Excerpted from Welfare for the Rich: How Your Tax Dollars End Up in Millionaires’ Pockets – And What You Can Do About It by Phil Harvey and Lisa Conyers.
Introduction
Welfare for the Rich is designed to inform Americans—especially taxpayers who are footing most of the bill—about the massive movement of money from millions of middle- and lower-income Americans to much wealthier people and corporations that do not need and should not be entitled to these favors.
Most Americans recognize the importance of a safety net for America’s poorest. Welfare programs for those in serious need, though often flawed, are means-tested and generally reach deserving parties.
However, there is simply no justification for providing cash benefits and subsidies to America’s rich. Yet for many decades, too many of our government’s policies have taken wealth from taxpayers of modest means and provided a big chunk of it to the rich. The same perverse policies are in place today, and there is every reason to believe that they’ll remain in place for the foreseeable future—unless we act as citizens to demand change.
What’s most remarkable about these policies is their variety and ubiquity. Governments at the federal, state, and local levels provide favors to wealthy businesses and individuals through outright subsidies, regulations that favor the well-connected over the powerless, targeted tax loopholes, taxpayer-guaranteed loans, zoning laws that create wealthy enclaves that working men and women can’t afford, and many other mechanisms. While today’s politicians—especially those vying for the presidential contest in 2020—are proposing ways that the government should act to reduce income and wealth inequality, we ask, at the least, that the government stop making inequality worse. Ironically, this is one area of economic policy that the vast majority of Americans of all political persuasions are likely to agree upon. Liberal or conservative, socialist-leaning or libertarian, Republican, Democratic, or independent—practically everyone will acknowledge the absurdity of having the government take from the poor and the middle class to give to the rich. Yet that’s exactly what happens, every day, in many ways, large and small.
The ways by which government policies transfer taxpayer funds to the wealthy break down into four basic categories.
- Cash and in-kind payments directly to wealthy individuals and companies. The U.S. farm program is the most egregious example of this. Originally designed during the New Deal to assure adequate food supplies to the poor and to help struggling farmers, the farm program hasn’t truly served those purposes for decades. The U.S. today is a major food exporter, and farmers as a group are no longer needy. Indeed, according to the Environmental Working Group, which tracks farm subsidies and crop insurance payments, fifty billionaire members of the Forbes 400 got over $6.3 million in farm subsidies between 1995 and 2014. [1] A report issued by Oklahoma Senator Tom Coburn in 2011 reveals that 1,617 millionaires received $16.9 million in farm payments in 2006 alone, an average of more than $10,000 each going to individuals whose incomes exceeded $2.5 million that year. [2] This is a shocking abuse of funds that are paid by millions of middle-class citizens who make only a fraction of that amount.
- Regulations that favor large companies and investors over smaller, less wealthy ones. An example: Mattel, a toy maker with revenue of $1.79 billion in 2016, lobbied in support of a 2008 federal regulation that imposed strict compliance standards on materials and processes used to make children’s furniture and toys. This regulation, the Consumer Product Safety Improvement Act, was justified on the basis of product safety, but the act went well beyond that standard, requiring complex and costly tests and inspections that only big companies like Mattel could afford. It ended up destroying the livelihoods of thousands of at-home small furniture crafts persons and toy makers whose toys and chairs were perfectly safe.[3] Similarly, the Dodd-Frank Bill of 2010, designed to make banks more resilient in financial crises, now favors large banks over small ones, and many small banks have gone out of business as a result.
- Tax laws and targeted subsidies that favor the rich. Our tax code is riddled with loopholes only the rich can slip through. “Carried interest,” for example, is a special tax privilege that allows hedge fund managers and private equity executives to classify the income they receive on investment gains as low-tax capital gains. Oil and gas companies, whose earnings in 2018 topped $181 billion dollars, also get special tax breaks and lots of subsidies. [4] Exxon Mobil’s 2011 upgrades to its Baton Rouge refinery in Louisiana, for example, are still generating benefits from a $119 million state subsidy, according to an investigative report in The Guardian.[5]
- Government policies that provide favors to the rich for which American consumers must pay. The sugar program is the biggest offender in this category. A combination of tariffs, guarantees, and import quotas force the cost of sugar in the United States up to nearly double the world price. As a result, everyone who buys sugar-containing products, from ketchup to candy to bread, pays more, benefiting wealthy sugar growers. This program is particularly egregious because even those too poor to pay income taxes must buy food, and they, especially, should not be forced to subsidize wealthy sugar barons.
How do these public payoffs to the wealthiest people and companies happen? It’s no secret. Special interests line up at the trough in Washington, where the big guys have loud voices. The major players include many of our biggest corporations, trade associations, and unions, and many other interest groups, from the American Association of Retired Persons to Lockheed Martin. Together, organizations like these paid a total of $3.45 billion to registered lobbyists in 2018.[6] In a recent study, the Sunlight Foundation, a nonprofit that promotes government accountability, found that “between 2007 and 2012, 200 of America’s most politically active corporations spent a combined $5.8 billion on federal lobbying and campaign contributions. Those same corporations got $4.4 trillion in federal business and support” during those five years, including subsidies, tax breaks and favored government contracts. [7] “After examining 14 million records,” Sunlight concluded, “we found that, on average, for every dollar spent on influencing politics, the nation’s most politically active corporations received $760 from the government.” That’s a rate of return that almost compels companies and other interest groups to get into the game.
The amount of talent and energy that goes into these efforts is staggering. There are twenty registered lobbyists for each of the 535 members of Congress, and they work hard. They labor to preserve government favors—from farm payments to tax loopholes to export subsidies—lest any group lose the privileges they already have. And they also work to create new favors every time Congress passes a budget, creates a new agency, or debates changes to regulations.
The stated rationales for these political maneuvers range from protecting vulnerable family farms to promoting useful industries to enhancing public safety. But although the programs involved do little to promote these goals, the programs live on. Government largesse to the rich is so well-entrenched and so well-guarded by the efforts of lobbyists that few objections to it are ever raised. So rich farmers get more money, wealthy individuals enjoy more arcane tax breaks, and big companies get even bigger subsidies. Meanwhile, middle- and low-income taxpayers get pinched, including entrepreneurs and small businesses that are being stymied by regulations and tax levies that don’t affect the big boys. The process exacerbates income inequality in America, which is both unnecessary and wrong. Why should the government systematically make the rich richer at the expense of everyone else?
When we first dug into this material, our reactions were deeply personal. Lisa was furious. “I pay taxes,” she said. “I pay a lot of taxes! And making ends meet can be a challenge. Why should these millionaires be getting my money?”
Phil pays income taxes in six figures and was equally appalled at the basic unfairness—the downright immorality—of present laws and policies. His reaction: “The payments to wealthy corporations and individuals, out of taxpayers’ pockets, are enormous, growing, and utterly inexcusable.”
In the months that we’ve been researching the details, we’ve heard the same sorts of reactions from almost everyone with whom we share our findings.
In the chapters that follow, we’ll draw on extensive research to reveal the increasing size and scope of the problem of welfare for the rich. We’ll provide insights from interviews conducted around the country with subsidy recipients, lobbyists, and investors who support these policy anomalies, and with citizens, activists, and community leaders who are working to change them. And we’ll offer advice and a host of ideas concerning what you can do to support the movement to reform our government’s laws, regulations, and policies so that welfare for the rich can finally begin to shrink.
Copyright © 2020 by Phil Harvey and Lisa Conyers. All Rights Reserved. Published by Post Hill Press. Used with permission.
Footnotes
[1] Robert Coleman, “The Rich Get Richer: 50 Billionaires Got Federal Farm Subsidies,” Environmental Working Group AgMag, April 18, 2016, https://www.ewg.org/agmag/2016/04/rich-get-richer-50-billionaires-got-federal-farm-subsidies
[2] Tom A. Colburn, M.D., “Subsidies of the Rich and Famous,” November 2011, http://big.assets.huffingtonpost.com/SubsidiesoftheRichandFamous.pdf
[3] Yvonne Zipp, “A New Law Hurts Small Toy Stores and Toymakers,” The Christian Science Monitor, January 9, 2009, https://www.csmonitor.com/The-Culture/The-Home-Forum/2009/0109/p25s23-hfgn.html
[4] M. Garside, “U.S. Gas and Oil Industry Annual Revenue 2010-2017,” Statista, September 26, 2019, https://www.statista.com/statistics/294614/revenue-of-the-gas-and-oil-industry-in-the-us/
[5] Damian Carrington and Harry Davies, “US Taxpayers Subsidising World’s Biggest Fossil Fuel Companies,” The Guardian, May 12, 2015, https://www.theguardian.com/environment/2015/may/12/us-taxpayers-subsidising-worlds-biggest-fossil-fuel-companies
[6] Erin Duffin, “Total Lobbying Spending in the U.S. 1998-2018,” Statista, April 29, 2019, https://www.statista.com/statistics/257337/total-lobbying-spending-in-the-us/
[7] Bill Allison and Sarah Harkins, “Fixed Fortunes: Biggest Corporate Political Interests Spend Billions, Get Trillions,” Sunlight Foundation, November 17, 2014, https://sunlightfoundation.com/2014/11/17/fixed-fortunes-biggest-corporate-political-interests-spend-billions-get-trillions/
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