Stop the Subsidies

Stop the Subsidies

by Doyle Ranstrom on Jan 24, 2022

It's interesting and sad, that when many in our society think of subsidies, they often talk about food stamps, now called Supplemental Nutrition Assistance Program [SNAP].  Some parts of the National media spread the misconception that poor people are often taking advantage of the program to eat crab legs and peppermint bonbons.  Nothing could be farther from the truth.  

From a US Census Bureau Report issued in July, 2020, an analysis of families receiving SNAP  benefits, 79% had at least one person in the family working.  I cannot tell you how many times I have mentioned this stat, and had the individual with whom I was speaking say something like, "is that true, I didn't know that".  The reason they did not know it was they did not want to know it because it interfered with their political beliefs.  

I often wonder about a society in which the same people who run around proclaiming their religious beliefs, are some of the biggest objectors to programs who help feed the poor, especially working poor.  

So let me mention a few of the subsidies that really frustrate me. 

Unvaccinated:  A Peterson-KFF study from December, 2021 found that the average cost of hospitalizations from Covid is over $20,000.  The vast majority of hospitalizations and deaths for that matter, are unvaccinated.  All of us who are vaccinated are subsidizing the unvaccinated as essentially we are all paying additional health care costs in one form or another because choose to not be vaccinated.  I would suggest any unvaccinated individual who ends up in the hospital due to Covid have an automatic deductible of $20,000.  This would be above and beyond any deductibles, co-insurance, and uncovered expenses which are also billed to the patient.  

Climate Change Deniers:  Though there is no doubt among the scientific community that climate change is taking place, there are still those who are denying it is happening and its effects.  No harm, no foul, some may say.  I would respectfully disagree.  One of the tangible effects on climate change is the increasing frequency and cost of natural disasters.  Each of the past four decades the number and cost of billion dollar natural disasters has increased.  In the 1980s, there were 28 one billion dollar or more events with a total cost of about $128 Billion.  From 2010-2019 there were 119 one billion dollar or more events for a total cost of about $802 billion.  This decade is on its way to another record decade.  This leads real world costs.  Two examples.  The federal government subsidizes flood insurance protecting private homes.  The government also guarantees mortgages on homes in high risk ares.  If the true cost of climate change and the potential for natural disasters was factored in, I suspect the costs of insurance and mortgages in certain areas would be much higher if they owners could get them at all.  I would argue the federal government's role should be long-term planning and reducing the overall costs of natural disasters, not subsidizing individual residential choices.  

Gun Violence:   According to a study cited by a report from ABC News in December, 2021, gun violence in the US costs about $280 Billion annually.  This includes such things as law enforcement, short and long-term health care, criminal justice system costs and loss of earnings by victims to name a few.  I am not advocating for gun control.  What I am advocating is we stop subsidizing gun violence.  According to a recent PEW Research study, about 40% of US  households own firearms but we are all paying or subsidizing the costs of gun violence.   I would suggest we end this subsidy and 100% of the costs of gun violence be paid by the gun industry in the form of annual renewable registration fees along with sales taxes at both the wholesale and retail levels.  Non gun owners can no longer afford to subsidize these costs.   

Carried Interest:  When I owned my wealth management firm, I paid a lot of taxes, state and federal income taxes, FICA and Medicare.  I am very thankful to have done so, paying taxes is one sign that my firm was doing well.  My taxes were based on earned income after business deductions.  In todays world, a business owner [self-employed] like myself pays 12.4% in 2022 on the first $147,000 of earned income for social security taxes, 2.9% of all earned income for Medicare taxes, plus federal and state income taxes.  

Now let's look at the tax rate for private equity and hedge fund executives.  Because of the carried interest loophole, they pay capital gains tax which is capped at 20% rather than ordinary income tax.  A married couple with taxable income of income of $83,550 moves into the 22% federal tax bracket and as their income increases, so does the marginal tax rate.  Plus state income taxes and FICA taxes and Medicare taxes.  The carried interest loophole is a subsidy and leads to billions of dollars of tax savings for the very wealthy.  This is one of the reasons our federal deficit has exploded, especially the past four years.  If you should meet a private equity or hedge fund executive, do not be impressed.  Rather they should thank you for your subsidy.  

For the record, SNAP is about 1% of the federal budget.  All the above mentioned subsidies cost billions of dollars each.  We as a country do get benefits from SNAP.  Not so much any of the above mentioned subsidies.  

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