The liberal Washington Post ran this headline: Richest 20 percent get half the overall savings from U.S. tax breaks, CBO says. The CBO is the Congressional Budget Office.
The story began:
“The 10 largest breaks in the U.S. tax code will save taxpayers more than $900 billion this year, with a little more than half the benefits flowing to the richest 20 percent of households, congressional budget analysts said Wednesday.
And the richest 1 percent of households, those with at least $327,000 in annual income, get an especially big haul — about 17 percent of the total savings, according to the report by the Congressional Budget Office.”
We know what’s coming.
“Democrats seized on the new analysis, saying it provides fresh support for President Obama’s claim that limiting tax breaks for the rich offers a more sensible path to deficit reduction than sharp cuts to agency budgets, known as the sequester. The sequester, which took effect March 1, will cut U.S. agency spending by roughly $42 billion through Oct. 1.”
Obama originally promoted the sequester. Now he is pretending the Reoublicans did it. But he signed the bill into law in 2011.
“Republicans, too, welcomed the report, saying it sheds new light on potential policy choices as lawmakers in both parties consider a comprehensive overhaul of the tax code. While Democrats want to limit tax breaks to generate new revenue for the government, Republicans want to return the money to taxpayers in the form of a simpler code with lower rates for everyone.”
A simpler tax code? That’ll be the day!
What are these tax loopholes?
“According to the CBO, the biggest tax breaks by dollar value this fiscal year are the tax-free treatment of employer-provided health insurance (about $260 billion), preferential rates for dividends and capital gains ($160 billion) and tax-free contributions to retirement savings ($140 billion). Deductions for state and local taxes ($80 billion), mortgage interest ($70 billion) and contributions to charity ($40 billion) are also among the top 10, as is the tax-free treatment of capital gains on assets transferred at death ($50 billion).”
Do you think Congress, which wrote the tax code, will soon alienate all the PAC donors who use these exemptions? I don’t think so.
Senator Snort is not going to vote to do away with the income tax deduction for mortgage interest payments.
With ObamaCare in tatters, not ready for implementation on January 1, 2014, will Congress now abolish the tax-free income associated with corporate payments for health care insurance?
The Washington Post then mentions this politically inconvenient fact: “Some argue that it might be reasonable for the rich to receive a large portion of the benefit from federal tax breaks because they pay an outsize share of federal taxes. According to the independent Tax Policy Center, the richest 20 percent of households paid nearly 70 percent of federal taxes last year.” Yes, “some” do argue this. That is because it’s true.
The Washington Post reporter then adds the obligatory “but.”
“But the CBO noted that tax breaks are essentially equivalent to government spending, intended to encourage and subsidize various behaviors, such as buying a home, saving for retirement and giving to charities. The rich are likely to engage in those activities even without such “financial assistance,” raising the question of whether that money could be better spent on other priorities.”
Got that? A tax break — taking less of your money — is a government subsidy. And it surely is . . . if you begin with the presumption that the federal government owns 100% of everyone’s income. Then when it lets voters keep some of their income, this is a government subsidy to you.
It’s all a matter of perspective. It all begins with a view of who owns you. The CBO assumes that the federal government owns you.
Fact: all tax laws encourage and subsidize “behaviors.” That is why Congress writes them. Congressmen want to encourage the behavior of getting special-interest groups to contribute to Congressional re-election campaigns. And let me assure you, this strategy works.
Then what does the phrase “other priorities” mean? It means government boondoggles.
I suggest this priority: cut taxes, thereby encouraging this “behavior.” Encourage taxpayers to decide what to do with more of their own money. But this priority does not appeal to Washington Post reporters . . . or to Congress.