Bessent: Deductions rig system for the rich

Pigs didn't fly and hell didn't freeze over, but something just about as extraordinary happened a couple of weeks ago. Some really rich people went to Capitol Hill and beseeched Congress to raise their taxes.

The group, Patriotic Millionaries for Fiscal Strength, wants people who make $1 million or more a year to pay more to help pull the federal government out of the red. The group has about 200 members, including actress Edie Falco.

That's a small fraction of the roughly 289,000 individuals with incomes of $1 million-plus. And some of the others basking in that rarefied air no doubt consider the patriotic millionaires traitors in what they see as class warfare.

I see them as altruistic pragmatists who understand the American people have to pay for what we get from the government. Cherished things such as Medicare and Medicaid, Social Security, and the military which, together with debt payments, eat up about $7 of every $10 Washington spends.

Besides, if there's a class war going on, the rich are winning -- big time. Their incomes have soared in recent decades while what the rest of us earn hasn't. The wealthy also got big income-tax cuts in 2001 and 2003, courtesy of President George W. Bush. And even beyond its incredibly shrinking rates, the income tax code has been very, very good to the very well-off.

How good is now clear, thanks to Sen. Tom Coburn (R-Okla.), whom nobody would label a tax-and-spend liberal. He culled government sources and compiled a report he calls "Subsidies of the Rich and Famous."

"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," Coburn wrote.

Ending government aid and comfort for millionaires won't wipe out federal deficits -- the red ink is way too deep. But the largesse is staggering at a time when we're racking up bills our children will have to pay.

Millionaires deducted $27.7 billion in mortgage interest from 2006 to 2009, $607.7 million in business entertainment expenses and $21 billion in gambling losses, Coburn reported. They pulled down $316 million in farm subsidies from 2003 to 2009, and $74 million in unemployment benefits from 2005 to 2009. On average, millionaires get about $30 billion a year in tax breaks and federal subsidies.

"We should never demonize those who are successful. Nor should we pamper them with unnecessary welfare to create an appearance everyone is benefiting from federal programs," Coburn said.

Well, sometimes we should. For instance, everyone of a certain age is eligible for Social Security and Medicare, and they should be. For most millionaires, a couple thousand dollars a month from Social Security is tip money. And they probably don't really need retirement health care on Medicare's dime, especially those raking in more than $1 million a year.

But if millionaires were taxed to pay for those things and then couldn't collect, many would no doubt come to view the programs as welfare -- and mount a political attack to kill them. Allowing everyone to benefit from programs so important to so many of us is a small price to pay for wide political support.

That doesn't mean we should dole out nonsensical tax breaks for the rich -- or the not-so-rich. Washington should do us all a favor and eliminate almost all the deductions, credits and preferential tax rates that complicate the tax code and nudge us to do what Washington wants with our money. Congress should just lower our tax rates instead.

That's an alternative millionaires and the rest of us could love.

Alvin Bessent is a member of the Newsday editorial board. This is a corrected version of the column. An earlier version overstated the amount of deductions claimed by millionaires for business entertainment expenses, as well as the amount of farm subsidies and unemployment benefits received.