Thursday, January 26, 2012

The Biggest US Government Subsidies Are The Employer Healthcare Deduction, The Pension Contribution Deductions And The Home Mortgage Interest Deduction: Let's Eliminate Them

The biggest loss of tax revenue to the US government are the subsidies to the middle class. They are according to the CBO:
  1. $675 billion from the elimination of the Exclusion of Employers' Contributions for Health Care, Health Insurance Programs, and Long-Term Care Insurance Premiums:
  2. $600 billion from the elimination of the Net Exclusion of Pension Contributions and Earnings:
  3. $500 billion from the elimination of the Deduction of Mortgage Interest on Owner-Occupied Residences:
  4. $400 billion from the elimination of the Reduced Rate of Taxation on Long-Term Capital Gains and Dividends:
  5. $275 billion from the elimination of the Earned Income Tax Credit:
  6. $225 billion from the elimination of the Deduction of Nonbusiness State and Local Government Income Taxes, Sales Taxes, and Personal Property Taxes.
.As I said in my March 11, 2011 blog post, "Major Sources Of Increased Income Tax Revenue Opportunities:"
The major sources of tax revenue mentioned above [Items 1 - 6 listed above] reduce the deficit about half, but will have a greater impact going forward as the deficit is expected to shrink.
There are few if any other options that would produce as much tax revenue for the US. Plus, elimination of most of these 'income tax expenditures' would reduce investment, consumption and incentive distortions that exist in the US economy. Increases to the personal income tax rate or the corporate tax rate are unlikely to produce an equivalent amount of new tax revenue.
So, Mr. President, let's eliminate the middle class subsidies to cut our deficit in half, to eliminate investment distortions, to restore growth in the US economy and to restore market discipline and market prices to the health insurance and housing markets.

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