Here’s more bad news that macroeconomists have to be realistic about.
Lots of people think if only we eliminated tax breaks, we could solve all our problems. Not so. Here’s the list:
Do note that these are only the tax breaks from the federal personal income tax. The federal government also gets a lot of money from FICA (which supports social security and Medicare) which has few “breakable” taxes, and from corporate income taxes (which, in total, aren’t much bigger than these breaks, and so probably can’t yield too much money).
Anyway, this is a laundry list of stuff the middle class feels entitled to. Only 2 items can reasonably be associated with “the rich”: capital gains taxes and estate taxes.
In sum, it probably isn’t very politically feasible to think seriously about cutting any of these, no matter how laudable such a move would be.
The data is is from the Congressional Research Service report entitled “The Challenge of Individual Income Tax Reform: An Economic Analysis of Tax Base Broadening”. Read the whole thing, entitled “Tax Breaks Exceed $1 Trillion” in the March 24 issue of The Wall Street Journal.