Which tax breaks are too costly? The ones that go to YOU, Mr. and Mrs. Middle and Lower Class America! So, kiss them goodbye. Paris needs some new shoes.
WASHINGTON (Reuters) - Tax breaks such as deductions for home mortgage interest and state and local taxes cost the federal government $728 billion last year and need to be reexamined, the Government Accountability Office said in a new report on Friday.
Comptroller General David Walker, who heads the agency, said the government must look at ways to rein in the growth of so-called tax expenditures if it is to avoid huge fiscal deficit problems in future years.
"We're on an imprudent, unsustainable fiscal path," Walker told a news conference. "The status quo is not an option and we're not going to grow our way out of this problem and the sooner we get started the better."
GAO launched the study to help contribute to federal tax reform debate in Washington that was expected to heat up this autumn. A Bush administration tax panel was scheduled to deliver its recommendations by September 30, but a spokeswoman said that will likely be delayed by at least a month due to Hurricane Katrina.
The GAO study said annual federal revenue losses tripled in real terms from $243 billion in 1974 to $728 billion in 2004. Tax expenditures peaked in 2002 at $783 billion before the full effects of the last recession cycled through the Internal Revenue Service.
For most of the last decade, revenue losses from tax expenditures were greater than the federal government's discretionary spending, the GAO said.
The biggest growth in recent years is the exclusion from income tax of employer-paid health insurance benefits, contributing $102.3 billion or 14 percent of the 2004 lost revenues. Deductability of home mortgage interest -- including second homes -- was the second biggest portion at $61.5 billion or 8.4 percent of the total.
What tax cuts? Heh heh. We are really screwed.