Finding Ways to Close the Budget Shortfalls

Everyone in Washington these days seems to be in favor of reforming the tax code and closing loopholes to solve our fiscal problems. But estimates by the Joint Committee on Taxation suggest that there aren’t enough loopholes to close to fix $1 trillion-plus annual deficits. Doing away with the 10 biggest loopholes – or “tax expenditures” in budget-speak – will raise an extra $834 billion in revenues, but most are so politically sacrosanct that they likely will survive. Here’s the list:

1. Exclusion of employer-sponsored health insurance:  $164.2 billion

2. Exclusion of employer pension benefits:  $162.7 billion

3. Mortgage interest deduction:  $99.8 billion

4. Exclusion of Medicare benefits:  $76.2 billion

5. Preferential treatment of capital gains:  $71.4 billion

6. Earned income tax credit:  $58.4 billion

7. Deduction of state and local income taxes:  $54 billion

8. Exclusion of gains at death and gift carryover extension:  $51.9 billion

9. Deduction of charitable contributions:  $51.6 billion

10. Exclusion of employer benefits under “cafeteria plans”:  $43.8 billion