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The 10 Biggest Tax Breaks (And How Much They Cost)

The 10 biggest breaks, deductions and credits in the U.S. income tax code are costing the Treasury $900 billion this year, with more than half of that total benefiting the wealthiest 20 percent of taxpayers.

This critique is not new — liberals have complained for years that too many exceptions written into what was designed as a progressive income tax instead benefit the most well-off. But this version comes from the nonpartisan Congressional Budget Office today, which means it could gain some traction if lawmakers start talking seriously about tax reform later this year.

Those 10 "tax expenditures," as the breaks have come to be known, account for two-thirds of the total cost of the more than 200 specific exceptions in the personal and corporate income tax codes.

"The 10 major tax expenditures considered here are distributed unevenly across the income scale," the report states. "In calendar year 2013, more than half of the combined benefits of those tax expenditures will accrue to households with income in the highest quintile (or one-fifth) of the population (with 17 percent going to households in the top 1 percent of the population), CBO estimates."

That pattern is even more skewed toward the wealthy in the area of lower tax rates on unearned income compared with the rates on wage earnings. "CBO estimates that more than 90 percent of the benefits of reduced tax rates on capital gains and dividends will accrue to households in the highest income quintile in 2013, with almost 70 percent going to households in the top percentile," the report said.

The tax breaks examined also include the exclusion from income of employer-sponsored health insurance, the deductibility of home mortgage interest and the earned income tax credit.

The analysis was requested by Maryland Democratic Rep. Chris Van Hollen, who is the ranking member on the House Budget Committee.

S.V. Dáte is the congressional editor on NPR's Washington Desk.

Copyright 2021 NPR. To see more, visit https://www.npr.org.