1. 1 Cleaning Up the Individual Income Tax Tax Policy Center Urban Institute and Brookings Institution Donald B. Marron January 18, 2013

2. 2 Lots of Policy in the Income Tax $1.4 trillion in tax revenue $1.2 trillion in tax breaks 2

3. 3 Preferences are not just loopholes 3 Select tax preferences (2013)$ billions Employer-provided health insurance294 Mortgage interest101 401(k) plans73 State and local taxes69 Capital gains62 Earned income tax credit56 Charitable contributions40 Accelerated depreciation33

4. 4 Spending is thus bigger … 4

5. 5 … as is revenue 5

6. Tax policy and government size OfficialReally New carbon tax Reduce mortgage interest deduction Increase marginal income tax rates 6

7. Tax policy and government size OfficialReally New carbon taxTax increase Reduce mortgage interest deduction Tax increase Increase marginal income tax rates Tax increase 7

8. Tax policy and government size OfficialReally New carbon taxTax increase Reduce mortgage interest deduction Tax increase Increase marginal income tax rates Tax increase 8

9. Tax policy and government size OfficialReally New carbon taxTax increase Reduce mortgage interest deduction Tax increaseSpending cut Increase marginal income tax rates Tax increase 9

10. Tax policy and government size OfficialReally New carbon taxTax increase Reduce mortgage interest deduction Tax increaseSpending cut Increase marginal income tax rates Tax increase Tax increase & Spending increase 10