New York Times op-ed: The American Dream Is Tax Reform’s Biggest Obstacle, by Christopher Faricy (Syracuse University; Co-author, The Other Side of the Coin: Public Opinion Toward Social Tax Expenditures (forthcoming 2020)):
Much of the commentary on the fresh revelations about President Trump’s tax returns has focused on how they illustrate the vulnerability of the federal tax system to exploitation by the ultrarich. This is for good reason: Mr. Trump aggressively used a set of tax breaks popular with real estate developers to pay no taxes in 11 out of the previous 18 years, and just $750 for both 2016 and 2017.
But the most expensive subsidies in the federal tax code are not used by real estate developers, energy chief executives or bankers. They are used by upper-middle-class households under the guise of earned economic security. The main obstacle to reforming the tax code is not Mr. Trump, but rather the upper-middle-class American voter.
There are close to 300 subsidies in the tax code that, in total, cost the federal government over a trillion dollars each year. According to the Congressional Budget Office, in 2019 more money was lost to the federal government through the nation’s regressive tax breaks than was spent combined on Medicare and Medicaid.
And six out of 10 of the most expensive federal tax subsidies — including the exclusion for employment-based health insurance, benefits for company pensions and the charitable contribution deduction — are commonly used by wealthier suburban families. In sum, they drain close to $680 billion annually from the U.S. Treasury.
These subsidies are sold as providing necessary assistance — affordable housing, health care and higher education — to middle-class families. But they also apply a veneer of political legitimacy to a system that shovels billions of taxpayer dollars every year to the wealthiest families and corporations in America. ...
In a forthcoming book on public opinion toward the tax system, co-written with the political scientist Christopher Ellis, we argue that federal tax subsidies, even those that provide the most benefits to the top 1 percent, are wildly popular with the public. It is the peculiar political nature of the American masses that creates strong incentives for policymakers to use the tax code to finance popular social goals. This is the manifestation of a phenomena described by studies for more than 50 years: A large segment of the electorate can be described as “symbolically conservative but operationally liberal.” They report hating government while favoring federal assistance for more affordable health care insurance, old-age pensions and child care.
Tax subsidies are amenable to the American psyche because they provide social insurance that doesn’t feel like government welfare. In our research, we found that many respondents viewed tax subsidy recipients as more deserving of government aid than beneficiaries of identically described programs where the assistance was provided through direct checks. ...
If we want policymakers to create a fairer tax code, we must outgrow our prolonged fiscal adolescence. We must stop acting like any increase to our taxes — whether through a reduction in tax breaks, or a slight increase to marginal rates — is a bigger threat than climate change, a crumbling national infrastructure, or an inadequate public health system.