In his budget proposal, Rep. Paul Ryan has a section on “tax expenditures.” These special tax breaks are the ways in which the government uses the tax code to reward people for jumping through particular hoops, such as borrowing lots of money to buy a house.
Ryan has this to say about tax expenditures:
[T]hese distortions are similar to government spending instead of markets directing economic resources to their most efﬁcient uses, the government directs resources to politically favored uses, creating a drag on growth. . . .
Tax expenditures have a huge impact on the federal budget, resulting in over $1 trillion in forgone revenue each year. . . . To put that number in perspective, $1 trillion is roughly the total amount the government collects each year in federal income taxes.
Eliminating large tax expenditures . . . would have a doubly positive impact on the economy it would stop diverting economic resources to less productive uses, while making possible the lower tax rates that provide greater incentives for economic growth.
Well said. Ryan doesn’t say, however, which “large” tax expenditures he wants Congress to eliminate.
The Congressional Joint Committee on Taxation recently released a regular report that details which tax expenditures will be the largest over the next half-decade — in other words, the main candidates for Ryan’s chopping block.
Below are the ten that made the JCT list, and the total projected costs of each of them over the five years from now till 2014:
- Tax exclusion for employer contributions to health insurance: $659.4 billion
- Deduction for mortgage interest on owner-occupied houses: $484.1 billion
- Lower tax rates for dividends and long-term capital gains: $402.9 billion
- Tax exclusion of pension contributions (defined-benefit): $303.2 billion
- Earned income tax credit: $268.8 billion
- State and local tax deductions: $237.3 billion
- Exclusion of pension contributions, 401(k)-style: $212.2 billion
- Exclusion of capital gains at death: $194 billion
- Charitable deductions: $182.4 billion
- Untaxed Social Security and railroad retirement benefits: $173 billion
Which one(s) would the commenters like to get rid of?(My vote is #2, although there are some runners-up.)
Original Source: http://www.nationalreview.com/corner/263985/tax-expenditures-nicole-gelinas