Tax Reform (The Magnificat in Reverse)

He has brought down the powerful 

from their thrones, 

and lifted up the lowly; 

he has filled the hungry with good things, 

and sent the rich away empty.

Luke 1:52-53

The new congressional tax bill is not tax reform. It is just tax cutting. And it is not just cutting taxes; it is distributing the overwhelming majority of those cuts to the wealthiest among us.

And it is not just at all.

The wealthiest 1% of all Americans already control substantially more than the bottom 90%. Under the new tax bill that top group will gain a little bit more.

This is the Magnificat in reverse. The rich are filled with good things and the poor are sent away empty.

Of course the theory-- and we should be clear that this is a political theory without any economic evidence to back it up-- is that if the wealthiest people have more money they will invest it in enterprises that will benefit everyone. Right now the wealthiest individuals and corporations are sitting on a lot of capital. The theory is that if they had more capital they would create jobs and raise wages.

This has not worked in the past, but (apparently) hope springs eternal.

For at least four decades the American economy has been devoted to a massive redistribution of income from the bottom to the top. The gap between the richest Americans and the poorest Americans has been growing, and the middle class has been shrinking.

And let’s be clear. This gap has widened under both Republican and Democratic presidents. There have been different rates of increase but there have been no great reversals.

President Obama made income inequality a major policy priority. He was able to reverse the Bush tax cuts for the wealthiest Americans while maintaining those cuts for the middle class, and he was able to expand healthcare for middle and low income families. But those modest policy changes were more than offset by the massive gains in pretax income that went to the wealthiest Americans as the economy recovered from the crash of 2008.

The new tax bill will deal a possibly fatal blow to the Affordable Care Act. By repealing the individual mandate, the bill will result in 13 million more Americans without health insurance. That number could rise if the increase in premiums caused by the repeal of the individual mandate causes premium costs to rise dramatically. We know that premiums will go up. We don’t know how much they will go up. 

This is not unintended. 

In a celebratory gathering on the White House lawn, Mr. Trump deviated from his prepared remarks to offer a candid assessment: “I shouldn’t say this, but we essentially repealed Obamacare.”

As Dana Milbank reported in the Washington Post:

“Trump, in a Cabinet meeting earlier Wednesday, let his fleeting encounter with honesty get the better of him when he read aloud the stage directions that called for Republicans not to advertise that they were killing Obamacare. ‘Obamacare has been repealed in this bill. We didn’t want to bring it up,’ he said. ‘I told people specifically, "'Be quiet with the fake-news media because I don’t want them talking too much about it.”’ Because I didn’t know how people would —.’ Trump didn’t finish that thought, but he said he could admit what had been done ‘now that it’s approved.’”

Unfortunately, the Affordable Care Act may not be the only casualty.

When the deficit increases, and we know it will, lawmakers will be “forced” to “reform entitlements.”  By “entitlements,” they mean Social Security and Medicare. And by “reform,” they mean cut.

So the rich will have their taxes cut and the poor and the middle class will have their Social Security and Medicare cut. 

Merry Christmas.

Wealth and Poverty and Taxes

Come now, you rich people, weep and wail for the miseries that are coming to you. Your riches have rotted, and your clothes are moth-eaten. Your gold and silver have rusted, and their rust will be evidence against you, and it will eat your flesh like fire. You have laid up treasure for the last days. Listen! The wages of the laborers who mowed your fields, which you kept back by fraud, cry out, and the cries of the harvesters have reached the ears of the Lord of hosts. You have lived on the earth in luxury and in pleasure; you have fattened your hearts in a day of slaughter. You have condemned and murdered the righteous one, who does not resist you.
James 5:1-6

I do not generally think of myself as a rich person. I think in household income we are outside of the top quintile, but we are still comfortably above the median. That’s in the United States, of course. 

In global terms, I am rich.

And that is an uncomfortable thought, because the Bible is hard on rich people.

The Letter of James is especially hard, but the theme is consistent. When Mary announces the coming of the Messiah, she sings about the poor being filled with good things and the rich sent away empty. Jesus says that it is harder for a camel to pass through the eye of a needle than for a rich person to enter the Kingdom of God.

In Luke’s Gospel, Jesus tells the story of “The Rich Man and Lazarus.” The rich man does not directly refuse to help poor Lazarus, he simply ignores him. And for that he is consigned to eternal darkness.

For the Bible, the problem is not wealth, but the juxtaposition of wealth and poverty, and the disparity between rich and poor.

There are warnings about focusing too much on possessions and not enough on justice, and it’s clear that we don’t really own things; we are only stewards of what ultimately belongs to God. But the biblical ideal is for everyone to have enough, “every man under his vine and fig tree.” No one should have “too much,” but the definition of “too much” is flexible and the real emphasis is really on “enough.”

All Christians live with a certain amount of tension on this. We are not called to renounce everything and live in poverty, although some embrace that calling. We are called to live life fully and abundantly, to accept and rejoice in the good gifts of life. 

But if we are sensitive to issues of global poverty and inequality, then our thanksgiving for our own comfort includes a concern for those who have less. And we need to be good stewards, setting aside a portion of what we have to do God’s work in the world.

Within the United States, the gap between rich and poor has increased dramatically over the past three decades. Almost all of the gains in economic growth over that time have been funneled to the wealthiest among us. The middle class is stagnant. The poor have less. And the rich have more. 

We have been redistributing income from the bottom to the top.

The richest 1% of Americans have more wealth than the total combined wealth of the lower 90%. At the same time, the tax rates for the wealthiest Americans are lower than they have been in decades.

Increasing the tax rates for the wealthiest Americans would be a good idea even if we did not have concerns about debt and deficits. A tax increase would slow the rate of increase in the gap between wealth and poverty, and reduce the upward redistribution of income.

Opponents of increasing the taxes of billionaires point out that the richest one percent of Americans now pay approximately 40% of all income taxes. That sounds like a lot until you realize that the richest one percent also have 40% of the wealth. In other words, the amount they pay in taxes is about average. They pay more dollars but they don’t pay at a higher rate. When we compare wealth (not just annual income) to taxes paid, the tax rate for billionaires is about the same as for average Americans.

Raising the marginal tax rate for the richest Americans would make a significant contribution to reducing the deficit. It would be fairer. But it would also be good. And it would be good for the rich as well as for the poor. In the words of the prophet Isaiah:

If you offer your food to the hungry,
and satisfy the needs of the afflicted,
then your light shall rise in the darkness
and your gloom be like the noonday.
The Lord will guide you continually,
and satisfy your needs in parched places,
and make your bones strong;
and you shall be like a watered garden,
like a spring of water, whose waters never fail.
Isaiah 58:10-11


Thank you for reading. Your thoughts and comments are always welcome. Please feel free to share on social media as you wish. 

*A slightly different version of this post was first published on July 15, 2011.

Healthcare and Income Redistribution

"He went to him and bandaged his wounds, having poured oil and wine on them. Then he put him on his own animal, brought him to an inn, and took care of him. The next day he took out two denarii, gave them to the innkeeper, and said, “Take care of him; and when I come back, I will repay you whatever more you spend.”
Luke 10:34-35

Maybe it’s not always about the money, but it’s about the money often enough to suggest that’s always a good place to start.

In Jesus’ famous parable, the last thing the Good Samaritan does for the man who was beaten and robbed is to leave money with the innkeeper for his continued care, and promise the innkeeper that if it costs more he will repay “whatever more you spend.”

In an article in Friday’s New York Times, Thomas B. Edsall outlines the effects of the American Health Care Act recently passed by the House of Representatives, and he begins with the money.

The bill cuts more than $800 billion from Medicaid over ten years and basically redistributes the money from those at the bottom of the income pyramid to those at the top. “By 2022, when the provisions of the AHCA would be fully effective,” he writes, “those in the bottom two quintiles would pay higher taxes, up to $160 annually, according to the nonpartisan Tax Policy Center. Those in the middle of the income distribution would get an average annual tax cut of $240; those in the fourth quintile, a cut of $510; and those in the top 20 percent, an average tax cut of $2,830.”

“The distributional impact of the tax provisions is most apparent in the highest income brackets: those in the top one percent, whose household income is more than $770,000, would get an average tax cut of $37,220. Those in the top 0.1 percent, who make $4 million or more, would get an average reduction of $207,240.”

“According to the nonpartisan Center on Budget and Policy Priorities, at the highest point of all, the 400 households with annual incomes exceeding $300 million apiece, the tax cut would be worth an estimated $7 million.”

The combination of repealing billions of dollars in taxes that were used to pay for the Affordable Care Act, and slashing the subsidies provided to those on low incomes means that when we compare the economic impact of the ACA with the AHCA we see huge redistributions of income in the House plan that flow from the poorest to the richest Americans. 

The politics in this are not nearly as clearly delineated as one might assume. Donald Trump was elected by white working class voters who voted for him overwhelmingly. That constituency was critical in Wisconsin, Michigan, Ohio, and Pennsylvania, the key states in his electoral college victory. But the voters who put him in office are the very ones who will suffer the most under the repeal of the ACA and the implementation of the AHCA.

Senator Joe Manchin, a conservative democrat spoke with Mr. Trump about his home state of West Virginia, where Trump carried every county and won the state vote with 67.9% compared to 26.2% for Hillary Clinton. According to Manchin’s account, he told Trump:

“Mr. President, 172,000 West Virginians got insurance for the first time. These are working people, but they’ve got something they never had before. They don’t know how they got it, they don’t know who gave it to them, they don’t know the Democrats, nothing about, ‘It’s Obamacare.’ They don’t know any of that. All they know is they’ve got it. And you know what? They voted for you, Mr. President. The Democrats gave it to them but they voted for you. They’re going to know who took it away from them.”

One of the strangest observations in all of this is that so many Americans voted against their own self-interest. Lower income voters were overwhelmingly for Trump, while upper income voters were solidly for Clinton.

One of the reasons that working class white voters supported Mr. Trump is race. In his Times article Edsall cites a piece in the March 23 issue of Rolling Stone in which Bridgette Dunlap points out that manipulating racial and ethnic animosity is a tried and true political strategy. She called it “divide and rule.”

“The rich guy convinced much of the white working class that he would ‘take back’ the country from the rest of the working class and other undeserving non-white and non-Christian people, as well as the coastal elites giving those folks jobs and handouts at the expense of ‘real’ Americans. It’s a strategy as old as this country.”