A report by Tom A. Coburn, M.D. U.S. Senator, Oklahoma Nov. 2011
Americans are facing tough times. Millions are still out of work. Wages remain stagnant, while health care costs, tuition, and other household cost continue to rise. Many homeowners owe more for their houses than they are worth.
With families across the country struggling to make ends meet during these economically trying times, many are left with few options so they are turning to the government – some very reluctantly – for assistance. The government safety net has been cast far and wide, with almost half of all American households now receiving some form of government assistance.1 But most taxpayers will be asking why when they learn who is receiving what.
From tax write-offs for gambling losses, vacation homes, and luxury yachts to subsidies for their ranches and estates, the government is subsidizing the lifestyles of the rich and famous. Multimillionaires are even receiving government checks for not working. This welfare for the well-off
- costing billions of dollars a year – is being paid for with the taxes of the less fortunate, many who are working two jobs just to make ends meet, and IOUs to be paid off by future generations.
This is not an accidental loophole in the law. To the contrary, this reverse Robin Hood style of wealth redistribution is an intentional effort to get all Americans bought into a system where everyone appears to benefit.
Even in these difficult times, the United States remains a land of opportunity and not everyone is in need of government hand outs. The income of the wealthiest one percent of Americans has risen dramatically over the last decade. Yet, the federal government lavishes these millionaires
with billions of dollars in giveaways and tax breaks.
The government’s social safety net, which has long existed to catch those who are down and help them get back up, is now being used as a hammock by some millionaires, some who are paying less taxes than average middle class families. Comprehensive information on the full range of government benefits enjoyed by millionaires has never been collected previously.5 This report provides the first such compilation. What it reveals is sheer Washington stupidity with government policies pampering the wealthy costing taxpayers billions of dollars every year.
These billions of dollars for millionaires include $74 million of unemployment checks, $316 million in farm subsidies, $89 million for preservation of ranches and estates, $9 billion of retirement checks, $75.6 million in residential energy tax credits, and $7.5 million to compensate for damages caused by emergencies to property that should have been insured. All and all, over $9.5 billion in government benefits have been paid to millionaires since 2003. Millionaires also borrowed $16 million in government backed education loans to attend college.
On average, each year, this report found that millionaires enjoy benefits from tax giveaways and federal grant programs totaling $30 billion. As a result, almost 1,500 millionaires paid no federal income tax in 2009.
The purpose of the UI [Unemployment Insurance] program has traditionally been to help bridge the gap between jobs,28 however, some people in the program are collecting UI and also earning millions of dollars in the same year. In 2009, the Internal Revenue Service reported that 2,362 millionaires collected a total of $20,799,000 in UI. Eighteen individuals reporting an adjusted gross income of $10,000,000 or more also received $12,333 on average in UI in 2009, for a total of $222,000.
The cost of a college education is increasing much faster than inflation.75 While tuition and fees at public universities have increased approximately 130 percent over the past 20 years, middle class incomes have remained the same.76
To help individuals afford the cost of college tuition and associated expenses, the Department of Education (“ED”) administers a number of loans to undergraduate and graduate students and the parents of dependent undergraduate students. The primary program in which ED administers student loans is the William D. Ford Federal Direct Loan (“DL”) program. For 2012, ED estimates that it will loan $124.3 billion to 25.1 million students and parents through the DL program, making it the largest federal program providing direct aid for postsecondary education.77 Under the DL program, low interest loans are made with capital provided by taxpayers, with maximum interest rates set by statute. These loans offer terms and conditions more favorable to borrowers than private and other non-federal loans.
Since income is not a factor in determining student aid eligibility for unsubsidized Stafford Loans under these programs, millionaires are eligible for these loans. Nor is income a factor in determining aid eligibility for PLUS loans for parents or graduate students.
The number and amount of loans to millionaires through the DL program has continued to increase over the past four years. The average amount loaned to millionaires through the DL program was $19,405.78
Babysitting for Millionaires. Under the current tax code, individuals are able to claim a credit for child care expenses for children under the age of 13. The credit can also be taken for expenses related to care provided for individuals that are “physically or mentally incapable of self-care.”80 An individual is allowed to count up to $3,000 in child-care expenses for one child, or up to $6,000 for two or more children. The credit is a Percentage of the amount spent on child care, and that percentage gradually decreases as income increases. Families that earn less than $15,000 can claim a credit for 35 percent of qualifying expenses. Families that earn $43,000 or more are only able to deduct 20 percent of costs, meaning millionaires take the same credit as families that make $43,000. No income limits exist on claiming the credit.