As President Obama and congressional Republicans argue over how to rewrite the U.S. tax code, the debate has revolved around “loopholes” for corporate jets and ending “carve-outs” for well-heeled special interests. But if the goal is debt reduction, that’s not where the money is.
Broad tax breaks granted to millions of families at all income levels dwarf the corporate giveaways. Over the past two years, largely because of these popular benefits in the federal income tax code, the government has reached a rare milestone in tax collection — it has given away nearly as much as it takes in.
The number of tax breaks has nearly doubled since the last major tax overhaul 25 years ago, with lawmakers adding new benefits for children, college tuition, retirement savings and investment. At the same time, some long-standing breaks have exploded in value, such as the deduction for mortgage interest and the tax-free treatment of health-insurance premiums paid by employers.
All told, federal taxpayers last year received $1.08 trillion in credits, deductions and other perks while paying $1.09 trillion in income taxes, according to government estimates.
Only about 8 percent of those benefits went to corporations. (The write-off for corporate jets equals about .03 percent of the total.) The bulk went to private households, primarily upper-middle-class families that Obama has vowed to protect from new taxes.
“The big money is in the middle-class subsidies,” said Syracuse University economist Leonard Burman, former director of the nonpartisan Tax Policy Center. “You’re not going to balance the budget by eliminating ethanol credits. You have to go after things that really matter to a lot of people.”
via Ever-increasing tax breaks for U.S. families eclipse benefits for special interests – The Washington Post.
I reject the way these tax breaks are called “tax expenditures,” since that implies that all money is the government’s and that letting us keep part of it is government largesse. Still, it is definitely true that the tax code is one way the government tries to control the economy and to manipulate citizens according to one policy or the other.
The government wants to encourage home ownership, so it makes mortgage interest tax deductible. It wants us to use alternative energy, so it not only gives the ethanol industry a big break, it gives consumers write-offs when they buy energy-efficient products. It wants us to buy health insurance, so there are tax incentives towards that end. And there are lots more. Add in the corporate tax incentives, which are aimed at nudging the economy in one direction or the other, and tax policy plays a major role–along with government spending–in the great Keynesian project of state control over the free market.
So should conservatives be in favor of every tax break, just because it means someone is paying less taxes, even if it is an attempt by the government to control the economy?
Should we just have a flat tax or a range of flat taxes? What do you think of Republican presidential candidate Herman Cain’s 9-9-9 plan (9% income tax; 9% corporate tax; 9% sales tax)? Would that wreak too much havoc in the housing market? With churches and other non-profits that depend on tax-deductible donations?
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