Tax package just passed will increase deficits by $68 billion annually

Reported here:

"The Joint Committee on Taxation (JCT) estimated that the tax bill will cost $622 billion over 10 years. Tax provisions in the omnibus will cost an additional $58 billion over 10 years, JCT said."

CBS News claims Trump keeps the EITC

Here.

For the current 5-year period 2012-2016 the Joint Committee on Taxation has previously estimated the annual cost of the Earned Income Tax Credit to be about $64 billion.

That's actually less costly than the food stamp program was in 2014: $74.2 billion.

Keeping the EITC means keeping what amounts to a welfare program, but one which rewards only those who work. The transfer payments to such individuals basically rebate the Social Security taxes they pay even though they generally make too little to pay much in the way of federal income taxes, if they pay any at all.

Trump's claim that his plan will be revenue neutral is already taking incoming because of things like this.

Of course we don't know what spending Trump plans to cut. He might go really big and call for shuttering some cabinet level departments entirely. The Department of Education, for example, costs $77.4 billion.

Libertarians At Forbes Completely Misrepresent The Mortgage Interest Deduction

Here:

The mortgage interest deduction (MID) is the largest personal tax deduction on the books and is widely considered one of the most sacrosanct tax benefits in the country because it is seen as making homeownership more affordable for middle-class Americans. Our new Reason Foundation research suggests, though, that the average benefits from the MID are not enough to be the difference between renting and home owning for a household.

----------------------------------------------------------------

If there's a sacrosanct tax benefit in this country, which by the way benefits mostly upper income people who also pay most of the taxes, it's reduced rates of taxation on dividends and long term capital gains, which the Joint Committee on Taxation says costs the federal government $596 billion in lost revenue between 2012 and 2016. The mortgage interest deduction, by contrast, will cost the feds $364 billion. Leave it to Forbes not to mention that.

The mortgage interest deduction may or may not be "the largest personal" deduction, but in the big picture of revenue forfeited by the feds due to tax preferences, which is categorized as "tax loss expenditure", the mortgage interest deduction represents just 6.9% of the revenue lost out of the largest 21 line items in the JCT's report representing $5.25 trillion in tax loss expenditures for the period mentioned (here).

Preferential treatment of income from stocks isn't the biggest preference either (11.4%), but it is much bigger than the preference given to mortgage interest. But businesses do get the biggest preference. When employers provide healthcare contributions, health insurance and long term care insurance, they get to deduct all of that. Cost to the feds? A whopping $706.6 billion (13.5%). And that figure will only grow under ObamaCare.

And how about retirement plan contributions? Cost of excluding both defined benefit and defined contribution plans comes to $505.3 billion over the period (9.6%).

Compared to these, the mortgage interest deduction comes in a distant fourth (in fifth is the earned income tax credit at $319.7 billion).

The much-maligned charitable deduction, meanwhile, which was the original basis for the standard deduction in the tax code, at $172.4 billion represents just 3.3% of the lost $5.25 trillion in revenue from 2012 to 2016. It comes in fourteenth.

There's lots of things wrong with the world, but changing the home mortgage interest deduction isn't going to fix them. For libertarians to focus on it as they do should tell you there's more going on here than meets the eye: an ideological bias against home ownership because it limits "freedom". Millions beg to differ.

Largest Sums Of Federal Revenue Forfeited Because Of The Tax Code, Joint Committee On Taxation, 2012-2016

$706.6 billion: exclusion of employer contributions for healthcare, health insurance premiums and long term care insurance premiums.

$596.0 billion: reduced rates of taxation on dividends and long term capital gains.

$505.3 billion: net exclusion of pension contributions and earnings to defined benefit/contribution plans.

$364.0 billion: mortgage interest deduction.

$319.7 billion: earned income tax credit.

$305.0 billion: exclusion of Medicare Parts A&B benefits.

$289.4 billion: credit for children under 17.

$259.2 billion: deduction of nonbusiness state and local government income taxes, sales taxes and personal property taxes.

$239.7 billion: deferral of active income of controlled foreign corporations.

$236.1 billion: exclusion of capital gains at death.

$184.3 billion: subsidies for participation in healthcare exchanges.

$182.8 billion: exclusion of interest on public purpose state and local government bonds.

$175.8 billion: exclusion of benefits provided under cafeteria plans.

$172.4 billion: deduction for charitable contributions.

$172.1 billion: exclusion of untaxed Social Security and railroad retirement benefits.

$153.8 billion: exclusion of investment income on life insurance and annuity contracts.

$143.0 billion: property tax deduction.

$124.1 billion: exclusion of capital gains on the sale of a home.

$119.1 billion: credits for tuition for post-secondary education.

Rich Radio Talkers To Make Bazillions Off AMT Fix And Don't Know It!

The New York Times reported the cost to the federal government of the permanent AMT fix over the next decade at $1.8 trillion, here, based on the findings of the Joint Committee on Taxation.

Do you know what that means?

If something costs the federal government something, it means it saves someone something, namely, the (mostly) rich taxpayers who pay the damn thing, who now get to bear the blame in the liberal media for increasing the deficit over the next decade because of it. That's a good thing to a conservative, last time I checked (keeping the money, not getting the blame), unless you are a conservative radio talk show host whose stupidity is exceeded only by the size of his paycheck. (Sean Hannity is so stupid he's actually criticizing the fiscal cliff deal because it does just that, increase the deficit. Someone should tell him he's just adopted the liberal argument that tax cuts increase the deficit, not that it would do any good). Teams Limbaugh, Hannity, Ingraham and Beck really ought to call their CPAs before they continue shooting their mouths off about what a massive victory Obama just achieved on the backs of the rich. The irony here is that while Obama thinks he just won a free Cadillac, it turned out to be a Pontiac from Rent-A-Heap, delivered by Rush, Sean and Glenn. They made Laura drive.

When are you stupid people out there in radio land going to get it? Like this guy does:

"The AMT fix, like the Medicare 'doc fix' was an end of year ritual that couldn’t be resolved permanently.  Why you may ask?  Because any permanent fix would reflect in the CBO’s deficit and debt estimates for the years going forward.  Fixing the AMT for any one year was considered a cost for that particular year, but the CBO would base their estimates by current law, which would have the AMT not being fixed for the next year and every year afterwards.  Fixing the AMT for one year is a cost of 92 billion dollars.  A permanent fix it for the next ten years costs almost a trillion dollars.  From a purely crass, political position, having the costs of a permanent fix to the AMT and Bush income tax cuts accrued under the Obama administration ( two items that Republicans wanted to do but could never find the money for):

Priceless.

However all is not well in conservative talk radio land.  I made it a point to listen to what I think was a fair cross section of conservative radio for their take on all things fiscal cliffdom, and I must say, it was a muddled mess of incoherence."

George Bush Beats Obama: NYT Says Republican Fantasies Fulfilled By Democrats

I won? Hey, that doesn't make any sense.

For once The New York Times gets it right, here, emphases added:

Just a few years ago, the tax deal pushed through the Senate in the early hours on Tuesday would have been a Republican fiscal fantasy, a sweeping bill that locks in virtually all of the Bush-era tax cuts, exempts almost all estates from taxation, and enshrines the former president's credo that dividends and capital gains should be taxed gently. ...

... a hard-fought compromise that [Republicans] could have easily framed as a victory. ...

The bill would do much more than head off the automatic tax increases and spending cuts. It would fix in place a tax code that for more than a decade has caused struggles over regular sunset provisions, temporary solutions and fleeting incentives. The bill would finally make permanent five of the six income tax rates created in 2001 by the first Bush tax cut. It would codify Mr. Bush's successful push, in 2003, to make tax rates on dividends and capital gains equal so that one form of investment income is not favored over the other. ...

The 10-year price includes $762 billion to lock in the Bush tax rates of 10 percent, 25 percent, 28 percent and 33 percent, along with some of the Bush-era 35 percent bracket; $354 billion to continue Mr. Bush's expanded child credit; and $339 billion to secure Mr. Bush's 15 percent capital gains and dividend rates for families earning less than $450,000. The alternative minimum tax fix would cost the Treasury $1.8 trillion, according to the bipartisan Joint Committee on Taxation.

Democrats say they had little choice. The Bush White House and Republican Congresses structured the tax cuts so that letting them expire would be politically difficult. Add the threat of across-the-board spending cuts if Congress does nothing, and President Obama felt he had no choice but to extend most of the tax cuts or watch the economy sink back into recession.

Ha Ha Ha Ha Ha!

Top Tax Loss Expenditures Projected For 2011-2015

From the Joint Committee on Taxation's January 2012 projection, here are the top individual categories of lost tax revenue, commonly referred to as tax loss expenditures (the revenue value of tax deductions, tax exclusions, and tax credits), for the five year period from 2011, annualized:

1. Healthcare, healthcare insurance, long term care insurance = $ 145 billion

2. Mortgage interest = $ 93 billion

3. Dividends, long term capital gains = $ 91 billion

4. 401k plans = $ 75 billion

5. Earned income credit = $ 59 billion

6. Pension plans = $ 53 billion

7. State, local income, sales, personal property taxes = $ 46 billion

7. Capital gains at death = $ 46 billion

8. Cafeteria plan benefits = $ 40 billion

9. Untaxed Social Security and Railroad Retirement = $ 38 billion

10. Charitable giving = $ 37 billion

11. State and local government bonds = $ 36 billion

12. Medicare Part A = $ 35 billion

13. Child tax credit = $ 34 billion

14. Life insurance and annuities = $ 30 billion

15. Medicare Part B = $ 27 billion

16. Capital gains on sale of primary residence = $ 25 billion

17. Property taxes on real property = $ 23 billion

Red = housing related ($ 118 billion)

Green = health related ($ 247 billion)

Blue = investment related ($ 137 billion)

Yellow = retirement related ($ 196 billion)

Purple = social welfare related ($ 130 billion)

Black = state and local government related ($ 105 billion)                                    

The Greedy Bastards' Big Lie About Your Mortgage Interest Deduction

1

Read the data for yourself, here, from the Joint Committee on Taxation's own estimate of the "cost" to the government of your mortgage interest deduction.

The JCT estimated that the government's biggest loss of revenue between 2007 and 2011 came from the exclusion of dividends and long term capital gains from higher tax rates. This does NOT include gains from selling real estate.

Tax losses from deductions for health insurance expenditures ranked second, tax losses from deductions for retirement plans third, all three of which range between $632 billion and $607 billion over 5 years.

The tax loss from deducting mortgage interest was a distant fourth, at $430 billion, yet the drumbeat from so-called conservatives to eliminate the deduction gets louder everyday.

Can you say, "Middle Class Tax Increase"?

2

3

4

Top Ten Tax Loss Expenditures 2011 From The Joint Committee On Taxation

10. Exclusion of benefits under cafeteria plans ................................................................$31 billion

10. Exclusion of untaxed Social Security and Railroad Retirement benefits ....................$31 billion

  9. Exclusion of capital gains at death .............................................................................$38 billion

  8. Deduction of state and local government income taxes, sales and property taxes ......$42.4 billion

  7. Pension plan contributions .........................................................................................$42.7 billion

  6. 401 K plan contributions ............................................................................................$48.4 billion

  5. Tax credit for children under 17 .................................................................................$56.4 billion

  4. Earned income tax credit ............................................................................................$59.5 billion

  3. Mortgage interest deduction ........................................................................................$77.6 billion

  2. Reduced rates of tax on dividends and long term capital gains ...................................$90.5 billion

  1. Exclusion of employer contributions for health care, health/long term care insurance.$109.3 billion

The Atlantic's Lies About Tax Loss Expenditures

The latest lazy lies attacking the so-called privileges of the so-called middle class come from one Linda Killian at The Atlantic here:

"The three largest expenditures in the tax code are all things many middle-class Americans take advantage of -- tax-free employer-provided health insurance, the home mortgage interest deduction and tax-free 401(k) retirement accounts. ... The tax exemptions for home mortgage interest cost the government more than the entire budget of the Department of Housing and Urban Development according to Steuerle [an Urban Institute economist]."

These are NOT the three largest. They rank 1, 3 and 6, not 1, 2 and 3.

If Linda Killian had bothered to read the Joint Committee on Taxation's latest report on the subject, she would have known that.

Here are the top ten tax loss expenditures for 2011, according to this committee of the US Congress:

$109.3 billion  Employer provided health insurance and related

$ 90.5 billion  Reduced tax rates on dividends and capital gains

$ 77.6 billion  Owner-occupied mortgage interest deduction

$ 59.5 billion  Earned income credit

$ 56.4 billion  Credit for children under 17 aka Child Tax Credit

$ 48.4 billion  401K-type plans

$ 42.7 billion  Pension plans aka union retirement plans

$ 42.4 billion  State/local income, sales and property tax deduct.

$ 38.0 billion  Exclusion of capital gains at death

$ 31.0 billion  Exclusion of benefits under cafeteria plans

$ 31.0 billion  Exclusion of untaxed Social Security and RR benes.

Who benefits from the top three? It's hardly a middle class phenomenon . . . today.

Rich and poor and everyone in between gets health insurance when they are employed by an employer, not just the middle class. And they don't pay tax on that "income." But the size of this break is bound to decline dramatically in coming years, if ObamaCare is not struck down or repealed. Fewer employers will be providing coverage, choosing to pay lower fines instead. Other companies will deliberately downsize in order to escape the requirements under the law, making employer-provided insurance less common than it is today. The net effect may very well be that employer-provided health insurance becomes more and more an upper class phenomenon.

Reduced rates of taxation on dividends and capital gains primarily benefit the rich in America. Could that be why Killian overlooked it entirely? It certainly doesn't fit her narrative against the middle class, does it? But this category is the real number 2 in the list of tax loss expenditures.

Working class and middle class people who are lucky enough to have joined the investor class are investing primarily through tax-deferring vehicles like union pension plans and 401K plans, which rank number 7 and 6 in Congress' accounting of tax loss expenditures. It is questionable, however, for pensions and 401Ks to appear in this list of tax loss expenditures at all. Eventually the deferred money will become income, and it will be taxed.

But the more important point is that everyone in this bottom 66 percent of wage earners by definition makes less than $100,000 per year and by and large very few of them are playing around in the stock market, where fat cats like Bill Gates and Warren Buffett and Mitt Romney derive their unearned income, taxed at the non-permanent lower rates under the Bush tax legislation of 2001-2003. Were these rates permanent, however, this tax loss expenditure wouldn't even make the list.

Contrast that with something which is more or less permanent: the exclusion of income from Social Security taxation. The current income ceiling after which income is not so taxed is almost $107,000 per year. In 2010 just under $2 trillion in ordinary wages and salaries made by the rich escaped the Social Security tax. The tax loss expenditure of that? $125 billion, higher than anything in the Joint Commission's report. And it all went to the rich.

Third is the ever popular whipping boy of the tax reform crowd, the mortgage interest deduction. It should worry average Americans who struggle on the crumbs which fall from their masters' tables that our betters want to make it harder for us to own four walls and a little garden and a tree. 100 million out of 150 million wage earners in 2010 made less than $40,000 per year. Try buying a house on that.

Democrats and Republicans have successfully conspired to attack Social Security for the first time by de-funding it temporarily and haven't yet been electrocuted by the once-feared third rail of politics, so I fully expect them to keep trying on mortgage interest.

Four years ago the mortgage interest deduction was more like $88 billion, so with the collapse of housing we have witnessed a decline in the amount of mortgage interest being paid, and so deducted. $10 billion less. The reason for this is two-fold. One, fewer homeowners. Two, refinanced mortgages at lower rates. With home ownership already under severe stress, it is astonishing that liberals of both parties continue to attack it under the guise of tax fairness. What it really is, is statists greedily looking for more revenue.

I say they can all go to hell.