The Wall Street Journal ran an article on March 24, 2012 - "Tax Breaks Exceed $1 Trillion: Report" by McKinnon. I think it is great that there is growing attention on tax expenditures because if they are not a focal point in addressing both tax reform and deficit reduction, and if the public doesn't know the cost of the tax expenditures they claim (which is far more than what corporations claim), we won't have tax reform or deficit reduction. For example, when people call for spending reductions, they really need to look at the roughly $1.1 trillion spending buried in the federal tax system rather than only discretionary (direct) spending.
The article notes that the largest tax expenditure is the exclusion employees get for the health insurance their employers provide to them. The estimated cost for 2014 is $164.2 billion. That is a lot of money and an inequitable and inefficient of government (taxpayer) resources. That $164 billion only benefits employees with employer-provided health insurance. Why not both reduce the cost and spread the benefit to more taxpayers?
Reducing or eliminating the 200+ tax expenditures in the federal system will allow for lower rates, a simpler system, a reduced tax gap, and greater economic efficiency. President Obama and Congressman Paul Ryan, and others, have proposed cutting back on tax expenditures, but with varying levels of specificity. I believe the lack of details is due primarily to the fact that this is an election year and if you make it clear you plan to eliminate or reduce the mortgage interest deduction, child credit, fringe benefit exclusion, and more, the public won't vote for you. The public needs to be informed on how inefficient, unfair and costly these items are. They also need to be convinced that the savings will be used to lower tax rates and lower the debt.
There is also a problem though in that elected officials for the most part, continue to consider and propose new or expended tax expenditures!
For more, see:
- Background information from the Tax Policy Center - here
- JCT tax expenditure reports - here
- CRS, The Challenge of Individual Income Tax Reform: An Economic Analysis of Tax Base Broadening (3/22/12)
- Center for American Progress - here (and search their website for "tax expenditures")
- My articles and reports on inefficiencies and inequities in California tax expenditures - here
