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.

Donald Trump, Mitt Romney, and the Forty-Seven Percent

When Mitt Romney spoke about the "forty-seven percent," 
I doubt that he had Donald Trump in mind.

My brothers and sisters, do you with your acts of favoritism really believe in our glorious Lord Jesus Christ? For if a person with gold rings and in fine clothes comes into your assembly, and if a poor person in dirty clothes also comes in, and if you take notice of the one wearing the fine clothes and say, “Have a seat here, please,” while to the one who is poor you say, “Stand there,” or, “Sit at my feet,” have you not made distinctions among yourselves, and become judges with evil thoughts?
James 2:1-4

We tend to favor the rich.

And we have always favored the rich.

The biblical witness, on the other hand, consistently presents an alternative vision. From the Torah through the prophets, to Jesus and the early church, the Bible argues against our bias.

The poor, says the Bible, are blessed by God precisely because they are not blessed by us.

Four years ago Mitt Romney translated our bias into political language when he made his famous observation about the forty-seven percent of Americans who paid no income tax and would vote for President Obama because they were dependent on government. This was his analysis:

“There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what. And I mean, the president starts off with 48, 49, he starts off with a huge number.

“These are people who pay no income tax. Forty-seven percent of Americans pay no income tax. So our message of low taxes doesn’t connect. So he’ll be out there talking about tax cuts for the rich. I mean, that’s what they sell every four years. And so my job is not to worry about those people.

“I’ll never convince them they should take personal responsibility and care for their lives. What I have to do is convince the 5 to 10 percent in the center that are independents, that are thoughtful, that look at voting one way or the other depending upon in some cases emotion, whether they like the guy or not.”

Romney made two claims in his analysis. First he claimed that the 47 percent who pay no income tax are “dependent upon government.” And second, he claimed that because they are dependent on the government they will vote for the politicians, like President Obama, who support the programs on which they depend.

Both claims are mistaken.

About half of those who pay no income tax are working people whose incomes are so low (typically below $27,000) that they do not owe any income tax. They do pay other taxes (Social Security, Medicare, excise taxes, property taxes, and sales taxes), but they do not pay income tax. Some receive government benefits and others do not. Others who pay no income tax are seniors on Social Security and those whose deductions and credits eliminate their tax liability.

The forty-seven percent do not vote as a block. Nearly half of them typically vote for Republican candidates. The ten states with the highest percentage of individuals and families owing no federal income tax all traditionally vote Republican, and conversely all of the ten states with the lowest percentage of those with no tax liability typically vote Democratic.

Apparently, Donald Trump is one of the estimated 7,000 families and individuals making more than a million dollars per year and not paying any federal income tax. In Mr. Trump’s case it is possible that he has not paid income tax in nearly two decades.

What is most striking in this is that our reaction to a rich person paying no taxes is so very different from what we think when a poor person is doing the same thing. The rich person, we think, is smart. The poor person is characterized as a freeloader.

A friend who works in a very lucrative field and is very good at what he does observed that, “It’s amazing; when you’re rich everybody wants to give you stuff.”

Sometimes the free stuff is given in the hope that the rich person will buy an expensive car or house or boat. Other times the free stuff comes along because rich people are friends with other rich people who give them the use of a yacht or a summer home.

When a poor person gets something for free, we worry that they will become “dependent.” When a rich person gets something for free we somehow think they have earned it.

At some point, if we are Christians we need to ask ourselves the biblical question, “Do you with your acts of favoritism really believe in our glorious Lord Jesus Christ?"

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