Ever since the earliest days of government benefits, when social workers would inspect the homes of welfare recipients for cleanliness, the poor have been asked to prove their worth in order to receive help from the state.
Now, a Wisconsin Congresswoman is asking: Shouldn’t the wealthy have to prove their worth for all the government benefits they receive, too?
Representative Gwen Moore is introducing the Top 1% Accountability Act of 2016, which would require drug testing for all tax filers claiming itemized deductions totaling over $150,000. Moore’s bill would require those with the higher itemized deductions to submit a clear drug test to the IRS or take the standard deduction, which is lower. The bill is intended to highlight the fact that it’s not just the poor who receive aid, even if they’re the ones asked to prove their standing. Aid to the wealthy comes mostly in the form of tax breaks, which allow them to keep money that they would otherwise be required by law to pay to the government.
“We don’t drug test wealthy CEOs who receive federal subsidies for their private jets, nor do we force judges or public officials to prove their sobriety to earn their paychecks,” Eric Harris, a spokesperson for Moore told me. “Attaching special demands to government aid exclusively targets our country's most vulnerable individuals and families.”
The number of government tests and requirements for poor people receiving government aid has grown in recent years. Utah in 2012 passed a law requiring drug testing for recipients for Temporary Aid to Needy Families, Alabama passed a similar law in 2014, and Arkansas followed in 2015. Other states, including Mississippi, North Carolina, Tennessee, Oklahoma, and Kansas require drug testing if “reasonable suspicion” exists.
These drug tests target people with almost no income who, in the case of states such as Arkansas, receive as little as $204 a month. And the drug tests hardly ever turn up positive. In 2014 Governor Rick Snyder signed a law in Michigan implementing a pilot program to drug test welfare recipients in three counties; none of the people in the pilot program have tested positive for drugs.
Middle-class and wealthy Americans may not be getting housing vouchers, but they are getting tax deductions, which come when people itemize their taxes rather than take the standard deduction. Itemizing taxes isn’t worth it unless you’ve spent more on tax-deductible items (including mortgage interest, charitable giving, and also the odd luxury item, such as a yacht) than the standard deduction, which was $12,600 this year for a married household filing jointly. According to one report, more than 95 percent of tax filers making over $200,000 itemized their deductions in 2011, compared to just 13 percent of those with incomes of $50,000 or less.
Make no mistake: These types of tax breaks are government subsidies, not substantively different than a housing voucher. Take the mortgage-interest deduction. When someone buys a home, he or she can deduct the interest he or she pays on the mortgage, up to $1 million. When someone deducts this interest from his or her income, not only is he or she avoiding paying taxes on that money, but he or she might also avoid the higher tax rates that kick in after certain earnings thresholds. And the higher a person’s tax bracket, the more he or she saves. Households making less than $200,000 deducted an average of $3,500 in real-estate taxes in 2013, while those with incomes over $10 million deducted an average of $77,000, according to the Corporation for Enterprise Development (CFED), a nonprofit that helps low- and moderate-income people build wealth.
Here’s an example from CFED of how two homebuyers could benefit differently:
As an example, let’s imagine that both a middle-income family, the Hendersons (15% tax rate), and a high-income family, the Hamptons (39.6% tax rate), bought homes that cost $300,000. Over the course of the year, both the Hendersons and the Hamptons paid $13,452 in mortgage interest and property taxes. Because this amount is greater than the $12,200 Standard Deduction (by a total of $1,252), they both opted to itemize their deductions in lieu of taking the Standard Deduction [CFED is using tax brackets from 2014]. But the value of this additional $1,252 in deductions differs for the two households. The Henderson family’s tax refund will be $188 bigger—$1,252 times their tax rate, 15%. The Hampton household’s refund will be $496 bigger—$1,252 times their tax rate, 39.6%. Both bought the same value house. Both chose to itemize deductions. Both deducted the same amount of mortgage interest and real estate taxes. And yet, the Hamptons get more than 2.5 times as much help from homeownership tax programs as the Hendersons.
“It’s equivalent to the government sending you a check,” says Chuck Marr, the director of federal tax policy at the Center for Budget and Policy Priorities. “The mortgage-interest deduction is essentially the government paying a share of a person’s mortgage.”
The government spent $17 billion in Temporary Aid to Needy Families (commonly known as welfare) in 2013. The mortgage-interest and real-estate tax deductions cost the government $98 billion in 2013, according to CFED.
Other examples of tax breaks for the rich: 529 plans, which allow people saving for college to avoid paying taxes on those savings; the capital-gains tax rate, which allows people who earn money on investments to pay lower taxes on those investments than they would on wages; and tax breaks for people who are landlords and incur expenses for renting out homes. Many of these exist to encourage behavior that society has deemed important on a mass scale, such as saving for college. But others seem to have little public purpose.
“All kinds of people get subsidies from the government,” Marr said. “This kind of demonization singling out poor people is just an unfair double standard.”
Congresswoman Moore got the idea for the bill after seeing House Speaker Paul Ryan introduce his anti-poverty plan at a drug-rehab center in Anacostia, a neighborhood in Washington, D.C. Moore and Ryan are good friends, are from the same state, and used to travel together on the plane to and from D.C., Harris said. Ryan would often help Moore put her bag in the overhead compartment. But announcing the poverty plan at a drug-rehab center “is the continuation of this narrative that those who live day by day trying to find ways to make a living—those who live under the poverty line—are somehow more susceptible to drug abuse than others,” Harris, Moore’s spokesperson, said. “That is a narrative that needs to be squashed right away.”
Harris says that Moore’s office has been inundated with calls from supporters and also from those who don’t like the idea—perhaps because they don’t want the government drug-testing them in order for them to get their benefits.