Government Expenditures & Individual Tax Breaks

Posted on September 17, 2022

Government Expenditures & Individual Tax Breaks

There are many individual tax breaks that cost the government billions of dollars each year in lost potential revenue. Tax breaks for individuals add more than a trillion dollars annually to government expenditures. To reduce government deficit, some believe that many of the tax breaks should be removed. Experts, on the other hand, state that reducing tax breaks will not directly impact revenue, as taxpayer behavior is a major factor in an increase or decrease of revenue.

Deducting non-business state and local taxes, other than on owner-occupied homes, is a tax break that costs the government $292.3 billion each year. Another top tax break that costs more than $245 billion is the tax deduction on certain pension plans contributions made by employers. Tax is not charged on the investment income earned by pension plans until it is withdrawn.

Many individual taxpayers make tax-preferred contributions to some employer-provided 401(k) and 403(b) plans. Tax is not charged on contributions till they are withdrawn.

There are many other tax breaks for individuals including tax deductions on charitable contributions, capital gains exclusion on home sales, and accelerated depreciation for eligible machinery equipments. Individual tax breaks are here to stay, helping taxpayers save more.

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