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How Government Works

Eduardo Porter, in The False Hope of a Limited Government, Built onTax Breaks (NYT, March 31, 2015), provides a good description of how America's government rewards relatively wealthy groups, whose members tend to vote and to provide campaign contributions, with tax breaks.

For instance, President Obama’s American Opportunity Tax Credit to subsidize college tuition has particularly benefited families making from $100,000 to $180,000, where the subsidy is cut off. Many economists have exposed how the mortgage tax deduction, which rises in value for those in higher tax brackets, does little to further its ostensible purpose: expanding middle-class homeownership. Over all, the Congressional Budget Office shows how the richest fifth of Americans get more than half of the benefits from the costliest tax breaks.


Porter ends with the suggestion that

...Washington might be better occupied culling the many goodies hidden in the tax code that serve little or no social purpose other than coddling well-connected constituencies. Those billions could then be used to provide regular American families the social insurance they really need.


Unfortunately, he offers no motivation for politicians to stop favoring groups who provide their campaign funding and votes. Those who wish to get re-elected cannot be expected to resist providing rewards to their supporters.



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