Tax breaks in jeopardy
In a recent article the Wall Street Journal discussed some of the tax breaks that are in jeopardy of being repealed. The top 10 individual tax breaks will cost more than $3 trillion in forgone tax revenues between 2010 and 2014, according to estimates by Congress’s Joint Tax Committee. By contrast, the top 10 corporate tax breaks will cost only $350 billion over the same period. (This disparity isn’t surprising: the individual income tax long has raised far more revenue than the corporate income tax; it currently brings in more than four times as much.)
Here is a rundown of the Joint Tax Committee’s top 10 tax breaks, along with their 2010-14 revenue cost. Medicare doesn’t appear on the list because Parts A, B, and D are counted separately. Added together, they would be in fourth place.
Health insurance: Employer payments for health care, health insurance premiums, and long-term-care insurance premiums aren’t taxed, costing $659 billion.
Mortgage interest: Homeowners may deduct mortgage interest on up to $1.1 million of debt for up to two homes, costing $484 billion for deductions on 34 million tax returns a year.
Capital gains and dividends: Long-term gains and qualified dividends are taxed at a maximum rate of 15%. Total tab: $403 billion.
Pensions: Defined-benefit pension contributions and earnings aren’t taxed (although payouts are), for a total of $303 billion.
Earned-Income Tax Credit: Some 26 million low-income taxpayers a year are expected to claim $269 billion.
Donations: Charitable contributions are largely deductible, costing $241 billion for 36 million claims a year.
State taxes: Deductions for state and local income, sales and property taxes will cost $237 billion for 41 million claims a year.
401(k): Contributions and earnings aren’t taxed (although payouts may be), for a total of $212 billion.
Capital gains at death: Assets held at death aren’t subject to capital gains tax. Total tab: $194 billion.
Social Security benefits: The portion of Social Security and railroad retirement payments that isn’t taxed comes to $173 billion from 28 million tax returns a year.