The Federal Government Loses an Insane Amount of Revenue to Tax Expenditures

A recent presentation by a senior CBO budget analyst to the Maryland Association of CPAs, which I’m sure was much more exciting than it sounds, included this slide:

Tax credits, deductions, and exclusions, in other words, amount to as much of U.S. GDP as the entire federal individual-income tax.

The CBO defines “tax expenditure” very broadly: It includes everything from the fact that employer-paid health-insurance premiums and pension contributions aren’t taxed to the preferential rate for capital gains and dividends and all manner of itemized tax deductions (for mortgage interest, e.g.) and credits (for the production of wind energy, e.g.). As Heritage has pointed out, this is a pretty heterogeneous group, some members of which are just natural parts of good tax policy (I think this is the case for a lower capital-gains rate, though some people disagree). Still, it helps remind us of the economic weight of all the vagaries of the federal tax code, and the size of a few of these expenditures — the exclusion for health insurance, most prominently.

Via economics professor Stephanie Kelton, who is very displeased with the contents of slide 18 (which explain why the CBO thinks higher federal debt is a problem).

Patrick Brennan — Patrick Brennan is a writer and policy analyst based in Washington, D.C. He was Director of Digital Content for Marco Rubio's presidential campaign, writing op-eds, policy content, and leading the ...

Most Popular

Law & the Courts

Obstruction Confusions

In his Lawfare critique of one of my several columns about the purported obstruction case against President Trump, Gabriel Schoenfeld loses me — as I suspect he will lose others — when he says of himself, “I do not think I am Trump-deranged.” Gabe graciously expresses fondness for me, and the feeling is ... Read More
Politics & Policy

Students’ Anti-Gun Views

Are children innocents or are they leaders? Are teenagers fully autonomous decision-makers, or are they lumps of mental clay, still being molded by unfolding brain development? The Left seems to have a particularly hard time deciding these days. Take, for example, the high-school students from Parkland, ... Read More
PC Culture

Kill Chic

We live in a society in which gratuitous violence is the trademark of video games, movies, and popular music. Kill this, shoot that in repugnant detail becomes a race to the visual and spoken bottom. We have gone from Sam Peckinpah’s realistic portrayal of violent death to a gory ritual of metal ripping ... Read More

Romney Is a Misfit for America

Mitt’s back. The former governor of Massachusetts and occasional native son of Michigan has a new persona: Mr. Utah. He’s going to bring Utah conservatism to the whole Republican party and to the country at large. Wholesome, efficient, industrious, faithful. “Utah has a lot to teach the politicians in ... Read More
Law & the Courts

What the Second Amendment Means Today

The horrifying school massacre in Parkland, Fla., has prompted another national debate about guns. Unfortunately, it seems that these conversations are never terribly constructive — they are too often dominated by screeching extremists on both sides of the aisle and armchair pundits who offer sweeping opinions ... Read More

Fire the FBI Chief

American government is supposed to look and sound like George Washington. What it actually looks and sounds like is Henry Hill from Goodfellas: bad suit, hand out, intoning the eternal mantra: “F*** you, pay me.” American government mostly works by interposition, standing between us, the free people at ... Read More
Film & TV

Black Panther’s Circle of Hype

The Marvel Cinematic Universe (MCU) first infantilizes its audience, then banalizes it, and, finally, controls it through marketing. This commercial strategy, geared toward adolescents of all ages, resembles the Democratic party’s political manipulation of black Americans, targeting that audience through its ... Read More