Approaches to tax expenditure estimation: The case of passive tax expenditures

Many states now prepare tax expenditure budgets, using a variety of approaches to estimate the magnitudes of revenue losses in their tax systems. This article examines the results of approaches to estimation of the losses associated with federal tax expenditures carried over to state income taxes. Issues of identification of income tax bases and definition of tax expenditures are examined, as well as several kinds of economic conditions and other factors that may produce diverse estimates.