Tags: IRS | Polls | cbo | deductions | lobbyists | revenue

US Corporate Tax Expenditures Total $131b

US Corporate Tax Expenditures Total $131b
(Tzogia Kappatou/Dreamstime) 

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Wednesday, 18 October 2017 10:08 AM Current | Bio | Archive

President Trump’s proposed tax policy change would lower the top corporate tax rate but hope to make up the revenue by eliminating deductions and spurring economic growth.

Currently, corporate tax deductions are estimated to cost approximately $131 billion or more annually.[1] That figure reflects 38 percent of the total corporate tax collected.[2]

However, as the Congressional Budget Office (CBO) notes, "The total amount of tax expenditures does not equal the increase in revenues that would occur if the tax expenditures were eliminated." That’s because changing the tax code would change the behavior of many Americans.[3]

One example provided by CBO notes that "if preferential tax rates on realizations of capital gains were eliminated and those gains were instead taxed as ordinary income, taxpayers would reduce the amount of capital gains that they realized, diminishing the additional revenues that would be produced."[3] If you raise taxes on capital gains, people will be less likely to sell their stocks or other capital gains. On the other hand, if you lower taxes on capital gains, people will be more likely to sell and pay the tax.

Most of the focus on tax issues revolves around the amount of income produced for the government and who pays it. However, in the larger context, it’s important to note that deciding who gets what deduction is a way for the government to pick winners and losers. "Tax expenditures increase the size and scope of federal involvement in the economy." According to CBO, "adding tax expenditures to conventional federal outlays makes the federal government appear notably larger relative to GDP."

This is the reality that keeps lobbyists fully employed.

Footnotes:

  1. Tax Foundation, "Corporate and Individual Tax Expenditures," August 2015
  2. Calculation based on Tax Policy Center, "Federal Receipts & Outlays: Amount of Revenue by Source," February 15, 2017
  3. Congressional Budget Office, "Tax Expenditures," March 17, 2017

Each weekday, Scott Rasmussen’s Number of the Day explores interesting and newsworthy topics at the intersection of culture, politics, and technology. Columns published on Ballotpedia reflect the views of the author.

Scott Rasmussen is a Senior Fellow for the Study of Self-Governance at the King’s College in New York and an Editor-At-Large for Ballotpedia, the Encyclopedia of American Politics. His most recent book, "Politics Has Failed: America Will Not," was published by the Sutherland Institute in May.To read more of his reports — Click Here Now.

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President Trump’s proposed tax policy change would lower the top corporate tax rate but hope to make up the revenue by eliminating deductions and spurring economic growth.
cbo, deductions, lobbyists, revenue
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2017-08-18
Wednesday, 18 October 2017 10:08 AM
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