Cato Daily Podcast Taxpayers Like Their Special Handouts, Dislike Yours
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Apr 14, 2025 Adam Michel, the Director of tax policy studies at the Cato Institute, breaks down the hypocrisy surrounding tax expenditures. He reveals how taxpayers cheer for their own benefits while deriding those that serve others. The discussion dives into egregious tax breaks that clutter the system, like deductions for pass-through businesses. Michel also highlights taxpayer favorites, such as the mortgage interest deduction, and examines how these preferences shape political landscapes. He advocates for a grand bargain in tax reform that could streamline the tax code by eliminating some benefits to reduce rates for everyone.
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Tax Expenditures Defined
- Tax expenditures are deviations from an ideal tax base, often the income tax base.
- They include tax credits and deductions given to special interest groups, impacting activities.
Tax Reform Recipe
- Broaden the tax base by eliminating tax expenditures.
- Use increased revenue to lower tax rates, minimizing economic damage.
Political Pressure and Tax Benefits
- Lawmakers face pressure to create tax benefits for specific groups.
- These groups lobby for subsidies, influencing the tax code.