When we talk about tax breaks, outrage usually zeroes in on special treatment for corporate jets and loopholes for rich investment managers.
But of the $1.6 trillion in goodies doled out in the tax code, many of them are middle-class favorites.
The code is more than just a convoluted vehicle to collect money to run the government. It includes almost 200 tax breaks that reward certain behavior: working, investing, saving for college, owning a home.
Reforming the tax code means ditching them and starting over. Many of these breaks are incredibly popular, and getting rid of them isn’t so easy. Still, the White House says only three tax breaks will be preserved for sure: charitable contributions, mortgage interest and retirement savings.
Some of the biggest tax deductions deal with where you live. Besides mortgage interest, homeowners can also deduct property taxes. Flex workers can subtract utility and insurance costs if they work from home.
For people in high-tax states, deducting state and local taxes is a favorite tax break. (Hello, New York, New Jersey, Connecticut, California. The Tax Foundation says you have the highest state and local tax burdens.)
Education is incentivized through the tax code. There are deductions for tuition and student debt interest, and the money you invest in a 529 college savings plan grows tax free.
But it’s not just deductions. Federal tax credits shave thousands off the typical tax bill. The earned income tax credit and the child credit mainly benefit low- and middle-income Americans.
Health care is the largest tax break. Today, workers do not pay taxes on the money their employers contribute to their health care. That will cost the government $236 billion next year. That could soon change.
