US Tax Breaks Benefit the Rich Most

September 23, 2010 Taxation in USA

Clean 140In 2009 US taxpayers received nearly USD 384 billion in tax subsidies and incentives, however the tax breaks provided were enjoyed primarily by the highest income earners in the country, leaving poorer individuals relatively no better off.

On September 22nd the Annie E. Casey Foundation and the Corporation for Enterprise Development (CFED) released a joint report analyzing the distributions of tax breaks and incentives provided to taxpayers in the US. According to the publication, in the 2009 fiscal year USD 384.32 billion in subsidies was given out to taxpayers, although high income earners enjoyed a disproportionately larger availability to the tax breaks. It was stated that an average family earning USD 50 000 per year would typically be entitled to approximately USD 500 in tax breaks, while a family making USD 100 000 would receive USD 10 000. Further, tax payers with incomes in excess of USD 1 million could expect combined tax breaks of nearly USD 96 000. The report claimed that inequalities are evident, as over 50 percent of all available tax incentives were ultimately utilized by taxpayers with incomes higher than USD 167 000, leaving little opportunity for low and middle income earners to benefit from the systems.

While the goal of the tax incentives is to assist tax payers in building wider asset bases or to reach higher economic positions, they do not take into account that low income earners are often unable to take advantage of the provided opportunities. According to the report, low salaried taxpayers do not often accrue large enough tax liabilities to extract significant benefits from current policies. Additionally, any tax breaks based on home size or investment portfolios are often completely inapplicable, skewing them to only benefit high income earners.

The report aimed to highlight the “upside down” policies currently seen in tax breaks, and highlight the evident inequalities. Andrea Levere, CFED President, stated that the report would soon be submitted to President Barack Obama’s fiscal commission, which is currently investigating means to cut Government spending and provide further economic growth encouragement.

Photo by Amarand Agasi