Courtesy of Goldman Sachs are Financial Terrorists, with over 23,000 likes and 192,000 shares. It’s also been recently shared by more well known, and slightly more “respected” outlets like The Other 98%, with over 1 million followers. According to the meme, a normal income earner pays trivial amounts of taxes to government services, and a relatively huge sum to “corporate subsidies”. It turns out this claim is so bizarre as to require fantastical leaps of both math and logic. On its face, these numbers would mean we pay more than 16 times our entire military budget to corporations! Something is fishy here, so let’s dig into the numbers.
The Tax Breakdown
It’s impossible to say what anyone who makes $50,000 per year will pay in taxes, as everyone has different circumstances and deductions. Proclaiming, “if you make $50,000 you pay this much in taxes” is wrong. This meme doesn’t point this out, but it’s quite possible that some $50,000 earners pay no income taxes if they have enough deductions like children, a house, medical expenses, 401K contributions, student loans, etc. However, they do still pay Social Security and Medicare.
It’s unclear how this meme determines $235.81 goes to Medicare when Medicare is 1.45% of a paycheck. To get that number, a worker would earn only about $16,000 per year, not $50,000. For the sake of simplicity, we’ll consider the most screwed taxpayer at the $50,000 level; a single earner with no extra deductions. Using a tax calculator, we find this to be the tax breakdown:
- Social Security- $3,100 (the employer also pays this amount, so it’s really $6,200)
- Medicare- $725 ($1450 including the employer’s share)
- Federal Income Tax- $5,696.25
- State Income/Property/Sales Tax- varies
Now, let’s go to the White House tax receipt calculator (which is even shown as a source in the bottom of this meme) to see the full breakdown of our income tax.
- Health Care (includes Medicaid, research, food safety and other health services)- $1,565.90
- National Defense- $1,361.97
- Job and Family Security (includes pensions, food stamps and other welfare programs)- $1,035.01
- Net Interest on the Debt- $516.65
- Veterans Benefits- $337.79
- Education and Job Training- $204.50
- Immigration, Law Enforcement and Justice- $113.93
- International Affairs- $105.38
- Natural Resources, Energy and Environment- $93.42
- Science, Space and Technology- $64.37
- Agriculture- $55.25
- Community, Area, and Regional Development- $24.49
- Response to Natural Disasters- $22.22
- Additional Government Programs- $194.81
Where are the “Corporate Subsidies”?
Certainly nowhere on the government’s website, but admittedly the White House can be deceiving, so the investigation continues. What does this meme consider to be a “corporate subsidy”. It doesn’t say, but the fine print on the bottom left of the picture lists a website address that brings us here. This is where the meme’s data comes from, and where things get truly fantastical.
The website is called “Common Dreams”, which is a progressive news site, not an objective source by any means. In this particular post, it’s claimed that the average family making $72,000 pays $6,000 in corporate subsidies (from which the meme apparently interpolates $4,000). They get this number by adding up a laundry list of things that are highly dubious, then they divide that amount among the total number of US families equally, even though taxes are highly unequal. Wealthy families pay much higher amounts and percentages of taxes, while many poorer families pay zero, or get a net subsidy from the government. To assume the burden is shouldered equally is wrong and obliterates the entire statistic, but let’s continue anyway.
Only about 15% were direct subsidies. This is what most of us think of when we hear “corporate subsidies”. For this, they use a stat from the Cato Institute (ironically, a libertarian think tank) that claims corporations get $100 billion in subsidies a year. There is no reason to doubt this study, as there is all sorts of waste and cronyism between our government and business, but these costs are already baked into the Federal Budget and our tax bill. They’re a part of the agriculture budget, the research budget, the military budget, food stamp budget, etc. This isn’t extra money paid in taxes, it’s waste and corruption, or just the realities of the existing budget. When the government buys tanks, the tank manufacturer gets a subsidy. When food stamps are issued, the grocery store gets a subsidy. To get rid of these subsidies would require the government to reduce its existing spending, which was likely the reason why the libertarian Cato Institute published the study.
Moving on, over 1/3 of the listed “subsidies” are not subsidies at all, but come from tax breaks, loopholes and avoidance. This isn’t a situation of the government taking money from us and giving it to a corporation (a real subsidy), but one where the government isn’t taking as much money from corporations as they might like. To call this a subsidy is incorrect. By the same logic, all tax deductions and avoidance, like children, home mortgages and 401k contributions should be considered federal subsidies. Some might argue that the taxpayer shoulders the burden when companies avoid taxes, but that’s not the case. The reality is that no one shoulders the burden (at least not yet), as the government just runs deficits instead.
The other items listed in the blog post are also not really subsidies. For example, it says $1,268 (20% of the entire Federal subsidies) comes from overpriced medication, due to “government granted patent monopolies”.
Back to the Meme
It should now be clear that the $4,000 corporate subsidy number has no basis in reality. It comes from a flawed blog post that first misidentifies what a subsidy is, and then divides that wrong number evenly among every family, even though lower income families (particularly at the $50,000 level) pay far less than the wealthy taxpayers who pay most of the income taxes. Most of the subsidies families do pay for are already a part of their income tax, not another sum on top of it. Ironically, if we really want to get rid of subsidies, we need to reduce government spending and regulations, something the perpetrators of this meme would likely oppose.