As many states enter a new fiscal year this month, it’s an ideal time to take a closer look at a major but often overlooked category of government spending: tax expenditures. To make these programs easier to explore and compare, ITEP has updated its state-by-state tax expenditure reports resource.
The page includes links to each state’s most recent report. We have also created a new searchable PDF that compiles the latest available reports from all states into a single document. For Wyoming, which does not publish a comprehensive report, the page includes resources on sales tax exemptions. These resources make it easier for researchers to quickly identify which states have quantified the impact of specific tax expenditures.
Tax expenditures are tax breaks targeted to specific individuals, businesses, or activities that are often presented as achieving goals similar to direct government spending programs. They can take the form of exemptions, deductions, deferrals, exclusions, credits, and preferential tax rates. They are government spending by another name, because they reduce the revenue states could otherwise spend directly on services like education and healthcare. For this reason, tax expenditures warrant the same scrutiny as budget spending, especially given that many primarily benefit special interests rather than supporting legitimate policy goals.
Nearly every state publishes a tax expenditure report that describes specific tax expenditures and their revenue impact. These reports are a useful tool because they:
- Promote accountability and transparency by documenting which tax expenditures exist and how much they cost;
- Support informed budgeting by helping policymakers track how tax expenditures will affect revenue and use this information to make sound budgeting decisions; and
- Enable program tracking by detailing how programs grow over time, describing how many and which groups of people benefit from the program, and assessing whether these outcomes align with policymakers’ expectations.
However, the quality of state tax expenditure reports varies considerably, and several common shortcomings limit their usefulness, including:
- Incomplete coverage: Some states exclude major tax expenditures altogether. For example, some states tax the sales of goods but not services but fail to acknowledge the exemption of services as a tax expenditure. Another common omission is the revenue loss resulting from conformity with federal tax provisions. This omission is particularly salient right now, as states struggle to deal with the fallout from the 2025 Trump tax law.
- Lacking context: Many reports lack critical information on tax expenditure programs. Reports should include the purpose of programs, intended beneficiaries, the tax policy rationale, legal citation, year enacted, and revenue impact.
- Outdated or infrequent reporting: Frequent and timely reports best inform policy debates and budgeting decisions. Yet, some states publish their reports years after the expenditure occurred, while others release them only biennially or every four years. Providing projected tax expenditure costs for upcoming years would offer more timely information for policymaking, even if estimates rely on data from past year’s tax filings.
Greater transparency around tax expenditures leads to better informed tax policy debates, and comprehensive reports are an essential tool for achieving that transparency. Our state-by-state tax expenditure page makes these reports easier to find and compare.
