Little of $400 Billion in Tax Breaks Goes to Low-Income Families
Today, the Annie E. Casey Foundation and the Corporation for Enterprise Development released a report showing that $400 billion given in tax breaks to “help families buy homes, start businesses, put their children through college, and retire comfortably” in 2009 helped the wealthy accrue wealth, but did little or nothing for low-income families. (The report didn’t analyze things like the Making Work Pay credits.)
In fiscal year 2009 alone, the federal government spent nearly $400 billion on policies that help families buy homes, start businesses, put their children through college, and retire comfortably.
But these policies, administered largely through the tax code, are terribly skewed. They tend to subsidize wealth building for the wealthiest among us, rewarding them for size of their homes and investment portfolios. Low-income households, who don’t make enough money to itemize deductions or even to accrue much tax liability, receive next to nothing from these strategies. For the poorest families, federal policy actually penalizes efforts to save money by cutting off benefits to those who manage to create even the smallest financial cushion.
The inequities extend beyond poor families. A typical middle-class household making $50,000 a year receives less than $500 in benefits from the most expansive of these federal policies annually; families making $100,000 get about $2,000. By contrast, taxpayers bringing in more than $1 million enjoy $95,820 in annual support through mortgage and property tax deductions and investment tax breaks.
Expressed differently, more than half of the $400 billion in benefits go to the top 5 percent of taxpayers, those earning more than $167,000. Meanwhile, low-income families get next to nothing.
Of course, in 2009, the Obama administration’s *spending *did disproportionately benefit millions of low-income Americans. The expansion of the federal social-safety net through the recession — from the additional unemployment insurance benefits to the bump in Social Security payments to the more generous food stamp benefits — helped keep 3.3 million at least from poverty. Still, the point about taxes remains.