ReutersThere's an outstanding new report from the Congressional Budget Office analyzing which income sectors receive the most benefits from tax expenditures.
One thing is completely obvious after the report: The U.S. tax code is designed to turn the screws on the middle class, while granting huge tax breaks to the rich and and tax credits to the lowest income quintile.
The CBO calls these "tax expenditures" because "they resemble federal spending by providing financial assistance to specific activities, entities, or groups of people. Tax expenditures, like traditional forms of federal spending, contribute to the federal budget deficit."
The report looked at four kinds of tax expenditures:
- Exclusions from taxable income - Roughly evenly distributed among the quintiles.
- Deductions - Benefits of itemized deductions "rise sharply with income," benefiting the rich the most.
- Preferential tax rates - The low tax rates on dividends and capital gains "provide almost no benefits to households in the bottom four quintiles" but are a huge benefit to the upper fifth.
- Tax credits - The credits provide large benefits to households in the lowest income quintile by design, with decreasing upward benefits.
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