Bringing Chips to the Potluck: Taxation and Inequality in the American System

Everybody knows that guy…the guy that brings a bag of chips to the potluck. Don’t be that guy.

Why? Because everyone else at the potluck made their grandma’s famous German potato salad, called their uncle for his classic barbeque dry rub, or at least thoughtfully picked out the nicest-looking watermelon from the local grocery store. But not that guy. He brought nothing but a measly, rumpled bag of potato chips that he already had at home in his lavishly stocked pantry. It is not right, and it is not fair to everyone else who did their part to make the potluck a success. And if you have too many guys bringing chips, the potluck is not a success and the party is ruined.

Sadly this type of behavior is not only present in our social lives, but ingrained in the American tax system. As it stands today, many American taxpayers are paying a disproportionately large amount of the income they need to live a life that is fully compatible with human dignity—making sacrifices that have a real impact on their well-being—while an elite few are paying just a fraction of their excess. Economic inequality is growing, and it is threatening to shred the national fabric of our country.

Let’s look at the larger problem here. Here are some shock-value statistics that are, sadly, not that shocking anymore:

  • 1% of Americans have 40% of the nation’s wealth
  • In 1976, the richest 1% took home 9% of the nation’s income. In 2012, they took home 24%.
  • CEO’s make 380 times their average worker’s pay.
  • America has more inequality than any other nation with an advanced economy.

The chasm of income and wealth inequality in the United States is vast and ever-growing, and it might swallow us all if we aren’t careful. Top American corporations in the financial services sector are admitting that inequality is a threat to the U.S. economy. Standard and Poor says, “The current level of income inequality in the U.S. is dampening GDP growth, at a time when the world’s biggest economy is struggling to recover from the Great Recession and the government is in need of funds to support an aging population.”

What does this economic inequality mean for real people? It means some people are choosing between food and their diabetes medicine, while others are choosing between Venice and Prague.

People are increasingly realizing what a problem this inequality is. What some people don’t think about, however, is the role that taxes play in this mess.

Our dysfunctional tax system plays a critical role in perpetuating and increasing the wealth gap. This problem began decades ago and is in no small part due to the fact that taxation has become less progressive. The Bush tax cuts delivered massive savings for the richest Americans. But this shift can also be seen in the growing reliance on regressive and flat taxes. Whereas progressive taxes calculate the amount that people pay based on their ability to pay, regressive taxes take a larger portion of income from low-income families than high-income families. For example, regressive payroll taxes, which cost people with lower incomes much more proportionately than the wealthy, are projected to rise to about one-third of federal revenue in 2015.

Furthermore, the wealthiest 400 people in the United States have two-thirds of their wealth in the form of capital gains and dividends. The top 1% owns half of the country’s stocks, bonds, and mutual funds. However, these forms of income are taxed at 15%, a significantly lower rate than income-from-work, which is taxed at up to 35%.

Our tax system must be designed to serve the common good. But right now, it does not. How can it? The National Conference of Catholic Bishops drafted a document called Economic Justice for All, which outlines three principles toward creating a just tax system:

  • First, the tax system should raise adequate revenues to pay for the public needs of society, especially to meet the basic needs of the poor.
  • Second, the tax system should be structured according to the principle of progressivity, so that those with relatively greater financial resources pay a higher rate of taxation. The inclusion of such a principle in tax policies is an important means of reducing the severe inequalities of income and wealth in the nation.
  • Third, families below the official poverty line should not be required to pay income taxes. Such families are, by definition, without sufficient resources to purchase the basic necessities of life. They should not be forced to bear the additional burden of paying income taxes.

Whether we like it or not, taxes are a matter of justice. As contentious and annoying as they might seem, taxes are necessary for the common good. This means that we shouldn’t think about taxes and say, “I worked hard for this money. It’s mine. Don’t take it from me.” Rather, we should contribute to the good of society based on how much we have to give and based on the needs of the community. And we should support tax policies that reflect this. Yes, you have probably worked really hard. And yes, you have earned that money. But we are called to share the gifts we have been given with those who do not have enough. That is the model of the early Christian communities, and the generosity, the caritas to which we are called today. This must shape our understanding of justice and push us to support a just system of taxation that serves all.

In other words, we shouldn’t be thinking about how we can bring the cheapest thing to the potluck and still eat like a king, particularly if we are living large at home, while others who took the time to make a quality contribution are struggling to make ends meet.

Gaudium et Spes, one of the four apostolic constitutions from Vatican II, said that “It is imperative that no one, out of indifference to the course of events or because of inertia, would indulge in a merely individualistic morality. The best way to fulfill one’s obligations of justice and love is to contribute to the common good according to one’s means and the needs of others, and also to promote and help public and private organizations devoted to bettering the conditions of life.”

Ladies and gentlemen, this means that we should be proud to pay our taxes! We should be proud that we are making a just contribution to the common good. We should be proud to share our favorite recipe at the potluck! We should be proud that we have done our part to make the potluck a success. We should be willing to do our part, and we should have tax-payer pride! (#taxpayerpride)

Last year, Pope Francis said, “Poverty in the world is a scandal. In a world where there is so much wealth, so many resources to feed everyone, it is unfathomable that there are so many hungry children, that there are so many children without an education, so many poor persons. Poverty today is a cry.”

Poverty is a cry, Pope Francis says. It is a cry for a more just tax system, a system that asks us each to bring our best to the potluck, not just that crummy bag of chips.

Allison Walter is the policy education associate for NETWORK, a national Catholic social justice lobby.