Why Cutting Tax Breaks Isn't So Simple
Posted at 2:15 p.m. on Nov. 21, 2012
The New York Times has a fascinating analysis of the trade-off between ending all tax breaks for the wealthiest tax brackets and other tax reforms to raise revenue.
“Wiping out all tax expenditures — the official name for the deductions, credits and other loopholes addling the tax code — for the top 2 percent of earners would raise about $2 trillion over 10 years… But doing so would mean that a family earning just over $250,000 a year might face a sharply higher tax bill than a household earning just under that amount.”
“A phase-in, which most analysts consider unavoidable, might slash $300 billion from the revenue pot, leaving roughly $1.7 trillion… There would be no deduction for charitable giving, or close to none, angering wealthy donors and nonprofit directors. The home mortgage interest deduction would vanish, hurting the housing market just as it has started to turn around. Preferential tax treatment of capital gains and dividends would disappear, probably throwing the markets into a sell-off. The top 1 percent of earners might see their after-tax income fall as much as 19.8 percent.”