Every year the Government doles out billions of dollars to the wealthiest Americans that our corporate owned media never talks about: itemized deductions for property taxes, mortgage interests, savings, and health care expenditures. No the cost of these deductions aren't included in budget proposals, but they're there: in plain sight but hidden by near universal silence on these costly give aways that could instead pay for things like student loans or even pay down the suddenly all important deficit. I'll let Rex Nutting explain:
I’m talking about private spending that the government subsidizes through loopholes, deductions and credits in the tax code. These tax breaks — known as tax expenditures — subsidize some of the most expensive items in the family budget: buying a home, buying health care, saving for retirement and paying for college and child care.
Because the government provides these subsidies through the tax code instead of through direct spending, the benefits go largely to those who make the most money. A $1,000 deduction provides $350 in benefits to a taxpayer in the top 35% tax bracket, but just $100 to one in the bottom bracket of 10%. The 65% of taxpayers who don’t itemize deductions but take the standard deduction instead get nothing at all.
Just how much do these subsidies for the top tax bracket cost the government each year? Well I read the
Tax Policy Center's report and here's what I found:
According to the study the top 5% of income earners enjoyed 36.4% of the Government's hidden subsidies for mortgage owners. This costs the Government more than $43 billion dollars (36.4% x 120 billion total), about the same as the entire cost of the earned income tax credit every year. As opposed to the entire bottom 60% of income earners who enjoyed just over 9% of the subsidy or less than $11 billion.
The hidden cost of allowing the top 5% of income earners to deduct healthcare costs is less but still significant: 12.2% of $172.9 billion dollars is over $21 billion dollars in lost revenue or the same amount the Federal Government spends on student financial aid every year.
The biggest subsidy to our top 5% of income earners are tax incentives for retirement savings: They enjoyed 41% of the benefit, costing the Government over $81 billion dollars, almost equal to the entire amount proposed by Obama to spend on Unemployment Insurance in 2011. As opposed to the entire bottom 60% of wage earners who enjoyed only 7.3% of the subsidy, or less than $15 billion.
So that's $145 billions of dollars that the Government loses in income to benefit the wealthiest 5% of Americans. Could the top 5% of income earners afford to have their deductions eliminated?
With $1.4 million in net worth (in 2004, probably more now) I surely think the top 5% can afford to have their hidden Government subsidies eliminated, after all they now enjoy 62% of our nation's net worth:
Obama actually campaigned on capping the benefits of deductions to those in top tax bracket at 28% instead of 35%, and has even proposed so in his 2011 budget, but I'd bet anything it's the first thing to go in any "compromise" with the Republicans, just as it has every previous year (even with large Democratic Majorities). Instead I propose he starts with a cap of 0% on the top 5% of wage earners and perhaps "compromise" at 15 but I won't hold my breath.
CNN actually ran a decent piece on this rarely talked about topic last year:
In fiscal 2009, the government spent a total of $384 billion on these "wealth-building" strategies, the report said. The policies included some direct spending, but were mainly comprised of tax breaks, tax credits and preferential tax rates.
While the goal is to help families climb the economic ladder by acquiring assets, the report said these policies are skewed towards high-income taxpayers because they are based on things such as the size of a home or an investment portfolio.
Middle class and low-income families, the report said, receive none of the benefits because they often don't make enough money to itemize deductions or even to accrue much tax liability
According to the study, more than half the benefits in question went to the wealthiest 5% of taxpayers, individuals and households making more than $167,000, in fiscal 2009. The top 1% of taxpayers, those making more than $1 million, received an average $95,000 in assistance, mostly through mortgage and property tax deductions and investment tax breaks.
By contrast, the poorest taxpayers, including families making $50,000, received less than $500 in benefits from the most expansive of these policies. Upper middle-income families making $100,000 annually received $1,600 in benefits.
We have to talk about this more, the longer we remain quiet about these subsidies to the wealthy the longer they'll continue to cost us.