Wednesday, May 29, 2013

Eliminating Federal Tax Deductions Unlikely Because Large Share Of Middle Class Taxpayers Claim Them

Posted by Milton Recht:

From Tax Policy Center, "The Challenge of Cutting Deductions to Lower Tax Rates" by Howard Gleckman:
It isn’t a new lesson, but it is one that bears repeating. For instance, a March 21 CRS paper shows that in 2010 about 40 percent of all deductions were claimed by households making between $20,000 and $100,000, with 28 percent going to those making between $50,000 and $100,000. Nearly half of tax filers making between $50,000 and $100,000 claimed deductions for mortgage interest and charitable giving, and more than half deducted state and local taxes.

Those three deductions alone represent more than two-thirds of all itemized deductions. Thus, it is hard to imagine any base-broadening, rate-cutting reform plan that doesn’t include some cuts in those preferences. And taking that step threatens to make a lot of middle-income taxpayers very unhappy.

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