In the world of partisan politics, few things
are more scrutinized and criticized than government handouts. The topic has been a frequent target of Right
Wing politicos for decades. The familiar
screed asserts that the ubiquitous giveaway is expressly reserved; no, targeted
for the undeserving lazy, unmotivated, shiftless poor of our society. After the main proposition come the
supporting premise: We must eliminate this wasteful expenditure of precious
resources.
The very notion is in fact a fallacy. The truth of the matter is, the well to do
benefit directly from the largess of government subsidies too. As a familiar post-Obama meme goes, “We are
all socialists now.” In fact, not only
are we, but we have been for quite some time.
“Social” Security, as it’s commonly called, for example, has been around
since 1935, or 80 years. Undoubtedly,
there have been, and still are efforts to roll back, or eliminate it ever since
the original Social Security Act, a compendium of social welfare and social insurance programs, was enacted. Surely one can make the case that America
employed policies that inured to the social or collective benefit of citizens
before that time. However, the 1935
measure marks an undeniable line in the sand.
What I want to make
perfectly clear at this juncture is, it is not just the poor who sup at the
government’s teat. The well heeled seek,
obtain, and accept benefits derived from government. Last week, Emily
Badger and Christopher
Ingraham wrote a piece in the Washington Post that not
only made this case, but delineated 10 current day examples of how folks,
including those not defined or thought of as poor, come to receive government
sponsored benefits. I will list those
items here for your edification:
1.
The
mortgage interest deduction for big houses and second homes.
Thanks to this tax break, the 5 million households in America making more
than $200,000 a year get a
lot more housing aid than the 20 million households living on less
than $20,000. Deductions for mortgage interest incentivize people already
capable of buying big homes to buy
even bigger ones. This tax break applies as well to second
homes (you only get one second
home though!). Note: In the eyes of the
Congressional Budget Office — the official word on this in Washington —
the mortgage interest deduction is equivalent to the government offering you
money, not you keeping your own money.
2.
The
yacht tax deduction. If you’ve got a boat and you’re paying
interest on it, that interest is tax-deductible – provided your boat is really, really big. If it
has sleeping quarters, a kitchen and a toilet – e.g., it is a yacht – then it
can be considered
a second home and any interest you pay on it is deductible.
But if you just have a garden-variety fishing boat or canoe, sorry – no
deduction for you. Beyond that, if you have a yacht you can loan
it out to a charter business for part of the year, and keep it for personal
use the rest of the time. This allows you to deduct the purchase price,
insurance, maintenance and slip fees too. [This
image perfectly sums up inequality in America, according to the Internet]
3.
Rental
Property. If you're a
landlord, which you probably aren't if you're very low-income, you can deduct many
of the expenses you incur renting a home, including repairs, advertising, HOA fees and
— again — mortgage interest. If you happen to rent out either your first or
second home for 14 days or less — because, for example, Augusta National Golf
Club is
hosting the Masters nearby — you get to just pocket all that income
without paying taxes on it at all.
4. Fancy business meals. Talking business over an expensive dinner?
That's tax deductible, too, a fact that puts taxpayer spending on food stamps
into relief. This is a good deal for, say, a CEO presiding over actual
filet mignon at a five-star restaurant. Scott Klinger, now
the director of revenue and spending policies at the Center for Effective
Government, explains
how this works here:
Imagine that the tab for dinner and drinks for 10 executives comes to
$1,600. Current tax law allows companies to deduct half of the cost of business
meals — in this case, $800. With a corporate tax rate of 35 percent, each
dollar of deductions yields 35 cents of tax savings — so that $800 deduction saves $280 in taxes. This means one dinner for
10 people provides more public food assistance than the $279 an average
household receives in food stamps for the whole month. [Missouri
Republicans are trying to ban food stamp recipients from buying steak and
seafood]
5.
The capital gains tax rate. This is the big one. Taxes on investment
dividends and capital gains currently
max out at about 24 percent when you add in a Medicare surtax that
applies to some investment income. But the top income tax rate is 39.6
percent. So investment income is taxed at a much lower
rate than regular income. The annual earnings of many of the ultra-rich come
from investments, not from wages. This is why Warren Buffett famously has a lower
effective tax rate than his secretary.
6.
The estate tax. “The Estate Tax is a tax on your right to
transfer property at your death,” according to the IRS. Without the estate tax,
super-wealthy families would be able to hoard that wealth in perpetuity,
becoming ever more powerful in the process. The tax, as it currently exists, only
kicks in on estates
worth $5.4 million or more, affecting about the top
0.2 percent of households. For everyone else in the top 1 percent,
congratulations! You can pass on your riches to your heirs tax-free. [The
double-standard of making the poor prove they’re worthy of government benefits]
7. Gambling loss deductions. Did you know that the government provides a
generous tax deduction for literally throwing your money away? You can deduct your gambling losses up to the
value of any winnings you earned. More gambling winnings mean more gambling
deductions, incentivizing you to keep gambling more to at least break even. And
if you’ve got more money to gamble, you’ll have more losses to deduct.
8. Social Security earnings limit. Social Security taxes only apply to income
up to $118,500 – anything after that is Social Security
tax-free. So the more money you make, the less your effective Social Security
tax rate is, making this tax about as regressive as they come. Technically, of
course, Social Security is a savings plan, not a tax. But the rich tend to live
longer than the poor and receive benefits longer than lower-wage earners, so an
adjustment to the earnings limit would help offset this difference. Social
Security’s own actuaries estimate that eliminating this cap would reduce
the program’s long-term deficit by about 86 percent.
9. Retirement plans. The federal government
incentivizes retirement by allowing you to reduce your taxable income by
saving money in 401(k) plans or IRAs. But employer-sponsored retirement
plans only benefit those people with employers that offer them (so,
largely not people who work in retail or the fast-food sector). And the benefit
for IRAs doesn’t help people who have no money left over for retirement after
they pay their living expenses. In total, about 66 percent of these retirement
subsidies go to
the top 20 percent of taxpayers. Less than 1 percent go to the bottom 20
percent.
10. Tax
prep. If you have hired an accountant to help you
sort through all of these tax breaks to make sure you maximize them — which the
wealthy are much more likely to do — you get to write off that expense, too.
Now, I’m not a tax attorney, or preparer, or a
member of the one percent. I know the
wealthy, as a rule, take great exception to most if not all ten of the points
above. And that’s OK. Feel free to post your own thoughts on the
subject. One thing that is beyond
rational repudiation is that corporate and wealthy welfare is real. We can engage in earnest debate about whether
such subsidies are earned, or simply a part of our economic system that needs
repair.
I know folks who believe that arguments such as
that proffered by the WashPo writers amounts to wealth envy. Interestingly, when arguments are made about
the economic drain ensuing from the rich carrying the poor, few if any one from
the ranks of the wealthy considers that poor envy. And of course, it isn’t. What wealthy person would actually want to be
poor? None!
I don’t believe pointing out the systemic
inequities listed in the items above is a function of any sort of envy. Rather it is a legitimate effort to foster a
conversation about aspects of our economic policies and practices that could be
realigned and improved. Meanwhile, my postulation remains, “The Ubiquitous GovernmentHandout: Not Just the Purview of the Poor!”
I’ll leave it at that. I’m done, holla back!
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