Respondents to this week’s RBJ Daily Report Snap Poll generally do not favor substantially cutting or eliminating some of the biggest tax breaks in the federal tax code. A notable exception is the deferral of taxes on income earned overseas through foreign subsidiaries and affiliates; nearly 90 percent of readers support cutting or eliminating that provision.
Removing tax breaks and loopholes is one way President-elect Donald Trump and congressional Republicans have said they might pay for major cuts in marginal tax rates.
Trump and Republicans in Congress have not yet reached agreement on a detailed plan, but both have backed sweeping reductions that would lower taxes at all income levels. An analysis by the Tax Policy Center of the Urban Institute and Brookings Institution found that Trump’s final campaign tax proposal would increase the federal debt by at least $7 trillion over the first decade.
Tax breaks allowed under the Internal Revenue Code total more than $1.3 trillion annually, according to a Pew Research Center analysis of data from the Joint Committee on Taxation. Also known as tax expenditures, these breaks include exemptions, deductions, credits and other special provisions that benefit particular individuals and businesses, Pew notes.
The two biggest tax expenditures are employer-paid health care, health insurance and long-term care insurance; and lower tax rates on dividends and long-term capital gains.
Roughly 380 readers participated in this week’s poll, which was conducted Dec. 27.
What is your political affiliation?
Reductions in marginal tax rates will pay for themselves by increasing GDP. Most tax credits are just subsidies paid for through the tax system and do not have the same effect. The government should cease trying to affect behavior through the tax system and limit it to raising funds for government operations.
There is no reason for the mortgage interest deduction to be considered sacrosanct. It should be eliminated immediately for anyone who doesn’t already have a mortgage, and phased out over several years for those who do. The government shouldn’t be rewarding people for going into debt or encouraging them to own homes they cannot afford. Tax breaks for insurance and savings should continue, since these are things the government should encourage. And although it isn’t on your list, the carried interest loophole should be eliminated.
There are too many tax loopholes for massive corporations, which is why they have headquarters that have no address in foreign countries. There are loopholes for the excessive rich to shelter their money from taxes, just like our president-elect! Start taking these away along with the alternative minimum tax. Give the tax breaks to the small business, middle and lower income people.
The federal tax code has morphed into the biggest mess imaginable. In my opinion, taxes should be collected to operate the federal government. The tax code should not be used to induce behavior and subsidize ANY particular activity. Deductions like the ones listed in this survey do nothing more than shift the revenue burden from one group to another. I benefit from five of the 10 survey tax questions, and I would happily give them all up in order to pay the “real” tax rate. Simplification is the answer!
—Sam Messer, Applied Measurement & Controls Inc.
There is no respectable reason why I pay a lower tax rate on my investment income than my neighbor pays on the income earned by the sweat of his brow!
This is a stupid exercise. Getting rid of tax breaks is no different than raising taxes.
I found it interesting that the corporation capital investment depreciation wasn’t on the list. Similarly, oil and gas tax breaks weren’t on the list. One last comment on the topic: Asking the average person to select is like asking which fox should be kept in the henhouse.
—Wayne Donner, Rush
The Adoption Tax Credit is among the tax credits slated to be eliminated in the new federal budget. Losing this credit will be an enormous loss to the families which adopt children, and to state and local budgets as well. The credit truly does encourage and enable lower income families to adopt children. Studies have shown that the credit, which offsets some or all of the costs to families adopting children, actually saves the government money in lower costs for services to the children who might otherwise be in foster care or group homes.
—Gregory Franklin, Brighton
This week’s question misses the whole point! Cutting existing taxes leaves companies and consumers more money to spend on everything, from new equipment to meals at restaurants. That spending creates jobs for people and profits for companies. Which in turn creates more revenue for all levels of government, from withholding taxes to sales taxes etc. It is proven to work every time it’s tried. Cutting tax A but eliminating deduction B as an offset does nothing to spur spending growth.
—George Thomas, Ogden
Selecting tax breaks to reduce or eliminate is difficult to swallow but necessary to do. The four I chose add up to approximately $380 billion per year, but one tax break not listed is the one Donald Trump used to great advantage, the NOL, or net operating loss, in which it appears he may not have paid any federal income tax for the past two decades. Although legal, I don’t believe it passes the smell test in which those taking great financial risks get rewarded by the Feds forgiving huge amounts into perpetuity. Maybe five years, but not forever. A second item often discussed but never moved out of committee is a 25 basis point charge for all brokerage transactions and elimination of the carried interest rule. These changes would generate much needed revenue to truly help middle income.
—Peter Bonenfant, Fairport
The federal tax breaks which people will choose to keep and to give up will depend on whose ox is gored. We should keep all the deductions which generate income like the earned income credit, which will be spent right away; lower tax rates on dividends and long term gains; and contributions to defined contribution retirement plans and defined-benefit pension plans, which will be invested and taxed on withdrawal. My children are 30 and 27 so we can cancel the credit for children under 17. Health care insurance subsidies should be canceled. Allow health care insurance (rates) to find their own level in the health care marketplace. There is no need for the mortgage deduction. Canada has no mortgage deduction and has an equal homeownership rate. One deduction not mentioned is the charity deduction, which I support. Charities do the work the government should be doing.
—Clifford Jacobson, M.D., Vanguard Psychiatric Services PC
Unfortunately, this question is based on an apocryphal belief. The idea that Republicans will “cut taxes” is much like the idea of, well … Santa Claus, to keep with the season, or the Tooth Fairy. They may close some “loopholes,” and they may even cut a few small portions of the tax code. But rest assured, progressives, taxes will go up. And government spending will go up. Even the great Ronald Reagan increased government spending. So those that are in favor of a reduction in the size and scope of government will have to wait for the second coming of Calvin Coolidge or Ron Paul. PS: I love the term “loophole.” We imply that there is something evil or disingenuous about following the letter of the law. Of course, we do this instead of correctly pointing the finger at the disingenuous and untrustworthy politicians that are making the laws.
—Kenya Burn-Moore, Rochester
Maybe I’m confused or maybe I’ve just been involved in business too long or maybe this question is just skewed by your editors and the RBJ has a hidden agenda. Aren’t all the items listed (with the exception of the earned income tax credit, credit for children under age 17 and dividends) operating expenses for businesses? To call them tax breaks is to presume that we have a gross receipts tax as the basis for corporation taxation and that just isn’t so. Why doesn’t the RBJ, instead of putting a slant on the subject of lower taxes, just ask the question of how would the readers fund a lowering of the corporate tax rates? Our U.S. corporate tax rates are extremely high and serve as a restriction on investment and growth. Personally, I’d like to see government spending drastically cut and for the federal government to get out of the energy and education business and return the administration of these type items to the states where they belong according to the Constitution.
—Keith B. Robinson, Diamond Packaging
Cut 79 percent farm food subsidies! Cut all transportation subsidies!
—John L. Sackett Jr., Byron
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