Tax Breaks as Spending - Article Example

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Tax Breaks as Spending

The tax code in the United States also offers help by giving parents tax breaks to pay for child care. A reduction in the taxes families has to pay puts more money in the hands of American citizens. There is a tax break that exists that allows parents to put aside $5,000 to pay for child care. Those wages escape the burden of being taxable income. The effect of this tax break for people that are in the 25% tax bracket is $1,250 a year in savings, while parents in the 39.6% tax bracket are able to save $1,980. The Child and Dependent Care Tax Credit provide families with a tax credit of up to $6,000 to cover eligible child-care expenses. These two tax breaks have the effect of saving American families $3.1 billion in taxes. The use of direct subsidies benefits more low-income families, while tax breaks target middle income and upper-income households. A second major way in which the government gives back to the community is through student aid. The subsidy mechanism that is used to help out students of low-income families is the Pell Grant. On the tax side, there are numerous credits and deductions for education purposes that benefit middle and upper-income families. Not all tax breaks are considered spending. For instance, the lower tax rate on dividends is not considered spending. The reason for the lower tax rate on dividends is to offset the effect of double taxation. It is estimated that nearly 67% of all tax breaks in the United States are a form of spending in disguise. ...Show more

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The paper "Tax Breaks as Spending" deals with the article which discusses the way the United States government utilizes the tax code to hide the fact they are spending money in the economy. Hence, for a typical family income and spending are clearly identified. …
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