Tax Expenditures—The Hidden
Entitlements by Robert S. McIntyre and Citizens for Tax Justice
According to Martha T. McCluskey writing elsewhere,
one major double standard gets ignored: “Ordinary people get less
security—while entrepreneurs—‘risk takers’—get government” protected loopholes,
subsidies, bailouts, monopolies, media control, and lobbying power. Examples
include the savings and loan bailout, tax expenditures, cable company
monopolies, Federal Reserve bailouts, airline bailouts, broadcast spectrum
giveaways, IMF bailouts, IMF fixed currency rates, and Small Business Administration
loans to convicted felons with no intention of paying the loans back.
This is one of those books that almost nobody reads,
yet is filled with important data. It contains a detailed
list of tax expenditures—subsidies, loopholes and so on—that will cost $3.7
trillion with a T between 1996 and 2002. If a government agency spends $3.7 trillion it gets noticed. If it
is done through the tax code, it sneaks by.
Tax expenditures include deductions for corporations,
business meals and entertainment, multinational tax breaks, insurance, tax-free
bonds, capital gains, accelerated depreciation, home mortgages, pensions and
various personal deductions and other tax entitlements are covered here. Among
the most bizarre expenditures are those rewarding companies for moving overseas.
There would be no problem if tax expenditures served an
overall benefit and were merited, but most of these entitlements cause
overall harm. When the government subsidizes gold mining, for example, we get
more mining than we otherwise would—and mine clean up costs and other
costs passed on to citizens. And for what? Eighty percent of gold ends up as
attorney busy finding and fighting for loopholes is potentially one less person
in the productive economy. The tax attorney down the street might otherwise
have discovered a new drug for leukemia.
McIntyre explains why deductions are worth more to
wealthier individuals than lower income individuals. An individual in the top income
tax bracket gets up to a $3,960 tax break on a $10,000 mortgage payment. A
low-income working family of four with a $300 dollar monthly mortgage payment
gets nothing. Worse, tax expenditures keep increasing. They cost $434 billion in
1995 and may cost an additional $175 billion in 2002. The mortgage interest
deduction will soon cost $60 billion a year, making it the largest housing
program on the planet. And that merely covers direct costs. Individuals buying
bigger houses, with bigger lawns and bigger energy costs than they otherwise
would have create many costs for other citizens. Heaven forbid that anyone should live in a $300,000 dollar home when they could be living in a $400,000 dollar home.
The remark MacIntyre makes about capital gains applies
to most tax expenditures. “[P]aying people and corporations to make investments
that otherwise make no economic sense undermines economic growth,” and causes
many non-economic harms.
Frankly, it amazes me that CTJ even exists, an
organization that fights powerful lobbies with boring truths. CTJ is evidence
that not everyone has given in to infotainment.
This work has few specific recommendations other than implying
that all tax expenditures should be eliminated, but it is a wonderful little
book. Highly recommended. Available for free at ctj.org
58p (H) 1996
—Book review article by J.T. Fournier, last updated July 24, 2009