Four Ways Our Tax Dollars Pay for Rich People's Toys

By Carl Gibson, Reader Supported News

14 April 14

fter losing all of my belongings in a fire, I still ended up owing the IRS a few hundred dollars. In the grand scheme of all taxes paid, that’s barely a drop in the Olympic-size swimming pool of tax revenue, yet it’s a significant cost to people in my situation.

While going through all the deductions I could claim, I was forced to leave blank all the slots available for purchasing a second home, buying a boat, drilling for oil, selling stocks, borrowing money to buy stocks, inheriting wealth, or having money in foreign bank accounts. People scraping by to make a living don’t have the money to purchase a second home or buy a few thousand shares of stock, and pay about a third of their income in taxes.

1. Frivolous Hobbies

While self-employed freelancers have to pony up nickels and dimes to pay the man, a multi-millionaire was able to write off $77,000 in deductions for a dancing horse in 2010. Romney classified his horse, Rafalca, as a "business," allowing the cost of the horse's training, stable fees, and grooming to be charged to the government. To compare, 256.6 freelancers who made $22,000 and had to write a $300 check to the Treasury Department would all pay for one extremely rich individual’s dancing horse.

2. Lavish Homes

The IRS allows people who buy million-dollar homes to qualify for the mortgage interest deduction, to where if someone borrows $1.3 million to buy a $1.5 million home, $1.1 million in interest can be deducted. As of 2009, 137,670 people qualified under those circumstances, saving $3,000 apiece. This means $410 million in taxpayer money was spent helping 0.03 percent of the population buy a million-dollar house. If ten people like me who made $22,000 a year and had to write a $300 check to the Treasury Department combined our tax payments, all those checks would pay for one tax break for one person who bought a luxury home.

3. Inherited Fortunes

Our tax system is actually set up so people who earn their money are being bled dry so someone doesn’t have to pay a dime of tax on a gift in excess of $5 million. And the IRS is rapidly changing rules that will make taxes even more cushy on people who inherited their wealth rather than earning it through labor. While the Bush tax cuts of 2001 exempted from estate tax all estates worth $1 million and less, the exemption cutoff has steadily grown over the last decade.

In 2010, there was no estate tax at all. When billionaire New York Yankees owner George Steinbrenner died, his heirs paid no taxes on that wealth when they inherited it, which saved them $600 million in estate taxes. This means that when 600,000 working-class households each wrote a $1,000 check to the Treasury Department for the taxes owed on income earned from a year’s worth of hard work in 2010, all of that revenue was cancelled out so a few wealthy heirs could avoid taxes on money they never worked for.

In 2014, estates are now exempt from paying taxes on gifts of less than $5,340,000. This is a $90,000 increase from the 2013 cutoff of $5,250,000. This means 300 people like me, who had to write a check to the Treasury Department for $300, are all paying for one heir’s tax break this year.

The Congressional Budget Office found that if the estate tax were restored to pre-Bush levels, we would rake in an additional $500 billion in ten years. This means we’re currently hemorrhaging $50 billion a year so a few rich brats don’t have to pay taxes on wealth they didn’t earn. To compare that with the rest of America, when 50 million working people write a $1,000 check to the Treasury Department, after showing up to work every day, stressing over rising grocery and heating costs, and worrying about how to put their kids through college, all of those taxes paid are cancelled out so the nation’s wealthiest heirs don’t have to pay taxes on the tremendous wealth that they didn’t have to work one minute for.

4. Corporate Welfare

The most unjust part of our tax system is seen in the tremendous exemptions given to billion-dollar corporations. Twenty-six highly-profitable corporations in the Fortune 500 paid $0 in federal income taxes between 2008 and 2012. Just five companies – AT&T, Verizon, Wells Fargo, IBM, and General Electric – all enjoyed $77 billion in tax breaks during that time period. This means if 10 million Americans all wrote a check to the Treasury Department for $1,540 on taxes owed for a year of hard work, every year, for five years, all of that revenue would be cancelled out by just five extremely wealthy global corporations too greedy to pay for the services they use and depend on every day.

The income tax was set up to be an equitable redistribution of wealth. People would ideally pay a portion of their income to the government, which would then redistribute it so society can function. But as our tax structure is currently working, the masses of working poor who have been working longer hours for less pay over the last several decades are redistributing their income upward, to the people who already have more than they can spend. Working people are being pinched for pennies and threatened by audits, all so the nation’s richest one percent and most profitable corporations can have even more money than they already have.

Imagine all of the good we could do in society if corporations like Verizon and GE no longer had offshore tax havens in which to stash the profits they made in the US. Imagine if hard work was taxed at a preferential rate, investment income was taxed at a higher rate, and inherited wealth was taxed at the highest rate. We would have all the revenue we need to create millions of good-paying jobs, high-quality education for all those who wish to learn, and a strong social safety net to support those on hard times.

America’s wealthiest parasites have been sucking on the public’s teat for long enough. It’s time we vote out their servants in November and have the equitable tax system we deserve.

Carl Gibson, 26, is co-founder of US Uncut, a nationwide creative direct-action movement that mobilized tens of thousands of activists against corporate tax avoidance and budget cuts in the months leading up to the Occupy Wall Street movement. Carl and other US Uncut activists are featured in the documentary "We're Not Broke," which premiered at the 2012 Sundance Film Festival. He currently lives in Madison, Wisconsin. You can contact him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it , and follow him on twitter at @uncutCG.

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