Did you ever wonder what tax “loopholes” cost relative to war and Pentagon spending? The figures are now plainly available to compare with respect to other government spending. For example, mortgage interest deductions “cost” Washington some $100 billion in lost revenue. This “buys” America some 11 months of war in Afghanistan or some 14 percent of the whole $740 billion Pentagon budget. Charitable and educational tax deductions “cost” Washington $52 billion per year. These include all yearly tax-deductible donations to churches, universities, charities, thinks tanks, and all other non-profits. All of it equals some 7 percent of Pentagon spending, or just about the amount of the coming sequestration cuts.
The facts above come from an analysis by Politico on the amounts of all major tax preferences in an article titled “Tax Loopholes Alone Can’t Solve Fiscal Cliff.“ Altogether they equal about $834 billion. The loopholes include, in addition to the above, $164 billion for employer-sponsored health insurance, $162 billion for exclusion of employer pension benefits, $71 billion for lower capital gains rates, $76 billion for the exclusion of Medicare benefits, $54 billion for the deduction of state and local income taxes, and $52 billion for the exclusion of capital gains taxes on estates at death. These tax deductions are a mere drop in the bucket compared to all the waste and unnecessary costs associated with “Defense.”