The concept of Tax Expenditures was developed by Harvard Law Prof Stanley Surrey. He also concluded that the federal estate and gift taxes accounted for almost 40% at the rates in effect when he was alive for the progressivity of the IRC [Internal Revenue Code]! The federal estate and gift taxes are actually not related to income at all but are TRANSFER taxes resting on the recipients of inheritances and gifts (donees)! For a brief time I worked in IRS on those taxes.
Today’s WAPO has an interesting article on the public debt of the US and its sources and contains the following statements:
“Polls show that a large majority of Americans blame wasteful or unnecessary federal programs for the nation’s budget problems. But routine increases in defense and domestic spending account for only about 15 percent of the financial deterioration, according to a new analysis of CBO data.
The biggest culprit, by far, has been an erosion of tax revenue triggered largely by two recessions and multiple rounds of tax cuts. Together, the economy and the tax bills enacted under former president George W. Bush, and to a lesser extent by President Obama, wiped out $6.3 trillion in anticipated revenue. That’s nearly half of the $12.7 trillion swing from projected surpluses to real debt. Federal tax collections now stand at their lowest level as a percentage of the economy in 60 years.”
Tax expenditures are in reality not totally excluded areas of the economy from federal revenue collections but exempted areas relating to definitions and exemptions and deductions from the tax base, and special rules and offsets. One example is the subsidy system buried in the tax code for various kinds of mining and extractive industries. These industries do provide a service in their extractive efforts but it is the “commons” that is being subjected to extraction and therefore that extraction should be regulated as to methods and means of that extraction and the profits should cover the investment necessary but not enrich the corporations that do that work. In many countries those extractive industries are not private and in fact oil and gas extraction in 90% of the world is conducted by the government itself. NOT in the USA and the federal and state governments in the USA don’t have any real idea of what those industries are doing because in many cases they are prohibited from law from even independently gathering statistical and economic data on a self-initiated basis.
Don’t ask for whom the bell tolls just read the IRC!