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OPINION AND EDITORIAL | |
TIME TO END UNDERWRITING THE BAD DEBTS AND FINANCIAL FOLLIES OF THE WELL OFF?
July 12, 2010
So begins an interesting piece in the New York Times by Ross Douthat that brings to light the crazy old uncle in the attic that the rich don't want talked about and the lower and middle classes usually know nothing about; namely that working stiffs - thanks to various tax laws and other laws - spend a lot of money subsidizing the lifestyles of the rich and near rich in America.
Douthat humorously calls his piece “The Class War We Need.” Perhaps he’s right.
He points to the news last week that Americans with million-dollar mortgages are defaulting at almost twice the rate of the typical low paid working stiff homeowner.
Similarly we are reminded of what Billionaire Warren Buffet pointed out a few years ago to NBC’s Tom Brokaw -- namely that the lowly paid office staff (read that working stiffs) in his own office at Berkshire-Hathaway paid more taxes out of their paychecks than he did and he’s the ONLY freaking Billionaire in the office!
Was there an outrage across the land from working stiffs when they heard that?
No.
They’ve been properly taught (like good little doggies) by the rich and hyper-rich investor class to be silent about such outrages for to do otherwise would be to commit the mortal sin of wanting to “wage class warfare” against the rich!
God forbid!
Remember the quote at the start of this piece from Douthat about the rich being different from you and me because they know how to game the system?
Now you know what he means. They’ve got this scam down to a science. They have brilliantly made obedient, silent lap dogs of the very working class that funds their excesses, lifestyles and follies. And the lap dogs just don’t get it.
They’re as dumb as dodo birds about the whole thing.
You can rest assured that if the rich found out that Warren Buffet was paying a nickel more in tax from HIS paycheck than his office workers were, there would have been a national emergency over the rich being gouged by high taxes.
Lobbyists would have been handed an extra ration of millions of dollars to go and pay off lawmakers to make the inequity right…to make that extra nickel of tax go away.
Douthat points out that he problem is we working stiffs continue to subsidize the irresponsibility of the rich too heavily — “underwriting their bad bets and bailing out their follies. The class warfare we need is a conservative class warfare, which would force the million-dollar defaulters to pay their own way from here on out.”
Here’s what Douthat means by that:
Consider the spread that the rich get to use when financing a big house on the hill worth say $1.7 Million.
“The first million of its reported $1.7 million price tag is presumably covered by the federal mortgage-interest tax deduction.
Intended to boost middle-class homebuyers, this deduction has gradually turned into a huge tax break for the affluent, with most of the benefits flowing to homeowners with cash income over $100,000.
In much of the country, it’s a McMansion subsidy, whose costs to the federal Treasury are covered by the tax dollars of Americans who either rent or own more modest homes. “
This policy, writes Douthat, is typical of the way the federal government does business.
In a 2007 report by the Congressional Joint Committee on Taxation, homeowner tax breaks cost the federal government $119 billion. (Economists call these "tax expenditures").
These include $73.7 billion in mortgage interest deductions, $16.8 billion in property tax deductions, and $28.5 billion in exclusion from capital gains taxes when homes are sold.
This would be OK if the tax breaks helped most middle- and working-class people, who need the cash. But they don't. Half of all homeowners, mostly those on the bottom-half of the income ladder, don't claim deductions at all. Among homeowners who itemize deductions, most get only a few hundred dollars a year in tax breaks. Renters, of course, don't even qualify.
But homeowners with the highest incomes and the most expensive homes (including second homes) GET THE LARGEST ENTITLEMENT!
If you want to be polite you could call it a subsidy compliments of the dumb lower class working stiffs.
We call it what it is however - an entitlement for the rich - because if anyone wanted to change the law and take that royal birth right away from the polo playing, villa-in-Tuscanny crowd, there would be hell to pay.
The richest 3% of all Americans (those with incomes over $200,000) get about 28% of the homeowner tax breaks.
As a result, a wealthy corporate executive, or an heiress like Cindy McCain, is likely to receive a much bigger homeowner tax break than a nurse, a factory worker, or a school teacher.
Many economists believe this current system is both inefficient and unfair. It subsidizes the rich to buy huge homes without helping most working families buy even a small bungalow. Duh.
As a result, it has little impact on expanding homeownership, since wealthy families like the John & Cindy McCains can afford to buy expensive homes without getting a subsidy.
Note: during his failed presidential bid, Senator McCain opposed providing government help for families (read that working stiffs) facing foreclosure.
He was against a mortgage tax credit for families who don't itemize deductions, which President Obama endorsed. And McCain said little if anything about the huge tax breaks that multi-millionaires like he and Cindy get on their huge homes. What a surprise, huh?
“In case after case, Washington’s web of subsidies and tax breaks effectively takes money from the middle class and hands it out to speculators and have-mores," says Douthat.
"We subsidize drug companies, oil companies, agribusinesses disguised as “family farms” and “clean energy” firms that aren’t energy-efficient at all. We give tax breaks to immensely profitable corporations that don’t need the money and boondoggles that wouldn’t exist without government favoritism."
"And we do more of it every day. Take Barack Obama’s initiative to double U.S. exports in the next five years. As The Washington Examiner’s Tim Carney points out, it involves the purest sort of corporate welfare: We’re lending money to foreign governments or companies so that they’ll buy from Boeing and Pfizer and Archer Daniels Midland. That’s good news for those companies’ stockholders and C.E.O.’s. But the money to pay for it ultimately comes out of middle-class pocketbooks, “says Douthat.
And it’s not just corporate welfare that is the problem. The same pattern is at work in our entire entitlement system, which is lurching toward bankruptcy in part because of how much Medicare and Social Security pays to seniors who could get along without assistance.
Douthat again:
“Instead of a safety net that protects the elderly from poverty, we have a system in which the American taxpayer is effectively underwriting cruises and tee times.
All of this ought to be grist for a kind of “small-government egalitarianism,” in the economist Edward Glaeser’s useful phrase, that seeks to shrink government by attacking Washington’s wasteful spending on the well-connected.”
One could go through the tax code and find time and time again where the rich have gamed the system in such a way that working stiffs below end up paying he the freight for it.
There’s much hue and outcry in America (always) about the "poor rich" are being taxed too much to fund the slackers and the lazy bums down at the bottom of the food chain who don’t want to work (or so sayeth the rich).
But Douthat writes “the most pernicious sort of (wealth) redistribution isn’t from the successful to the poor. It’s from savers to speculators, from outsiders to insiders, and from the industrious middle class to the reckless, unproductive rich. “
His piece is an interesting read. You can find it HERE
There’s also an interesting video piece about welfare for the wealthy HERE
You may be surprised to learn in the video that your tax dollars went to subsidize a wealthy Houston doctor’s 10,000 acres of land.
Is that a sweet deal or what?
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