Class warfare is a politically charged term these days, from the Wall Street protests to the Capitol Hill negotiations over curtailing the nation’s debt. But a new congressional analysis, obtained by Newsweek, may fuel populist outrage by showing the extent of government subsidies that go to the wealthiest people in America.
From unemployment payments to subsidies and tax breaks on luxury items like vacation homes and yachts, Americans earning more than $1 million collect more than $30 billion in government largesse each year, according to the report assembled by Sen. Tom Coburn, a Republican from Oklahoma, who is so often at odds with members of both parties that colleagues call him “Dr. No.” The Internal Revenue Service provided the data showing how much money was going to the much-referenced top 1 percent.
In all, millionaires receive hefty help from Uncle Sam. The $30 billion in handouts, to put it in perspective, amounts to twice as much as the government spends on NASA, and three times the budget of the Environmental Protection Agency. On the other hand, it would only cover the cost of fighting about three months in Iraq and Afghanistan. Still, eliminating them would help make a small dent in the $1.5 trillion congressional leaders are trying to find by Thanksgiving.
Jon Bon Jovi, the millionaire rock star cited in the report, took federal dollars to raise honeybees on his property. Together billionaire moguls David Rockefeller and Ted Turner have also accepted more than half a million dollars in farm payments. Basketball legend Scottie Pippen took $210,520 in agriculture subsidies while making his fortune playing for the Chicago Bulls. To make matters worse, the government disclosed to Coburn that some recipients of farm subsidies got it by mistake. Tax records show that more than three fourths of high earners collecting farming money list their primary residence in a city—land unsuitable for farming.
Top earners, surprisingly, also get significant amounts of unemployment insurance and disaster payments. Since 2004, people with seven-figure salaries have accepted more than $9 billion in Social Security. A small band of GOP senators, led by Sen. Lindsey Graham, the South Carolina Republican, have proposed “means testing” to shrink Social Security payments for people who probably don’t need them.
The biggest money comes—or goes, rather—through unpaid taxes. More than 1,500 millionaires paid no income tax last year, according to federal records, mainly due to tax loopholes and savvy accountants. Tax breaks taken by millionaires on things like mortgage interest ($27.7 billion), rental expenses ($64.2 billion) and electric vehicles ($12.5 million) keep cash from entering the federal coffers.
“The country is sucking wind right now,” Coburn says. “We end up subsidizing the very wealthy and not helping the ones who really need the help.” The Oklahoman is one of few Republicans who support tax increases as part of a plan to reduce the deficit. Meanwhile, antitax activist Grover Norquist, a frequent nemesis for Coburn, says the whole system is too complex, and too unfair, and that lawmakers need to get rid of loopholes and to lower rates across the board.
Many federal programs maintain broad appeal, especially in such a volatile economy. Agricultural subsidies help farmers handle large swings in commodity prices.
But Coburn’s report is certain to generate arguments on the other side about tax fairness. Why, some might wonder, shouldn’t people who feed the government get to reap its benefits? Millionaires “pay a lot into the system,” says Joseph Thorndike, head of the Tax History Project, a Washington analysis group. “The government comes to the rescue of people in bad moments, and it should do that blindly.”
Yet the crux of the argument—that millionaires are using the social safety net as a luxury hammock—fuels an ongoing campaign by the White House to raise some taxes on top earners. “Republicans need to stop supporting tax breaks for the richest Americans so we can use some of that money to create jobs and reduce the deficit,” says White House spokesperson Amy Brundage. Or as Obama likes to put it, folks like him can afford to give more and take less.