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On the Economy

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

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As noted, these are rough estimates from a variety of sources but they’re ballpark. You can’t tote up the whole list without double counting, because reducing itemized deductions covers all of the other individual components in the table. But the point is we could theoretically get to $1 trillion in savings over 10 years in lots of ways, and many of these are obviously dialable.

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We could raise $1.2 trillion by only allowing people to itemize deductions at a 15% rate instead of the top rate they face. This would obviously be a big deal—most of this stuff would be a big deal—but as my CBPP colleague Chuck Marr points out, in terms of fairness, why should a wealthier person get bigger breaks for their deductions than a middle-class person. And don’t conservatives like flat taxes?

I’m not endorsing all of these. Economists legitimately worry that the mortgage interest deduction distorts prices in the housing market, but it remains a bedrock tax break to a lot of middle-class families (44% of the value of deductions goes to families with incomes less than $100K), and you actually couldn’t get rid of that distortion without whacking home prices, something you’d kinda want to avoid right now.

Others should be a slam dunk. The so-called “carried interest” loophole allows hedge fund managers to pay the capital gains rate (now 15%) on their earnings, so they end up paying a lower rate than a middle-income school teacher.

The point is we could stick to tax expenditures and hit the $1 trillion in revenue the President wisely laid out at the beginning of this process. I’m not saying we will. Just sayin’ we could.

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