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Who Do Tax Breaks Benefit?

2018-04-10 · explainer · John · 3:56 · watch on YouTube

Topic: US politics & society · mode: Explainer · tags: self promotion

Prompted by Sarah's Art Assignment video on art and tax avoidance, John uses four hypothetical families to show that, because of the $28,000 standard deduction, the charitable and mortgage interest deductions mostly benefit the wealthy, above all the richest 1% of US households.

What is said

The parts of the video and what is said in each (★ — how much it matters to the video).

00:00:00 — Hotel-room greeting; Sarah's art-and-taxes video; the tax code mostly matters to the rich

  • ★★ John says Sarah made a brilliant Art Assignment video last week (week of 2 April 2018) on how extremely wealthy people sometimes use art collecting to avoid taxation, which prompted this video. — 00:00:00 · Sarah Urist Green, The Art Assignment
  • ★★★ A lot of the US tax code seems to affect everyone but in fact mostly matters only to rich people. — 00:00:09 · United States

00:00:17 — Four hypothetical families: standard deduction, charitable and mortgage interest deductions, who benefits

  • ★★ John's hypothetical families earn $35,000, the US median household income of $59,000, the top-10% household average of $295,000, and the top-1% average of $1.2 million. — 00:00:21 · United States
  • ★★ US deductions reduce taxable income; many business expenses are deductible, so $100 of poster sales costing $20 to print leaves $80 taxable. — 00:00:36
  • ★★★ Every US taxpayer can take the standard deduction, made to simplify the code; in 2018 it is $28,000 for these families ($14,000 single), so other deductions help only above $28,000. — 00:00:52 · United States
  • ★★★ Most charitable gifts are deductible, but if each family gave 8% of income, only the 1% family, giving $96,000, would see its taxable income fall from charitable contributions alone. — 00:01:17
  • ★★★ The rich family gave much more in dollars, but it is the only one of the four to essentially receive a government subsidy for its donation. — 00:01:39
  • ★★★ The deduction does spur giving by the rich and charities would get much less without it, but 35% of the money behind a donor's name on a museum or research facility would otherwise have gone to the government. (hedged) — 00:01:48
  • ★★ John wryly doubts that the forgone tax would have built roads, paid soldiers and reduced the deficit: probably not. (playful) — 00:02:00
  • ★★★ The tax breaks don't make the rich super generous: families earning $45,000-60,000 give 3.5-4% of income to charity on average, those earning $1-5 million 2.8-3.2%. — 00:02:07
  • ★★★ The mortgage interest deduction is supposed to encourage home buying but in practice mostly encourages rich people to get mortgages. — 00:02:25
  • ★★★ With 8% to charity and a home at four times income, the two lower families get no break; the top-10% family saves about $4,300 (just over 1% of income), the 1% family over $40,000 (over 3%). — 00:02:35
  • ★★ Some families may have other deductions, especially medical expenses, and homeownership and charitable giving are good things for governments to encourage. (hedged) — 00:03:18
  • ★★★ These deductions mostly benefit wealthy people, and by far the greatest benefit, in dollars and share of income, goes to the richest 1% of US households. (hedged) — 00:03:22 · economic inequality, United States

00:03:37 — Recommendation of Sarah's Art Assignment video; sign-off and sneeze

In the description and comments

  • ★ The description says taxing income is a huge part of political discourse, but details get lost in ideological debates, so John looks at whose deductions actually count. — video description

Threads in this video

Mentioned

Central: tax · tax deduction

Also: Charity (practice) · economic inequality · mortgage loan · Sarah Urist Green · tax avoidance · The Art Assignment · United States

Also centred on tax: Clinton vs. Sanders: POLICY IS EXCITING! · Why Are Taxes So Complicated? (The Musical?)

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