Tax code mostly benefits the wealthiest Americans

conservatives, to reduce program spending has meant that the tax code has increasingly become the primary driver of social policy when it comes to education, retirement and housing.

The amount of spending in those areas channeled through taxes is on the rise, topping $620 billion in 2014, up from $540 billion in 2013, according to Levin’s analysis. By comparison, federal discretionary spending by 14 of the 15 Cabinet agencies, including Housing, Transportation, Labor, Commerce, Education, Treasury and Health and Human Services totaled $464 billion.

“This is not a liberal position or a conservative position,” he said.

Those at the tippy-top of the income scale — the top 0.1 percent, with an average annual income of $7.6 million — received an average of $33,391 in federal tax payouts analyzed by the group. Those in the bottom 60 percent, who earn less than $65,000, got less than $1,000 on average, altogether about 12 percent of the billions handed out.

A 2013 report from the Congressional Budget Office that looked at the 10 largest tax subsidies, worth a total of $900 billion, found that more than half went to households in the top fifth on the income scale.

Neither analysis includes the new federal tax credits available to low- and moderate-income households that bought private health insurance on public marketplaces set up under the Affordable Care Act. Roughly 85 percent of the 16.4 million Americans who are insured through these exchanges receive a government subsidy to help pay premiums, according to figures released by the Obama administra- tion this week. The Congressional Budget Office has estimated the average subsidy in 2015 at $3,960.

The bulk of this financial assistance, which is available through federal exchanges in 34 states, has been challenged by conservative opponents, and a Supreme Court ruling is expected in June.

Once you exit the partisan muck surrounding the Obama administration’s health-care program, however, Democrats and Republicans are largely united on many tax breaks, which were aimed at encouraging what are considered socially beneficial goals, like homeownership and college and retirement savings. Eliminating or reducing them can unleash a firestorm, as President Barack Obama discovered when he proposed, and then abandoned, a plan to do away with the tax benefits for 529 college savings plans, where families can contribute up to $14,000 a year. Households with incomes above $150,000 received 80 percent of that program’s tax benefit, according to the White House.

Many economists have noted that from an accountant’s point of view, there is no difference between spending through the tax code and the budget. The minimum-wage worker who uses a federal voucher to help pay the rent and the Wall Street banker who deducts the mortgage interest on a multimillion-dollar vacation getaway in the Hamptons are both the recipients of government housing assistance.

Donald Marron, a former member of President George W. Bush’s Council of Economic Advisers, called it “spending in disguise,” arguing that “the confusion surrounding such spending allows politicians to claim they are saving taxpayers’ money when, in fact, they are it.”

Congress started including what are known as tax expenditures in federal spending totals in 1976 as part of a budget reform package.

Anti-tax advocates ardently dispute the notion that tax reductions are equivalent to public assistance. “That’s just stupid and dishonest,” said Ryan Ellis, tax policy director at the conservative Americans for Tax Reform. “Letting people keep their own money does not increase the size of government in any way.”

Suzanne Mettler, a professor of government at Cornell University, counters that the government does not bestow tax-related largesse equally. “Just like direct social benefits, benefits in the tax code are directed at certain groups of people,” she said. Homebuyers get a break; renters don’t, even if they both earn the same.

To Mettler, the hidden nature of tax code spending undermines support for the government, because people don’t recognize just how much they benefit. Mettler, who is the author of The Submerged State: How Invisible Government Policies Undermine American Democracy, pointed to a 2008 poll from Cornell’s Survey Research Institute that found that a majority of Americans insisted they did not use any government programs, even when they took advantage of deductions on mortgage interest or student loans.

She advocates providing receipts that detail just how much money someone receives through the tax code, a counterpart to the W-2s and other notices that list what someone pays.

That way everyone would know just who is getting their billions back.

really spending