Dumb tax breaks cost America billions
Taxpayers have received 150 more of them over 40 years, but a handful really stand out as the most wasteful.
Congress' Joint Committee on Taxation notes that the number of breaks offered to American taxpayers has grown from just 60 in 1972 to more than 200 today. So many, in fact, that when CNNMoney asked the Tax Policy Center which breaks are the worst, the center responded as if asked whether it would rather be burned to the ground or plowed into the ocean.
"It's hard to rank stupid tax provisions, because there are so many candidates," said Len Burman, the center's incoming director.
Some breaks disproportionately help some taxpayers more than others. In other cases, they're not much help at all and only make it more difficult to balance the nation's books. The folks at the Tax Policy Center reserved much of their ire for four tax breaks in particular:
Basically, carried interest allows managers of private equity, venture capital and hedge funds to pay a lesser rate on their share of profits from the funds they manage. Instead of paying the top rates of 35% or 39.6%, they get the long-term capital gains tax rate of 20% on those carried interest earnings.
Fans of carried interest love it because it lessens their risk a bit. Critics say the fund managers are performing that service for a fee and should be taxed the same as everyone else. Were that to happen, the Joint Committee on Taxation estimates the higher rate would bring in an extra $17.4 billion over the next decade.
The health care exclusion: Yes, health care is costly enough even when an employer chips in. However, for 160 million Americans, even the tax-free employer-covered health care is subject to tax breaks that will cost an estimated $760.4 billion over the next five years.
State and local tax deductions: By deducting your state and local income tax, property taxes and others, the one-third of taxpayers who itemize tax deductions are effectively subsidizing those state and local governments, as CNNMoney explains. That gives states like California the means to jack up income taxes to 13.3% because their citizens know they can deduct their state income tax on their federal returns.
And it's costing the federal government $278 billion over the next half decade, according to the Joint Committee on Taxation.
Exclusion of capital gains taxes at death: It's one of the many ways the rich get richer. Basically, if a loved one dies and bequeaths you stock they've held for decades, you're not on the hook for any of the capital gains accrued by that stock during the original holder's lifetime. The gains start when you inherit the stock and taxes need to be paid only if you sell it.
The estate tax should be done away with entirely-----------You have already paid taxes on earnings
and why should you have to pay double taxes just because you die?????????????????
Each "tax break" you want to eliminate simply means you want to increase the percentage of the economy that is taken from taxpayers and given to the govt.
SHAME ON YOU for suggesting that instead of cutting government.
Straight 10% for everybody with no exemptions, one simple form! You will still gain billions over this exempt ridden tax schedule that allows major corporations to pay 0 or a very small amount of the tax burden. If that formula is still not bringing in enough to fund the government, more cuts and as a last measure a 1% consumer tax or national sales tax. Even, fair and everybody has to pay their fair share. The progressive tax schedule is a joke with all the exemptions currently in it. Oh yea! a 35% tax rate for all corporations that manufacture over seas and import the product back into the U.S. You see if they build it here they get the 10% rate, talk about stopping the out sourcing and bringing good jobs back to the U.S.. That alone would stop a lot of unemployment being paid out and provide more living wage job tax payers paying into the system. Including Social Security that desperately needs the new workers paying into it.
Oh yea! shut down the Cayman Island and Swiss banking accounts, get the money back on shore and not hidden in tax dodging accounts.
"it's a great way to hand down wealth while avoiding that pesky estate tax"
Incorrect. It only avoids the capital gains taxes. The stock would still be subject to estate tax at its full value.
So this author thinks it unfair that the Federal government is not taxing you on the tax that you have to pay to state and local governments. Are you kidding me. They talk about the money as if the government earned it and you are the one getting a handout rather than the other way around.
It is amazing how all the articles seems to imply government entitlement through taxes. Taxes are necessary but why do we always feel our local, state and federal officials are always looking for ways to raise taxes and not how we can lower them or live within the restricted budgets. As with any persoanl finiance, one must live within their means, but the government never approaches it that way. They always seem to think more money will resolve any problem in lieu of how to impove the issues through good business/government decisions based on the funds available, as most famililes everyday. It is frustrating to think government officials are always looking for something they can tax as if it is their badge of honor.
Simple system really!
If one is Poor or Rich than that person pays less tax or no tax....
The Poor and the Rich are the first classes to scream " my rights have been violated " .
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