Apostolos Pittas contributed to this post.
Senator Tom Coburn (R-OK) recently released a report, titled “Subsidies of the Rich and Famous: Federal Programs and Tax Breaks That Help Millionaires,” that details how millionaires have benefitted from federal law to collect approximately $1.6 billion in payments and $28.5 billion through tax breaks each year. Coburn argues that millionaires are unfairly receiving these benefits, and that they serve as a “reverse Robin Hood style of wealth redistribution.”
During these times of fiscal imbalance, the U.S. must re-examine excess payments and special tax loopholes. Following the super committee’s recent failure to reach a deficit reduction agreement, Congress as a whole must pick up where those members left off. And whether or not one might agree with every one of Coburn’s recommendations, he has honed in on a commonsense area for savings.
In his report, Coburn addresses a wide swath of payments that range from Social Security and Unemployment Insurance to farm and conservation programs. He highlights, for example, an Internal Revenue Service (IRS) report that showed 1,430 individuals with incomes of over $10 million received a total of $47 million in Social Security benefits (or an average of $33,000 per recipient) in 2009. Coburn proposes to scale back these payments, and although many would contend that the universality of the program is important, there seems to be room for savings. Even more astoundingly, Coburn points to the Farm Service Agency, which from 2003-2006, made $49 million in overpayments to ineligible farming recipients, including land developers and a National Basketball Association (NBA) star. As one might expect, bipartisan support already exists for a number of Coburn’s recommendations, including the effort to end unemployment benefits for millionaires and billionaires, which recently received a unanimous vote in the Senate.
Coburn also strongly emphasizes the need for reducing millionaire’s tax breaks, such as deductions for mortgage interest, rental expenses, and business entertainment expenses. Comically, yet tragically, he points out that yachts, should they have sleeping, cooking, and toilet facilities and are lived in for a mere two weeks a year, can be considered secondary homes, and as such enable the wealthy to deduct the interest paid on these mortgages. Coburn also references an absurdly broad IRS definition of “entertainment,” as being any activity that provides entertainment, amusement, or recreation. This definition and the federal tax provision associated with it has led to millionaires to deduct over $607 million in taxes owed (from 2006-2009).
The Bipartisan Policy Center strongly supports modifying or eliminating all of these tax breaks (along with many others). The Domenici-Rivlin Task Force’s tax reform plan did just that. It will create a more pro-growth, simpler, and fairer tax code than the one in place today. The new system will reduce the top individual and corporate rates to 28 percent, while curbing or clearing out a whole host of these deductions and loopholes. In this manner, improving the efficiency and progressivity of our tax code goes hand-in-hand with deficit reduction.
Cutting down unnecessary handouts and loopholes are positive steps towards reducing the deficit, but much more needs to be done. Policymakers need to call for sacrifice from all Americans in order to put the nation back on a path of fiscal responsibility. Yet this is also an opportunity to reassess our priorities as a nation, reform our broken tax system, and restore faith in our government.
Senator Coburn deserves credit for stepping forward with this report to spell out deficit reduction policies – as he did previously with Back in Black – that will eliminate waste and help put America’s fiscal house back in order. He is one of few members of Congress who have courageously proposed specific changes on the revenue side of the equation.
This report sends the critical message that the wealthiest among us are collecting large amounts from government payments and tax breaks. As members of Congress work to close our fiscal gap, they should heed Senator Coburn’s advice to reduce our bloated government’s expenditures – the rich don’t need gold-plated life preservers and taxpayers can no longer afford to provide them.
- BPC’s Tax Reform and the Capital Gains Exclusion, November 18, 2011
- Tax Reform and the Twenty-Eight Percent, November 18, 2011
- Entitlement and Tax Reform: The Two Must-Haves, November 7, 2011