What will you be reading on the beach this summer? / Photo by Klara Kim
It’s sexier than you think. Tax breaks might not be your first thought for hot summer beach reading, but what we’re really talking about are big piles of cash. And that makes for juicy summer intrigue.
Tax breaks – a.k.a. tax loopholes – are policies written into law to encourage activity the government deems beneficial, such as home buying, by offering a special discount in your taxes. But as the number and size of tax breaks has increased over time, the federal government loses money it would otherwise collect in revenue. This year all tax breaks combined will total around $1.2 trillion – about 16 times the size of Bill Gates’ fortune, and substantially more than this year’s budget deficit. That's a lot of cash staying in the pockets of taxpayers who would otherwise owe it to Uncle Sam.
As it happens, the top 10 tax breaks alone account for the vast majority – $900 billion – of that $1.2 trillion. And more than half of those $900 billion in benefits will accrue to the wealthiest 20 percent of households. Policies like the home mortgage interest deduction disproportionately benefit wealthy taxpayers who have more expensive mortgages and can even take a deduction for second and third homes.
Americans are divided on what to do about this and other tax breaks. According to one poll, 41 percent of Americans would like to see the home mortgage interest deduction reduced for all taxpayers, while 19 percent would like it reduced only for the wealthy, and 30 percent say it shouldn’t be altered at all.
Both the House and Senate are talking about tax reform – and that could mean fundamentally overhauling the tax code and modifying or eliminating some tax breaks. But a report to Congress back in February by the Joint Committee on Taxation hinted at the difficult road ahead: Every tax break has its own beneficiaries who want to see the tax code improved overall while leaving their particular tax break intact.
Talk about suspenseful beach reading. No one knows how this cliffhanger will turn out, and trillions of dollars are at stake.