Expensive income tax breaks are claimed by the 47 percent and the 53 percent
Thursday, September 20, 2012
Or you a maker or a taker?
While that question isn't particularly elegant either, it's how Republicans wish Mitt Romney had phrased his secretly taped comments at a Florida fundraiser.
Most American are working hard, contributing to their families' support and success. If asked the maker or taker question, they would have said there is no way they are anything like the 47 percent of nontaxpayers whom Romney dismissed as eager dependents on the federal government.
But the truth is that we are all takers in some way, dependent in some fashion on Uncle Sam, especially when it comes to taxes.
And we are all costing our government major dollars.
More about the 47 percenters: American Bridge 21st Century, a left-leaning research and communications group in Washington, D.C., broke out the tax tendencies of the now well-known 47 percent of nontaxpayers.
It found this group of taxpayers used a variety of legal and long-standing tax breaks to help them greatly reduce or zero out their tax bills and, in some cases, get refunds.
Most nontaxpayers, 44 percent, are the elderly who receive Social Security. In most cases, those government checks are tax-free. But the elderly who must file a return also get special tax code consideration, including a larger standard deduction amount and a special tax credit for the elderly.
Next are the 47 percenters who make use of child-related tax provisions. Almost a third of them used these tax breaks to reduce any tax they owed.
Tax breaks for all, at a cost: Those are just a few of the many tax expenditures -- losses to the U.S. Treasury from certain tax deductions, exemptions or credits allowed specific categories of taxpayers -- that benefit not just 47 percent of Americans, but all of us.
Because of them, the U.S. Treasury misses out on big bucks every year.
The Joint Committee on Taxation last March released a report showing that Uncle Sam will be out more than $3 trillion between 2010 and 2014 thanks to these tax deductions, credits and exclusions from income afforded individual taxpayers.
The top five and their five-year costs are:
- Exclusion of employer contributions for health care, health insurance premiums and long-term care insurance premiums, $659 billion
- Deduction for mortgage interest on owner-occupied residences, $484 billion
- Reduced rates on tax on certain dividends and long-term capital gains, $403 billion
- Net exclusion of pension contributions and earnings: Defined benefit (that is, solely employer contribution) plans, $303 billion
- Earned Income Tax Credit, $269 billion
Do you benefit from any of these? I do.
The hubby and I get health care coverage via his employer as an untaxed workplace benefit. We claim our mortgage interest, although thanks to our recent refinancing the amount we will claim on our 2012 return will be substantially lower. We benefit from the lower tax rates on our investment earnings.
That makes us takers of the top three costliest tax expenditures offered by Uncle Sam. And I guarantee that we're not going to quit taking his largess until we're forced to give it up.
We are not alone.
Keep the government out, except when it helps me: Most people don't think of tax breaks as governmental help.
And most of the tax deductions and such have been in the tax code so long that most taxpayers feel entitled -- yes, that word -- to claim them.
When Romney insinuated in his off the French cuff remarks to wealthy potential campaign contributors that almost half of the country was mooching off them and the rest of us, the candidate was counting on this blurring of definitions.
Political scientists, economists and psychologists back up that point of view.Mark Schmitt, writing at the Roosevelt Institute blog Next New Deal, notes that most people who benefit from government programs don't see their participation that way.
"In her important recent book, The Submerged State, Suzanne Mettler of Cornell looked at data asking people whether they had ever benefited from a government social program. While most participants in the classic, older transfer programs were aware that they had benefited from programs, most of the newer programs, especially those delivered through the tax code, were invisible to a majority of their beneficiaries. (Even 45 percent of Social Security recipients said they had never used a government program, which may reflect the belief that they are receiving benefits they've paid for.)"
So most of us get some sort of invisible government assistance. We're going to have to admit that dependency before we can have a meaningful discussion on who makes, who takes and how we deal with that as a civilized society.
What tax expenditures, breaks, deductions, income exclusions and the like do you take from the federal government? Do you feel like a moocher?
More importantly, are you willing to give up your tax benefits so that you're no longer dependent on Uncle Sam?
And what benefits are you willing to help fund via your tax dollars -- yes, that other word, redistribute -- so that others who are more dependent can get their lives back on track and start making the country stronger?
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Thanks, Elizabeth. I agree with you that politicians have gotten out of control in using the tax code for their purposes on both sides. Unfortunately, I believe it will continue because it's easier to sort of hide things there and tout them as tax breaks, e.g., the EITC. I think the EITC is a good program; people working for little money need help and encouragement to keep those jobs so that they hopefully get better ones. But instead of focusing on problems with administering this way too complicated tax credit, it get used as a political football. I'm also for simplifying the tax code by removing a lot of tax breaks, many of which I use to my benefit. But I would like to keep some sort of progressivity in the tax code. Simpson-Bowles is a good foundation. I hope Congress, regardless of which party is in charge of the House, Senate and White House next year, will give this tax reform outline a serious look.
Posted by: skbell1 | Saturday, September 22, 2012 at 11:43 AM
I am so sick of politics. Especially how they use the tax code more and more. It is terrible how our country lives "paycheck to paycheck" yet we expect our citizens to not be in that position.
I say we just need to blow the tax code up and start with a flat tax .. no special breaks at all. I know that everyone will hate it and complain about it but if you wait long enough, something else big will happen and the tax change will be forgotten.
Thank you for this article. I shared it on facebook in hopes to combat the propaganda that is flying around..
Posted by: Elizabeth Ruh | Saturday, September 22, 2012 at 07:23 AM