United Front

Printed in The Washington Post October 11, 2010

IF YOU WERE spending $400 billion a year on social programs, would you give half of that to the wealthiest 5 percent of Americans? We didn’t think so. But that is the perverse result of the stealthy spending conducted through the federal tax code. The code is salted with “tax expenditures” — programs, many worthy, designed to promote policies from homeownership to education to retirement savings. There are two problems with this approach.

First, it lacks transparency and accountability. While direct spending programs are subjected to continual review, the spending that takes place through the tax system operates on silent autopilot. Once embedded in the code, the preference tends to be in place until dislodged.

Second, accomplishing social policy through tax expenditures tends to award the most help to those who need it least. As a new report by the Corporation for Enterprise Development and the Annie E. Casey Foundation demonstrates, the $400 billion federal asset-building budget — subsidies to buy homes, save for education or plan for retirement — is upside down. Rather than ameliorate rising income inequality, it reinforces it. Low-income households who do not earn enough to itemize deductions don’t get the benefit. A middle-class household earning $50,000 a year “receives less than $500 in benefits” from tax breaks for mortgages, property taxes and investment income, the report found. “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,” it said.