Tax Breaks Favor The Income Rich
Jon Perr at Crooks and Liars does a nice review on defining who benefits the most from tax breaks: CBO Study Shows Tax Breaks Favor the Rich
“Every year, tax expenditures–Uncle Sam’s myriad credits, exclusion, loopholes and breaks–cost the U.S. Treasury over $1 trillion a year. To put that in perspective, that figure is greater than the cost of Medicare, Social Security and national defense. Much larger than this year’s projected budget deficit of $642 billion, tax expenditures equal roughly 30 percent of federal spending. It’s no wonder why Republicans are so fond of calling for closing loopholes while lowering rates to produce “revenue-neutral” tax reform.
Jon goes on to add:
But a new study of the top 10 tax expenditures also show why GOP leaders including Mitt Romney, Paul Ryan, and House Ways and Means Committee Chairman Dave Camp refuse to name a single loophole they would close to achieve it. As the new Congressional Budget Office (CBO) analysis shows, half the value of those $900 billion in tax breaks goes to the top quintile of American income earners. Nevertheless, their elimination would devastate lower and middle income households.
But while the well-to-do pocket over half of the windfall produced by the numerous breaks in the tax code, the standard of living of lower-income working families is much more dependent on them. The Earned Income Tax Credit (EITC), which President Ronald Reagan called “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress,” provides almost all of $61 billion in annual benefits to the bottom 60 percent of taxpayers. Overall, the major expenditures account for almost 12 percent of the income for the bottom quintile of earners.
The Distribution of Major Tax Expenditures in the Individual Income Tax System