On this Independence Day, it's appropriate to link to a trenchant discussion of how most Americans are much less "independent" that they think they are. It's popular these days to call for cutbacks of "government spending" with the expectation that such cutbacks will only affect "other people." In an article in
The Washington Monthly, Suzanne Mettler provides some eye-opening data:
Beneath the surface of American government lurks a system of social programs for the wealthy that is consuming the federal budget. It’s time for progressives to do battle with tax expenditures.
As a matter of budgeting, however, there is no difference between a tax break and a social program: both have to be paid for, either by raising tax rates or by adding to the deficit...
Of the three most expensive ones, the Home Mortgage Interest Deduction was created first, as part of the original tax code in 1913; the preferential tax treatment of employer pensions was established through a hodgepodge of administrative rulings and congressional statues between 1914 and 1926; and the tax-privileged status of employer-provided health benefits resulted from a similar conglomeration of policies during World War II and in the 1950s. In 2011, these three pillars of the submerged state are expected to cost the nation $104.5 billion, $67.1 billion, and $177 billion, respectively...
Whereas mainstream Democrats have traditionally taken the lead in creating our landmark direct social programs, it was originally Republicans and conservative Democrats who initiated the benefits that operated through the tax code. Doing so enabled them to court their favored constituencies and channel resources toward them, but without creating or enlarging government bureaucracies to distribute the funds...
Most Americans assume that U.S. government social programs aid primarily the poor and the middle class, but tax expenditures generally shower their most generous benefits on those in the upper reaches of the income spectrum...
On the rare occasions when policymakers do actually speak about the Home Mortgage Interest Deduction, they portray it as a middle-class benefit that helps to increase home ownership, a pillar of the American dream. Yet countries such as Canada and Australia manage to have U.S.-level rates of home ownership without offering a home mortgage interest deduction in their tax codes. Moreover, in 2004, 69 percent of the benefits of America’s home mortgage interest deduction were claimed by households with incomes of $100,000 or above—the top 15 percent of the income distribution...
Much more at the
link.
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