Taxing the Rich to Pay for Big Business Tax Credits

While much ado was made about taxing the rich, scant attention has been paid to other provisions in the fiscal cliff bill, namely large tax credits filling the pockets of big businesses and energy projects.

Using data from the Congressional Budget Office and the White House, this chart, modified from a recent article by Tim Carney in the Washington Examiner, shows that the extension of business special-interest tax breaks is larger than the amount of money raised from increasing taxes on the rich.

This chart uses two measures of the revenue impact from taxing the rich (blue bars): the FY2013 amount and the 10-year average tax collection. The business and energy tax extenders (red bar) alone take away $67.7 billion from federal revenue in 2013. 

Taxes collected from increasing rates on the rich in FY2013 amount to $27 billion, while tax revenue collected based on the average over 10 years is roughly $62 billion. Even in the best-case scenario for tax collection, the increases in revenue are lower than the amount being paid out to businesses and energy subsidies.

If President Obama had let all of the special tax breaks for businesses and energy companies expire, he would have raised more revenue than his tax hikes on high-income earners. The president’s actions contradict his professed desire to ensure that “the wealthiest corporation and individuals can’t take advantage of loopholes and deductions that aren’t available to most Americans.”