What’s great about this for the rich is that those tax breaks only strengthen their political position. Tax breaks—say, preferred rates on dividends—mean either higher taxes on everyone else or larger deficits, both of which are unpopular. Since no one can see what the government is doing, it becomes less popular. Higher taxes make people think they’re not getting their money’s worth; larger deficits make them think the government is incompetent. Either way, they get mad at the parts of government they can see, not the tax breaks that the rich benefit from. Increasing anti-government sentiment leads to what you saw in 2010 and today: the Tea Party, demonization of the federal government, and a mad race among Republicans to see who can cut rich people’s taxes by the most.
Whether this is a conscious goal of the anti-tax movement or simply a nice side benefit , it really works. In chapter 2 of The Submerged State, Mettler describes a study showing that people who benefit from visible government programs (those that are transparently delivered by government agencies, such as food stamps) are more likely to have positive views of government and its impact on their lives than people who benefit from invisible programs, even after controlling for the usual things. So you can have a program like the mortgage interest deduction that mainly helps the well-off but also helps the middle class a little—and it helps turn its middle-class beneficiaries against the federal government. If you’re Grover Norquist, what could be better than that?