Federal tax reform discussions often include proposals to reduce or eliminate various tax expenditures—special exclusions, deductions, credits, and other provisions that allow people or businesses to reduce their income taxes.
This interactive map highlights the state distribution of several federal tax deductions and credits.
The maps reveal wide variation across the states, indicating that changing federal tax expenditures likely would change the geographic distribution of federal tax benefits.
Tax expenditures reduce the revenue the government would otherwise collect and are often similar to direct government spending in their goals as they seek to promote activities such as charitable giving and homeownership.
In 2013, federal tax expenditures are estimated to total about $1.1 trillion, rivaling total federal “discretionary” spending that Congress allocates annually to areas such as defense, education, and transportation.
Itemized deductions have been identified in various proposals under discussion in Washington as a target for tax reform and as a group are estimated to total about $215 billion in forgone revenue in 2013 (see definition of summing tax expenditures). This amount is on a par with the largest single tax expenditures. The earned income tax credit ($58 billion) and the child tax credit ($41 billion) are some of the biggest federal tax credits.
The geographic distribution of federal tax expenditures is influenced by how a particular expenditure is structured as well as differences across states in income and other demographic characteristics, economic conditions, state tax structures, and other factors.
It is important to note that deduction amounts shown in the maps are not comparable, and cannot be added to, the credit amounts. This is because deductions reduce the amount of income that is subject to tax, whereas credits reduce the tax amount itself. Thus, the deduction amounts do not reflect the direct impact on a filer’s tax bill while the credit amounts do.