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On January 17, 2012 the Joint Committee on Taxation released its report, Estimate of Federal Expenditures For Fiscal Years 2011-2015. The Joint Committee is a bi-partisan committee of the Senate Finance Committee and the House Ways and Means Committee. 

The Report sets forth by functional category in the Federal Budget the largest estimated expenditures in billions of dollars for the 2011-2015 period. The top 10 expenditures are as follows:

1. Exclusion of employer contributions for healthcare, health insurance premiums and long term care.                                                                                                 

$725.00

2. Deduction of mortgage interest on owner occupied residences.                               

$464.1

3. Reduced rates on dividends and long term capital gains.

$456.6

4. Net exclusion of pensions and earnings from defined contribution plans.

$375.9

5. Earned Income Credit.

$294.1

6. Net exclusion of pensions and earnings from defined benefit plans.

$263.7

7. Exclusion of capital gains at death.

$230.8

8. Deduction of non-business State and Local income taxes, sales taxes and personal property taxes.

$230.3

9. Exclusion of benefits provided under Cafetaria plans.

$197.6

10. Exclusion of untaxed Social Security and railroad retirement benefits.

$188.8

Closely behind were the deductions for charitable contributions, other than for education and health ($186.1); exclusion of interest on public purpose State and local government bonds ($177.6) and exclusion of Part A (hospital insurance) Medicare benefits ($177.1).

Using an expanded income tax bracket [1], this tax liability mostly falls on the $100,000 and above brackets, accounting for 92% of the estimated tax liability for all brackets. For these top two brackets the itemized deductions that mattered most in dollars were in order, mortgage interest deduction; State and Local income, sales and personal property deductions; charitable contribution deduction and the real estate tax deduction.


[1] The income concept used to place tax returns into classes is adjusted gross income (“AGI”) plus: (a) tax-exempt interest, (b) employer contributions for health plans and life insurance, (c) employer share ofFICA tax, (d) workers’ compensation, (e) nontaxable Social Security benefits, (f) insurance value ofMedicare benefits, (g) alternative minimum tax preference items, and (h) excluded income of U.S. citizens living abroad.

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