Why 'Going After' Millionaires 'On The Benefit Side' Doesn't Work
On Fox News Sunday, Senate Minority Leader Mitch McConnell (R-KY) outlined the GOP's plan to go where the money isn't:
Look, we are not here to defend high income people. And in this bipartisan package that we're just discussing, we make sure that millionaires don't get unemployment and don't get food stamps. ... This is a very balanced package. It doesn't do anything for millionaires. In fact, it goes after them on the benefit side.
Unfortunately, 'going after' millionaires 'on the benefit side' doesn't make a bit of fiscal sense.
First, there isn't any money in it. According to Sen. Tom Coburn (R-OK), one of the leading proponents of means testing jobless benefits, unemployment benefits for jobless millionaires cost the government about $20 million a year. The total federal budget is about $3.7 trillion, so eliminating all such unemployment benefits would shave a mere 0.0005 percent off the budget. Theoretically, anyway: In reality, it would save even less, because implementing means testing for unemployment benefits wouldn't be free.
Second, it doesn't 'go after' millionaires, as McConnell claims. Instead, it goes after the tiny number of millionaires who are eligible for unemployment benefits or food stamps. In 2008, more than 323,000 tax returns showed adjusted gross income of at least $1 million. According to Coburn's office, 2,840 of those people received unemployment benefits. So denying unemployment benefits to people who have had income of at least $1 million doesn't go after millionaires — it goes after the less than 1 percent of million-dollar earners who are currently eligible for unemployment benefits. It wouldn't affect 99 percent of millionaires at all. Just the handful who have lost their jobs.
If McConnell and his fellow Republicans were really interested in "going after" millionaires (and it's worth noting that a Democrat using that language would likely be vilified by the GOP for confiscatory "class warfare") to solidify the government's fiscal position and address the growing inequality between the super-rich and everyone else, they'd focus on the tax side, not the benefit side. They'd support things like the millionaires' surcharge, an end to preferential tax treatment of investment income, and an increase in — or even elimination of — the cap on income subjected to the payroll tax. Those changes would, unlike means testing unemployment benefits, actually produce significant revenue from the richest Americans that could be used to strengthen essential programs that help everyone else.
Take Social Security, for example. Currently, income above roughly $106,000 is not subject to the payroll tax that funds Social Security. Eliminating that cap would, all by itself, keep Social Security solvent for 75 years. But Republicans focus instead on the benefit side, proposing increases in the retirement age that would hit poor and middle-class workers hardest and means testing of benefits. Here's House Budget Committee Chairman Paul Ryan (R-WI):
Rather than raising taxes and making it more difficult for Americans to become wealthy, let's lower the amount of government spending the wealthy now receive. The President likes to use Warren Buffett and his secretary as an example of why we should raise taxes on the rich. Well, Warren Buffett gets the same health and retirement benefits from the government as his secretary, but our proposals to modestly income-adjust Social Security and Medicare benefits have been met with sheer demagoguery by leading members of the president's party.
Ryan's position is 100 percent rhetoric and 0 percent math. The maximum monthly Social Security benefit for a worker who retires at the age of 66 is currently $2,366. Even if we completely eliminated Social Security benefits for Warren Buffett — rather than, as Ryan suggests, "modestly income-adjust" them — that would save about $28,000 a year. Neither Buffett nor the federal government would even notice the difference to their bottom line. If, instead, we eliminated preferences for investment income and other tax provisions that helped Buffett pay a lower effective tax rate on the $62.8 million he made last year than his secretary paid, that would bring in millions of dollars in additional revenue. So Ryan's approach saves a few thousand dollars from Warren Buffett; the approach he shuns brings in millions. Ryan can't possibly be bad enough at math not to realize this, which means he's deliberately using the rhetoric of fairness to support policy choices that continue to coddle the super-wealthy.
Republicans don't really want to go after millionaires: They want to appear to be doing so in order to insulate themselves from public discontent at politicians rigging the system in favor of the rich, even while they peddle policies that further rig the system in favor of the rich. And they want to co-opt populist sentiment in order to weaken social safety net programs. They're going after the poor and middle class on behalf of millionaires, just like they always do. They're just hoping they can dupe the poor and middle class into helping, just like they always do.