Ineffectual Taxes
Democrats won’t be able to find the revenue they need from closing “loopholes for the rich.”

Copies of Obama's 2014 budget at the Government Printing Office


During the 2012 presidential campaign, the Democratic party and the Obama campaign had one major criticism of Mitt Romney’s tax proposal: It couldn’t raise as much revenue from closing loopholes and limiting tax deductions for the rich as Romney claimed, so in order to achieve the rate reductions he promised it would have to raise taxes on the middle class. During the fiscal-cliff battle, the White House and Democrats made the same accusation: House Republicans couldn’t raise as much revenue as the White House wanted ($800 billion to $1 trillion, give or take) by closing loopholes — at least not without hitting the middle class.


Policy debates can realign more quickly than you’d think, but rarely this quickly: Senate Democrats recently passed a budget that won’t raise the revenue they say it will ($975 billion) by eliminating deductions, and if they want it to do so, they’re going to have to milk middle-class families. Meanwhile, the White House, about to release its own 2014 budget, has remained somewhat consistent: It is still suggesting some limits on tax expenditures — but it’s realistic about the revenue available, and it openly proposes raising taxes on the middle class.

The Senate’s budget proposes raising $975 billion over the next ten years, “eliminating loopholes and cutting unfair and inefficient spending in the tax code for the wealthiest Americans and biggest corporations” while ensuring that the tax increases “come only from the wealthiest Americans and biggest corporations.” (I’ll assume that means all Americans making less than $250,000, as both parties seem to have agreed that above that, there be tycoons.)

But there is almost no such thing as a tax benefit exclusively devoted to “the wealthiest Americans and the biggest corporations.” If you add them all together — the capital-gains rate paid on some investment managers’ compensation, or “carried interest” ($13 billion over ten years); mortgage-interest deductions for second homes and yachts ($80 billion over ten years, much of which comes from people making less than $250,000 anyway); accelerated depreciation for corporate jets ($2 billion over ten years); and a few others — you still end up with a paltry amount of revenue.