Wednesday, November 5, 2008

Taxing the Wealthy

I've seen this tax illustration countless times leading up to the election but its very misleading for several reasons.

1. All we are privy to is what each man at the table pays for the total bill (i.e. his taxes). We have to do the math to figure out what each one makes according to the 2008 tax brackets. To pay $0 of a $100 tab, the bottom four men must make $8000 or less a year. Our present poverty line for singles is $10,400, neither of which are livable wages. For the richest man to pay $59 he must be making 44 times that amount, or $354,000.

2. In reality of course, taxes don't buy beer unfortunately. Pure capitalism is a bit of a mirage. Big business in America takes a lot of government money to float by way of infrastructure, subsidies, security, etc. So the richest men at the table are paying money to make money, not just to fund others' drinks.

3. In the illustration, the money is paid in exchange for equal rounds of beers for all participants. The poorest appears to drink as heartily as the richest. Sadly this is embarrassingly untrue. Of course richer folks will live more comfortably on their own income than poorer folks, but how do we account for the huge disparity on government spending between wealthier and poorer communities? Let's just say kids in Richland County don't go to the same public schools as kids in Lexington.

4. On that note, the illustration fails to account for the members at the table as human beings, instead of units of economic output. Each man at the table represents not just himself but his family, his community, his school, his subculture. America is not a level playing field. Sure there are lazing, greedy, mooching poor people (just as there are lazy, greedy, mooching rich people). But unless we are willing to say that the reason 80% of black kids in inner-city Baltimore fail to graduate high school is laziness, we are just beginning to scratch the surface of a problem much bigger than we realize. Meanwhile, we're arguing over who gets to pay the least for it. Surely money is not the only answer, but I'm not holding my breath for a free one.

5. Another barrier to a level playing field yet to be mentioned is oppression. The Bible is not ignorant to the inherent wickedness and laziness of man (see Proverbs and Paul). But by far, the number one factor contributing to poverty according to the Scriptures is oppression (see Pentateuch, History, Psalms, Proverbs, Prophets, Gospels, Paul, and James). Of course there are rich people who are innocent of malicious oppression; and there are rich people who are ignorant of their oppression; and there are rich people downright guilty of it in complex economical, social, and political ways biblical writers' couldn't have dreamed of. Whatever the category, chances are that at that table, some are able to pay more of the bill because others can't.


kylene said...

This was really good -- this was all I have been thinking, but didn't know how to express it to people, so thanks David!

John Paulling said...

Good post. I guess I don't understand what exactly this guy is saying the beer is analogous to.

John Paulling said...

All right so, my uncle read your blog, david, and liked it so he posted it on his facebook, and my cousin read it, and responded. He thought my uncle wrote it as you can tell by the use of the 2nd person singular pronoun throughout, but my uncle cleared that up. See what you think.

1. Having a total tax liability of only 10.4K is not that unreasonable. I would venture to say that my annual income puts my family and I squarely into the middle class, yet my tax liability last year was only 31K, and I don't own a house! In 2005, my AGI was ~40K, tax liability ~13K, and total tax...0! I was a guy outranking (out-earning) 70% of the US military and still not paying for beer.

2. Agreed that pure capitalism does not exist in America. But that is not the fault of business owners. Legislatures set tax and subsidy policy. Their ability to be bought by big business reflects on them much more than on the businesses that buy them. Competitive advantage (lobbying) is good business. If it didn't work, they wouldn't do it. Your argument here combines personal income tax and corporate tax. They are and should remain separate. Personal income should be taxed fairly across the spectrum of income (flat rate, or sales tax only) and corporate tax should encourage domestic business development. Finally, you suggest that a successful small business person gladly pays high taxes to help his big business competition hang around --"So the richest men at the table are paying money to make money, not just to fund others' drinks."

3. Here the illustration must be taken as just that. It illustrates things like Defense and infrastructure, everybody benefits the same regardless of your tax rate. While in some ways, it may be true that wealthy communities benefit more than poor ones, your school example doesn't hold much water. Public schools are funded almost completely by local tax revenue. This means that wealthy communities with higher tax revenues will have more money for their schools than poorer communities with lower tax revenues.

4. Cultural problems are beyond the scope of the "illustration". Additionally, i don't really buy the 'level playing field' argument. I see that as transference of responsibility. "I'm stuck here because someone else is doing something for me."

5. Here you have suggested that the govt is responsible for the shortcomings of the Church. Thats on the Church my friend, not govt.

There's my rant. That's what happens when you start espousing centrally planned economics. I'm free enterprise and people who aren't kinda scare me.

david said...

Thanks for posting these John, its good to have some dialogue about such a difficult topic. Here's how I would respond.

1. I applaud your cousin's income tax savvy. But it doesn't address the two problems with the illustration. First, its numbers don't match our nation's. In it we need 40% of Americans making less than $8000 but in reality 12% are below the poverty line. Second, those 12% have an income of 10.4k or less not a tax liability, so yes it is extremely unreasonable.

2. I'll concede that I mixed the two - I guess I'm still confused on what the beer is myself. But I would still stress that individuals with higher incomes are personally and corporately benefiting from their tax dollars in ways that low income folks aren't. In other words, there's a clear distinction on April 16th and that's about it.

3. My leaky school example is drowning the poorer communities it thrives in. This point deserves to be expounded indefinitely but suffice to say if you're not buying the level playing field argument you can't afford to admit any discrepancy in American communities (which he did, so he can't).

4. I agree the illustration does not address "cultural problems", but that's the whole point. We aren't units of economic output and the hardest workers don't rise to the top of the economic ladder. That kind of thinking is grossly out of touch with the realities on the ground. Sure their is misplaced victim talk among the poor that is a "transference of responsibility". But I've found that talk pales in comparison to the naivety of those who think their success is purely in the rigor by which they pulled their own boot straps.
I plead with anyone who is trapped in this kind of warped thinking to befriend some kids in your nearest, poorest community. If you still think their unit of output suffers from lack of enthusiasm, I'm at a total loss.

5. I made the point that the Bible accounts for poverty in a myriad of ways (including laziness) but that its most robust and oft-mentioned category is oppression. If that's Scriptures' vocabulary then it must be ours whether or not it squares with the American dream.
I'm not sure where the response is going here but I'll take a stab. Yes, it is the Church who holds the Scriptures which rail against all oppression, sacred or secular. So why have we fled poor communities in the first place? And why, once we've left, do we bemoan a caricature of them? If we can agree the Church is responsible than why can't we agree to love, act, imagine, work, and not least vote in line with God's heart for the oppressed?

I'm not really concerned with who espouses what economic policy. At the end of the day, its the folks who let personal property trump people that really scare me.

John Paulling said...

Thanks for your response, david. I might try to post it for my cousin to respond again, but I'm not sure. This thing got a little out of hand on my uncle's facebook page in the last few days, and he's ready to let it go, so I probably won't. Nevertheless, I brought up some of the same points you did specifically about point 5. He responded by saying that once the tax money that we want to be allocated to the poor gets funneled through our countries bureaucratic infrastructure there won't be much left. These funds will be redirected from relieving the marginalized to $700 billion plus to bail out Wall Street, Global interventionism, and giving money to automakers so they can keep overpaid unionized labor employed (essentially buying the union vote in the next election). Then he quoted Prov. 17:16 to me, "Of what use is money in the hand of a fool (unbeliever), since he has no desire to get wisdom?" To Prov. I say touche, but I would want to argue that his former points are essentially a failure of the Christian imagination, and can potentially cause further marginalizing of the Church in the west. Anyway, I'm still not completely clear on enough of this stuff to talk.
What I do know is that when wealthy people don't want to spend money for whatever reason (fear of a turbulent economy, or higher taxes) one of the first things that goes is their wives' new kitchen, and living room. This means I don't paint.

Christina Ottis said...

My question refers to the logic of many Christian voters that, because it is the church's job to take care of the poor and not the government's, vote accordingly for the right-winged party that rewards the earners and leaves little for anyone else. Although I don't have an exact response to this yet, I have a big problem with it. While I am always encouraging those in my church community to take on the needs of the poor and oppressed, can I not also support a political party that does so as well? Does allowing the government to meet these needs negate the fact that I believe the church should be the primary giver of relief and aid to the suffering and needy?

John Paulling said...

Excellent point, Christina. I do want to emphasize, though, that often when the wealthy are rewarded it trickles down to the poor. Certainly this doesn't always happen, and the rich are still guilty, from time to time, of hoarding their wealth. This was my point about painting, and other blue-collar jobs.
A personal example: I work with an African-American man whose wife just gave birth to septuplets, no fertility drugs or anything. It was in the paper. Now, he gets Medicare and that spares him a lot of extra expenses (he doesn't even pay a copay when he takes one of his boys to the doctor)... he's certainly grateful for that, and so am I, for him. But, the thing he is the most concerned about is that he has work tomorrow. This takes wealthy people having the extra cash flow to be able to paint their houses. Now, under the Obama plan higher corporate taxes should not necessarily prohibit that, thats not what I'm saying. What I am saying is that people getting jobs, even the most humble ones, is more affective than what the government can afford to give them. It isn't enough to assume that because the government is giving breaks to the wealthy, they are leaving out the poor.
The beauty of the generosity of the Church is that it puts a face on things. This is somewhat analogous to PD's post today about abortion. Generosity in the form of a certified envelope in your mailbox will never have the transforming aesthetic that watching a friend sacrifice on your behalf will. So, I'm totally cool with relief from the govt., as long as we realize that it is a temporary fix.

david said...

I know its easy to fall into tired left/right stereotypes here. I dwell in them more than I probably realize. I'll be the first to admit that I'm out of my league when it comes to discussing economics.

I guess I liken this to N.T. Wright's illustration for debt relief - if you catch a robber in the act, you may not understand his culture, circumstances, criminal justice theory. But the bottom line is you stop the crime and arrest the robber. To me the plight of a large body of our poor in America reeks of wrongness. Whether it really works as well as we think or not, at least I understand the notion of trickle down economics. But that strategy is not helping the 80% high school drop out rate of black Baltimore youth. Yes we need to implement job creating ideas. But maybe the Clinton years showed us we can raise taxes without discouraging our top earners from earning even more.

Again, I'm not saying money is the answer. But a free solution or even a trickle down solution to a pressing, present problem seems far-fetched. Like you said John, it is a temporary fix for individuals and maybe a long-term strategy for our nation.

John Paulling said...

Deal! I certainly want to emphasize that one can supplement the other. Hopefully the govt. assisting the poor shouldn't take away the church's job. Honestly, I don't think it will. I just hope we don't get divided too much in the process. That was my primary concern with the Nov. 4 blog post. It is emphatically not time to start alienating people that we might soon need to persuade.

John Paulling said...

One caveat from a few comments earlier. I don't want to come across as saying more consumption is always a good thing. I think that is clear by all the conversations about sustainability going around. But maybe there are some win/win situations to be explored, some surprises out there. Maybe there is a way to create economic stability with a stagnant GDP, which would certainly bring us closer to a broad sustainability. Anyway, I know that's getting into different things, I just wanted to be clear.

Sheryl said...

Another fascinating string of comments, guys. And of course - one I must respond too.

Let's talk about education - as the mother of older children - who over the years has had one in public school in the South, two in private Christian schools for 1/2 their years and home schooled for the other half - it's a fair claim that I've experienced more of the education reality than most of the people on this blog.

Here's the problem as I see it - it is not the inequality of money spent (which is fairly obvious)since ALL of the state schools in America produce children who cannot keep up with the rest of the world.

It has everything to do with the American mindset - whether it is the:
1. anti-intellectual Christians,
2. the unmotivated general culture parents who don't care if their kids live on TV and video games
3. low income folks who don't insist on and value education

Ask any public school teacher - if the parents don't encourage learning and supervise doesn't happen. This is why I don't understand the resistance to vouchers - parent choice matters. When parents feel powerless - they check out, or move.

Let me bring it to reality - what would you do if your child was mocked and mistreated in the public school system for their physical handicaps?

How many times are you willing to comfort your other children while they sob because someone made fun of their defenseless brother?

How long would you let your very bright daughter(a gift from God) be bored in a regular classroom when you were perfectly capable of delivering a classical and difficult education at home?

What attention will you pay to the really stupid things your children are taught - as truth - that are directly counter to God's Word?

Most important to me - how will you deal with the moral conundrum that your child will face in the public school when they must answer test questions with un-biblical answers in order to pass their science tests?

How will you form the moral fiber of your children when they are taught about "value neutral" character traits instead of godly ones? Or when they are taught there are many paths to "god" and how to do New Age versions of meditation in gym class? (Not kidding!!)

The irony of the "Enlightenment" is that it has darkened the mind of mankind. Read Rousseau's "Social Contract", or Marx's "Communist Manifesto". The glorification of the "noble savage" became the ideal (see Shelley's "Frankenstein" and Victor Hugo's "Hunchback of Notre Dame") We are paying for that shift today.

To me, the issue should not be liberal and conservative Christians lobbing grenades at each other about taxes, education dollars and politics.....but how do we go about winning the hearts and minds of all unbelievers? Isn't that the point? If we help them see Christ, trust the Holy Spirit to convert and transform them - wouldn't all the other issues work themselves out as the earthly kingdom of God advances?

Everyone on this blog has experienced the grace of God in a very personal way - if we start there - instead of redistribution of wealth theories - I think we would get alot further.

You guys need to think more about the overall will of God and the sovereign tapestry of his design. He has a place for all of his creatures - different circumstances and different means of specific grace. Each of us has a role to play - elevating one by detracting another is Phariseeism in a Christianized package.

The point is - how do we win souls and minds for Christ? After that - we can focus on education. It will be much more effective when parents are aware of their responsibility before God and not temporal authorities.

I'm a business person - and one of the true joys of my job is that I work with people in India. I've had more opportunity to share the gospel through this job than any other in my life. Also, on a practical level, when I sell a project here in the US, it means we hire 15 more Indians who were under employed as day laborours. When one of them came to the US and worked well on a project (her name is Shanti) she got to go back to India and buy a real home (a 10 X 12 concrete building with a well & electricity) with a fence for her parents and move them out of the "hut" structure they lived in their whole life. That was the first project, the second one - she bought them a nicer house and moved her brother and his family in the "old one". Deride "trickle down" all you want - to that family - it is very palpable.

To me - that is the transformative power of grace. God reclaimed my abilities for HIS purposes......and his glory.

As CS Lewis said - Christianity is the "good infection" - it spreads in each individual and from one to the next.

Without the underlying transformation of the individual - none of the rest will take.

david gentino said...

Sheryl - I definitely have to take issue with two of your remarks.

1. After experiencing Christian and private schooling with your kids you locate the blame of poor education not on schools but "has everything to do with the American mindset". I hardly know where to begin with that statement. No one is saying money will solve all educational ills, or even that education will solve all social ills.

But I hope we can agree that our kids in inner city America are disadvantaged by a little more than lazy parents and TV. I know you've derided us a couple of times for lack of experience. But I have been a student in the DC school system, am friends with high school drop outs, have labored alongside inner city kids, and have read at least a handful of articles on the issues.

And I can only tell you that your assessment does not come close to the realities on the ground.

2. Another emphasis you made was wining souls for Christ over and against fighting social ills. If that happens, you remarked, "wouldn't all the other issues work themselves out as the earthly kingdom of God advances".

Without marginalizing evangelism which I hope is our life's work, the answer is a deafening, 'No!', things will not work themselves out! That's why the Scriptures are laden with commands to minister to the poor and oppressed, to champion justice, to call oppressors to account. The Good Samaritan, Jesus' quintessential image of neighborly love, was not to witness to robbers hanging out on roadways but to immediately take action on behalf of the dying man.

Woe to any Christian who wags their head at the deplorable conditions of America's poor. We can debate how best we can minister to them but there's really no discussion on biblical grounds whether we ought to.

Sheryl said...

David - I don't mean to deride you guys at all. I will admit the "homeschooling isn't contraception" comment was a bit inflaming when I read it.....

I have immense respect for you, John and PD as you attempt to work out your calling and mission in life.

I don't see this as an "either/ or" proposition - but rather an "and". Evangelism without social justice is as empty as faith without deeds.

With all due respect - I think you missed the point of my last post. What I was NOT seeing in the collective group of posts was much about actual evangelism and spreading the gospel of grace. I saw lots of criticism of older generations for their choices.

There are absolutely more issues than just uninterested parents etc. as disadvantages for the poor in our country. I don't pretend to know everything about poverty in America and the ground zero conditions there. I was attempting to raise additional perspectives for your group as you think about what to do next.

david gentino said...

Thanks Sheryl. I love that you're on here adding a different perspective that we need to hear. I think you're right about the generational differences. Even though I am passionate about spreading the gospel I find myself writing largely in reaction to people who I regularly talk with who view evangelism as our true biblical responsibility and social justice as a nice extra-curricular activity. I need to realize I sound like I'm swinging the opposite way.

On this blog there's a letter I wrote to Shane and Chris about them doing just that. I'm still waiting for a response from those guys.

Welcome to the fellowship of those who have been inflamed by PD. You're in good company.