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I always get a little annoyed when people talk about benefits of some tax deduction accruing to the "rich". It's not that it's technically wrong but, but rather

I always get a little annoyed when people talk about benefits of some tax deduction accruing to the "rich". It's not that it's technically wrong but, but rather a sort of a truism - if you can take the max deduction and have a high marginal tax rate you will accrue more benefit (whether it's 529 or mortgage interest deduction). That being said, you also are likely to pay more taxes both nominally and proportionally if you are benefiting from a 529 deduction - so when you take the revenue side of the equation into account the proposition looks a lot less lopsided...

rubyfan 9y ago
Also specific to the 529 issue, many of these families will go on to pay more out of pocket tuitions than the bottom 80% who benefit from all sorts of government money and aid.
mgkimsal 9y ago
"deduction", perhaps, but what about "reductions"? The AHCA had a provision to eliminate a 2% additional tax on dividend income (IIRC) for people earning over $200k. Removing that is, as far as I can tell, only a benefit to "the rich" (by some definition, maybe not yours).
- prostoalex 9y ago
  A very small segment of the rich who rely on dividend payments for cashflow and are not financially savvy enough to hold dividend-producing stocks in a trust or tax-shielded accounts. Special provision for higher tax on dividend income after a certain threshold (a) complicates the tax code (b) increases the cost of tax preparation, therefore removing disposable income that would be spent elsewhere from those sectors of the economy and (c) encourages companies to favor stock buybacks over dividend payments, which introduces its own distortions into the economy. And oh, by the way, it's completely avoidable if you suspect your income will exceed $200k and are willing to spend 10 minutes to rebalance your taxable accounts in favor of growth stocks, real estate and municipal bonds. Other than that it's an excellent provision in the tax code.
rayiner 9y ago
It's not just that they get a bigger benefit. They get to take a bigger deduction because, e.g. They have a big house with a big mortgage, or have generous health insurance benefits from their employers.
BearGoesChirp 9y ago
>and proportionally Is this true if you count in the ~13% regressive employment tax? While income tax is progressive, we should consider taxes as a whole and there are some taxes that are regressive in nature that make it hard to make such broad claims without further work.
RHSeeger 9y ago
Its worth noting that there are a fair amount of tax deductions that do not apply to those in the higher tax income ranges, either because they phase out as you make more money (deductions for children or school loans) or because they must be worth at least X% of your income (home office costs). Its not a simple matter of "tax deductions benefit only the wealthy" as some like to pretend.
stult 9y ago
The problem is when these tax expenditures become a substitute for more inclusive policies. Congress passes a tax deduction and then claims they have done something to address unaffordable tertiary education, when in fact they've only helped the people who least need it: people who could probably afford tuition anyway and whose children are most likely to qualify for academic and athletic scholarships.

rubyfan 9y ago

Also specific to the 529 issue, many of these families will go on to pay more out of pocket tuitions than the bottom 80% who benefit from all sorts of government money and aid.

mgkimsal 9y ago

"deduction", perhaps, but what about "reductions"? The AHCA had a provision to eliminate a 2% additional tax on dividend income (IIRC) for people earning over $200k. Removing that is, as far as I can tell, only a benefit to "the rich" (by some definition, maybe not yours).

prostoalex 9y ago
A very small segment of the rich who rely on dividend payments for cashflow and are not financially savvy enough to hold dividend-producing stocks in a trust or tax-shielded accounts. Special provision for higher tax on dividend income after a certain threshold (a) complicates the tax code (b) increases the cost of tax preparation, therefore removing disposable income that would be spent elsewhere from those sectors of the economy and (c) encourages companies to favor stock buybacks over dividend payments, which introduces its own distortions into the economy. And oh, by the way, it's completely avoidable if you suspect your income will exceed $200k and are willing to spend 10 minutes to rebalance your taxable accounts in favor of growth stocks, real estate and municipal bonds. Other than that it's an excellent provision in the tax code.

rayiner 9y ago

It's not just that they get a bigger benefit. They get to take a bigger deduction because, e.g. They have a big house with a big mortgage, or have generous health insurance benefits from their employers.

BearGoesChirp 9y ago

>and proportionally Is this true if you count in the ~13% regressive employment tax? While income tax is progressive, we should consider taxes as a whole and there are some taxes that are regressive in nature that make it hard to make such broad claims without further work.

RHSeeger 9y ago

Its worth noting that there are a fair amount of tax deductions that do not apply to those in the higher tax income ranges, either because they phase out as you make more money (deductions for children or school loans) or because they must be worth at least X% of your income (home office costs). Its not a simple matter of "tax deductions benefit only the wealthy" as some like to pretend.

stult 9y ago

The problem is when these tax expenditures become a substitute for more inclusive policies. Congress passes a tax deduction and then claims they have done something to address unaffordable tertiary education, when in fact they've only helped the people who least need it: people who could probably afford tuition anyway and whose children are most likely to qualify for academic and athletic scholarships.