The
Absurd Amount of Entitlements That Go to Rich People
By Paul Buchheit
for Common Dreams
The Rich Get as Much of the Safety Net as the Poor
Thomas Piketty,
Emmanuel Saez, and Gabriel Zucman have calculated that,
on average in 2014, the middle class received more of the safety net than the
lower class.
Specifically, the 40%
of American adults with incomes just below the top 10% received more in safety
net government transfers (Medicare, Medicaid, food stamps/SNAP, Veterans’
benefits, etc., but excluding Social Security) than the bottom 50% of Americans
(Figure 11).
Even MORE
STUNNINGLY, according to the
same authors, when Medicare and Social Security are both included the
richest 10% on average received approximately as much in government transfers
as the poorest 50% (Figure S.13).
The BIGGEST
SHOCKER: When Medicare and Social Security are both included, the average
household in the .01%—those with OVER $100 Million in
assets—received MORE in government transfers in 2014 than the
average household in the poorest 50% (Table II-TG4b).
Over 90 percent of
safety net entitlement benefits go to the elderly, the disabled, or working
households.
This helps to explain the various estimates that
the poorest 20% of
American households receive only about one-third of all government benefits, or
about $250 billion of the total 'welfare' budget of $740 billion.
That comes
to about $10,000 for each of the 25 million households in the bottom quintile,
an annual government subsidy that pales in comparison to the tax
benefits enjoyed by wealthy households (to be described below).
The Rich Cash In on Medicare and Social Security
As the longevity of
wealthy Americans increases relative
to low-income Americans, they benefit more and more from Medicare and Social
Security. A National Institutes of Health study found "a
growing gap in projected lifetime benefits under programs such as Social
Security and Medicare because higher earners are increasingly more likely to
receive such benefits over longer periods of time relative to lower
earners."
A Brookings report
quantifies this, estimating that lowest-quintile Americans born in 1960 will
receive "only 78 percent of the lifetime Medicare benefits received by the
top income quintile."
Middle- and
upper-income Americans are even dipping into Medicaid,
because of the program's accommodating asset-exclusion
limits.
According to the National Center
for Policy Analysis, "15 percent of the elderly in the middle
income quintile receive Medicaid benefits, 8 percent in the upper-middle
quintile receive benefits, and 5 percent in the top quintile receive Medicaid
benefits."
The U.S. federal tax
system is progressive, and thus big incomes lead to higher federal taxes and
greater investments in Social Security.
The Urban Institute calculates
that a married couple with two low earners will pay only about one-third the
amount paid by a married couple with one high earner and one average earner.
However, 20-year annuities (ages 65 to 85) yield about $22,000 per year for the
low earners and about $44,000 per year for the high/average earners (see
analysis here).
Much, Much MORE Entitlement Money: Tax Benefits,
Almost Entirely for the Rich
According to West's Encyclopedia
of American Law, an 'entitlement' is "an individual's right to
receive a value or benefit provided by law."
This includes
mandatory means-tested safety net programs and subsidies resulting from new or
revised tax laws. Based on analyses by the Congressional Budget Office (CBO),
Pew Research, the Center on Budget and Policy Priorities (CBPP), and several
trusted news sources, the following is a summary of tax entitlements taken by
the households of the poorest 20%, the richest 20%, and the richest 1%.
The Poorest 20% of U.S. Households Get up to
$3,000 Each in Tax Entitlements
CBO estimates that
about 8 percent of tax breaks in 2013, or $72 billion out of $900 billion, went
to the bottom quintile, while CBPP estimates 2.8
percent of $1.1 trillion, or about $30 billion. That accounts for anywhere from
$1,000 to $3,000 in government tax subsidies for the poorest 20%.
The Richest 20% of U.S. Households Get at least
$18,000 Each in Tax Entitlements
CBO itemizes the
ten main tax expenditures, including capital gains, employer health insurance,
pension deductions, and state and local tax breaks. In 2013 over half of these
benefits (or about $450 billion) went to the top quintile (25 million
households). That's $18,000 per household.
CBPP's estimate is
much higher, with two-thirds of $1.1 trillion in benefits (almost $30,000 per
household) going to the top quintile.
The Richest 1% of U.S. Households Get Over
$120,000 Each in Tax Entitlements
Pew Research counted $1.15
trillion in tax expenditures in 2016. Thus tax break entitlements cost
taxpayers much more than the entire $740 billion safety net for the
poor.
Evidence that most of
this goes to the super-rich is derived from various sources, including CBO, National
Priorities Project, The Fiscal Times,
and the New York Times.
CBO estimates that
17 percent of the $900 billion in tax expenditures in 2013, or $153 billion,
went to the 1.25 million households in the top 1%. CBPP's estimate is
much higher, with 23.9 percent of $1.1 trillion in benefits (over $200,000
per household) going to the top quintile.
Even MORE Lucrative Entitlements for the Rich
On top of everything
else, there exists an incredible array of big-money tax breaks that
primarily benefit well-positioned Americans:
(1) The mortgage
interest deduction for second homes,
which might even be a YACHT;
(2) Another luxury
home benefit with UP TO A HALF-MILLION DOLLARS TAX-FREE when a couple sells
their home;
(3) Yet another
rich-couple subsidy with properties worth up to $10 million
TAX-FREE when an estate is passed on to heirs;
(4) Deductions on
rental properties for landlords, who are unlikely to be low-income people;
(5) The $127,200 limit
on Social Security taxes, which benefits only the richest 10% of Americans;
(6) Tax breaks
on 401(k) accounts,
which are less likely to be owned by low-income people;
(7) Higher education
financial aid, especially from the prestigious universities that admit more
students from families in the
top 1% than the entire bottom 50%; and
(8) Miscellaneous
entitlement perks, such as business meals, gambling loss deductions, tax
preparation.
And finally, for any
defenders of high-end entitlements on the basis of federal tax paid, TOTAL
taxes should be considered. It has been estimated that
poor Americans pay about 25 percent in total taxes, while the 1% pays anywhere
from 18 to 23 percent.
Wealthy Americans
complain about 'entitlements' for the poor, but they keep collecting their own
entitlements, to a degree that average Americans can only dream about.
Paul Buchheit is a college teacher, an active member
of US Uncut Chicago. His latest book is, Disposable
Americans: Extreme Capitalism and the Case for a Guaranteed Income.
He is also founder and developer of social justice and educational websites
(UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor
and main author of "American Wars:
Illusions and Realities" (Clarity Press). He can be reached
at paul [at] UsAgainstGreed [dot] org.
