Who Really Gets Those Tax Breaks?

Liberals claim the wealthy get all the tax breaks, but our Swiss cheese-like tax code dispenses goodies to all income groups, including lower-income taxpayers. First, who pays? Thanks to an already heavily progressive tax code, in FY2009:

• the top 1% of earners paid ONE-THIRD (36.7%) of all federal income taxes collected;
• the top 10% of earners paid over TWO-THIRDS (70.5%) taxes collected; and
• the top 50% of earners paid almost ALL (97.8%) taxes collected.

Who gets? In FY 2011, tax breaks "amounted to over $1 trillion," among them:*

• $100 billion to low-income taxpayers through three "refundable" tax breaks: the Earned Income Tax Credit, the Refundable Child Care Credit, and the Making Work Pay tax credit;
• $109.3 billion to earners with company benefits for tax-free employer-provided health insurance;
• $42 billion to taxpayers for deductions to offset state and local taxes paid; and
• $76 billion to homeowners for mortgage-interest deductions.

The $1 trillion figure "is why many deficit reduction plans want to shrink them," writes Diana Furchtgott-Roth, a former chief economist of the U.S. Labor Department.

Those on the left of the political spectrum seek to eliminate tax expenditures as a way of raising revenue. Those on the right want to lower tax rates, keeping revenue collected by the federal government at the same level as it stands now.

The soundest way to reduce our deficit is through fundamental tax reform, which generates the economic growth that powers our economy. This means a revenue-neutral plan to get rid of tax expenditures [i.e., breaks] and to lower tax rates, without raising overall levels of taxation. Raising taxes by eliminating tax expenditures, without a commensurate decline in tax rates, will only reduce economic growth.

*See Furchtgott-Roth's three page report and chart for a breakdown of these and other tax breaks.