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Taking tax breaks seriously

In 2010, total collections of federal income taxes from individuals, families and businesses equaled 7.5 percent of GDP. That was by far the lowest portion of the economy collected in income taxes in recent history by the way.

In that same year, the combined values to individuals, families and businesses of all deductions, credits, exemptions and other tax breaks equaled 7.4 percent of GDP.

So tax breaks basically equaled tax collections in 2010.

These facts are drawn from a graphic published today by the Washington Post as part its ongoing occasional series titled “Running in the Red” about the sources of the national debt.

If you go to the Post’s site you can see the graphic and also fool around with a more complicated graphic that includes all the tax breaks, what year they took effect and how much potential revenue each one cost the treasury.

I applaud the Post for doing this work and likewise anyone who has the patience and attention span to  take it in and think it though.

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Comments (11)

  1. Submitted by Ray Schoch on 09/13/2012 - 11:50 am.

    Tax breaks

    VERY interesting, Eric. Froma Harrop had a piece at Creators Syndicate this morning about the mortgage deduction that feeds right into this, and overall, this goes a long way toward explaining why government always seems to be broke, which feeds into Mark Dayton’s speech as reported by Doug Grow here. The hand that taketh away is also the hand that giveth, as it were. There are no functioning societies that are tax-free, so there should be some interesting rhetoric around this little factoid.

  2. Submitted by Dennis Tester on 09/13/2012 - 12:51 pm.

    I agree

    According to the National Taxpayers Union:

    The top 50% of earners, people making more than $32,000 a year, paid 97.75% of all federal income taxes.

    The bottom 50% paid virtually nothing (2.25%) towards the “common good.”

    It seems to me that any discussion of tax fairness should begin by asking the half of us who pay nothing to start paying something. Those who have no skin in the game couldn’t care less about federal budget deficits and national debt and that has to change or they’ll keep electing politicians who don’t care either.

    http://ntu.org/tax-basics/who-pays-income-taxes.html

    • Submitted by Nathan Roisen on 09/13/2012 - 01:57 pm.

      I’m sure a dozen people are furiously writing rebuttals to this as I type…

      1) The bottom 50% do have “skin in the game” when you factor in state income taxes, sales taxes, gas taxes, property taxes, car registration, and so on, and so forth. The “skin in the game” hypothesis is a smoke screen, because…

      2) They really do not have an appreciable level of income or wealth that could close much of the deficit. Jon Stewart did a tremendous job poking holes at this a few months back on the Daily Show…I think that the net worth of everything the bottom 50% owns is something like $750 billion. The government could confiscate ALL of the wealth of half the country and scarcely close 1/8 of the national debt.

      • Submitted by Dennis Tester on 09/13/2012 - 03:24 pm.

        Since Eric’s point

        was about federal income taxes, I limited my remarks to federal income taxes. Your examples are all state and local taxes. The skin in the game I was referring to was for the national “common good.” Or don’t you believe that such a common good exists?

        • Submitted by Nathan Roisen on 09/13/2012 - 04:01 pm.

          The implication of the ‘skin in the game’ argument is that half the population is composed of freeloaders.

          I don’t think that is the case, and the idea that there is a national and local ‘common good’ that each require some level of ‘skin’ is hairsplitting that doesn’t help your argument. What about the many, many projects or services that use a combination of federal, state, and local money?

          Do the bottom 50% have requisite ‘skin’ to drive on state highways, but are freeloading on the interstate? Should we only allow the top 50% to use the recently completed (with federal and state money) interchange between 35-W and MN-62? The Bottom 50% have to get off at Lyndale or Cedar so as to not freeload? I don’t buy this argument one bit.

        • Submitted by Paul Brandon on 09/13/2012 - 07:26 pm.

          Read

          the Constitution of the United STATES.

    • Submitted by Frank Phelan on 09/13/2012 - 10:20 pm.

      Mr. Tester, conservatives love to point out (when discussing the wealthy) that income strata are not stagnant and people move up and down during life times and generationally as well. But I suppose for the folks at the bottom, they all just stay there, year in and year out.

  3. Submitted by Paul Brandon on 09/13/2012 - 01:09 pm.

    Of course

    Some people don’t WANT a functioning society.

  4. Submitted by Ray Schoch on 09/13/2012 - 03:08 pm.

    Functioning society

    Thanks, Paul. We know who they are…

    Those who go to the WP graphics will also note that actual tax spending was far higher in the Reagan years than is the recent case, whether under Bush 2 or Obama. Oddly enough, that’s not mentioned by commentators who think of themselves as “conservative.”

    And, of course, if you play with the interactive graphs, the list of individual tax breaks is staggering. Mucho publicity about subsidies for oil companies and tax-sheltered corporate income, but almost nothing – in fact, almost literally ZERO – media attention paid to individual tax breaks like the mortgage interest deduction or, the big one in terms of dollar value, exempting your employer’s contribution to your health insurance premium from taxable income (assuming you’re employed by an entity that provides health insurance, good, bad or indifferent, to its employees).

    I’m not really a numbers guy, and spreadsheets make my eyes glaze over pretty quickly, but eliminating those two tax breaks alone would make a significant difference in terms of fiscal solvency for the nation – and in the process probably make for political suicide for any public official who supported those sensible policy alternatives to the status quo. What most of the ranters/commentators after Doug Grow’s column on Dayton’s call for more state income are really saying is “Stop government spending on stuff that doesn’t benefit ME.”

    As Mr. Dayton points out, that way lies ruin for everyone, and as Eric (and the WP) has pointed out, the current tax burden is lower than it has been in several decades, so much of the debate over taxes is based on the false premise that taxes have grown exponentially in the past decade or so. It’s simply not true.

  5. Submitted by Peder DeFor on 09/13/2012 - 08:53 pm.

    More and more breaks

    It’s kind of striking that there are more and more breaks, never fewer.

  6. Submitted by Paul Brandon on 09/14/2012 - 09:38 am.

    Lobbyists

    How much money is paid to people lobbying AGAINST tax breaks for special interests?

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