Today is Tax Day, the day on which federal and state income tax filings are due for all Americans. The complexity of the tax code makes filing taxes a headache for most individuals, who have to root through the various deductions and credits they may be eligible for.
The government spends $1.3 trillion on various tax expenditures each year, enough to fill the entire deficit in President Obama’s latest budget proposal. And while some of the popular tax credits have real benefits for low- and middle-income Americans, the vast majority of the breaks go to the wealthy. In all, tax expenditures provide an extra quarter-million dollars a year for individuals in the top 1 percent of income-earners, according to economists Betsey Stevenson and Justin Wolfers:
Even as many areas of government spending have been cut to the bone, our tax code remains larded up with expenditures that cost taxpayers $1.3 trillion every year. According to the nonpartisan Tax Policy Center, the biggest tax expenditures apply to employer-provided health insurance, pension contributions and mortgages.
Popular as such tax breaks may be, they differ from typical government spending in that they give bigger subsidies to wealthier families. […] Taken together, individual income tax expenditures are the equivalent of sending $686 each year to those in the bottom fifth of the income distribution, $3,175 to those in the middle fifth, and $30,714 to those in the upper fifth. The average member of the top 1 percent gets nearly a quarter of a million dollars a year — a statistic that might have proved useful for the folks protesting in Zuccotti Park.
President Obama and Senate Democrats proposed the Buffett Rule, a minimum tax on millionaires, and fought to close other tax breaks that benefit the wealthiest Americans. Meanwhile, the budget authored by Rep. Paul Ryan (R-WI) and passed by House Republicans would supposedly pay for massive tax breaks for the wealthy by ending unspecified tax expenditures, but the GOP won’t explain which breaks they have in mind.
The GOP spent the last year making the case that the nation’s tax code unfairly benefits the low- and middle-income Americans, pushing the myth that half of Americans don’t pay any taxes. But as Stevens and Wolfers note, the fact that tax expenditures disproportionately benefit the top 1 percent makes it easy to “come to the mistaken conclusion that our tax code is more progressive than it actually is.”