View Full Version : Annual cost of tax expenditures

01-24-2011, 10:54 PM
There is spending, and then there is tax spending or tax expenditures. What am I talking about?

Since spending programs have a bad reputation, it has been the consistent policy in recent decades to subsidize allegedly worthy concerns with tax breaks in the tax code rather than spending the money in a spending program.

For one example, we decided as a society that people with children deserved additional support. (As a childless person, I don't qualify, and I must ask why should other peoples' choices to have children mean that I should subsidize their choice? But that's a different topic.)

We COULD have simply PAID them $1,000 a year per child (up to age 18 is probably the cutoff), in addition to the dependent deduction. But no, that would be BAD. Instead, we use a tax credit of that amount, and whatever they would have otherwise owed in taxes status quo ante, it's reduced dollar for dollar by that tax credit amount.

The way I view it, it's almost the same thing. All other things being equal, assuming the tax income to the feds prior to this desirable change in policy was $1 trillion, and 1 million children got $1,000 each = $1 billion dollars, if we PAID this directly, the feds would net out $999 billion, or if we cut taxes by this amount, the net income to the government would that same figure.

Now, people complain about the complexity of doing their taxes, and rightly so. Guess what? Almost the entire complexity is based on filing for these tax preferences.

People also complain about the large number of persons who pay no federal income tax. Guess what? The reason is again these tax preferences (particularly the EITC rebate as a federal income tax credit for payroll taxes paid).

So right there, you have two reasons that doing these kinds of subsidies in the tax code create issues.

But what is more staggering is the AMOUNT of such subsidies. What is it? Sen. Durbin was on Fox News Sunday, and he gave the figure at $1.2 trillion a year, as much as the entire annual take from the income tax for the country.

It's relatively easy to put sunset provisions into a spending program, and that is common after Carter came up with the idea. These tax preferences tend to be eternal, however.

Does it make sense to subsidize the OIL INDUSTRY some $40 billion a year in forgiven taxes, given their record levels of profit? Should the hedge fund managers have a subsidy on their tax rate that cuts it to 15% when they earn a billion a year each?

Yes, I know taxes are bad, and spending is bad, but if everything has to be on the table, including cutting seniors (down the road), shouldn't we closely examine these tax expenditures to see if they still make sense?

01-25-2011, 08:34 AM
Just think if you got rid of all those subsidies and tax credits and passed the Fair Tax.

01-25-2011, 12:57 PM
I think everything should be on the table. Congress should be forced to sit down and come up with a way to cut the spending to a point that they can begin paying off debt instead of increasing it. Remove all their many vacations throughout the year and force them to come up with something.


01-25-2011, 01:20 PM
They are talking of rolling back spending to 2006 levels.
I say roll it back to 2002 levels.

01-25-2011, 03:28 PM
Apparently we'd just about balance the budget even now if we eliminated the tax expenditures (or somewhat less than balancing, since that new income would be less the losses from the dynamic effects' scoring, which would likely occur).


Let's see if the GOP will make any moves toward reining in tax expenditures. Actually, the extra Obama tax cuts that he got into the lame duck tax cut passage ARE due to expire in somewhat less than 2 years, so we know there are SOME tax cuts the GOP will allow to expire if left to their own devices.

01-25-2011, 04:21 PM
Are you claiming that the Bush Tax Cut extensions are now Obama Tax Cuts????

01-25-2011, 04:24 PM
By the way you know where I stand on it. I want the government eviscerated.

There is going to be pain. Make if fast and get it over with.

Of course that wont happen because certain people want to get reelected in 2012.