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Value of tax expenditures by income group

Dan Crawford | July 19, 2013 9:03 am

Politics
Taxes/regulation

cbo_taxexpenditures 2b

Comments (9) | Digg Facebook Twitter |
9 Comments
  • Terry says:
    July 19, 2013 at 9:49 am

    I have been telling my upper middle–lower upper class friend that he would be better off complaining about the rich eating his lunch rather than the poor. Thanks for sending the reality based factual information to back up my point. He is right to complain that he is getting screwed by the current tax system, he is just wrong about who to blame.

  • Daniel Becker says:
    July 19, 2013 at 10:02 am

    I can’t find it, but I know I posted on it, but the NYT had a great break out of the Bush tax cuts in a great chart some years ago. It was clear, even those at $500k/yr were getting screwed by the party they identified with because they were actually paying a higher percentage in income tax than those of the top. You had to earn more than $500K/yr to be part of the rich party.

    Yet, they think their part of the club. Ha!

  • Dan Crawford says:
    July 19, 2013 at 11:24 am

    http://angrybearblog.strategydemo.com/2013/06/tax-breaks-2.html

    http://angrybearblog.strategydemo.com/2013/06/reader-rjs-sends-us-several-links.html

  • m.jed says:
    July 19, 2013 at 11:41 am

    While the chart/CBO use the term “Tax Expenditures”, think one needs to be careful about the nomenclature. CBO defines expenditure, for the purpose of this report as “exclusions from taxable income”, “itemized deductions”, “preferential tax rates on cap gains and dividends”, and “tax credits”.

    Certainly possible that I’m an idiot, but the chart, in conjunction with the title, led me to believe that corporate welfare as the driver of the top end of the income distribution.

  • Jack says:
    July 19, 2013 at 2:26 pm

    It would be more accurate to think of corporate welfare as a contributing factor to the distortion of income distribution. Then the “tax expenditures” which are more the result of individual welfare for the richest and poorest Americans modifys that distortion. For the poorest Americans it mildly ameliorates the disadvantages of poverty. For the wealthiest Americans it grossly inflates the degree of distortion resulting from the initial distribution process.

  • m.jed says:
    July 19, 2013 at 4:12 pm

    Jack – if you eliminated deductions for retirement/pension plans and employer-provided health insurance in exchange for lower marginal statutory rates in a revenue-neutral way, we wouldn’t call the lower rates “tax expenditures”

  • Bruce Webb says:
    July 19, 2013 at 6:58 pm

    M.jed. YOU wouldn’t.

    Before we agree that ‘I’ and ‘We’ wouldn’t it might be necessary to examine the reasons why those exclusions are in the tax law to begin with and whether they substitute for what would in an equitable society BE tax expenditures and so their elimination that only without offsetting tax expenditures but actually to reduce tax burdens on the payers of top marginal rates to actually be a double tax expenditure.

    That is you simply assume Social Democracy away and deny that there is some societal obligation to provide minimal income security in retirement or health care and so see provisions to partially fund that through the tax code as a distortion from a system that has all those responsibilities be individual. Whereas I seeing as a distortion in the other direction, effectively buying off the middle class by giving them a break on services we should be providing to society as a whole.

    For example under a true Universal Single Payer Health care system there would be no deduction for employer or (under the theory that employer health care is simply a one to one displacement of labor productivity based compensation) as tax free income to the employee. Instead health care provisions would be societally disassociated from employment and attached to residency. And certainly that move would be scored as a tax expenditure.

    Your argument seems to be that that move wouldn’t happen and indeed shouldn’t happen, that governmental incentives/provisions for health care are themselves distortions. That is “Assume Ayn Rand and the Virtue of Selfishness (and perhaps the Road to Serfdom) then—–“. Well all that is not all that obvious to me. Start from the premise that everyone should have health care and the removal of that tax expenditure simply increases the distortion and arguably from an equity standpoint effectively doubles the expenditure from the optimal tax baseline.

  • m.jed says:
    July 22, 2013 at 8:32 am

    Bruce – I knew it was possible that I was the idiot. In pointing out the difference between connotation and denotation of a graph’s title, don’t know why I didn’t consider starting with a premise that we have an entirely new entitlement program that hasn’t a chance of being signed into law; thanks for pointing out the flaw in my logic.

  • Jerry Critter says:
    June 22, 2015 at 11:57 pm

    Are corporations even included in this analysis?

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