One easy way to raise $1 trillion
The US is going to have raise revenues one way or another, and there are $1 trillion worth buried in the tax code
If revenues are to be in the budget package that the President and Congressional leadership are now negotiating—and be in there, they must—they will almost surely come from cutting tax expenditures. Those are the one trillion worth of tax revenues forgone each year due to tax breaks for various activities in the code.Skip to next paragraph
Before joining the Center on Budget and Policy Priorities as a senior fellow, Jared was chief economist to Vice President Joseph Biden and executive director of the White House Task Force on the Middle Class. He is a contributor to MSNBC and CNBC and has written numerous books, including 'Crunch: Why Do I Feel So Squeezed?'
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Politicians of both parties recognize that many of these tax breaks are loopholes, as seen in the vote a few weeks ago to end the $6 billion annual tax subsidy for ethanol, which garnered 34 R’s in the Senate.
There’s even a little list going around town of tax expenditures that might get cut in the deal, including oil and gas subsidies, favorable tax treatment for inventories (why should the tax code favor inventories?…like I said, loopholes), and other cats and dogs (corporate jets!).
The thing is, back in April, when President Obama set out his budget guidelines for this aspect of the talks, he said he wanted a cool trillion in revenues, out of deal that reduced deficits over 12 years by $4 trillion.
So, connecting all these dots, it seemed like a good idea to think about various ways to get to a trillion in savings through cutting tax expenditures. Here’s a menu, with rough cuts of the savings over 10 years.
|Tax Expenditure||Billions over 10 Years|
|End the favorable tax treatment of inventories||53|
|Close Carried Interest Loophole||15|
|Eliminate Preferences for Fossil Fuels||46|
|Reform International Tax System||129|
|Tax Stock Dividends Like Regular Income||125|
|Raise Both Cap Gains and Dividends Tax to 28%||140|
|Eliminate the Mortgage Deduction on Second Homes||60|
|Itemize Deductions @28% for Incomes>$250K||321|
|Itemize Deductions @15% for Incomes>$250K||900|
|Itemize Deductions @15% for All Incomes||1,200|
|Eliminate Itemized Deductions for >$1 mil||475|
|Phase out the Mortgage Interest Deduction Over 10 Years||750|
|Sources: Don’t Ask…(CBO, Fiscal Commish, Obama FY12 Budget, my calculations)|