Posted by Bob Lord
In today's lead editorial, The Real Spending Problem, the New York Times gets it right, but I doubt anyone's listening. Tax expenditures are the economic equivalent of spending, in the form of direct subsidies, mostly to wealthy taxpayers. The Times points out that (1) the carried interest loophole allows income that should be taxed as ordinary income to be taxed as capital gains, (2) the wealthy are stashing giant sums in IRAs, (3) the like-kind exchange rules allow for deferral and avoidance of tax on real estate and other gains in a manner never intended by Congress, and (4) the estate tax system is an absolute joke.
The Times makes another point, far too obliquely, that almost is never discussed. In discussing the gigantic IRAs of the wealthy, the Times notes: "No one knows how much tax is avoided this way." In discussing the revenue lost from like-kind exchanges, the Times notes "Government estimates say this costs about $3 billion a year, but industry data suggest the amount could be far higher."
Truth is, we don't have an f'in clue how much tax revenue is going out the door, because the revenue estimates from the CBO are absurdly low. I've noticed one estate tax revenue loss estimate that likley is accounted for in the clients of just one New York estate planner. I wonder how the masses would react if we were told the real numbers on tax sheltering? I'm guessing the class war would start the next day, which probably is why we're kept in the dark.