Which of the following is NOT a tax expenditure?

A tax expenditure refers to a government revenue loss attributed to tax provisions that provide benefits to specific taxpayers or activities, often designed to encourage certain behaviors or support specific sectors of the economy. Common forms of tax expenditures include deductions, credits, and exclusions that individuals or businesses can claim.

The option referring to an inflation-based adjustment to real property tax rates is not considered a tax expenditure. This adjustment relates to a statutory change intended to account for inflation, ensuring that property tax rates remain fair and equitable over time. It does not represent a selective benefit that decreases government revenue; instead, it serves to maintain the level of taxation in line with the economic variable of inflation, which is crucial for consistent funding for public services.

In contrast, the other options represent examples of tax expenditures because they provide specific tax benefits that reduce the overall tax liability for individuals or businesses. For instance, the deduction for energy-efficient window installation and the deduction for medical expenses directly lower taxable income for those who qualify. Similarly, a credit for adoptive costs offers a financial incentive by reducing tax liability based on qualifying expenses incurred during the adoption process. These provisions are created to encourage behavior and assist taxpayers in specific situations, making them classic examples of tax expenditures.