Saturday, January 14, 2012
Welfare for the rich
Here's a fascinating Huff Post article by Dan Froomkin on how we subsidize the rich in the US. Conservatives constantly complain about the social welfare of social security and Medicare, but what about their tax expenditures? The two biggest of the latter are employer-sponsored health benefits and 401k and other retirement programs which disproportionately favor the rich.
Direct social welfare programs are 16.2% of the total US economy, which as a % is lower than every European country but Slovakia. Social tax breaks in the US, however, are at 2% of GDP, more than any other country in the world. The top 20% receive 80% of these tax breaks. And in both types of welfare the middle class gets hit from both ends with higher actual tax payments. Furthermore, tax welfare is hidden because there is no budgetary line item for how much this costs the Treasury, whereas social welfare is apparent.
He also argues that tax welfare leads to the social ills we've seen displayed in the recent financial crisis. “Subsidized health insurance has resulted in people overbuying health care, subsidized mortgages have encouraged people to buy oversized homes, and subsidized 401(k)s have generated huge proceeds for Wall Street.”
One thing that struck me about the comparison though is that he is comparing social welfare as a % of the total economy and tax welfare as % of GDP. I'd like to see an apples-to-apples comparison to know what % of the total economy these tax breaks represent. Also, given their contributing cause to financial bubbles and collapse, their social costs seem to be far higher than social welfare programs. But how do we quantify that?.