The Welfare State For the Rich

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Pew has a cool new tax expenditures database tool that I recommend you examine. As a preview, here’s the exploration of the scope and importance of these measures:

I recommend Jacob Hacker’s The Divided Welfare State for a good high-powered look at some of the implications of this. But the quick version is offered by Ezra Klein who says “What’s interesting about tax expenditures, I think, is that they’re basically the welfare state for the middle class, cleverly arranged such that they don’t look like the welfare state for the middle class.

I would say that what’s even more interesting about these tax expenditures is that they actually do much more to benefit the rich than to benefit the middle class. Major tax deductions like the one for employer-provided health care or for home mortgage interest payments are, yes, big-time benefits for middle class Americans. But since the income tax code has a progressive rate structure, the really big wins from these cuts go to the folks with the highest incomes. This is one reason why I’m not in love with the politics of “we’ll only raise taxes on rich people.” There are many tax measures that would have a progressive distributional impact in the aggregate that would nevertheless involve some non-rich people paying somewhat higher taxes.

At any rate, the whole setup is . . . clever. A program like Social Security essentially yokes the interests of poor Americans to those of the middle class. A program like the health care tax break instead yokes the interests of the middle class to the interests of the rich.