Tax Loopholes and the Federal Budget

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.

Matt Yglesias points to a chart from his CAP colleagues showing a dramatic increase in tax credits and deductions since 1982 and comments, “It’s not a good trend. Simpler taxes and efforts to do a more straightforward consideration of what is and isn’t worth spending money on are a much better idea.” Here’s the chart:

I’m not here to defend tax complification, and I’d like to see some of these tax expenditures cut back too. Still, I call foul. The usual way to measure this stuff is as a percent of GDP, and real GDP has increased from roughly $6.5 trillion in 1982 to $14.7 trillion in 2010. This means that as a percentage of GDP, tax expenditures have fallen from 8.1% to 7.0%. It would be nice for them to fall even further, but not because there’s been an explosion in tax expenditure revenue over the past three decades. There hasn’t been.1

However, CAP’s presentation has ten charts in it, and charts 1-9 are pretty good. It’s worth a click.

1Actually, this is kind of odd. The three biggest tax expenditures are the exclusion of employer contributions to employee healthcare plans, the mortgage interest deduction, and the exclusion of pension contributions. These are all pretty fast growing areas, and in addition lots of smaller tax expenditures have been added to the tax code since 1982. Given all this, I’m surprised tax expenditure revenue hasn’t grown faster.

UPDATE: I’ve revised the GDP numbers in the text. I used the real GDP series from the BEA, but forgot that it’s in 2005 dollars. I’ve adjusted it to 2010 dollars so it’s in the same units CAP uses for tax expenditures.

You could also do this as a percentage of federal revenue rather than a percentage of GDP. If you do it this way the relative size of tax expenditures has indeed gone up (from about 40% to 48%), though some of that is an artifact of the plunge in tax revenue following the 2008 recession.

A BETTER WAY TO DO THIS?

We have an ambitious $350,000 online fundraising goal this month and we can't afford to come up short. But when a reader recently asked how being a nonprofit makes Mother Jones different from other news organizations, we realized we needed to lay this out better: Because "in absolutely every way" is essentially the answer.

So we tried to explain why your year-end donations are so essential, and we'd like your help refining our pitch about what make Mother Jones valuable and worth reading to you.

We'd also like your support of our journalism with a year-end donation if you can right now—all online gifts will be doubled until we hit our $350,000 goal thanks to an incredibly generous donor's matching gift pledge.

payment methods

A BETTER WAY TO DO THIS?

We have an ambitious $350,000 online fundraising goal this month and we can't afford to come up short. But when a reader recently asked how being a nonprofit makes Mother Jones different from other news organizations, we realized we needed to lay this out better: Because "in absolutely every way" is essentially the answer.

So we tried to explain why your year-end donations are so essential, and we'd like your help refining our pitch about what make Mother Jones valuable and worth reading to you.

We'd also like your support of our journalism with a year-end donation if you can right now—all online gifts will be doubled until we hit our $350,000 goal thanks to an incredibly generous donor's matching gift pledge.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate