Tag Archives: tax code

Rich Man,Poor Man…

Let’s talk about welfare.

Usually, when you hear someone railing against “welfare cheats” and/or “encouraging dependency,” the objects of scorn are unwed mothers, people of color and other impoverished populations. The people who express these sentiments resent the use of their “hard-earned” tax dollars to help support people who are clearly unworthy.

There are a number of uncongenial facts that don’t influence those diatribes: the fact that our current social welfare system (if you can dignify it by calling it a “system”) is monumentally inadequate (most people who are struggling to put food on the table don’t qualify); a large percentage of those who do receive benefits are children, the disabled and the elderly; and– triggering my rant this morning– the most dependent and often unworthy beneficiaries are the rich.

A recent essay from Commondreams.org focuses on that last item, and details the ways in which wealthy Americans benefit from a wide array of tax breaks and government subsidies that somehow escape mention when Republicans complain about entitlements for the poor.

Those favorable provisions are often hidden in the tax code.The enormous stock market gains that investors have made since the end of 2008–estimated at some 30 trillion– can be held tax-free until the stocks are sold, and can also be passed virtually tax free by the super-rich to their children, who can take their inheritance subject to a so-called stepped-up provision which allows them to erase all the accumulated gains. In many instances, that means without paying a single dollar in taxes. As the author notes, “This massive subsidy for the super-rich, along with gift tax and estate tax loopholes, has allowed families like the Waltons to avoid paying their debt to society.”

Then there are what we euphemistically term “tax expenditures.”

Tax expenditures include mortgage deductions, interest and dividend exclusions, and reduced rates on capital gains. According to the Center on Budget and Policy Priorities, “the cost of all federal income tax expenditures was higher than Social Security, the combined cost of Medicare and Medicaid, or the cost of either defense or non-defense discretionary spending….These tax expenditures are ‘upside-down,’ providing their largest subsidies to high-income people even though these individuals are least likely to need financial incentives to engage in the activities that tax expenditures are generally designed to promote, such as buying a home, sending a child to college, or saving for retirement.

The total loss of tax revenue from just the mortgage and property tax deductions is nearly double the amount spent on public housing programs.

The Common Dreams article didn’t even mention the corporate subsidies I have so often criticized on this site: the subsidies for fossil fuels, payments to corporate farmers, and numerous, highly favorable tax provisions that allow corporations to evade taxes on huge profits, among many others.

Many of these provisions are defended as necessary to “incentivize” socially-useful activities, although research suggests that (with a few exceptions) there is very little evidence for that assertion, and in the case of those fossil fuel “incentives,” what we are incentivizing might more accurately be called “socially suicidal.”

Speaking of socially desirable activities, most Americans would include raising healthy well-adjusted children in that category. Making that task easier for poor families and/or single parents seems to me to be a better investment in the common good than incentivizing oil companies to locate new fossil fuel deposits.

But of course, poor people and single parents lack the means to hire lobbyists…