Submerged State
main characteristics
-Federal policies provide incentives, subsidies 1. Indirect means via tax code: tax credits, tax deductions (which work like subsidies/cash assistance) 2. "existing policies that lay beneath the surface of U.S. market institutions and within the federal tax system" - 3. Largely invisible: 94% of those who denied using programs benefited from at least 1. Average respondent had used 4
Inequalities for the poor (HMID)
-Gov is effectively spending the rich family more money than the lower income to buy the exact same home -Does not apply to renters on federal income taxes -Over $100 billion spent on HMID last year, could have used to expand section 8 housing but instead subsidized home ownership for upper-middle class homeowners
Result of example:
-those with the greatest housing burdens receive the lowest frequency & value of this benefit. - 1⁄3 of the total benefit of the HMID earn over $200k. ii. Those who earn so little that they do not pay taxes do not benefit. -This deduction is only accessed by people who choose to itemize their deductions instead of doing the standard deduction. -Virtually only benefits the upper class. Construction and real-estate industry fiercely protects this deduction, because profits are made from this incentive to buy a larger home.
example: Home Mortgage Interest Deduction
1. When you file your taxes, you can deduct the interest you pay on your mortgage from adjusted gross income. a. Gives larger tax break/subsidy to richer homeowners w/ higher tax brackets. b. Richer families get more money back than poorer families to buy the same house w/ same interest rates because their in a higher tax bracket. -This also increases more and more if people are buying more expensive homes. The 'subsidies' increase with income & the cost of your home/home interest rate.
inequalities for the poor:
Distributional consequences: 1. Subsidies ($100 billion +++) given to wealthy rather than being used towards welfare programs
competing perspectives
Free market fundamentalism 1. Views tax breaks not as subsidies but as freeing up the market. 2. The benefits will "trickle down" to the rest of society. Liberal Social Program perspective 1. Tax breaks are taking potential revenue from what could've been invested in social programs. 2. The rich are benefiting from the SS, to the detriment of the poor.