As Congress and the White House move forward on reforming our tax system, policymakers are looking with increased scrutiny at the hundreds of tax expenditures that cost the United States as much as $1.2 trillion a year (about the size of the annual budget deficit), distort market behavior, and complicate the tax code. Whether they are called subsidies, loopholes, deductions, or tax breaks, all tax expenditures amount to the same thing: targeted spending for special interests through the tax code, which allows politicians to claim they are lowering taxes rather than increasing spending.

In 2002, The Century Foundation convened the Working Group on Tax Expenditures to examine and propose reforms to the tax code. This resulting report, Bad Breaks All Around, identifies twelve tax breaks with little or no economic justification. Each fails the test established by the Working Group: Does the tax break address a market failure? Can we measure its success or failure? Is the tax break cost-effective? And why is this tax break better than a direct spending program? These “dirty dozen,” which today cost a combined $73.4 billion a year, are no less ripe for the chopping block a decade later, as Congress finally takes up the task of simplifying the tax code. This report also offers broad policy recommendations for improving the tax code’s transparency, accountability, and progressivity.

The Working Group Report is accompanied by three background papers: “Evaluating Tax Incentives as a Tool for Social and Economic Policy,” by Eric Toder; “Tax Breaks and Behavior: A Review of Evidence,” by Bernard Wasow; and “Our Bucket Is Leaking: Tax Expenditures and Loopholes in the Federal Budget,” by Michael P. Ettlinger.