It’s Time to Reverse Decades of Extreme Redistribution to the Rich

David Leonhardt writes:

The extreme redistribution of income — upward — has multiple causes. Some of them, like technological change, stem mostly from private-sector forces. But government policy plays a crucial role. Tax rates on the wealthy have fallen sharply. Labor unions have been undermined. Big companies have been allowed to grow even bigger and more powerful. The United States has lost its lead as the most educated country in the world.

More often than not over the past 40 years, our government has helped the rich at the expense of everyone else. As a result, economic inequality has reached Gilded Age levels.

In the face of these trends, the radical response is to do nothing — or to make inequality even worse, as President Trump’s policies have. It’s radical because soaring inequality is starting to threaten the basic fabric of American life. Many people have grown frustrated and cynical. Average life expectancy, amazingly, has fallen over the past few years….

On social issues, like abortion and immigration, the country is deeply divided. But clear majorities support higher taxes on the wealthy, higher taxes on corporations, more education funding and expanded government health insurance. No wonder: Americans don’t resent success, but they do resent not receiving their fair share of economic growth….

The coming primary campaign will be a good time for the candidates to hash out which specific ideas make sense and which don’t. So far, the agenda looks pretty good. Elizabeth Warren has a plan to increase workers’ power within companies — and help them get larger pre-tax raises. Cory Booker and Kamala Harris want to lift the after-tax pay of the middle class and poor. Kirsten Gillibrand and others support reducing major living costs, like child care and education.

Perhaps most important, some Democrats have begun pushing for a wealth tax — to reverse the upward redistribution of the past 40 years. Warren has proposed an annual 2 or 3 percent tax on large fortunes. Bernie Sanders has proposed a big increase in the inheritance tax.

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.

Around the Web (Part 2)

Check out these recent articles from around the web:

Economic Inequality: Can Theology Say Something New? by Kate Ward: “In my view, a good deal of advocacy around inequality, including that of religious leaders, avoids one of the more important questions we should be asking: how does inequality affect our moral formation? For many of us, it’s easy to find common cause with those who are like us and more difficult to feel empathy for others who we may perceive as more distant. This adds urgency to the question of whether it matters if, for example, a CEO earns 100 times or 100,000 times what her lowest-paid employees do, even supposing the employees earn a living wage. Do we really think vastly different living standards have no impact on our ability to form solidarity with one another?”

In Lebanon, Syrian refu­gee children find safety from war but new dangers on the streets by Loveday Morris: “The United Nations announced that Lebanon registered its millionth Syrian refugee on Thursday, making the tiny country — which had a population of just over 4 million before the Syrian war — home to the highest concentration of refugees in the world. Among the most visible representatives of that influx and the impact of the Syrian war on Lebanon’s capital are children such as Mohammed, who fled the violence and ended up here, selling flowers, tissues, chewing gum or shoeshines on the streets of Beirut.”

Finding ‘Mercy’ in daily life by Gail Finke: “Yes, it’s funny (“In which I get locked out of the church while trying to help people into it”) and sad and thought-provoking and inspirational. If you take even one thing away from this book, you’ll be a better person and a better Catholic. But you’ll take away a lot more than one.”

On Coates v. Chait by Ross Douthat: “You don’t have to regard morality as at the seat of all our troubles to recognize that it’s intertwined with some of them; you don’t have to write off public policy to concede that there are ills that policy alone can’t solve; you don’t have to ignore structural disadvantages to recognize the importance of asserting individual agency — saying ”there are things under our control that we’ve got to attend to …,” as the president has put it — in the face of collective difficulty.”

Facts, Propaganda and Libertarianism by Michael Sean Winters: “Any thoughtful Catholic has sufficient difficulties with liberalism, all of which tend to wish it were less individualistic, less focused on human autonomy, less redolent of rights apart from correlative responsibilities. Libertarianism wants to pull liberalism in the opposite direction, removing even the few checks on unfettered license that liberalism supplies.”

Shifting the Focus: Objectification, Porn and the Longing for Belonging by Leah Perrault: “Objectification and depersonalization are natural consequences of porn, but I don’t think that the average porn user, at least at the beginning, is aiming for those consequences as a primary goal. The appeal of porn, and eventually the compulsion or addiction, isn’t about the (often female) body, person or sexual appeal. It’s about the longing, fear and/or compulsion in the viewer.”

Opinion: Forget Ukraine, Syria is now the world’s biggest threat by Simon Tisdal: “Al-Assad’s continued survival as Syria’s head of state is an egregious affront to the U.N. Security Council and its various related Syria resolutions, to the U.N. charter, to international law, and specifically to international war crimes legislation. Al-Assad stands accused of war crimes and crimes against humanity, not least over the use by his forces of chemical weapons against civilian populations. But once again, nothing much is done, and the credibility of such institutions and laws suffers as a result. The moral example set by such dereliction is shocking.”

To prevent another Rwanda, all it takes is a few well-trained troops by David Blair: “Gen Dallaire’s searing memoir of those 100 blood-soaked days, Shake Hands with the Devil, contains a lesson of eternal relevance. This distinguished Canadian soldier offers his professional assessment that a mere 4,000 trained troops, entrusted with a mandate allowing the use of force to protect civilians, could have stopped the genocide in its tracks. For want of a handful of soldiers, 800,000 people died.”

Crisis and Need in the Central African Republic by Allen Ottaro: “Father Mombe shared an overview of the history of the conflict in his country, efforts by churches and faith communities to end the violence and initiate reconciliation, and his personal experience of the conflict in the capital city, Bangui, in December 2013.”

How You Can Address Income Inequality and Poverty

Recently the USCCB posted this presentation on income inequality. I thought it was a great place to start on raising awareness about how wage inequality impacts people who are living in poverty in this country. It’s a major problem but it doesn’t have any simple solutions, and the presentation doesn’t really offer any. The complexity of the situation has been weighing heavily on my heart because the Congressional Budget Office (CBO) report that came out recently indicated that:

● The higher minimum wage would reduce jobs by about 500,000, or 0.3 percent of projected 2016 employment. The CBO admits that its estimates involve much uncertainty. Job loss, it says, might be as high as 1 million or as low as almost nothing. The half-million figure is its best judgment.

● Up to 25 million workers would receive wage increases, about 16.5 million below the proposed minimum and possibly 8 million more just above it. Wage increases would raise the incomes of families in poverty by about 3 percent, or $300 annually. The effect is muted because most people in poverty don’t have jobs and many low-income workers are part-time (47 percent).

●Higher incomes would lift about 900,000 people above the government’s poverty line in 2016 ($24,100 for a family of four). That’s about 2 percent of the projected 45 million poor.

A higher minimum wage would help a lot of people, but it could also hurt a number of people too, and it certainly isn’t a final solution to the problem of poverty in the USA. The situation can’t be reduced to one simple step. Hunger and poverty are complex issues, and if we are going to end them (which I hope we all would love to see) it’s going to take a lot of work on a lot of different fronts. What the USCCB presentation does is highlight the historical, theological, and statistical reasons why we should CARE about income inequality. Great job! I care about it, but now what should I do?

How can income inequality best be addressed and what changes might be put into place within a wider series of reforms?

I have recently been reading the new “Hunger Report” on “Ending Hunger in America.” It’s 250 pages long, but a faithful and fruitful discussion on the issues of hunger in America is presented in it. It addresses income inequality, jobs, local leadership, and national policy. It also takes the time to look at those on the margins who are often left out, excluded, and denied access to the programs, jobs, and services that can keep them secure. I highly recommend taking a look at it.  Each component in addressing poverty is complex and essential, and requires people who are willing to address the issues in their complexity.

As Catholics I believe we are all called to take action with our time, voice, and resources to make an impact in our communities. We should take time to talk and learn about poverty. We should take time to speak up about poverty to our friends and, more importantly, to our policy makers. We should take time to pray about poverty. We should take time to serve those in poverty. We should use our resources to support those in poverty.

I believe that income inequality is a crisis that will only grow if we don’t address it. It’s part of a larger problem of poverty in our nation. To fix it will take some difficult decisions, and actions like raising the minimum wage are certainly an essential part of it. More importantly, though, it also requires people who are willing to make difficult decision in their own lives to address it. As we approach Lent I encourage you to think about some ways that you can impact poverty as part of your spiritual practice this season.

Here are a few ideas:

  1. Connect your fast to Justice! I recently posted 5 creative fasting ideas that can help connect what you give up for Lent to the trials of those in poverty.
  2. Make letter-writing a spiritual practice. This is something I recently encouraged over at Bread for the World. Letters can comfort the grieving, embrace the lonely, uplift the discouraged, and carry love across the globe. A letter can also affect the lives of people you may not even know. Writing to your policy makers in Washington, D.C., can influence the decisions they make—decisions that affect millions of people both here at home and around the world.
  3. Give a little extra. Budgets are moral documents. They indicate what we value. Take a look at yours and evaluate if you can make a sacrifice anywhere so that you can help others who are struggling.
  4. Take time to pray about these issues. As we connect with God’s heart for justice, our own lives find strength and inspiration. Consider making issues of poverty a topic for prayer and contemplation. You might also consider taking a group though a time of prayer and study together. I am hoping to use this guide with my family this year. 

I pray God will bless you this Lent, and that you will be led into the heart of our just God and his love for all people.