Subsidizing the Rich

As I noted in my previous post, public concern about government spending has become an intractable part of our political discourse, with only unemployment registering as an equal or higher concern. While it’s disputed whether debt should be top priority, most of us could agree that government waste is something to be curtailed for the sake of political integrity, practicality, and ethics.

Yet of all the surprising places that taxpayer money could (and does) go, who would expect that those in our society who need it least, would be recipients of tens of billions of dollars of it? As HuffPo reports:

Millionaires are receiving billions in taxpayer-funded support every year that helps them pay for everything from child care to bad debts to boats and vacation homes, according to a report released Monday by Sen. Tom Coburn.

People who individually earned more than a million dollars in 2009 even managed to collect a total of nearly $21 million in unemployment insurance.

“From tax write-offs for gambling losses, vacation homes, and luxury yachts to subsidies for their ranches and estates, the government is subsidizing the lifestyles of the rich and famous,” wrote Coburn, an Oklahoma Republican, in an accompanying letter. “Multimillionaires are even receiving government checks for not working. This welfare for the well-off — costing billions of dollars a year — is being paid for with the taxes of the less fortunate.”

Read the Post’s satirical but sobering report on just how and where the estimated $30 billion of pubic money is spent. It pretty much breaks down to this:

Coburn totaled up all the federal money for millionaires over several years that his office could find. Among the handouts for the well-heeled are:

  • $18.15 million in child care tax credits
  • $74 million in unemployment checks
  • $89 million for preservation of ranches and estates
  • $316 million in farm subsidies
  • $608 million in business entertainment deductions
  • $9 billion in retirement checks
  • $21 billion in gambling losses
  • $28 billion in mortgage breaks for mansions, vacation homes and yachts

Some of the payments, such as for Social Security and Medicare, stem from payroll taxes and are not means-tested when they are paid out. Advocates of such payments believe the government made a promise to individuals that it must keep, regardless of their wealth.

Some other payments, such as the millions received by the wealthy to preserve land or to use alternative energy sources, arise from programs that proponents consider beneficial overall, even if the rich get the money.

If this isn’t a case for reform, I don’t know what is. If the government made a promise to individuals to repay a certain amount, regardless of whether they actually need it, than that’s not a case for scrapping social security altogether, but for at least attempting to re-calibrate it’s distribution to make more sense. It’s dated and inefficient, but it still does some good and could still merit more creative solutions besides total amputation (which is largely populist rhetoric anyway, but is still thoroughly supported by a lot of people).

The same goes for these other programs – maybe some of this money will always inevitably spillover into the wealthier segments of this society: the free rider problem is endemic in any public good. But why not try to mitigate this issue through auditing and reform rather than wholesale cuts that will hurt the poor far more? (consider that a hypothetical question, since the answer as to why it’ll be obstructed should be obvious by now).

Many would argue that $30 billion isn’t a lot of money in the grand scheme of things, which is a sad indicator of just how flawed our fiscal system is. But money is still money, and we should trim any and every amount that is unnecessary. We hear much about the “waste and fraud” that goes into social welfare programs for the poor and middle-class – some of it exaggerated, some of it credible. But things like corporate welfare – which also costs us tens of billions of dollars additionally – don’t get nearly as much as much attention, even by the GOP hypocrites who claim to be small government warriors while safeguarding and creating tax loopholes for the wealthy. I commend Coburn for owning up to this issue, despite the indifference or outright support by most of his party.

“Government policies intended to mainstream wealth redistribution are undermining these principles. The tragic irony is the wealth in these cases is trickling up rather than down the economic ladder,” he continued. “The cost of this largess will thus be shared by those struggling today and the next generation who will inherit $15 trillion of debt that threatens the future of the American Dream.”

Coburn does not argue that taxes should be raised on the wealthy, however. Simply ending giveaways for people who don’t need them would help, and he recommends limiting or cutting payments to millionaires in the safety net programs; ending farm and conservation payments to the rich; means-testing tax breaks and other payouts; and reforming provisions of the tax code that help pay for vacation properties and mansions.

Indeed, at the very least we could start with streamlining a tax code that allows for $1 trillion in lost revenue due to  various deductions and loopholes. That should’ve been one of the few non-partisan non-issues that everyone could’ve agreed on. And yet even that, go figure, was too much for the best politicians money could by.

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