Who Gets Tax Breaks? Tax Expenditures and Credits by Income Group

From Dylan Matthews:

The CBO is out with a big new report on who gets what out of tax expenditures, the deduction, credits, and exclusions that have grown to cost the federal government hundreds of billions of dollars a year.

Here’s the headline: the 10 major expenditures examined in the report cost the government $900 billion this year and will cost almost $12 trillion over the decade to come. That’s more than Medicare, defense or Social Security.

So who’s getting all this money? The affluent, for the most part. Nearly half of the budgetary cost of the expenditures went to people in the top income quintile, which, for a family of four, means families making over $162,800 a year pre-tax:

cbo_taxexpenditures

As a share of individuals’ income, the level of benefit doesn’t differ that much by class. In fact, the very poorest and the very richest each do better than those in the middle:

cbo_taxexpenditures2

It’s also worth noting that the kind of expenditures matters a lot in terms of who benefits. Refundable credits like the Earned Income Tax Credit or the Child Tax Credit are a huge deal for the bottom quintile, but they’re basically worthless for the top one percent:

cbo_taxexpenditures3

On the other hand, itemized deductions for state and local taxes, charitable contributions, and mortgage interest primarily benefit the rich*:

cbotaxexpenditures5

Same goes, unsurprisingly, for the lower rates on capital gains and dividend income:

cbotaxexpenditures4

Exclusions, or types of income that are just excluded from taxation (including, in many cases, payroll taxation) entirely, are a more mixed bag. The biggest exclusion, that for employer-provided health insurance, gives the most benefit to the bottom quintile, but the bottom 90 percent all together get about the same out of it. But the very rich don’t get much at all. On the other hand, other exclusions, such that for pension contributions and earnings, tend to benefit the wealthy more:

cbotaxexpenditures6

 I can’t break down the contribution by deduction, sadly, as they interact with each other; the interactions between credits and exclusions, by contrast, are minimal.

Advertisements

About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar. http://faculty.chicagobooth.edu/owen.zidar/index.html
This entry was posted in Uncategorized and tagged , , , , . Bookmark the permalink.

One Response to Who Gets Tax Breaks? Tax Expenditures and Credits by Income Group

  1. I’ve been exploring for a little bit for any high-quality articles or weblog posts
    on this sort of area . Exploring in Yahoo I finally stumbled upon this site.

    Reading this info So i am happy to convey that I have a very excellent uncanny
    feeling I came upon exactly what I needed. I such a lot for
    sure will make certain to don?t put out of your mind this website
    and give it a glance regularly.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s