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1 Michael Schuyler, Baked in the Cake: Why the Progressivity of the Income Tax Isn't Visible in the Distribution of Tax Expenditures 1 (2014)

handle is hein.taxfoundation/taxfaacc0001 and id is 1 raw text is: TxS Baked In The Cake: Why The FOUNDATION Progressivity Of The Income Tax Isn't Visible In The Distribution Of Tax Jan. 2014 Expenditures No. 212 By Michael Schuyler Tax Foundation Fellow Key Findings While lists of tax expenditures can sometime be helpful in highlighting tax preferences, they are not a shortcut to tax reform. Many current tax expenditures would not be considered tax expenditures in a neutral tax system. The distribution of tax expenditures is not an accurate guide to understanding the progressivity of the federal income tax system, and one reason is the structure of the tax expenditures list. Most distributions of tax expenditures do not include the personal exemption and standard deduction, although a strong case can be made that they are very large (and desirable) tax expenditures. When we model 11 major tax expenditures (excluding the personal exemption and standard deduction) using our Taxes and Growth model, we estimate that as a percentage of income low income (9.4 percent) and high-income (10.4 percent) taxpayers receive the largest amount of tax expenditures. While conventional wisdom says that the wealthy benefit the most from tax expenditures, when the personal exemption and standard deduction are included, low-income taxpayers receive twice the benefit (22.6 percent share of income) of tax expenditures that middle and high-income earners receive (10.9 percent).

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