The nation's fiscal future depends on the balance between the spending in the federal budget and the revenues flowing into the treasury. Tax policy involves decisions about who to tax and by how much, as well as the effect of tax rates on economic growth and revenue capture.

Furthermore, policymakers often use tax policy to encourage or discourage behaviors. This popular practice has led to a whole category of the federal budget commonly referred to as "tax expenditures" or "tax entitlements." These tend to be special deductions inserted in the tax code that are quite similar to mandatory spending programs in aim and effect. Some of the largest and most popular of these are the home mortgage interest tax deduction, tax-free employer provided health insurance, and the deduction for charitable contributions.