High-income taxpayers get the most value from the group health tax exclusion and other major tax breaks.
Edward Harris and Joshua Shakin, analysts at the Congressional Budget Office, make that point in a new report on "tax expenditures," or exclusions, deductions, preferential rates and credits that lower federal tax revenue.
The analysts put a budget-cutting bull's-eye on the tax expenditures by dividing households into "quintiles," or fifths, by income, and then showing how much value each quintile gets from 10 costly tax expenditures.
The top-quintile households soak up about half of the tax exclusion benefits, and households in the top 1 percent in terms of income absorb 17 percent of the benefits, the analysts estimated.
Top-quintile households get about 34 percent of the benefits from the group health tax exclusion and about two-thirds of the value of the net pension contributions and earnings exclusions, the analysts said.
The analysts looked at several tax breaks of interest to insurers and employers, including the group health premium tax exclusion; employers' pension contribution and earnings tax exclusions; the exclusion of capital gains on assets transferred at death; the exclusion of a portion of Social Security and Railroad Retirement benefits; and the deduction for charitable contributions.
The analysts also looked at the home mortgage interest deduction; the deduction for state and local tax payments; the tax breaks on earnings from dividends and long-term capital gains; the earned income tax credit; and the child tax credit.
Critics of the income tax system contend that a "tax expenditure" is simply a move to leave money that belongs to the taxpayers in the hands of the taxpayers, and the analysts acknowledged that tax expenditures can help further societal goals, such as promoting a healthier population.