Sen. Tom Coburn is a conservative Republican who is at the forefront of the deficit reduction crusade. He served on the president’s bipartisan fiscal commission and has been a member of the “Gang of Six” in the Senate, which weighs in on budget matters from time to time.
Monday the Oklahoman issued a 37-page report titled “Subsidies of the Rich and Famous.”
In his preface, the senator, who is also a physician, said, “We should never demonize those who are successful. Nor should we pamper them with unnecessary welfare to create an appearance that everyone is benefiting from federal programs.”
He goes ahead to argue that those who earn $1 million or more each year shouldn’t be given Social Security checks, unemployment compensation, farm subsidies or be allowed to deduct mortgage interest and take other tax deductions they don’t need.
Coburn cites specifics:
— In 2009, millionaires received $20.8 million in unemployment insurance.
— From 2007 to 2010, millionaire college students were given $16.4 million in subsidized loans.
— In the same time period, millionaires were allowed to deduct $27.7 billion in interest deductions.
He estimates $9.5 billion in government benefits have been paid to millionaires since 2003. He writes, “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.”
ACCEPTING COBURN’S prescription requires some attitude changes.
First, differentiate between two definitions of millionaire. Coborn is talking about those with an income of $1 million or more each year. That puts them in the top 1 percent, or higher. Allen County doesn’t have any.
Another definition is those with a net worth of $1 million or more. Those are the people Thomas Stanley had in mind when he wrote, “The Millionaire Next Door.” There are, as Stanley wrote, a fair number of those. Allen County has some, but they could all fit into the First Presbyterian Church without crowding it.
Attitude change two: stop thinking of Social Security as retirement insurance. It isn’t and never has been. It is a safety net program to keep the elderly from living in abject poverty when they no longer can earn a living. It is a form of welfare that represents all of the income that the bottom third, or so, of the retired population has — and is but a very small percentage of the income of the over-65 wealthy.
But, because of the limitation on the income which is taxed for Social Security, the amount paid in by employee and employer doesn’t come close to paying the cost of the program. Because this is true, Sen. Coborn is correct. It does not make sense to give the wealthy government retirement checks they don’t need. The program payouts should be indexed.
Change three: making the interest paid on dwelling mortgages is too broad a benefit. The cost in taxes-not-collected is massive and the benefit goes across the board, as though the need for tax relief was the same for our number-one category millionaire as it is for the $15 an hour factory worker. We need to stop putting all mortgages in the same mental basket and differentiate between the rich and the not-rich. First, draw a line between primary homes and vacation dwellings. Don’t give any taxpaying unit the right to deduct interest on more than one house or apartment.
Next, draw a line between a house and a mansion. Only allow interest deductions on the first $200,000 — or whatever amount is appropriate — of a dwelling’s mortgaged value. The American taxpayer should not be required to subsidize the purchase of hugely expensive homes as they have been forced to do since the deduction has been on the books.
Giving more people the ability to own their own home and realize the American dream justified the mortgage interest deduction. It worked. But it also made it easier for people like Sen. John McCain and his wealthy wife to own six homes (or is it seven?). There are better ways to subsidize housing for those who need subsidies to put a roof over their head — a category that numbers in the tens of millions.
With the homeless and the ill-housed in mind, it really is a moral shame that we give tax dollars away to the rich and well-to-do so they can more easily live in luxury, yet won’t afford public housing for more than a fraction of those in need.
It is a good thing that these anomalies are brought to the nation’s attention by a rock-ribbed Republican conservative like Tom Coburn.
— Emerson Lynn, jr.
