CBO: Tax Breaks Cost $12 Trillion Over Decade, Benefit Most Wealthy

[TampaYankee]

CBO: Tax Breaks Cost $12 Trillion Over Decade, Benefit Most Wealthy

* Top 20 pct of earners get half the benefit of top breaks

* Tax breaks on capital gains favor the wealthy

* Study favors Obama's approach to tax reform -Democrats

By David Lawder

WASHINGTON, May 29 (Reuters) - The top ten U.S. tax deductions, credits and exclusions will keep $12 trillion out of federal government coffers over the next decade, and several of them mainly benefit the wealthiest Americans, a new study from the Congressional Budget Office shows.

The top 20 percent of income earners will reap more than half of the $900 billion in benefits from these tax breaks that will accrue in 2013, the non-partisan CBO said on Wednesday.

Further, 17 percent of the total benefits would go to the top 1 percent of income earners -- families earning roughly $450,000 or more. The same group that was hit with a tax rate hike in January.

The benefits of preferential tax rates on capital gains and dividends, a break worth $161 billion this year, go almost entirely to the wealthy, including 68 percent to the top one percent of earners.

House Democrats, who requested that Congress' budget referee conduct the study, argued that it backs up President Barack Obama's proposed approach to tax reform and deficit reduction: raise revenues by limiting the amount tax preferences for the wealthy.

"This shows that we could achieve a significant amount of deficit reduction by limiting the preferences to the highest income earners," said Representative Chris Van Hollen, the top Democrat on the House Budget Committee.

Although the study did not provide income thresholds, U.S. Census Bureau data for 2011 shows the top 20 percent of household income extends to down to $101,582, a level that is considered middle-class in many parts of the United States. The lowest quintile topped out at $20,262 in the Census data.


MIDDLE-CLASS AID

But the study also showed that benefits for the largest of the tax preferences, the exclusion for employer-paid health benefits, worth $3.4 trillion over 10 years, are more evenly distributed, with well over half of the benefits going to the middle 60 percent of earners.

The middle 20 percent of earners also got the biggest benefit from excluding a portion of Social Security and Railroad Retirement benefits, a perk worth $414 billion over 10 years.

Three other big tax breaks, the $2 trillion exclusion of net pension contributions and earnings over 10 years, the $1 trillion deduction for mortgage interest and the $1.1 trillion deduction for state and local taxes, also benefited the top 20 percent disproportionately.

Representative Sander Levin, the highest ranking Democrat on the House Ways and Means Committee, the panel that is trying to advance tax reform this year, said the study shows that Republicans would have to greatly reduce tax breaks that benefit the middle class in order to achieve their goals of reducing tax rates and balancing the budget.

"The CBO report underscores the need to go beyond the rhetoric of lowering tax rates without indication of how that would be achieved or the implications for economic growth and tax equity," Levin said.

A spokesperson for Ways and Means Committee's Republican Chairman, Dave Camp, could not immediately be reached for comment on the study.

Republicans want to reform the tax code by eliminating certain deductions, credits and exclusions, but they do not want to divert any resulting revenues toward deficit reduction. Instead they want to use the savings to lower rates, which they say will accelerate economic growth and increase revenue collection.

Democrat Van Hollen said his favored approach would be to limit the total amount of deductions for the top 2 percent of income earners, or families earning $250,000 or more, while leaving intact much of the top 10 tax breaks, which also include deductions for charitable contributions and tax credits for earned income and children.

These latter two tax breaks, which are largely aimed at the working poor, provide two thirds of their $118 billion in 2013 benefits to the lowest 40 percent of wage earners, the CBO said in the study. Over 10 years, these two credits will cost $1.2 trillion.

See original article at: http://www.huffingtonpost.com/2013/05/29/cbo-tax-breaks-wealthy_n_3355836.html

[TampaYankee]

Pretty much explains the deficit. We could have paid for two wars and filled the hole in our economy left by the Wall St meltdown, or come close. Instead, we have a big deficit, getting smaller every day just through what modest gains in the economy that have been made, the rich getting richer -- not a stretch to say 'much' richer -- the poor getting poorer and the middle class falling behind and many out of that category.

Republican economics have been a great boon to some -- the few -- but a bust for most. Do we really need more of that? When do people wise up.

It is true what they say: "If you want to live like a Republican then vote like a Democrat". Dogma be damned, look at the facts man!!

[RA1]

I am very much in favor of raising taxes to pay for any declared war. During my lifetime LBJ proved that guns and butter does not and will not work. If the administration cannot get the Congress and the public to support a war, then maybe we should not be fighting it. Obvious, isn't it?

However, the Congress (and administration) enacts or promotes political tax deductions. Voters can easily overcome any they don't like. I happen to believe that those who invest and benefit from using "extra" funds to promote various business enterprises are the ones who should benefit first, if not foremost from their risk. However, we all should benefit from investments. No capital, no jobs. The government makes no products. Its' so called revenue is taxes on many of us. Fine. We need government services. Maybe not as many as we have now or are proposed. Who shall pay for them?

Regardless, that does not mean I think that there is not a lot of room for improvement to include tax reform. How good would it be if anyone who benefitted from capital gains tax treatment could only take for him or herself 10% with the rest needing to be re-invested? That might solve some of the "give-away" stock options for CEO's and the like. After all, the stock holders, not executives, are the ones taking the risk and need the most reward. This easily can be available for any worker with a 401(k) or the like. Invest in America. You might like it.

Best regards,

RA1

[TampaYankee]

I am very much in favor of raising taxes to pay for any declared war. During my lifetime LBJ proved that guns and butter does not and will not work. If the administration cannot get the Congress and the public to support a war, then maybe we should not be fighting it. Obvious, isn't it?

However, the Congress (and administration) enacts or promotes political tax deductions. Voters can easily overcome any they don't like. I happen to believe that those who invest and benefit from using "extra" funds to promote various business enterprises are the ones who should benefit first, if not foremost from their risk. However, we all should benefit from investments. No capital, no jobs. The government makes no products. Its' so called revenue is taxes on many of us. Fine. We need government services. Maybe not as many as we have now or are proposed. Who shall pay for them?

Regardless, that does not mean I think that there is not a lot of room for improvement to include tax reform. How good would it be if anyone who benefitted from capital gains tax treatment could only take for him or herself 10% with the rest needing to be re-invested? That might solve some of the "give-away" stock options for CEO's and the like. After all, the stock holders, not executives, are the ones taking the risk and need the most reward. This easily can be available for any worker with a 401(k) or the like. Invest in America. You might like it.

Best regards,

RA1

We agree on taxes and war. Too bad the last Republican Administration and Congress did not -- twice!!.

As for voters easily overturning any tax laws they do not like you mean a very significant supermajority of voters right? It seems only supermajority rules in the US Senate anymore. Also, the sitting House Democrats received over a million more votes in total than the sitting GOP members, yet the GOP controls the House. Another blow for the voters easily affecting Congress.

I share your view that those who invest and take risks in business enterprises should be the primary beneficiaries of their investment. But how much is enough? Quite simply, nobody builds a successful business in a vacuum. Obama made this point in his campaign, which the GOP demagogued high and low. Everybody knows this who takes a few moments to reflect on how businesses flourish in this country or any other -- anybody willing to be honest about it.

For this country to provide robust economic development ground it has to flourish across the board. It has promote both the Common Welfare and the General Welfare of this country. By Common welfare, I mean benefits to all in common, eg. police, fire, military and national security, etc. By General Welfare I mean benefits that may not touch us all but that do benefit the country in the long run and short run. For example, Head Start, WIC, education loans, affordable accessible health care for all to name a few.

So, yeah, the question becomes how much is enough? CBO says the rich get richer, much, and the poor get poorer, and the middle class stagnates or declines and looses many to the class of working poor, if they are lucky to be working at all. Yet the GOP says the rich need more and the middle class and poor should pay more or do without. Where has the trickle down gone?

You are quite right that the government is not a manufacturer. It is a service industry and venture capital enterprise. It has served this country well as both. It is also the first responder for economic meltdowns and the intensive care unit for gravely ill/wounded economies. No other entity has the wherewithal to meet that need in a crisis.

Some say (mostly conservatives) let a sick economy burn itself out and we will rebuild a new stronger one for the future. The analogy is: let the apartment building burn down. It will be replaced by a new, beautiful, modern, high-efficiency living space that will grace the city skyline. What of the people dying in that conflagration. Unfortunate, but they will be replaced by younger stronger better educated tenants. So much for trickle down and austerity economics.

We certainly agree that tax reform is badly needed. Not sure if we agree on all specifics of those reforms, not that I disagree with your above proposals. They sound like a good start.

[RA1]

When I wrote the voters can easily overcome unfair tax laws I meant by voting in different folks. Something much easier to write than do. Apathy abounds. Otherwise they can try to persuade their current Congress critters by writing to them and various other legal means. No ricin enclosed, please.

Can legislation solve all the problems you mention? I think laws are concepts reduced to writing about what various thought they should be trying to do, much like a contract. But there is no such thing as a contract that cannot be broken and laws are the same.

Is not this country trying to get the government to be all things to all people? Did we not learn from the SPQR, the Republic of Rome, that this cannot and will not happen? While I do not like a small group of folks controlling and concentrating such a huge percentage of the wealth, I am very fearful of the road our country seems to be embarked upon.

As I think we agree, neither party is doing anything effective to try to deal with these problems.

Best regards,

RA1

[AdamSmith]

by voting in different folks. Something much easier to write than do.

And something that gerrymandering has made even more difficult than formerly. Which observation of course in no wise contradicts any of your points.

[RA1]

As always, the party currently in power does the gerrymandering. Therefore they take turns which just means politics as usual.

Best regards,

RA1

[TampaYankee]

When I wrote the voters can easily overcome unfair tax laws I meant by voting in different folks. Something much easier to write than do. Apathy abounds. Otherwise they can try to persuade their current Congress critters by writing to them and various other legal means. No ricin enclosed, please.

Can legislation solve all the problems you mention? I think laws are concepts reduced to writing about what various thought they should be trying to do, much like a contract. But there is no such thing as a contract that cannot be broken and laws are the same.

Is not this country trying to get the government to be all things to all people? Did we not learn from the SPQR, the Republic of Rome, that this cannot and will not happen? While I do not like a small group of folks controlling and concentrating such a huge percentage of the wealth, I am very fearful of the road our country seems to be embarked upon.

As I think we agree, neither party is doing anything effective to try to deal with these problems.

Best regards,

RA1

I'm not sure I take much away from your apathetic voters remark.

Is a failure to vote a yes vote to the status quo. I think not. I believe it is more a statement of my vote won't change anything so why vote, or equally, a recognition that many many people really have no idea what transpires in and by their government unless whatever it is falls on their head or in their dinner plate and can be seen and smelled both. Otherwise, they are oblivious to it.

And the remark still stands that the voters -- those who DO vote -- cannot easily do anything when majorities don't work.

Legislation might not be able to solve all problems but that doesn't mean it cannot solve some and shouldn't be tried if the problem is significant enough to warrant and some type of legislation seems feasible from effectiveness and cost perspectives. Of course, this has to be weighed against the cost of doing nothing in order to assess those factors. This is a very general remark as was yours that it responds to. I agree that not every problem can be solved by legislation or should be, but there is a place for legislation that can problems deemed important enough to address.

I do not believe this country is trying to be all things to all people. That is one of those charges easy to throw around. And maybe some wacko far left types who float above the plain of reality foresee such a Utopia in their delusional dreams. That does not validate the charge either. There will always be wackos and they even find their way into Congress, if too few in number to influence much.

Rather than being all things to all people, I believe the government is trying to offer help those who need it and some do. Certainly many millions do not need much, if any, of that help. But some do whether it is temporary or transitional or permanent depending on individual circumstances.

By definition, not everyone can be in the one percent. Not everyone can be a bank president. Free societies and economies necessarily have a pyramidal structure. That means everyone cannot be at the top. Of course Karl Marx envisioned a society where everyone was at the top. That theory was found to be fatally flawed.

As for your fear of the direction this country is going in, I'm not sure what your fears are exactly. If one of them is income redistribution then fear not. We have engaged in that several times in the last 150 years from the break up of the Robber Barrons to the recent past. We didn't turn the rich into the poor, only the not as rich as they were headed. That money created market competition and the middle class over the long run. The rich remained extremely well off but not Robber Barron wealthy... until now. It is creeping back. When the one percent capture 90% of the wealth, guess what? And it continues to accelerate. Modern American history should comfort your fear that we can do income distribution without ruining the country or sending the wealthy to the Poor House.

Your fear should lie in the circumstance about what happens to this country if this wealth accumulation trend continues. If you live in a closed room and breath up all the oxygen in that room that ultimately is very bad for you. Likewise, if the middle class disappears who will support the economy? Who will the rich use to increase their wealth from? The other rich? Does that give you comfort for the direction of the country? Keep in mind that just as nature abhors a vacuum, economies abhor imbalance. There is where your fear should lie, IMO

[RA1]

What is the difference between not voting due to indifference and not voting due to a belief that nothing will change. To me that is a "complete" definition of apathy. The folks you describe as ignorant and oblivious are pathetic, not merely apathetic. Those folks CAN change things. However, like you, I prefer they become knowledgeable before they just start changing things.

I was trying to be nice when I said the country is trying to be all things to all people. What I really meant was politicians and mainly democrats.

I am all for helping folks. I am thrilled about how many citizens have offered to help at OK or last year, on the east coast. However, I can see the day possibly coming where most will say, we pay taxes, let the government do it. I hope to be gone when and if that day comes.

Best regards,

RA1

[TampaYankee]

Once again, you identify agreement in our views.

As for slamming democrats, I believe your target should be 'them stinkin' Democrats'. Sometimes they do overproduce with legislation. One example is 'Ethanol'. But then they had some Republican help too. I'm sure many more examples could be produced without breaking a sweat.

As for your final thought I hope that day never comes. As a general precept I like that idea of people helping people when they can and hope to see it flourish where it can. But that cannot be relied on as the only help because it may not be there always in sufficient quantity or timeliness.

I don't think cutting support for programs like Meals on Wheels strengthens neighbor-helping-neighbor initiatives either. Also, when it gets down to specifics, the limitations of one neighbor helping another can be difficult if not insurmountable, if for no other reason than logistics. Consider Hurricane Sandy or the Gulf Oil Spill? Just too massive for the neighbor-helping-neighbor model. I see a desire and need for both types of aid and hope that we as a country will support both.

[RA1]

I certainly do not excuse Republicans to which many of my prior posts can testify. Pols are pols. I consider them the problem but also the remedy. They just need proper guidance from us, the informed voters.

Best regards,

RA1

[RA1]

TY-

Here are two links which discuss some of my concerns.

http://www.commercialappeal.com/news/2013/j:reasons-american-presidents-always-us/

http://www.commercialappeal.com//news/2013/j:turley-the-rise-of-the-fourth-branch-of/

Best regards,

RA1

[TampaYankee]

TY-

Here are two links which discuss some of my concerns.

http://www.commercialappeal.com/news/2013/j:reasons-american-presidents-always-us/

http://www.commercialappeal.com//news/2013/j:turley-the-rise-of-the-fourth-branch-of/

Best regards,

RA1

Unfortunately, both links returned a Page Not Found Error.