tax expenditure

Tax expenditure refers to the revenue the government loses due to various tax deductions, credits, exemptions, and preferential rates that benefit specific activities or groups. Essentially, instead of collecting that money through taxes, the government allows certain taxpayers to keep more of their income. These expenditures are intended to encourage specific behaviors, like home ownership or charitable giving, but they can also reduce overall government revenue. Understanding tax expenditures helps clarify how public policy decisions affect the economy and which benefits are extended to specific sectors or individuals.