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.

Averting the Fiscal Cliff and Casting Out Demons

“When the unclean spirit has gone out of a person, it wanders through waterless regions looking for a resting place, but it finds none. Then it says, ‘I will return to my house from which I came.’ When it comes, it finds it empty, swept, and put in order. Then it goes and brings along seven other spirits more evil than itself, and they enter and live there; and the last state of that person is worse than the first. So will it be also with this evil generation.” 
Matthew 12:43-45

Jesus was talking about the so called “Fiscal Cliff.”

Seriously.

The “person” is the country and the “unclean spirit” is the combination of tax increases and spending reductions that congress created as a way to force itself to deal with the national debt. Congress has, at least temporarily, driven out the unclean spirit, but they have not replaced it with anything positive. Unless they fill that void, the unclean spirit will return and bring friends with it.

It is amazing (and not in a good way) how much time and effort (much of it negative) congress has invested in averting a crisis that it created. And the false demon of the fiscal cliff kept them from addressing the real problems of economic growth and job creation.

The debt is a long term problem, but the immediate problem is jobs. And almost everyone admits this. In the presidential campaign, both President Obama and Governor Romney talked about jobs and economic growth as the most critical issues facing the nation. If the debt were the most important issue, then the fiscal cliff would be a solution rather than a problem. But almost everyone in congress wanted to avert the fiscal cliff because they believed, as almost all economists believed, that it would throw the country into another recession.

So one demon has been cast out. One catastrophe has been averted.

And the markets around the world seem to like this; at least they like it better than the alternative. The Dow Jones Industrial Average was up over three hundred points yesterday. Investors apparently think that congress has done the right thing.

Lost in all of the Fiscal Cliff hoopla is the fact that as of January first, the payroll tax has gone up for everyone. The Social Security tax has gone back to 6.2% from the temporary rate of 4.2% adopted as an economic stimulus for the past two years. The two percent increase applies across the board on all earned income up to $113,000. Intentionally underfunding Social Security never seemed like a good idea to me, but a two percent across the board tax increase isn’t a good idea either. Economists say it will slow economic growth by about half a percentage point, which doesn’t sound like much, but with the economy growing at only 3% annually, that’s a loss of nearly 20%.

Still, we averted disaster.

Maybe now we can focus on the need for job creation and economic growth. Ironically, for all of their differences, both Republicans and Democrats seem to agree on the need for economic stimulus. Conservatives want to do it with tax cuts and liberals want to do it with spending, but those are just different sides (literally) of the same coin. The argument we should be having is about which kind of stimulus will work best.

Class Warfare

Jesus, looking at him, loved him and said, “You lack one thing; go, sell what you own, and give the money to the poor, and you will have treasure in heaven; then come, follow me.” When he heard this, he was shocked and went away grieving, for he had many possessions. Mark 10:21-22
In our current political discourse, there is no shortage of politicians who want to turn the Gospel upside down.

We used to have the "war on poverty," now we have a war on the poor.

Some politicians are concerned because 47% of Americans do not pay income tax. So am I. But not for the same reason. As Christians, we need to be concerned about the roots of that problem. The root problem is that the bottom half of the country has so little money. The gap between rich and poor has been growing for decades. Since the 1970’s we have been redistributing income from the bottom to the top.

The top 1% of the population has an average household income of over $1,000,000.
The top 10% has an average income of over $160,000.
The bottom 90% averages just over $30,000.
That’s per household, not per person.

The wealthiest 1% pays about 40% of all income taxes, which sounds like a lot until you realize that they also have about 40% of the wealth. So their tax burden is really about average.

Poor people do pay taxes, of course. They pay sales taxes, excise taxes, property taxes, and payroll taxes. On average, the lowest income group pays over 16% of their income in taxes.

But there are lots of politicians who want poor people to pay more in income taxes. Senator Dan Coats of Indiana has said that everyone should pay some income tax so that “everyone has some skin in the game.”

Some are upset with the earned income tax credit, introduced by President Reagan, which provides tax “refunds” to the working poor in excess of what they paid in taxes. But the earned income tax credit is one of the most effective antipoverty programs, because it provides an extra incentive for working, as well as thousands of dollars to poor families each year.

The earned income tax credit and the child tax credit lifted 7.2 million families out of poverty in 2009. And they provide an on-going economic stimulus because almost every dollar is immediately pumped back into the economy in the form of consumer spending.

When Jesus told the rich young man that he “lacked one thing,” the disciples were shocked. Mark reports that then Jesus looked around and said to his disciples, “How hard it will be for those who have wealth to enter the kingdom of God!” And again, the disciples were perplexed, so Jesus repeated himself, “Children, how hard it is to enter the kingdom of God! It is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God.”

“To enter the kingdom of God” is to live into God’s presence, to live as God calls us to live, and to be part of making the kingdom of God come “on earth as it is in heaven.” That is the prayer that Jesus taught us and that is the work to which he calls us.

Taxing Billionaires

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
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.

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 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 as much wealth as 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. 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