Yesterday Sen. Tom Coburn released a report, “Subsidies of the Rich and Famous,” detailing the ways in which the government transfers money to the wealthy. Based on his staff’s investigation into a number of different programs, Coburn estimates that the feds shell out about $30 billion per year to millionaires — that is, people making $1 million in adjusted gross income in a given year.
Coburn is trying to take control of the narrative about income inequality. It doesn’t make sense to call for taxing “millionaires and billionaires,” as President Obama has on countless occasions, if you’re planning on also subsidizing them to the tune of $30 billion per year. For perspective, eliminating all of the spending identified in Coburn’s report would save the Treasury about two-thirds of the revenues that would be raised by raising rates on the highest income tax brackets back to Clinton-era levels. In other words, Coburn’s proving that clamoring to “tax the rich” is incoherent without also calling for end to subsidies for the rich.
Yet Coburn’s report is not quite what it seems, in two different ways. First, he only identifies about $1.5 billion per year in direct spending on millionaires. The other $28.5 in subsidies comes from tax breaks, such as the mortgage interest deduction. 1.5 billion dollars spent on billionaires is 1.5 billion too much, but let’s face it: it’s not a lot in government terms. The bulk of the subsidies are tax breaks that are going to prove tricky for Coburn. If he wants to cut them, he’s setting himself up for a showdown with Republicans who consider cutting tax breaks (without also lowering tax rates) to be the same as raising taxes, and something to be avoided. He aggravated many within the Republican coalition when he tried to eliminate a tax break for ethanol earlier this year. The reality is that, while such “subsidies” are terrible policy and should be ended, they are not quite the same as direct spending.
An even larger problem with the report, though, is the fact that it only covers spending and tax breaks that directly benefit millionaires. The amount of government spending that finds its ways into the hands of those who least need it is surely far higher than $30 billion per year. Set aside the bailouts, stimulus packages, and other one-off emergency bills. Much of the most uncontroversial, routine government spending accrues to the benefit of the rich, no matter who the nominal beneficiary is.
It would be great to see a report that detailed the amount of Medicare and Medicaid spending that ultimately benefited health care executives as opposed to old people and low-income families. Or one that estimated how much of each farm bill and ethanol subsidy flowed into the coffers of companies like ADM. Coburn notes that millionaires profit hugely from claiming tax deductions for the mortgage interest they pay on their own houses, but he doesn’t quantify how much banks have made by investing in mortgages taken out by middle- and lower-class folks making use of the same deduction. The list could go on.
Coburn’s report is a great first step in reframing the debate about government privileges for the wealthy. But it only hints at the real scope of the problem.