Many wealthy Americans complain about the amount of government subsidies going to the poor. Their complaints demonstrate ignorance, or greed, or a total lack of fair-mindedness, or a combination of all those symptoms of entitlement at the top.
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).
"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." 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). Even without Social Security, the multi-millionaires got nearly two-thirds the government transfers received by the poorest 50% (Table II-TG4).
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.
