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Political Talk
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Old 03-19-2013, 01:16 PM   #1
Rhumb
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The Most Expensive Tax Breaks

While many, particularly the GOP, have proposed cutting tax breaks as a way to balance the budget, I don't think any actually go so far as to detailing just what tax loopholes, errr, breaks they would cut, typically leaving it to the otherside to take on that unpopular task.

Well, here are the eight most expensive tax breaks, according to this article in Yahoo News:
  1. Employer Paid Health Insurance
    Five year cost: $760 billion
  2. Lower Rate For Capital Gains, Dividends
    Five year cost: $616 billion
  3. State And Local Tax Deductions
    Five year cost: $431 billion
  4. Mortgage interest deduction
    Five year cost: $379 billion
  5. Tax Free Medicare Benefits
    Five year cost: $358 billion
  6. Workplace Retirement Saving Plans
    Five year cost: $336 billion
  7. Earned Income Credit
    Five year cost: $326 billion
  8. Child Credit
    Five year cost: $292 billion
Total over five years: $3.5 trillion.

Since we here on this post are of stiffer moral fiber than those wishy washy politicians, just what breaks would you be amenable to eliminating? The Child Credit? The Capital Gains Lower Rate? None? Some? All?

In reality, once faced with cold stark realities, do you think Americans overall would actually accede to eliminating these breaks, abstract sentiments for cutting the budget notwithstanding? Inevitably, these "cut waste, fraud and abuse, and frivolous tax breaks" refers to other people's waste, fraud and abuse, and frivolous tax breaks, certainly not their own noble and worthy programs and benefits.

Or, when faced with these stark realities, do you think there might actually be even more for increasing revenues, i.e., taxes, particularly on wealthier individuals, that polling already indicates a clear majority of Americans want?

What might be the unintended (or intended) negative consequences of eliminating these breaks? Would they undercut are still fragile recovery (as austerity approaches arguably have done in Europe)? Might these be better gradually over time rather than some more cold turkey approach?

Last edited by Rhumb; 03-19-2013 at 01:17 PM.
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Old 03-19-2013, 01:25 PM   #2
casino is no lie
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I support deductions that benefit me.
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Old 03-19-2013, 01:33 PM   #3
evolved
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I think there's plenty of room for modification outside of the black and white option of eliminating one, or the other. One also has to consider the ramifications of changes to these tax programs. For example, the main reason the Earned Income Tax credit is around is to keep low income families off of the government dole by way of food stamps/welfare/etc. If you limit or get rid of the EIC then all of a sudden we'll see certain welfare programs balloon even more. Medicare benefits are tax free, but getting tax money from these type of people is going to be like getting blood from a turnip.

There's an endless number of things that could be done to not only the aforementioned tax credits, but taxes on the whole. With that said, I would be for limiting the Child Tax Credit to 3 kids instead of it being unlimited. This would amount to an increase on low/middle income earners since the current phase out cap is around $110K. On the other hand, I would be for potentially reducing the mortgage interest deduction amount. As it sits currently an individual can deduct the interest on a maximum loan amount of $1,000,000. This would amount to an increase on the middle/upper income earners since people need a high income to afford a $1mm mortgage.
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Last edited by evolved; 03-19-2013 at 01:38 PM.
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Old 03-19-2013, 01:42 PM   #4
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http://en.wikipedia.org/wiki/Paradox_of_thrift

What benefits you individually doesn't benefit the macro side of our economy. Cutting taxes doesn't work unless the savings goes towards production, and it increases to counter the tax break.
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