The Beatitude on the Buffet Tax

Sometimes a message just comes up out of nowhere and smacks you upside the head. That’s what happened to me this week as I read these verses from the Book of Luke:

Blessed are you who are poor,  for yours is the kingdom of God….But woe to you who are rich, for you have received your consolation (Luke 6:20, 24)

I read these words during the first meeting of my Presbyterian Women’s Bible Study at my church. Each year our Bible study group focuses on a different book or passage in Scripture, using  the “Horizons Bible Study guide” published by the Presbyterian Church (USA). This year’s study is on the Beatitudes, and yesterday’s lesson was on the first verse of the Beatitudes in both Matthew, and this lesser-known version cited above, from Luke.

This passage hit me so hard because over the past few days I’ve been following the debate over President Obama’s new proposal to impose a minimum tax on millionaires -otherwise known as the Buffet tax in honor of billionaire Warren Buffet’s argument that the existing tax code unjustly favors the wealthy.  In particular, I’ve been transfixed as Republican leaders  – many of whom are supposedly devout Christians – fight against Obama’s initiative and call it ‘class warfare’.

Now here I was studying Christ’s own words on the issue of economic injustice, and was amazed by the parallels to our own time. Just as the Beatitudes were originally uttered as a protest against the dramatic gap between the rich landowners and the poor working farmers in 1st century Palestine, they seemed to be equally relevant in our own time in evaluating the ever-widening socio-economic gap in our own society.  Some Christian leaders such as Susan Brooks Thistlethwaite have already made strong arguments for why the current Republican position is not consistent with Christ’s message.  As Thistlethwaite puts it:

Let me be clear as I can be. We need to understand the so-called “Christian” underpinnings of the anti-tax, anti-government, anti-the-poor, “let him die” approach to economics and public policy today as completely un-Christian, as well as un-American. What we need to do is re-establish our national values of fairness, equality and opportunity for all, values that I believe are actually the core of the Christian faith, (as well as of other religious traditions and of humanist values).

Seems kind of hard to argue with that.

But hold on a sec. Are all Republicans actually saying ‘Oh, leave those nice rich people alone. They have the right to be as greedy as they want. The poor deserve what they’ve got comin’ to ‘em.’

While there may be some who hold such extreme positions, overall this is a distortion of the view of many Republicans.  In fact, over the past few days I’ve had several conversations with close Republican friends who have helped me appreciate how even a subject that can seem like such a moral no-brainer can actually be quite complex.

For example, one major concern with imposing a tax on millionaires is that it could also impact small businesses that choose to report profits as individual tax returns (millions of small businesses in the US report taxes this way). Imposing a blanket minimum tax on small business that file personal income of over a million could negatively impact American jobs – hardly the thing our economy needs as we teeter on the verge of a double-dip recession.

Another point raised by a friend of mine who is an accountant is that there is actually a valid reason that the tax rate for investment income (dividends, capital gains) is lower than the tax on salaries (this lower capital gains tax rate is a key factor of why many of the wealthiest have lower effective tax rates, since a significant portion of their income is derived from investment). The reason for the lower rate is this: investment income has already been taxed once – the corporation has to pay taxes on revenue earned. Dividends are paid out to shareholders (i.e. co-owners of a company) after that corporate tax has been paid. So any tax paid by individual shareholders on those dividends received is a second tax on the same money earned.  So to avoid unfair ‘double taxing’ of income, the capital gains tax is lower than the corporate or income tax rate.

Then of course there are also the fundamental philosophical differences that I’ve heard repeatedly – the belief that it is better to leave money in the hands of individuals so that they can choose to spend it on what they please – including which charities they will support.  (For an interesting example of this philosophy at work, check out this video of Ron Paul talking about personally providing financial support to a friend and colleague who became fatally ill and did not have health insurance). And of course, there’s the fact that in times of economic distress you usually want to put more money back into the hands of consumers, rather than taking money away.

After hearing all of these arguments, my initial reaction was that I should just stay away from this topic because it’s too complex. While my Columbia MBA might  help me understand some aspects of these discussions, I’m not a professional economist or a trained political commentator.  Who am I to write about such things?

But then those verses came back and smacked me upside the head again, and I realized I couldn’t remain silent on this subject. As theologian Marcus Borg put it in his book The Heart of Christianity:

If we ask why the God of the Bible cares about politics, about systemic justice, the answer is disarmingly simple.  God cares about justice because the God of the Bible cares about suffering. And the single biggest cause of unnecessary human suffering throughout history has been and is unjust social systems.  What would it mean for us to take this seriously?

My answer to Borg’s question is that the first step is to actively engage in these subjects. Rather than running away from this topic because of its complexity, or having a knee-jerk reaction to the right or left of the political spectrum, I need to educate myself so I can come up with my own opinion about what path will lead to justice.

So I’ve been reading more about the Buffet tax. I learned, for instance, that the percentage of small business owners who would be affected by this tax is very small.  I learned that, while 47% of Americans pay no income tax (an argument for why our existing tax system is relatively fair) the poor pay a high proportion of their income through payroll, sales, state and local tax.  I learned that over the past few decades, the inflation-adjusted income for median-income families in the US rose 21%, while income for the top 100th of 1 percent of the wealthiest in the US grew 480%. I learned that the wealthiest Americans give proportionately less of their income to charity than do the poorest Americans and that “less than one-third of the money individuals gave to nonprofits in 2005 was focused on the needs of the economically disadvantaged.”  Oh, and if you want a humorous look at the issue, you’ve got to check out Stephen Colbert’s analysis of the relationship between millionaire tax rates and the unemployment rate:

So as a Christian, what do I think is the right thing to do? I think millionaires should pay more in taxes (and that top wage earners earning less than a million ought to pay more as well- and yes, that would personally affect me and most of my friends). I think if we are asking the entire nation to tighten its belt to fix the budget deficit, then everyone needs to chip in. I don’t think that the fact that Obama’s initiative is a populist gambit should detract from a conclusion that it’s the right thing to do. But most importantly, I think that everyone reading this post should do their own research and make up their mind for themselves – because it seems to me that the lesson of this first verse of the Beatitudes is that we should care enough about the plight of the poor, and about social justice, to take the time to do so. After all, that seems to be a core imperative not just for people of faith, but for people living in a democracy.

Now I gotta go – ’cause my head’s kind of sore from all that smacking…

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4 Responses to The Beatitude on the Buffet Tax

  1. joan says:

    Well said Louise. Do we believe in the Capitalism a la King Midas or the notion of we “are our brothers (and sisters!) keepers” as an American democracy?

  2. Anonymous says:

    It’s not that simple, even if we took all the earned income for the wealthiest 10% of taxpayers we could only run the government for a few days. Our tax code is complicated, and the payroll tax you reference is Social Security, which is a coveted scheme where the current money being paid in is pay the current benefits. ( which is why someone called it a ponzi scheme). My real question for a governmental level is: are we trying to equalize opportunity, or are we trying to equalize outcome.
    So for me it’s not who should pay more taxes, it’s how is the money allocated, and currently no one is making any sense, and the most nonsensical of all is our current president.
    As I mentioned to you before, I feel the Bible was written for believers in Christ, He was not here to overthrow the government, but to radically change the behavior of individuals. The church has fallen short of expectations, even ours because our largest budget item is the building, not mission outreach. Yes I understand its for pragmatic reasons, but still, think of what local impact we could make with the B&G budget!

    • seeingfaith says:

      Hey Beja! Thank you so much for your comments. So first, I want to just step back and emphasize that the whole question here is ‘how do we fix our country’s enormous budget deficit without completely toppling our fragile economy back into a full fledged recession”. As you note, raising taxes alone – especially on the wealthiest – won’t fix the problem. I completely agree. The bulk of the fix will have to come from spending reductions. However, most of what I’ve read indicates that to truly fix the problem we also need to increase tax revenue as well. I found this article by Fareed Zakaria to be particularly helpful in laying out why we need both tax hikes and spending cuts to fix the problem: http://www.fareedzakaria.com/home/Articles/Entries/2011/8/4_The_Debt_Deals_Failure.html .Of course the tax hikes shouldn’t come just from millionaires – it’ll need to come from a broader swath of the public (phasing out the Bush era tax cuts, closing loopholes, etc). But my entire point is that everyone needs to chip in to fix the budget deficit – both those at the middle and lower ends of the economic spectrum who will feel much of the pain from the spending cuts, and those at the upper end of the economy who will probably shoulder the bulk of any tax increases.

      Next – the only point I was making re the payroll tax is that the claim that 47% of Americans pay no tax is misleading – they still pay part of their income in tax – it’s just done through the payroll tax not the income tax. And the fact that this money goes to social security actually is quite relevant, since social security makes up over 20% of federal budget (thus something that needs to be addressed at some point if we ever are going to dig our country out of its debt hole). And actually – although I know Perry has gotten huge flak for calling Social Security a Ponzi scheme, it actually seems to be a rather accurate description to me…that doesn’t mean that I don’t think we need to provide a safety net for the elderly, it’s just that the way it was established is now no longer sustainable given the changing demographics of our country.

      Finally- re your point that “the Bible was written for believers in Christ, and that Jesus was not trying to overthrow the government but to radically change the behavior of individuals”. Well, actually – the Bible was written for believers in God (not just Christ, since the bulk of the Bible was written before Jesus arrived and Jesus himself advocated belief in God). And while Jesus may not have explicitly advocated the overthrow of the government, I think He was indeed crying out against the injustice of the political system as much as he was calling out for change in individual behavior. I strongly believe that the message of the Bible is not just about personal morality – that it is also about how, as individuals, we should look at our society and governmental systems as a whole and work to see our society as a whole become more just – more like the Kingdom of God. Marcus Borg writes eloquently about this in the Heart of Christianity – about how the evangelical tradition has focused almost exclusively on personal transformation without addressing the larger societal issues. I’ve also started reading Paul Tillich’s Systematic Theology where he also addresses this. This is a terrific topic – one that I’m going to write more about. But as always – thank you for your points. I’m going to post your tax stats in a separate comment because they are really interesting….

  3. seeingfaith says:

    My friend sent me these stats from IRS.gov and I wanted to share them because they are very interesting:
    in 2008
    Filers with adjusted gross income of over 1 million dollars paid an average of 23.3% in federal income tax
    Those earning between 100,000 and 200,000 paid 12.7% in federal tax
    Those earning 50,000 to 100,000 paid 8.9% in income tax

    This is really helpful because it does point out that – on average – millionaires already are paying more than those lower down on the income scale. However, the Obama plan was simply to impose a MINIMUM tax on millionaires – so that those in that group who are paying well below this average because of the make-up of their income – would be bumped back closer to the average. Bottom line – these stats are helpful because they emphasize that, as a group, millionaires are indeed paying more than other groups. The problem lies within a segment of the millionaire group whose effective tax rate is much lower because they earn substantial income from investment income…

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