Wasteful Tax Code Spending
At a hearing on reducing the deficit by eliminating wasteful spending in the tax
code on Tuesday, Budget Committee Chair, Democrat Patty Murray struck some hard
notes in areas ripe for revenue raising. “There’s no good reason that taxpayers
currently subsidize millionaires more, when they purchase a second home, or a
yacht, than they do middle class families purchasing their first home. And why
should a hedge fund manager pay a lower tax rate on his income than a soldier,
police officer or a teacher?” Murray added, "My Republican colleagues, in
particular, tend to focus on cutting programs the most vulnerable families
depend on to get back on their feet. They say spending on food stamps is out of
control, and we can’t afford so many education and job training programs, and
unemployment benefits are driving up the deficit. Now, there’s no question that
we do need to look at government programs carefully, so that we can make fair,
responsible cuts that put families and our economy first. But a big source of
spending, and one that deserves to be just as closely examined, is expenditures
in our tax code. Tax expenditures have grown over the last 20 years to become
one of the largest impacts on our deficits and debt. Just this year, the
Treasury will lose $1.3 trillion to tax expenditures. That’s more than we’ll
spend on either Social Security or Medicare. But here’s a big difference: when
we think of entitlements, we typically think of Social Security and Medicare,
which keep our promises to seniors, or nutrition assistance, for families who’ve
fallen on hard times. These programs allow our country to fulfill its part of
the bargain with those who have already done their share, and enable us to give
those most in need some relief. For that 70 percent of tax expenditures, the
higher your income, the more you benefit. So the wealthiest households benefit
the most, while middle class families receive much smaller benefits, and many of
our most vulnerable don’t qualify at all. The less you need, the more you
get. And we all pay for it. In 2012, on average, the top 1 percent of income
earners saw their after-tax income increase by nearly $250,000 as a result of
tax expenditures. But middle class families received an average benefit of only
about $3,500. Which means that when we talk about big government welfare, maybe
we shouldn’t always jump to cut spending for those who are most in need. Maybe
we should think about what we’re spending on those who are least in need. The
skewed nature of tax breaks like these has helped drive the amount the
wealthiest Americans pay in taxes to historically low levels, as a share of
their income. IRS data show that the effective tax rate for the 400 wealthiest
taxpayers has fallen from almost 30 percent in 1995, to only 19.9 percent in
2009.This is less than the rate paid by many middle-class families. And
meanwhile, over the same time period, the average income for the 400 wealthiest
taxpayers rose five-fold. That’s probably why some tax expenditures are often
called back door spending, or special interest earmarks for the largest
corporations and wealthiest Americans. Just as we have got to bring down our
deficits and debt, we’ve got to make sure we’re educating our workforce for the
21st century. We need to repair our roads, bridges and airways so that
businesses can move their people and products efficiently. And we need to invest
in research and development so we can continue growing new industries in the
United States, rather than ceding those new industries, and the jobs that come
with them, to China or India. A recent poll showed that 57 percent of
respondents strongly agreed we should eliminate the loophole that allows hedge
fund managers to pay lower tax rates than the middle class. 58 percent strongly
agreed with closing loopholes that allow wealthy Americans and corporations to
shift income overseas. And Americans want to see that new revenue used to lower
the deficit, and make crucial investments in our future, rather than lowering
tax rates for those who are already doing just fine.
The Dow Jones Industrials Average moved to an all-time intraday and closing high
of 14,207.65 during early morning trading on Tuesday.
The Institute for Supply Management reported on Tuesday its survey of purchasing
managers - the executives who buy supplies for their companies - rose to 56% in
February from 55.2% in January. ISM's new-orders index rose 3.8 points to 58.2%,
production moved slightly higher by 0.5 points to 56.9% and employment fell by
0.3 points. Of the 18 industries tracked, 13 reported growth during February, an
increase from eight in January.
According to CoreLogic, U.S. home prices rose by 0.7% in January to stretch the
year-on-year advance to 9.7% for the largest year-on-year gain since April 2006.
CoreLogic chief economist Mark Fleming said in a statement, "With these gains,
the housing market is poised to enter the spring selling season on sound
footing." Home prices nationally have shrunk by 26.4%. Delaware and Illinois
were the only two states not experiencing year-over-year price gains with
Arizona taking the lead with a 20.1% surge. CoreLogic's pending home sales rise
forecasts a 0.3% decline in February but a year-on-year gain of 9.7%.
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Mar 5, 2013