By Bernie Becker and Erik Wasson - 05/29/13 07:44 PM EDT
Top Republicans pushing to overhaul the tax code have long said that they’re willing to eliminate or limit a wide range of preferences and incentives in the code. But unlike Democrats, GOP lawmakers generally want to pour all the savings into lowering tax rates.
Not surprisingly, the CBO’s report found that the wealthiest and lowest-earning households relied on very different tax breaks. The highest earning families received the vast majority of the benefits from the preferential rates on capital gains and dividends, while the lowest earners relied heavily on the Earned Income Tax Credit.
The 10 tax breaks highlighted in the CBO report amount to just a fraction of the tax breaks in the code.
But in all, the 10 breaks will add up to some $900 billion this year and $12 trillion over a decade – or more than 5 percent of the country’s gross domestic product.
The 10 tax breaks also include the exclusion for employer-sponsored health benefits, the deduction for mortgage interest, the deduction for charitable contributions, the child tax credit and the exclusion for pension contributions.
Rep. Sandy Levin (Mich.), the top Democrat on House Ways and Means, suggested the report showed that Republicans' goals for tax reform – including reducing the top individual rate from roughly 40 percent to 25 percent – are too ambitious.
Levin has also said that several of the big-ticket tax preferences, like the mortgage interest deduction, broadly help the middle class.
“The preferences that benefit the very wealthy highlight the ability to obtain the needed revenues to address the sequester and achieve a balanced approach to tax reform,” Levin said.
President Obama's budget proposed limiting the value of deductions to 28 percent. Levin said that the report shows the proposal is basically sound but that it needs to be examined carefully in terms of its detailed impacts on mortgage interest, charitable and state and local tax deductions.
"We would like to sit down and have serious discussions with Republicans," Levin said." I think the president was right to put it forth. It is now up to Congress to carefully look at that...so far there has been nothing but rhetoric from Republicans."
According to CBO, single taxpayers making at least $327,000 a year and a family of four making at least double that would comprise the top 1 percent of earners. The top quintile included single taxpayers making at least $81,400 a year, two-person households making $115,100 a year and a four-person family bringing in $162,800 a year.