Governments implement policies and spend money either directly or indirectly.
They spend directly, for example, when they build roads; pay people or businesses for goods or services; or otherwise give people or businesses money to further a policy goal.
Goverrnments spend money indirectly through tax laws that benefit taxpayers by decreasing their tax liability. These tax provisions are called tax expenditures or tax preferences.
This section defines tax expenditures, explores their effects on people and the economy, and considers issues of equity and fairness. It provides both examples of how tax expenditures work and provides readers with exercises that will help them understand the nature of tax expenditures and their consequences.