What are the largest tax expenditures? In 2008 expenditures (tax deductions allowed) these are the amounts and types of deductions that Romney MAY suggest be eliminated or reduced. If ALL the deductions were eliminated another $653 billion would be added to tax revenue... BUT this would mean middle class tax hikes because $86 billion was deducted for example in 2008. Since Romney said that would NOT happen at worst case Romney would means test, i.e. higher taxable income would have less deductions. So all Romney needs is to CAP deductions say by 10% and paid ONLY by the WEALTHY. Romney can keep pledge NO tax hikes... reduced government spending, increased revenue from decreasing deductions AND increasing GDP by 3% would generate additional income and therefore BALANCE THE BUDGET!!! eventually reducing the DEBT!!! Ranked by size the type of deduction and the amounts written off against taxes in 2008 Amount of Deduction Type of deduction that government ALLOWS tax payer to subtract from taxes [*]$131.0 billion Exclusion of employer medical insurance premiums and medical care [*]$117.7 Net exclusion of pension contributions and earnings [*]$ 88.5 Deductibility of mortgage interest on owner-occupied homes [*]$55.9 Accelerated depreciation of machinery and equipment [*]$49.1 Deductibility of non-business state and local taxes [*]$46.8 Deductibility of charitable contributions [*]$31.5 Deferral of income from controlled foreign corporations [*]$30.0 Capital gains exclusion on home sales [*]$29.1 Deductibility of State and local property tax on owner-occupied homes [*]$28.4 Child credit [*]$24.2 Capital gains (except agriculture,timber, and coal) [*]$21.5 Step-up basis of capital gains at death $653.7 billion So ONCE and for all folks IF the ENTIRE tax deductions were eliminated in 2008 there would have been $653.7 billion MORE in tax revenue.