  • Treatment of "Alaskan Native Corporations" losses
  • Cancellation of indebtedness
  • Exceptions to imputed interest rules
  • Exemptions of certain mutuals' and cooperatives' income
  • U.S. savings bonds
    • 12. Pensions, IRAs, etc.

    PART III

    Personal Tax Expenditures

    1. Itemized deductions
  • Mortgage interest on owner­occupied homes
  • State and local taxes
  • Charitable contributions
  • Medical expenses
  • Casualty losses
    • 2. Fringe benefits
  • Employer­owned medical insurance and expenses
  • Other employer­provided insurance benefits
  • Exclusion of employee parking expenses & employer­provided transit passes
  • Other fringe benefits
    • 3. Earned­income tax credit
    4. Other personal tax breaks
  • Tax­free Social Security benefits for retired workers
  • Other support of the aged and the blind
  • Capital gains on home sales
  • Workmen's compensation, public assistance & disabled coal miner benefits
  • Benefits to soldiers and veterans
  • Child and dependent care expenses
  • Scholarship and fellowship income
  • Self­employed health insurance deduction
  • U.S. savings bonds for education
  • Dependent students age 19 or older
  • Foster care payments

    • PART IV

    Conclusion

    APPENDIX: DETAILED TABLES (spreadsheet downloads)


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