Sep 5, 2019

The case against tax deductions

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Note: Data includes the first 30 weeks of each year; Data: Internal Revenue Service; Chart: Chris Canipe/Axios

Trump's tax cuts were, weirdly, feared by homeowners and charities. Normally, tax cuts make people richer, and richer people spend more money on housing and charity.

But, but, but: Both those items have historically benefited from massive tax expenditures, leading to worries that they would be worse off after the tax cuts.

Driving the news: According to the latest data from the IRS, the tax cut worked much as everybody expected it would. The number of people itemizing their taxes plunged by more than 65%, with similar falls for the number of people deducting mortgage interest and charitable contributions.

Yes, but: The other shoe hasn't dropped.

  • Only 8% of taxpayers now deduct mortgage interest, yet home prices continue to rise, with no indication that the new law changed anything at all.
  • Similarly, the charitable contribution deduction has had no visible effect on charitable contributions. Total giving rose by 0.7% to a new record high in 2018, despite a late-year stock market plunge.

The bottom line: Tax deductions are much easier to create than they are to abolish; they're also hugely expensive. The evidence strongly implies that almost all of them are a waste of money.

Go deeper

Elizabeth Warren's wealth tax could have slashed billionaires' fortunes

Photo: Nic Antaya for The Boston Globe via Getty Images

The top 15 richest Americans could have seen their net worth decline by more than half — hundreds of billions of dollars — had Elizabeth Warren’s wealth tax plan been in place since 1982, Bloomberg reports.

Why it matters: A new paper by two French economists, Berkeley professors Emmanuel Saez and Gabriel Zucman, who helped Warren devise the proposed tax, shows how a wealth tax of "just a few percentage points might erode fortunes over time and presumably reduce wealth inequality."

Go deeperArrowSep 10, 2019

Scoop: Bernie Sanders one-ups Warren with his own wealth tax

Photo: Joshua Lott/Getty Images

Sen. Bernie Sanders has released a wealth tax that's even more aggressive than Sen. Elizabeth Warren's "ultra-millionaire tax." Axios first reported Sanders' proposal.

Why it matters: Sanders keeps trying to remind voters that he's the original when it comes to progressive policy in the 2020 field, but he's being eclipsed at every turn by the surging Warren. The Vermont senator has proposed massive spending — $16 trillion on climate alone — and so has to show a little revenue to add credibility to his proposals.

Go deeperArrowUpdated Sep 24, 2019

Manhattan DA urges judge to dismiss Trump lawsuit over tax returns

Manhattan District Attorney Cyrus Vance Jr. at a news conference in New York City in April. Photo: Spencer Platt/Getty Images)

Manhattan District Attorney Cyrus Vance asked a federal judge in a court filing Monday to reject President Trump's attempts to stop New York prosecutors from subpoenaing his corporate and personal tax returns.

Details: Trump sued Vance last Thursday in an effort to block New York prosecutors from obtaining 8 years of his tax returns from his longtime accounting firm Mazars USA. Vance said in the filing addressing Trump's lawsuit that the president was trying to be covered by a "sweeping immunity" that is not provided by law.

Go deeperArrowSep 24, 2019