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Your Turn: Should the U.S. Get Rid of All Tax Deductions?

Should we eliminate all tax deductions? Why or why not?

by Countable | 1.9.19

  • Eliminating all tax deductions would raise $1.3 trillion over the next decade, according to the nonpartisan Congressional Budget Office (CBO).
  • As Charles Lane points out in his latest column for The Washington Post, while this estimate relies on a somewhat unlikely assumption about how the tax code may be structured in the future, it nevertheless raises some interesting policy questions.

Suburban sprawl

In its 2017 tax bill, the Trump administration took some steps toward reducing certain deductions, particularly the State and Local Tax (SALT) and mortgage interest deductions. Lane notes that both of these deductions have contributed to suburban sprawl in the U.S.

The SALT deduction particularly benefitted high-income residents of wealthy suburbs, and Rep. Nita M. Lowey (D-NY) is trying to restore it. Lane explains the effects that would have:

“Fifty-six percent of the benefits from reinstating the SALT break would go to the top 1 percent of households, those making $755,000 or more, according to the Tax Policy Center. It would also resurrect the nontransparent situation whereby residents of low-tax states cross-subsidized their counterparts in high-tax states.”

Climate change

A tax increase for ultra-high earners is one element of Rep. Alexandria Ocasio-Cortez’ (D-NY) sweeping Green New Deal proposal to address climate change. Her proposal would raise an estimated $720 billion over the next ten years, which, as Lane points out, is considerably less than the CBO’s estimated savings from eliminating tax deductions. Furthermore:

“The move would be highly progressive, because more than 30 percent of individual tax deductions accrue to the top 1 percent on the income scale, and 80 percent go to the top fifth, according to the Congressional Budget Office...
“Beyond those wealthy few households, however, it would make little or no difference to the American social fabric. Removing federal tax policies that effectively subsidize wealthy suburbs would undermine a broad array of privileged arrangements, residential and educational.”

Lane goes so far as to posit that ending tax deductions that encourage suburban sprawl might actually do more to address climate change than the Green New Deal. When asked to explain, he told Countable that less suburban sprawl would lead to less driving, less fuel consumption, less energy spent heating large, single-family homes, and various other sources of greenhouse gas emissions.

What do you think?

Should we eliminate all tax deductions? Why or why not? Tell your reps what you think, then share your thoughts below.

—Sara E. Murphy

(Image Credit: iStock.com / imacon

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