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Comment on President Obama’s Budget Deficit-Reduction Address
By Andrea Levere on 04/13/2011 @ 05:30 PM
This afternoon, I issued the following statement in response to President Barack Obama’s call for changes in the U.S. tax system.
In his speech earlier this afternoon, President Obama rightly identified tax reform as a major part of the solution to bring the federal deficit under control. The president’s approach to tax reform reduces tax rates and closes loopholes in a way that actually generates revenue, spurs the economy and expands opportunity at the same time that it reduces our deficit.
In particular, the president is correct to call for limiting itemized deductions for the wealthiest of Americans. As Fiscal Commission director Bruce Reed has said on more than one occasion, “the current tax code has more holes than cheese." Our existing system amounts to an upside down set of tax incentives that allow wealthier taxpayers to shelter income and build assets while doing little to help low- and middle-income families. Current tax deductions and preferences that are aimed at helping American families buy homes, go to college, save for retirement and start businesses are well intentioned but unfair. Our recent report, Upside Down: The $400 Billion Federal Asset-Building Budget, shows that in 2009 they amounted to about $400 billion in foregone revenue. Who got the benefits? More than 53 percent accrued to the top 5 percent of tax filers by income. By way of contrast, the bottom 60 percent of tax payers combined saw 4 percent of those benefits come their way. Put another way, the current system of tax deductions saved millionaires over $95,000 on their tax bill, while middle class tax payers earning about $45,000 saw a savings of about $270 and the lowest income fifth received less than $4.
The simple fact is that we could raise a lot of revenue to lower long term deficits by closing some of these unfair and unproductive holes. We believe it is possible to cut at least $200 billion per year from existing tax deductions that could go toward deficit reduction. And at the same time we could simultaneously create new, fair and effective incentives that include low- and middle-income families, and encourage them to save, start businesses, create jobs and build skills. When it comes to dealing with the deficit, tax reform that closes loopholes, generates adequate revenue and protects and strengthens the American Dream should be legislators’ top priority.”
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