The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in an excellent series on inequality, the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.
C.E.O.’s of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent.
That’s the backdrop for one of the first big postelection fights in Washington — how far to extend the Bush tax cuts to the most affluent 2 percent of Americans. Both parties agree on extending tax cuts on the first $250,000 of incomes, even for billionaires. Republicans would also cut taxes above that.
The richest 0.1 percent of taxpayers would get a tax cut of $61,000 from President Obama. They would get $370,000 from Republicans, according to the nonpartisan Tax Policy Center. And that provides only a modest economic stimulus, because the rich are less likely to spend their tax savings.
The Rich get Richer
November 8, 2010 By 90 Comments
A couple of thoughts:
I’m not as concerned with the distance b/n the top and bottom as I am the buying power of the bottom and the number of folks (including children) that are there.
I think the repubs have a tough road on the sale they want to make. Bush’s tax cuts are expiring precisely because the deficit projection was awful without the “sunset” provisions. Now the gov’t needs $$ more than then, voters are concerned about deficits more, and the repubs want to insist that all the tax cuts stay in place, even on the very wealthiest people.
As a tax lawyer it always astounds me: A government check/subsidy to those folks of that amount would never pass. But if we set it up on the collection side (taxes) instead of the spending side (subsidies), suddenly half the country favors it. It’s the reason our tax code is a total mess: tax cuts pass and subsidies don’t, even though they are mathematically/economically the same.
Well, the majority of Americans also oppose a flat tax, which would make an awful lot of sense, largely because they don’t know what it is.
On the flip side of this post, about half of Americans don’t pay income taxes (or pay very little). As such, there is no incentive to cut spending. It doesn’t matter what the spending actually accomplishes, as long as the majority of the country doesn’t have to pay for it.
This isn’t really new news. We’ve known this for years that the spread is getting larger. And likely it will continue to get larger. But, we would never want to raise taxes on this group, they need it so we can have jobs. But, how much is enough?
Reaganomics at work. I wonder what Amos and the other prophets would say to us today?
I sincerely hope this is not an area where Obama compromises.
“Conservatives say if you don’t give the rich more money, they will lose their incentive to invest. As for the poor, they tell us they’ve lost all incentive because we’ve given them too much money.” George Carlin
The gross level of inequality is directly tied to the economic doldrums the U.S. is mired in. History has repeated itself — 1928 and 2007 stand out as markers where inequality marks were at historic points, then next year, crash…
But inequality manifests in other detrimental means — see
economists Robert Frank and Samuel Bowles for their work on how inequality sets up destructive “arms races”, perpetrates injustice, creates “gated society” constructs that apply a disproportionate amount of resources to managing and maintaining a “security state”.
In stark contrast to post WWII era where economic nature was much more egalitarian (relatively speaking and pre-Civil Rights excluded unjustly African American citizens) and when a flourishing middle class blossomed.
The size of the average tax cut matters less to me than the rate.
If complete expiration of the cuts were allowed we would be going back to a situation where the poorest had a tax rate of 15% all the way to the richest group who had a tax rate of 39.6% (before you add social security, capital gains, state and local income tax, sales tax, and property tax)
Following the Republican plan lets poor people keep their 10% rate and rich people keep their 35% rate. Following Obama’s plan let poor folks keep their 10% rate while raising rates on the rich back to 39.6%.
To me, this looks like open class warfare. Even under current policy the wealthy still have a marginal tax rate 3.5x higher than the poor, all Obama is saying that 3.5x isn’t enough, it should be 4x or 5x. According to the IRS only 4% of poeple make more than $200K per year, so this is really just the masses realizing that they should be able, electorally, to confiscate the incomes of the wealthy.
This isn’t about the deficit either. Keeping all the current rates increases the deficit $3.8 trillion over the next decade, but raising rates on the rich, but keeping them intact for all other groups still increases the deficit $3.1 trillion.
Since this is a Christian website, could we at least pretend to think about this biblically.
What are the rich condemned for in scripture? Unethical business practices (false weights and measures) and failing to open their hand to the poor. Does Jesus, or God, anywhere in scripture advocate a system of taxation that requires more (beyond proportionality) from the rich, simply because they are rich.
If you hate income inequality work for a system that doesn’t let Senators like Robert Byrd and Jack Murtha stuff the pockets of their friends with tax dollars, or let companies use dishonest business practices. Those are the things I see God railing against.
The essence of biblical justice is that the rules are the same for everyone, and this desire to set up a different system of taxation for the wealthy, simply because of their wealth, has no biblical support that I can see.
If you want to argue for higher rates because of cost/benefit principles or some other economically rational reason that is a different case altogether, but all I have seen in the present debate is “look, some people are wealthy, how can we punish them or get their money for ourselves?”
@ Robin
You’re absolutely right that this is open class warfare but you couldn’t be more wrong about which class is waging the war.
Think about it Biblically? Sure, let’s look at the Magnificant and the example of the early church where the rich were brought low and the poor raised up. Let’s look at the condemnation of Sodom and Gomorrah for not caring for widows and orphans. Let’s look at the condemnations of the prophets that highlighted dishonest scales that took advantage of the poor. Let’s look at Romans where the command is to submit to the authorities.
How do you think the wealthy got that way? Did they all earn it by the sweat of their brow? The game is slanted in their favor.
Listen to Warren Buffet on it. He disagreed with the Bush era cuts when they were made and he still disagrees with making them permanent. He recognizes that he has profited as a result of the blessings of this society and rightly recognizes paying higher taxes as a way of giving back.
The widening gap between the wealthiest Americans and the poorest is perhaps the biggest economic issue that we face going forward. The incredible growth in CEO pay versus that of the average worker is a travesty. It also seems to be evidence that market forces, so often extolled by the political right, are somehow being short-circuited when it comes to CEO compensation. Ideally, shouldn’t the cost of labor be subject to supply and demand just like the cost of any other product? If there are no significant barriers preventing it, the supply (of qualified candidates) should ideally grow to meet the demand and thus the cost (i.e. CEO pay) should come down as competition increases for those jobs, right? Something is preventing that. What that is can be debated, of course.
But one quote in the article is incorrect. “The richest 0.1 percent of taxpayers would get a tax cut of $61,000 from President Obama. They would get $370,000 from Republicans, according to the nonpartisan Tax Policy Center. And that provides only a modest economic stimulus, because the rich are less likely to spend their tax savings.” There is no tax cut on the board here. There is a current tax rate which is a result of the so-called Bush tax cuts. If those tax cuts expire and the rates automatically go up, that is a tax increase. The difference between President Obama and the GOP on this issue is not one of how much taxes to cut, but whether to increase taxes or not. Maybe semantic quibbling, but it’s relevant. Taxes will go up in reality under President Obama’s proposal. He is proposing no tax cut at all, only a smaller tax increase than what will occur automatically.
Now if President Obama wants to really make things difficult for the GOP, he should try and beat them at their own game with their own rhetoric. According to supply side economics (or at least a simplistic version of it) tax cuts remove money from the government sector (where it is not efficiently used to create jobs and stimulate the economy) and shifts it to the private sector (where it is efficiently used and generates jobs and stimulates the economy as well as ultimately increasing overall tax revenues.) Kevin S. is correct about most Americans paying little or no taxes. But theoretically, as far as economic stimulation goes, it shouldn’t matter where the taxes are cut, right? Any cut that removes the money from the government coffers and returns it to private hands should be stimulative and create jobs. right?
So the president should simply propose tax cuts from the bottom end while making similar claims about stimulating the economy that the GOP makes while pointing out that this money will benefit those who need it the most as opposed to the wealthiest Americans. However, if the president proposed letting the Bush tax cuts expire on the folks making $250K+ and instead proposing equivalent tax cuts on the lowest income taxpayers, he could really make it difficult for the GOP to sell the extension of the Bush cuts for the wealthiest Americans.
Now frankly, I’m not sure that supply side economics is truly as stimulative as claimed by the GOP. It seems to me that a lot of the stimulation historically seen when taxes are cut could just as well be the result of increased government debt due to the deficit spending that has usually accompanied those cuts. But using the GOP’s own claims would make it very difficult for them to push for extension of the Bush tax cuts for the very wealthy when the democrats would be proposing equivalent tax cuts, except for the not so wealthy. For the GOP to continue to push for cuts for those making $250K plus would look like “let them eat cake” politics. That won’t play well with the general public. Especially when a lot of them would be the folks actually getting the money.
Sorry this was so long. I didn’t intend to ramble.
To put it another way…
I have no problem if Bill Gates, Lebron James, or Steve Jobs gets richer, and richer, and richer if they do it by creating products or providing services that the rest of the population is clamoring for, and I would see no reason to tax them at higher rates (unless there was an economic rationale)
However, if someone is getting richer, and richer, and richer because they are evading taxation on their goods (John Kerrey) getting insider stock trading tips because of their political position (Congressional staffers) designing the tax code to let them escape taxation most of us have to pay (Charlie Rangel) or simply getting the government to turn a blind eye to porblems like environmental contamination (BP) child labor (Nike, Apple) or various other laws that all other taxpayers have to live with…then not only do they deserve higher tax rates, they deserve serious jail time.
Wealth and success are not sins, and we shouldn’t treat them as such; however, when that wealth is ill-gotten, especially if it is ill-gotten on the backs of the poor then we should be in the front with pitchforks.
Robin@6 says “To me, this looks like open class warfare.”
Robin, I am going to try to be a little nice in this, but that is one of the most out of touch and inconsiderate things I have heard. Oh, the big rich people are afraid of all the lobbyists and might and TV commercials and signs that all the poor people are putting up. Oh, wait, the poor are threatening to take the rich by force! Oh, wait, perhaps it really is the the poor are dying in the hospitals the rich are trying to get a room in so they are having to see them as they go in through the front door.
It is not class warfare. Those who are top 1% earners are some of the biggest advocates for this move.
Let’s face it, the poor are not out there screaming for this! How can you say this is class warfare?
Richard in #8 has the right slant, this is class warfare but not the poor against the rich, it’s the rich against the poor. Seriously Robin.
It was President Obama who himself said that he was the only thing standing between the bankers and the pitchforks.
I am not opposed to increasingly progressive taxation, if there is substantive reason for it beyond “those wealthy people are sons of bitches, and NBA players are just thugs that don’t deserve what we give them” type language.
And there really isn’t any difference between the thought that CEOs don’t “deserve” what their employers pay them and that Lebron doesn’t “deserve” what we willingly pay in ticket prices to see him.
At least give me a good reason, like the benefits that rich people receive from having a stable legal and economic system, for having paved roads, for having electronic communications systems, benefits them financially (more than proportionally) than it does the poorer classes therefore it is in keeping with cost benefit analysis for them to be charged progressively higher taxation rates.
I can respect that argument, and while I might disagree with certain numbers, it is certainly economically valid. All I have seen watching this debate for 3 months is “rich people are evil, let’s tax them some more.” Or, “they only make up 1% of the population, so we can do whatever we want to them.”
It isn’t the policy I hate, it is the complete lack of perspective that usually presents it.
I think those that are rich that want to pay more taxes should be allowed to… and maybe even encouraged to if they want to. I would think they might take a course like a Truett Cathy (founder of Chik-Fil-A) who has reportedly given away over $100M since 1967. I think someone that is blessed to be rich (or have innovation and hard work that one day allows them that earthly blessing) can really do some amazing things with their wealth if they have a heart that is open to what good it might accomplish.
Really it’s about the direction of hearts. Some former pro football players & coaches that invest in the lives of people to improve things do amazing results. I would rather have their wealth poured into ambitions like that vs paying a higher tax rate so we can get $500 toilet seats or $2 billion aircraft that are rarely flown.
Sadly, I think we also need to look at reasons the rich get richer — middle America really helps every time they buy a $80 sports ticket as well. How about every time we pay for that $12 movie. It’s true that people with amazingly unique talents and abilities are always going to comamnd a premium to see the works of their hands. An amazing artist or talented businessman can achieve wealth — but what they choose to do with it, and how they might bless America (& the world) with those riches is something that would be nice to see.
Another spiritual battle — I don’t like to write-off the rich. Jesus died for them too. But I would like to see them be open and loving with their wealth and try to impact the world around them.
Lord knows a rich person with love in his heart could make a difference in a poor man’s world better than a bureaucratic ineffective government program could.
Robin, I like your factual approach to these issues though I do think there’s some stuff in the Bible that deserves serious consideration on how Christians ought to live (and share) — and I’m not too bothered by the judgment that taxes weren’t levied as you are saying because the Torah clearly imposed charity and didn’t leave it up entirely to volunteerism.
Still, I agree. Too much of this seems like Robin Hood to me. (Not your kind of Robin but the majority voting against the minority. It’s just not right.)
Having said that, and I want you to know that I like your approach to finances since it seems to me you must be working in that world, I wonder if you think there ought to be some caps or limits on income in the business sector. I remember the first time I heard some Exxon executive was making something like 30 million dollars. Now, knowing that guy doesn’t personally own that oil (if he did I really would see this differently), doesn’t it strike you as out of line to see someone make that kind of mullah?
LeBron’s a pain; he plays for the wrong teams; his owners pay him that much; they’re foolish; and I think pro athletes make too much.
Still, wondering what you think on this sort of thing?
Robin, there is an ever-widening gap between the rich and poor with the poor getting more poor (yes, even less well off) and the rich getting richer (even more well off). The facts seem to support that the rich are even more disproportionately rich now than any time in recent history. Give that lay of the land, and the fact that the government is running in a big deficit, then if we are going to affect the revenue side of the equation it should then come from the rich to a greater degree than the poor.
We could also deal with the subsidies side of the equation as T points out, but given the facts in my first paragraph it would be kicking those who are down in the face, adding insult to injury to take away their subsidies.
As T said, this would never be tolerated if it was couched as a subsidy to the rich, but the reality is the poor generally do not know all the in’s and out’s of finance, it gets lost in the message.
Why in the world would we give more money to the people who are richer than ever and take it away from the poor that are getting poorer? Why?
Robin: What do you make of 2 Cor 8:13-15? Does wealth have to be the result of “sin” to trigger redistribution?
Scot,
I’m completely in favor of ruthlessly enforcing laws that might have a “side effect” of limiting executive compensation. Businesses should have to compete in a fair regulatory environment. BP shouldn’t get to skirt safety laws because they have effectively bought off the regulatory agency and there is no legislative oversight. Companies like NIKE and Apple would have dramatically lower profits if they weren’t allowed to take advantage of lax child labor policies in third world countries, etc. Lots of that stuff would naturally lower profits by getting rid of real corruption and injustice.
I would view capping CEO pay as similar to instituting a maximum player contract in professional sports. After all, if Exxon’s CEO gets paid $30 million, it is because his employer, the board of directors, chose to give him that money instead of the stockholders.
So how would we think about it if it was pro sports. The NBA owners could lower the salary cap by 20% and either return that money in lower ticket prices or pocket it themselves (just like the board could reduce the CEO’s salary) but how would we feel about congress stepping in and saying that professional athelte (or actor, or musician) salary is capped at $x million dollars, and all compensation above that amount had to go back to either the production company or the consumers? Would that be legitimate in entertainment and why would CEO pay be a different animal.
Back to Robin Hood, there is a world of difference between the Sheriff of Nottingham who is wealthy because he stole from the mouths of his citizens, and the other wealthy people in the story (who we are not sure if they became wealthy through illicit means). I openly cheer for Robin Hood against Nottingham, I’m not so sure how I feel about him stealing from just randomly wealthy folks.
Albion,
I appreciate the verse and perspective. I think the first clear application of that is that we should expect Christians to give sacrificially to the poor. Charity should cause a financial burden, WE should be that committed to it. I need to think more about whether Jesus would want us to require a secular, or pluralistic, government hold all of its citizens, Christian and non-Christian, to that standard.
Robin asked about the rich getting more benefit from the Government so they should pay more. I feel the rich do get much more from the Government than the poor. Here is an attempt to articulate some of the benefit.
1. Defense – sure my poor little sister gets some benefit from Canada not taking us over, but the rich get much more benefit since their footprint to protect is much much larger. It is part of McLaren’s endless cycle from one of his books, the more you have the more motivated you are to defend and do so in other people’s lands. Do you really think the poor feel we should be in Iraq? They got no benefit from it.
2. Infrastructure – The roads, highways, power grid and everything else is much more dedicated to the rich than the poor.
3. Raw materials – As someone said above, if the Oil executive acutally owned the oil it would be different. He does not. The oil really is a natural resource of our country that we are allowing some to take. Same goes for the air pollution and such. They rich take the clean air from the poor.
Robin,
ASSUMPTION OF HARD WORK:
Correct me if there’s something obvious I’m missing, but doesn’t saying that the super rich should not pay more taxes assume that they have somehow earned their wealth? They may have gotten rich through bullying or even illicit means.
RECOUPING THE COST OF WHITE-COLLAR CRIMINALS
Crime researchers tell us that the cost of street crime in the US is about $18 billion per year. The cost of corporate crime is about $1 trillion. Conviction, sentencing, and severity of punishment is much lower for white-collar crime than street crime. Taxing the super rich may be one way to recoup some of the public harm done by white-collar criminals. If the law-abiding rich feel this is unfair, one thing they could do is use their power to work for proportionate punishment of white-collar criminals.
As far as concrete proposals go, I’m actually not a fan of capping executive compensation outright because I do think there is some merit to ambition and I have no problem with pursuing a large paycheck (I have greater reservations about stockpiling wealth due to scriptural mandates about stewardship).
That said, I would like to see executive compensation handcuffed to how much the lowest paid employee makes. Afterall, it’s the team that determines the success of the organization as a whole, right? This is the only way I could see “a rising tide that lifts all boats” actually happening.
Redistribution is a fine and desirable goal. In fact, it happens. Say what you will, but the poor are better off now than they were in 1976, whether or not they make more money as a function of the top-earners.
Centralizing government doesn’t redistribute anything equitably. If you work for a union, the preferred constituency of the Democrats, you have made a lot more off Obama’s redistribution programme than other folks who pay taxes.
That’s a trend that will only continue as we give leadership the power to make economic decisions.
The NBA is a great example of how the economy works.
NBA tickets are expensive. Athletes and team presidents are well compensated, as are many other people involved in the league. It is also true that thousands of middle class people are employed by the NBA.
The NBA is popular because it represents the game played at the highest level. In order for this to be true, player salaries have to be set very high, in order to make the competition for jobs competitive.
Games require basketball courts, as well as nice facilities, which seat the fans who pay to watch the events.
The sport also needs to be profitable, else nobody will want to take on the financial risk of hiring players, building facilities etc… If you increase taxes, you decrease profits, and/or drive up ticket prices.
If the former, expect a weaker offering. If the latter, expect expensive tickets. Either way, the average ticket buyer gets a poor return on the investment.
So the “bible says so” argument doesn’t really work. You are asking people to make sacrifices unwillingly to achieve a particular aim. The prophets didn’t ask for this. They were not combating a system that remotely resembled the American economy.
“Say what you will, but the poor are better off now than they were in 1976, whether or not they make more money as a function of the top-earners.”
Let’s assume that you’re correct in saying the poor are better off now than in 1976 (was it not as cold on the streets then?). The issue remains that there are more poor now than there were then and a large part of that is related to income disparity. Profit-sharing is a great motivational tool for workers. The middle class has been eroded over the last 30 years and those that remain in the middle class are certainly not better off than those in the middle class in 1976.
The wealthy got that way by the sweat of their brow (and the brow of everyone working for them). It’s reasonable to want to see an economic system that reflects that.
Why are so many on here who frequently bemoan the Religious Right, now invoking their religious beliefs and morals in regards to economics? It seems to be a double standard to say religious social conservatives need to be less vocal on issues like gay marriage, and then pontificate on how we should pursue more “just” economic systems. All legislation is moral, all.
Personally I am fine with a more socialistic economic agenda as I even heard recently that the rich in America now possess 40 trillion dollars. If we had a one time tax just upon the richest Americans who have 40 trillion dollars we could easily clear our national debt…just sayin.
In what ways were the poor worse off in 1976? In what ways are the poor worse off now? It seems important to think about this since a greater proportion of the population is now poor.
Robin, how is this for Biblical economics: If you have two coats, one of them belongs to the poor. Ask Jesus.
JoeyS,
Not that I disagree, but you might be quoting John the Baptist. That text in Luke 3:10-14 is often confused with Jesus’ words in Matthew 5:38-42.
Scot, sure, but I feel pretty comfortable that Jesus wouldn’t oppose such an idea.
In fact, JoeyS, when the officials demanded a coat Jesus said to give them another one to stop the cycle and change into a grace economy.
JoeyS,
I agree that if I have two coats, and I am a follower of Jesus, that the poor own one of them. I do not agree that if Jesus saw a Roman citizen, who wasn’t one of his followers, who worshipped a pantheon of Gods, that we would have taken that man’s coat to give it to the poor.
I appreciate DRT’s communication of 3 reasons why it might be right to tax the rich more.
Jason, I want to be clear that if the gains are ill-gotten I am in favor of doing anything possible to confiscate it. I am less favorable to applying higher tax rates to all wealthy people because a few of them (like the Kennedy family) got it through illicit means.
As far as using the tax system to recuperate white collar crime money. I would prefer the court system, that way you are taking the money from the criminal. If we are going to say that all people earning above $x are somehow responsible for the crimes of their peer group…well I could very convincingly argue that a disproportionate share of all crime is committed by the poor, or African American, or Immigrant populations in this country, and therefore we need a special tax on the working poor, black, and immigrant to recuperate the damage their peers have done to the country…I don’t think anyone wants to live in that kind of system.
I wanted to post this separately, because it has been overlooked to this point.
We should remember that, at least in the case of company executives, the thing that has allowed (caused) CEO compensation to spiral out of control is the design of the tax system itself.
There might have been a time that it made sense for large company executives to earn a salary, but with progressive taxation, where salary incomes are taxed at 35% (Bush) 39.6% (Clinton) or 70% (Carter) but where capital gains are taxed at only 20% (Carter and Clinton) or 15% (Bush) it makes much more sense to take a large chunk of your compensation in stock options which are taxed at the lower rate.
It would be difficult to get a board of directors to agree to a $30 million salary, but they will agree to stock options that have a tremendous value if your company turns a $20 billion profit in one year, but no value if you run the company into the ground (and I know that some people still got lavish benefits even when their company did poorly)
Just pointing out that our desire to “tax the rich” has been the single most important factor in them getting massive stock option packages.
50 years ago the church was the institution to give to if you wanted to support service to the poor and economically oppressed. Giving to an institution makes more sense, after all; combined and thoughtfully executed resources can have a much greater impact than one individual can have on their own.
Local efforts were, measurably, the most affective way to alleviate the suffering of our neighbors who have less opportunity and advantage. I still advocate for local efforts. But with the coming of the Great Depression that crippled our nation beyond the reaches of localized efforts and the institution of the New Deal, the church also shifted. Over the past 50 years congregations became commuter churches rather than neighborhood churches. Still today many urban churches thrive while the neighborhoods around them decay. The church, as a local institution, is no longer in a position to adequately serve the least fortunate among us.
The fact that 1% of Americans are getting richer while the rest are getting poorer is a tragedy. I would give anything to see the Christians reorder our finances (especially within the church) so we could better serve our neighbors. I would love us to reclaim what it means to tithe (by looking at the Bible rather than our expenses). The reality is, right now there are no local institutions that can adequately address the needs of the poor. The best effort we have at this time is to, as Richard mentioned above, create policies that raise the tide for all people, not just the rich.
Protecting our local efforts is, unfortunately, a facade. I will continue to work in the local church and encourage churches to pick the flag of service and using our resources well back up but right now it is not enough.
Robin,
A couple thoughts on stock options as compensation. Is it no longer true that options exercised prior to a certain date (5 years?) are taxed as regular income? I know this was true of employee stock purchase plans, but my options never got above water, so I’m not sure about they work.
Secondly, one of the problems with stock options for compensation is that the strike price is frequently far below the market price. Thus, even when a stock declines 50%, the CEO stands to make a substantial profit. For instance, I have seen strike prices on stock options as low as $4 or $5 dollars when the stocks at the time sold for $20. I cannot see how this has the shareholders best interest at heart, but I understand it is common practice.
If this is the case, then the truth is that stock options are “cheaper” for the company (in fact, they only cost the shareholders) and the tax rate would not be the predominant factor.
@Richard
Republicans are working to make the streets warmer. It’s you green liberals who want to keep them cold.
In all seriousness, though, the streets are cold, but more poor people have heat, not to mention phones and access to the internet. These technologies did not exist 34 years ago, and/or were prohibitively expensive. A lot the top 0.1% became very wealthy making them so.
“If we had a one time tax just upon the richest Americans who have 40 trillion dollars we could easily clear our national debt…just sayin.”
And the remainder would move off-shore immediately thereafter. One of the reasons companies are unwilling to spend their money is because they fear this sort of outcome. If investing and getting richer means triggering some sort of IED in this game of class warfare, it makes very little sense to put capital at risk.
The poor aren’t getting poorer. (From inequality.org) At least according to the data that I have seen. Real After Tax Income has increased for every income group since the 70s. Real income means income that has been adjusted for inflation, so you can think of it as purchasing power. Even the poorest 20% of the country has 6% more purchasing power now than they did in 1979. The middle 3 quintiles have 17%, 21%, and 29% more purchasing power now than then, and the top income group has 69% more purchasing power.
In every income group, it is better to be alive now, than in the 70s, the golden age of the middle class.
Oh, and today we found out the Tom Brady dumped Nike and signed with Body Armour, but instead of signing a regular endorsement deal which would have been taxed at 40% under current legislation (35% Federal & 5.3% State) he chose stock compensation which will only be taxed at 20% (15% Federal and 5.3% Local).
So, if Body Armour stock triples in the next few years and his compensation looks ridiculous, do we blame his personal greed, Body Armour’s naivete in paying his so much, or do we look at how the tax system influenced his compensation choices?
Dan,
I am not sure about the 5 year rule on stock options or even the strike price. T might have more knowledge about those. I was just pointing out that high personal income tax rates sometimes have the effect of people choosing alternative compensation packages to minimize tax liability. Or if they are congressmen like Charlie Rangel, they can just invest it in Dominican real estate, not report it, and then face no consequences.
One thing that hasn’t been mentioned is that whatever the tax rate is for whatever tax bracket there are tax deductions, rebates, or credits. Although, these tax benefits have the potential to benefit all, they do tend to fall out heavier on the top. Hence, anybody in the top tax bracket who is actually paying the full rate either should fire their tax attorney or is profoundly stupid.
To kevinS-
One of the major reasons why companies are not investing has little/nothing to do with class warfare or even what the tax code will look like. The companies either are not selling enough product to warrant expansion or they don’t want to get caught short on cash as they did in 2008 when the banking system in essence seized up. If everyone was actually doing what they were supposed to be doing (banks actually lending money for example) the system would start to work again.
The true issue is that our banking system has no idea what it actually did with all of those mortgages and loans.
Robin-
What happens if Body Armour’s stock crashes? Does Brady have any kind of backup plan or wil he be working for nothing?
SteveD,
I’m sure that even in the even of a crash there is some type of parachute built in, just like it is for CEOs. I’m sure he has saved up enough in the last decade, not to mention his wife’s pay as a supermodel, that they will survive.
I actually agree with this post, but I’d like to push back just a bit and ask for the source of the assertion made in the last sentence: “the rich are less likely to spend their tax savings.”
I’m late to this discussion but I’ll add a few thoughts.
Economic justice can be divided into three categories:
Commutative – Justice in the economic transactions.
Remedial – Justice in the process of correcting economic wrongs (ex. destroying someone’s property, failing to honor a contract, stealing, etc.
Distributive – Justice in how things get distributed.
If you read closely, the OT prophets are addressing the first two, not distributive justice. The big themes in the OT and NT center on commutative justice and remedial justice combined with generosity to the poor. There is no ethic that somehow everyone’s income must be equalized. There is an unquestionable ethic that the poor should be helped. (But Scripture does not view the poor as so many cattle to be fed and sheltered. The poor are to participate, and to the degree possible, to be integrated back into the communities of production and exchange.)
Until very recently, human productivity was understand to be unchanging. You couldn’t alter it. Land had a fixed yield capacity. Thus, you had little change in economic production. The meant the economy was largely a zero-sum game. My wealth is at someone else’s expenses. The only issues that could be influenced significantly were consumption and distribution of wealth.
With the rise of specialization of labor, expanded trade, and the Industrial Revolution, we have learned that we can radically influence production. This development is not anticipated in the biblical world, nor in the centuries that followed the early church. We don’t have well developed frameworks and traditions for how to handle things ethically and many keep trying to directly apply teachings in the Scripture as though nothing changed.
So when you come to the wealthy, we must be clear. There is not a fixed pot of wealth in the world from which the wealthy were distributed a greater share. There is (in most years) a growing pot of wealth. The wealthy got their wealth, not by taking from others, but by creating more wealth. Generally speaking, in developed nations, the wealthy are not taking from the wealth of the poor.
So on what theological basis do we redistribute from the wealthy to the poor? Mind you, I’m not saying there aren’t any. I’m just saying that the reasons have to be deeper than a vague notion that some have too much and things should be more level. They have to be more than Scripture uncritically applied from its context to ours. Certainly one of the seven deadly sins is greed. But another was envy … or as Augustine put it “grieving the good of others.”
Mark Baker-Wright,
Studies from the 2001 and 2003 tax cuts showed that all income groups below $100K were more likely to use their tax cut to either save or to pay down debt. Only the people earning $100K plus were most likely to increase their consumption.
The economic theory has always been that poor people can’t afford to save because they’ll spend every penny on groceries, etc., but that theory was not borne out in 2001 and 2003. Maybe it would be different now because of the economy, but I cannot find any evidence to back up that assertion.
http://www.csmonitor.com/Business/Economist-Mom/2010/0901/Would-the-rich-really-spend-less-of-their-tax-cuts
Michael Kruse,
Have you looked at Keller’s Generous Justice yet?
Michael, I was hoping you’d weigh in too… you and Robin really help this kind of discussion.
What do you think of the statement by John the Baptist? Isn’t that distributive justice at some level? And Paul’s comment about “equality” is close to that too.
Robin #36
The typical stat referenced when saying the there has been no growth income for the middle class is household family income. Several things have to be taken into account when comparing, say, the top quintile of income to the lowest quintile.
* Household size – Top Qs are getting larger and bottom ones smaller. When you divide total household residents into the household income, the per capita difference narrows. There 3.5 persons in Top Q households and the 1.7 in bottom Qs. So while the number households is divided neatly into fifths, there are double the number of individuals in top income households as at the bottom.
* After Tax Income – The income referenced is usually pre-tax income. The top 50% pay 97% of federal taxes. That reduces the disparity in after tax income. The substantial redistribution in income that is already occurring is not being factored into pronouncements of a widening gap.
* Non-cash benefits – In recent years there has been a shift by government and business to move toward more non-cash benefits. That doesn’t show up as income.
When you factor these issue together and look at spending rather than income, there is no change in the ratio over the last twenty years between top and bottom. Between top and middle quintiles it has stayed at ratio of 1.8:1. Also, prices for generic food and basic household staples have not risen as quickly as prices for premium brands of these products or for a range of other consumer goods. As food and basic staples make up a greater portion of the budget for the poor, prices have not risen as much for the poor.
There is also the factor that benefits everyone with technological advances. TVs, washers, computers, take fewer and fewer ours of labor to buy and offer expanded and more efficient features. Most poor in America have TVs, climate controlled homes, washers and dryers, etc.
Now, it is not my intention to suggest that there is no suffering and need among the poor but it is not true that the poor have been getting poorer. The enormous growth in wealth at the very top has not been a zero-sum game of extraction from the bottom.
#45
I’m not sure which passage by Paul you’re referring to. As to giving an extra coat to the one who is need, I think we are looking at someone giving what to another of their abundance. It was about raising someone to the basics needed to survive. I don’t think is an equalization of wealth.
I’ll also say that I think something is present in Jesus’ announcement of his ministry in Luke 4 that is not obvious to us. He is “channeling” the jubilee via Isaiah. Jesus, in a sense, is bringing remedial justice. The Israelites who have been deprived of being tenants on God’s land will be restored to their role, each family living unmolested on their land, producing and exchanging with each other in harmony. It isn’t just a materialistic vision of making sure everyone has enough to consume. It is holistic vision that sees everyone re-included in the economic life of the community.
In general, wherever a Bible character is giving economic direction, I imagine the following. What if we are there with the character and we ask “What if instead we could show you a way (via specialization of labor, trade, and technology) we could increase everyone’s productivity a hundredfold (and that is an understatement by historical standards) and dramatically increase everyone’s material well-being? What would they opt for?
So I can understand a biblical character’s reasoning in their context and easily affirm it in that context. But has the context radically changed in a way that we need to rethink what it means for today. I’d say yes?
Mark #43
The people at the bottom end of the ladder spend nearly all there money just to live from day to day. Even a wealthy person with a rapacious lifestyle can only spend so much so fast. Meanwhile, the wealth is on deposit in banks or invested in stock, being put to productive use in the economy.
There was a book written several years ago called “The Millionaire Next Door.” What it documented is that the great majority of millionaires in the country lived in homes that were not far from the median value of homes, bought used cars, didn’t dress in the latest fashions, in general did not lead extravagant lives but instead saved their and invested their money on a relentless basis.
One more thing I wanted to add that gets more directly at the post. Take the Fortune 1,000 corporations out of the picture. On average, the approximately 300,000 corporations, on average, pay their CEOs about four times what the average employ in their firm makes.
And when we come to the mega corporations, they have grown magnitudes large in the market capitalization over the last thirty years. The CEO salaries are at a similar ratio to the market capitalization as they were thirty years ago. So that raises an interesting question: are these CEOs being as productive as their predecessors but with a much larger wad of wealth under their control?
The CEO pay at this level is a tournament model. In a golf tournament or auto race, the first-place winner gets an enormous prize. Second gets a much smaller prize. Third, is much smaller still and everyone else gets a pittance. But it is the opportunity to win the tournament that motivates everyone to do the best they can. Similarly, so the theory goes, executives will hone their management skills as they compete to win the tournament for CEO. The big cash prize isn’t just to reward the CEO but to motivate others.
I’m doubtful of the efficacy of this in developing good management. Too much reward is given for near-term performance that may actually be counter-productive to a firm’s best interests.
My bottom line here, is that much of this far more complex than it initially looks but it concerns me too that their is such a concentration has emerged at the top.
Michael W. Kruse, what do you make of Jubilee?
I am fond of John M. Perkins assertion that we should make resources more readily available to all rather than redistributing moneys.
Well, read the comments more carefully and you realize your question has already been answered.
In my opinion this discussion on tax rates doesn’t deal with the deeper systemic issues that underlie the current situation. I see three trends that have decimated the middle class and will allow the rich to keep getting richer while the poor get poorer.
1) Technological advances that continue to increase production efficiency. More can be produced by fewer people.
2) Continued growth of mega-corporations. Every corporate takeover results in the elimination of several layers of workers, from factory floors to secretarial pools to junior management(downsizing). This is touted as improving the corporate bottom line through increase economy of scale.
3) Globalization. Factories in third-world nations can make almost anything cheaper than it can be produced here. As long as there are no tariffs or trade barriers only ’boutique’ factories make much business sense in the USA.
All of these have contributed to the exodus of good-paying jobs from our country, as well as increased income for the stateside executive branches of the multinational corporations as well as stockholders. Nothing as simple as a tax rate change is going to make much of a dent in the problem.
I’m still trying to decide how I need to respond. My state, Texas, has legislators meeting to decide whether to pull out of Medicaid. I shudder to think how many will be showing up at the doors of my small church looking for assistance if they succeed.
As the late great Mark Heard once sang:
We get the picture from week to week
The rich get richer and inherit the meek
Long since started preying on the weak
Am I the guilty party if I turn the other cheek?
I’m alright
Nothing is bothering me
I’m just trying to keep the weight of this world
From dawning on me
Joey #50 and #51
This was also a theme of Ron Sider’s and of the economic development education I got at Eastern University. Sider used to say that he was such a capitalist that he believed everyone ought to own some.
More generally I think we have to be about redistributing human capital (health, education, spiritual well-being) and social capital (functional healthy families and communities.) It is interesting that Timothy Noah attributes 30% of the resulting inequality to decline in education and essentially dismisses household makeup as an issue. I do think improving education is an area that would help but I think changing household patterns are weakening intangible human and social capital transfers.
But I think we are basically talking about a divergence between the bottom 99% and the 1%, and particularly the top .1%. I would give more weight than 30% to what has happened in the salaries in financial arena. I also think that CEO compensation strategies have been flaky at the top. I’ve also speculated that transportation and communication improvements have allowed any one company to get its product before so many customers at one time has meant that companies can grow to previously unheard of sizes. Naturally if you control a substantial portion of the stock you will have unprecedented wealth. (On the other hand, why have so few corporations from other countries had this same phenomena?)
But in short, I’m a bit mystified by Noah’s focus on improving the lot of the poor as means to change inequality when it seems so clear that what has deviated is the top 1%. The bottom 99% hasn’t had that wide a change. We are obligated to work for a better life for those at the bottom but I don’t think that is going to change inequality.
Yeah, most of the CCDA folk would share Sider’s and Perkin’s sentiments. I’ve read quite a bit of Lupton, myself.
Education is helpful, but only in as much as the households of those being educated are healthy. Of course a few rare students will make great strides despite poor upbringing but as I work with teenagers the biggest difference between success in education is parental involvement.
I don’t think our goal as Christians is to make everybody middle class, but if you spend any time in communities that struggle economically you learn very quickly that not everybody has equal opportunity. That is something that we can work towards shifting. I’m convinced that right now the private sector doesn’t have the infrastructure to handle the amount of people who are genuinely hurting do to poor economic conditions. For as mismanaged as the government can be they at least have the capability of enacting helpful change, even if local efforts would ultimately be better. It seems reasonable that those who gross over a million dollars a year might shoulder a larger portion of the taxes. A 1% tax increase of the richest 1% would probably overshadow a 1% tax increase for the bottom 99%. Government is not ultimately the source of our hope, but until churches rethink how they can serve their neighbors on a larger scale it may be all we have.
Robin,
Most crime in America is white collar. Most punishment and the most severe punishment is given to the poor and especially African American poor. No need to tax the poor because they’re already being punished. The rich however are creating the lionshare of public harm and getting little and light punishment. Helping the rich make up for some of their public harm by taxing them a bit more sounds like a good stopgap measure until we start punishing them in a way that fits their levels of crime. Since I don’t see this on anyone’s radar, it seems fine to go the taxing the super wealthy route.
The United States Constitution allows federal spending “to pay the Debts and provide for the common Defence and general Welfare of the United States.”
Call me simplistic, but if the federal government limited its spending to the constitutional mandate our tax rate discussions would be considerably different.
Let’s limit the federal government to its constitutional role and trust and expect the people to work things out. After all care for the poor is, at its heart, a moral issue. If people won’t care for their neighbors because of love, can we really expect the government to do any better?
Then this allows the people of God to set the example and lead the way. We expect the government to do too much for us as it is. Enough already! God’s people can and must be the agents of God’s compassion.
JRS, that was once a wonderful possibility. Then the Great Depression changed America’s ability to protect its most vulnerable well. If we leave the people to work things out for themselves the country as a whole looses. It wasn’t until government intervention that we got 8 hour work days, non-discriminatory hiring, vacation, fair wages, and the like. When things are left entirely up to the private sector the poor suffer. When profit is the only motivation for a market to move those with the least amount of control get overlooked and misused.
I think there has to be a third-way. It isn’t good, as you have pointed out, for the government to run all of our social welfare programs. But it is good for there to be a regulatory body so abuse does not happen. It isn’t good that we have to pay so many taxes that our ability to be charitable is waned, but it is good that where the private sector could not accomplish the task Uncle Sam stepped in to help alleviate suffering.
Let’s be realistic. The government lets vulnerable people fall through the cracks. And the church lets vulnerable people fall through the cracks too. Realistically, we need both–a full court press on compassion for our most vulnerable neighbors. Even then, vulnerable people will be left in harm’s way … but at least fewer of them will be. Keep in mind that a lot of what we’re talking about here is children in poverty–people who did nothing to deserve their chaotic and disadvantaged living conditions.
Well said, Jason Lee. Well said.
JoeyS #57, good stuff. I think the role of govt. in all this should be to engineer some ‘inefficiency’ back into the way business works. Maybe a new round of trust-busting as in the turn of the 20th century. More small corporations would require more workers at every level. We’d pay more for stuff, but it would go into the broader economy and not to the government in the form of higher taxes.
JoeyS, 57
Please note that my comments referenced the federal government’s constitutionally limited role. If we want/need government intervention, let the local or state governments handle it. They are closer to the people and so should be more responsive to the people and the needs. At this point, my contention is clear that the constitution limits the federal government to three types of expenditure.
Jason Lee, 58
I am continually amazed at how much confidence people have in the federal government and how little confidence people have in the church.
No realistic or pragmatic argument changes the church’s responsibility. God is counting on his people. His people should never try to shift their responsibility to the government or anyone else. In fact I wonder why God’s people would ever allow any government or organization to usurp their responsibilities.
I wonder how our tone or approach would change if we expanded this conversation to include the gap between rich and poor worldwide?
JRS: “His people should never try to shift their responsibility to the government or anyone else. In fact I wonder why God’s people would ever allow any government or organization to usurp their responsibilities.”
This is a false dichotomy. God’s people need not shift their responsibility to the gov. in order to advocate for government programs that reflect Kingdom values. One can take seriously one’s responsibilities in the local community while simultaneously promoting a government agenda that you might believe-rightly or wrongly-honors the things God cares about. I think this point was made above.
What amazes me is how much faith people put in business as opposed to “government” as if business people weren’t up to their necks in self-interest. Neither business nor government is a panacea. What is required is a robust dose of realism about the limits to anything we do in any arena–church, business, government–and work cheerfully towards the goals we believe to be kingdom-worthy, without rancor, trusting God.
I used this quote a week ago on a different post but I think it is a powerful observation:
“Monsma argues that as government expanded into fields of social activity already occupied by nonprofits, many of them religious, it did not smother private benevolence. Rather, the rise of the welfare state led to a complicated pattern of shared public and private efforts, sometimes parallel, other times overlapping. This coexistence has endangered a system that John Dilulio (quoting Don Kettle) calls “government by proxy,” in which government carries out its public agenda through private and quasi-public institutions (Dilulio and Bennett 1997). This has generated new forms of direct collaboration and indirect influence. Religious providers ahve become an integral link in the public social safety net, while government’s presence is felt through the regulations, licensing, and financing of many private organizations.”
-Ron Sider; Saving Souls, Serving Society-
Michael (47) said: “As to giving an extra coat to the one who is need, I think we are looking at someone giving what to another of their abundance. It was about raising someone to the basics needed to survive. I don’t think is an equalization of wealth.”
2 Cor 8:13-15: “13 Our desire is not that others might be relieved while you are hard pressed, but that there might be equality. 14 At the present time your plenty will supply what they need, so that in turn their plenty will supply what you need. The goal is equality, 15 as it is written: “The one who gathered much did not have too much, and the one who gathered little did not have too little.”[a]”
I don’t think you’ll find much support for your thesis here. And Jubilee seems to be as much about this idea as anything else, however much we may want to spiritualize it or redefine it so that it’s about getting a piece of the pie as opposed to having the slice returned to you, your debts forgiven and slaves freed.
#42, 46-49; @Michael W. Kruse
The numbers you cite regarding corporations are misleading— they do not take into account functions “out-tasked” and outsourced to subsidiaries and “supplier” firms (both on shore and off shore). In the Jack Welch / McDonalds model, just about everything except a few executive/exempt core positions to manage the relationships and interactions with client firms. Essentially, in a nutshell, it’s all about “branding” and levying “tolls” for use of the “name”. This is evidenced in vast reductions in corporate work forces — even before the recent financial meltdown, corporate employment has been spiking downward. And it’s especially an albatross on the old legacy manufacturing firms like auto makers for example, who are cursed with obligations and pensions that newer leaner corporate competitors (or offshore firms that rely on governments to provide big chunks of what traditionally American companies provided for employees).
On spending and cost of living — while it’s true that food costs are much less and many basic “staples” and conveniences like appliances are relatively cheaper, the ante for economic opportunity has been raised significantly. From the 50′s until the mid 70′s, it was common for Americans without a high school degree to secure long term stable employment that provided for family (including stay-at-home wife). Today, a college education is needed (see stats on average earnings for high school grad v. college grad, it’s 2X, and unemployment ratio is 2X+). Also, along with education, there’s access and mastery of computers (which cost has gone down for hardware, but someone getting by on minimum wage is going to be hard pressed to plunk down ~$50+ for internet plus $500-$1000 for a decent machine), mobile phone ownership, etc.… — stuff that certainly is not essential to live, but a large factor in becoming|remaining economically viable.
Then there is the “poor people” penalties — lesser access to grocery market choices, reliance on payday loans to make ends meet, distasteful banking options, scales of justice insanely tilted against (one example: white suburban kids are just as heavy users of illegal drugs as poor urban youth, yet the prosecution and incarceration rates are exponentially scaled). That might seem like a separate issue, but it’s part and parcel of the gross inequality.
But as other comments have pointed out, there are deeper structural issues with “jobs” as we envision them, and yet nobody is addressing this truth that it just takes less jobs to produce equivalent work.
“Helping the rich make up for some of their public harm by taxing them a bit more sounds like a good stopgap measure until we start punishing them in a way that fits their levels of crime.”
It is the opposite of justice to hold people accountable for crimes they have not committed. Punitive taxation, more than any other breed, stifles growth. Who wants to join a class regarded by the government as comprised of criminals?
FDR made it a point to criminalize wealth (he had to resort to special pleading to save himself from his own laws), and he presided over the worst economic period in American history.
@Naum
The hyper-reliance on college degrees is a function of governmental intervention. Between funding for public institutions and governmental loan programs, we have instituted a four year degree as a hurdle to real employment.
The solution to this problem is to undo the hurdle. Very few jobs actually necessitate advanced training, so let’s stop paying for the training.
@Michael
“I’m doubtful of the efficacy of this in developing good management. Too much reward is given for near-term performance that may actually be counter-productive to a firm’s best interests.”
This is what I don’t understand. Why are companies so anxious to extend enormous compensation packages to leaders? It seems reasonable to assume that at least 25% of, say, VP of Ops are qualified to handle the role of COO, and that at least 33% of COOs could step into the CEO role.
As such, most large companies should have at least a modest pool of qualified candidates. Working in the C-suite requires a lot of sacrifices, and there is some effort to give credit for time served, so large bump in salary is reasonable.
But market forces should keep the salaries at a reasonable level. And yet, especially for CEOs, this is not the case.
And it’s not just the monetary and stock compensation. Why are compensation packages laden with golden parachutes that only kick in once the CEO has left (or is terminated)?
The only possibility I can think of is that boards of directors are given far too much latitude to shape the C-structure. Board members are typically retired CEOs and business owners, are appointed by existing management structures, and serve on more than one board. As such, they don’t have enough skin in the game.
If the government were to intervene in an effort to cap compensation, this would be the place to do it. There have been efforts in the past to give stockholders a louder voice in the process. I’m not sure the best way to do that, or if doing so will solve the problem.
Albion #65
Thanks for identifying the passage from Paul. A few observations.
The context for 2 Cor. 8 and 9 is a crisis in Jerusalem and Paul’s attempts to persuade the Corinthians to make an offering. It is not a general discourse on economic relationships.
Paul is not giving instruction about alleviating poverty in the world. Was there no poverty in the city of Corinth? Why send money to the Jerusalem church? Paul notes that the Macedonians were poor (v 2). Why are they not lifted up as targets of the economic equalization process? Something other than a universal principle of income equalization is going on here.
If the economic ethic is radical equalization, then we might presume that the Corinthians knew this by now from Paul’s teaching. In 1 Corinthians 11:20-22, Paul chastises the behavior of the wealthier Christians:
“20 When you come together, it is not the Lord’s Supper you eat, 21 for as you eat, each of you goes ahead without waiting for anybody else. One remains hungry, another gets drunk. 22 Don’t you have homes to eat and drink in? Or do you despise the church of God and humiliate those who have nothing? What shall I say to you? Shall I praise you for this? Certainly not!”
There is no direction to equalize wealth and the fact that there will be people of differing economic status is taken for granted.
Furthermore, if income equalization were a moral imperative, then we would have Paul rebuking the Corinthians for having abandoned his teaching. Yet he writes “I am not commanding you, but I want to test the sincerity of your love by comparing it with the earnestness of others.” (v
This is not about enforcing an equalization ethic but rather testing their generosity.
The church at Jerusalem was in peril, much like the Israelites in the desert. God supplied manna to the Israelites in dessert. It was temporary response to a crisis before they would enter a land of mutual abundance. Here Paul is suggesting that the Corinthians will play the role of God’s manna in Jerusalem’s time of distress. (Once in the promise land, the Israelites all become productive members of their economy and the manna was no longer needed.)
I think this passage has little to say about broader economic principles. The presenting issue is how Paul can instill an ethic of mutual support and aid for the fledgling network of congregations he has established. He wants to develop an ethic of love and generosity for distant brothers and sisters who are a part of the same community. Drawing a universal ethic of income equalization from this passage is a bit of stretch.
Albion #65
The jubilee was not wealth redistribution. Agricultural land transactions were essentially lease agreements.
Lev 25:15-17
15 You are to buy from your countryman on the basis of the number of years since the Jubilee. And he is to sell to you on the basis of the number of years left for harvesting crops. 16 When the years are many, you are to increase the price, and when the years are few, you are to decrease the price, because what he is really selling you is the number of crops.
They buyer is leasing the land to produce crops until the jubilee at which to the land returns to its original owner. Similarly, one could lease one’s labor to another only until the jubilee. At that time, the lease agreement was up the produce of the laborers labor went back to the laborer.
This is not wealth redistribution. Furthermore, wealth the in any form other than agricultural land was not affected by the jubilee. We can certainly make the case that the jubilee placed barriers in the way of inequality but it was not a periodic wealth redistribution to attain wealth equality.
The difficulty in trying to derive policy from the New Testament is that it public policy wasn’t of much concern to the early church. They didn’t have the ear of the government and spent a good deal of time trying to keep peace to avoid persecution when it wasn’t necessary for furthering or maintaining the faith. This is why it is more applicable to look towards the previously established Israel.
Reading through Michael’s post #69 made me think of Onesimus. Position was probably more important to the economic status of a person than was actual currency. Onesimus was a slave and his owner, Philemon, was in a higher social class. Paul’s encouragement (note, not command) here is interesting because he asks Philemon to accept Onesimus as his brother, which is a very equalizing thing to ask. We know little about how Philemon responded, but it is safe to assume he did as Paul asked as Onesimus eventually became the bishop of Ephesus.
Now that we live in a time period where we do have the ability to influence public policy, we have the opportunity to demonstrate this equalizing posture that seemed to permeate God’s establishing Kingdom.
So what if this is true, Christians need to follow the Tenth Commandment:
“You shall not covet your neighbor’s house; you shall not covet your neighbor’s wife, nor his male servant, nor his female servant, nor his ox, nor his donkey, nor anything that is your neighbor’s.” Exodus 20:17, NKJV
@ #72, That is mostly unrelated.
Coveting is not an issue here. That command is about what we desire in our heart and is not intended to squander generosity. It falls at the end of a series of commandments about dishonest gain, which is completely different than taxes (as Moses imposed the first tax).
The Book of the Covenant (Exodus 21-23ish) establishes rights for the most vulnerable. It is no longer OK to beat your slave to death. It is no longer OK to sleep with a girl and then leave her dishonored. Usury is now forbidden (there goes capitalism!). The whole book definitely leans away from marginalizing and taking advantage of people and is a huge step towards justice.
#71 Joey
“…we have the opportunity to demonstrate this equalizing posture that seemed to permeate God’s establishing Kingdom.”
I agree that our ability to influence policy is a new wrinkle in Christian witness that creates new obligations. The challenging problem is that Scripture doesn’t give us a guide for setting economic policies and (as I noted above) the ancient world did not know of the radical impact specialization of labor, expanded trade and technology could have on productivity and innovation. Their world was fixed-sum game. Ours is one of massively expanding wealth.
“Equal,” as we are using it here, is an adjective in need of a subject. We are talking about two persons having the same measure or value of something as someone else. So what constitutes equality?
We can equalize income. But the creates other kinds of inequality. It means no matter how hard I work, what skills I develop, or how responsible I am with my treasures, I will get the same as everyone else. There will be inequality in how I’m rewarded versus what I produce. Is that justice?
We can equalize on opportunity. That is going to create inequality of income. Based on a bell curve of human gifts in an environment of perfectly equal opportunity, a few would do quite poorly, a few would do exorbitantly well, and everyone else would fall some where toward the middle of the curve. People at the bottom may not get what they need. Is that just?
We can equalize based on some criteria of need. That is going to lead to inequality in both income and opportunity. Is that just?
If you work to equalize any one of these you increase the inequality of the others.
Michael (70): I read Leviticus differently: ““‘The land must not be sold permanently, because the land is mine and you reside in my land as foreigners and strangers. 24 Throughout the land that you hold as a possession, you must provide for the redemption of the land.
25 “‘If one of your fellow Israelites becomes poor and sells some of their property, their nearest relative is to come and redeem what they have sold. 26 If, however, there is no one to redeem it for them but later on they prosper and acquire sufficient means to redeem it themselves, 27 they are to determine the value for the years since they sold it and refund the balance to the one to whom they sold it; they can then go back to their own property. 28 But if they do not acquire the means to repay, what was sold will remain in the possession of the buyer until the Year of Jubilee. It will be returned in the Jubilee, and they can then go back to their property.”
Cattle and land were about the only forms of real wealth in the ANE. When you had land, you had something of great value. This passage describes wealth redistribution. If one becomes poor, loses their land and cannot redeem it in the intervening years before Jubilee, it still comes back in the year of Jubilee, arguably for the purpose of eliminating the concentration of wealth in the hands of a few.
(And, as you pointed out in an earlier post, this is what Jesus is getting at by quoting Isa 61 in Luke 4.)
When you get to 2 Cor 8, no doubt Paul writes in the context of relief for a church in need, but it is premised on the idea that those with much will supply the need of those with little. He is describing how followers of Jesus will share generously with each other.
So if this is how God wills that life in the kingdom should be lived, why not apply that principle to a world over which Jesus is Lord? Why not, for example, tax the rich (and I count myself in that number) to provide health care for the ones who cannot afford it–if we have the means to do it? In other words, in America, choices have been made about funding wars v. funding health care. If Christians said it was better for the poor to have health care than to use our money to kill people half way across the world, why not do something about that?
Of course Paul is not giving instructions about alleviating poverty around the world. He is not even prescribing a hard and fast rule for the church that no one should have any more than any other. What he does say is that abundance must supply want. I think that’s what Jubilee gets at (in a roudabout way) and it’s why I think progressive taxation makes sense in a country as wealthy as ours. There are systemic issues that government can address and this kind of wealth redistribution, grounded in biblical precedent, is a reasonable way to provide some dependable and consistent services to the poor that they would otherwise never receive.
But perhaps I’m missing something.
I’m guessing we’ll always have poor people (Mark 14:7) with us because Jesus said so. I’m guessing he puts them there for us to help them. Yes, to influence them, and also to influence us so we don’t become greedy self-absorbed people… so our hearts will become more like His.
Some government assistance to the poor is well used. But has the church abdicated our role of helping the poor to the government? I think Jesus asked us to be involved as individuals. The government acts without love when it helps the poor (the government will take back money given to a poor person if it’s too much, I have examples!) The church typically gives out of love, and doesn’t demand the money back by garnishing future pay checks!
The government can also use this as a tactic to sway votes and make this topic very political to ensure that the power brokers stay in power as long as possible. There are dozens of topics that fit that same category, but sadly this one plays into it as well I think.
@ RobS
btw, the second half of that verse is “…so you can serve them any time you wish.”
kevin s. #68,
“The only possibility I can think of is that boards of directors are given far too much latitude to shape the C-structure. Board members are typically retired CEOs and business owners, are appointed by existing management structures, and serve on more than one board. As such, they don’t have enough skin in the game.
If the government were to intervene in an effort to cap compensation, this would be the place to do it. There have been efforts in the past to give stockholders a louder voice in the process. I’m not sure the best way to do that, or if doing so will solve the problem.”
I’m not sure of the best way either, but your comments about stockholders are spot on. That may not be the only factor but there is no doubt that something is preventing market forces from keeping salaries down. The game appears to be rigged by some of the participants.
#75 “… but it is premised on the idea that those with much will supply the need of those with little. He is describing how followers of Jesus will share generously with each other.”
I don’t discount for a second that this true. But I want to keep pressing the issue of radically different contexts. The understanding of economics at that time was a zero-sum game. If the poor are going to be helped, then someone with more is going to have to do with less in order to meet the need.
What we now know is that specialization of labor, trade, and technology (all circumscribed by a just juridical framework) results in unimaginable (to Paul) increases in productivity, wealth, and physical well-being. So, as I wrote above, if I could travel back to Paul and say “What if I could show you a way that people could radically improve everyone’s material well-being? … what would Paul say?
Over the past two centuries, the development of the three factors I mentioned has done exponentially more to improve the material status of humanity than all the acts of generosity in the preceding 1,800 years. To be clear, I’m not suggesting an end to generosity. It is still to be in evidence for Christians. But to dwell on it as the central player in improving the material aspects of people’s lives seems erroneous to me.
I’m not opposing progressive taxes necessarily. I’m not sure there is a biblical mandate for them. Sometimes prudence points the way rather than mandates. I’m also not opposed to certain services (a safety net if you will) being in place through government means. I simply come back again to the issue of subsidiarity and thinking carefully about the balance between large centralized entities and local expressions of community. With most economic issues it less an issue of following biblical mandates and more of doing what is ethically prudent. I think most cases made from the Bible for current government policy (right or left) are usually overreaching.
Michael: Very interesting post that gives me much to think about.
I wouldn’t argue that progressive taxation is biblically mandated so much as it is consistent with the kingdom ethic of sacrificial sharing. Therefore, I have no qualms about supporting expiration of the Bush tax cuts on folks making more than $250k. Progressive taxation is one means of financing social programs that meet the needs of those who otherwise would fall through the cracks because local communities are ill-equipped to meet them. What those programs might be is up for debate but the principle seems biblical enough.
The problem with the specialization of labor, trade and technology is that the just juridical framework you posit to circumscribe these things is, at best, a haphazard mess. When business can set the rules of the game via lobbyists in state legislatures, you get a worker’s compensation system like the one in Texas. Do not get injured in Texas. And that’s true for many states around the country. And, of course, we’ve sent lots of jobs overseas, many of which amount to little more than indentured servitude (Milton Friedman notwithstanding).
I’m not sure what a distinctively Christian economy might look like, but we have to be aware that much of the material wealth we enjoy is made possible by soul-deadening kinds of specialized labor in which the worker is underpaid, does one specific task over-and-over again for hours on end and never sees the fruit of his labor. It’s not a simple calculus.
Finally, ethically prudent feels wrong somehow. Isn’t it a matter of simple justice? The follower of Jesus is to be his hands and feet in the local community; in this country, we can also advocate to have our taxes support laws that provide for the welfare of those who can’t afford the things we enjoy. Abundance should supply need. I see this especially with the health care debate.
Too tired to say more and apologize for the disjointedness. Thanks again for an interesting take on things, Michael.
I was in a conversation about this very fact last Thursday and what blows my mind about this whole blog is that we are on a Christian website and the whole center of this seems to be able money and the accumulation of money, I’m sure everybody in this blog has more than what they really need, America is by far the most material nation in the world, now this isn’t per family but I read a startling fact that the average gross income for the world is an amazing $5,510 per person, so this isn’t per family, but let’s just say both parents work, that would be $11,020. Now it might cost more to live in American than other nations but let’s look at some numbers. If you live in America and you work full time at the current minimum wage of $7.25 then you earn $15,080 alone, now if I lived a humble means my first apartment here in Florida I paid about $680 a month or $8,160 a year, I spent about $150 a month in food for myself and I ate pretty well, for another $1,800 a year. Now I didn’t have a car payment but paid about $100 for liability insurance for another $1,200, my electric was about another $1,200 a year, $400 for the water bill which was a little over $30 a month, and so far I’m about $12,700 so I have about $2,500 to spare which I would probably lose to taxes, but you get the picture. I lived in a fairly nice and decent size apartment, it was definitely more than I NEEDED and I probably could have saved a little. The point is, we live in the richest country in the world and have it better than most but we are so consumed by the “mighty dollar”, “Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich person to enter the kingdom of God.” Matthew 19:24. Our thoughts should be focused more on the eternal.
http://www.NextGenerationDisciples.com
“soul-deadening kinds of specialized labor in which the worker is underpaid, does one specific task over-and-over again for hours on end and never sees the fruit of his labor. ”
Can you cite an example of what you are talking about here?
http://www.businessweek.com/2000/00_45/b3706008.htm
Good link, albion.
Kevin s., did you seriously just question the existence of sweatshops? My word.
Here’s another, on worker suicides in China:
http://www.nytimes.com/2010/06/07/business/global/07suicide.html?_r=2
Also: http://www.state.gov/g/drl/rls/hrrpt/2005/61628.htm
With regard to CEO salaries, we should be careful about making accusations of sin. If the board of directors freely offer a CEO a mega salary (without blackmail, lying or coercion) it has not sinned, if the CEO represents value to their company. They are in the best position to decide what the company needs.
If the CEO accepts the freely-made offer, he has not sinned.
If the CEO is a Christian, he is accountable to God for what he does with it. Having control of such a large amount of money gives him enormous responsibility. Much is expected from those to whom much is given. The elders he submits to have a right to challenge him about what he does with his income. They should also pray for him that he has the wisdom to do the right thing.
The church does not have the right to declare particular salary levels immoral. When the church tried to set a just price for bread, it got it into all sorts of problem, often causing shortages of food. Efforts by the church to set a just wage are equally misguided.
The problem of mega salaries arises from the proliferation of huge businesses in America. Very few people have the capability, the experience and the energy needed to manage one of these businesses and many who take on the task fail. This means that when a mega business is search for a new CEO it is fishing in a very small pool. Since the demand outstrips demand, the price tends to go up. This is why CEO salaries are so high.
The root of the problem lies not with the salaries, but with the American business model. Limited liability laws and other federal laws that protect big corporates have encouraged the emergence of this mega business model, but this model is wrong. Controlling a large amount of resources with a hierarchy of power is the way of the world. The Christian model is many smaller businesses linked through networks of relationships.
If the laws that protect big business power were removed, the size of American business would shrink. Forming large conglomerates would be unnecessary and too risky. This would lead to a greater number of smaller businesses doing the same things more effectively. These smaller businesses would be much easier to manage, so the demand for superman-CEOS would disappear. Mega salaries would disappear with them.
RonMcK
Scot #15
You say that “the Torah clearly imposed charity and didn’t leave it up entirely to volunteerism.” You have made a similar comment in other posts, but I am not sure that this is correct.
The Torah does specify charity through loans gleaning, etc. However, the Torah does not create any authority with power to enforce these laws. Nor does it specify penalties for people who ignore them. That effectively makes them voluntary.
The Jubilee laws are particularly interesting. In Torah times, the main form was capital was land. When Israel entered the land, it was divided evenly between families. This means that capital was fairly evenly distributed. This is an important principle. God prefers capital to be evenly distributed, so everyone has a similar chance to succeed or fail.
The Jubilee laws allowed people to work hard and expand their capital. They rewarded productivity. The Jubilee laws also allowed people to make mistakes and recognised that some would fail. People were accountable for their decisions.
The huge benefit of the Jubilee system was that after every second generation, the distribution of capital was restored back to a rough equality again. This meant that the new generation got a fresh start, without being encumbered by their parents or grandparents mistakes. Jubilee provides for a second chance for the new generation.
The jubilee laws clearly led to a change in the distribution of capital. However, the Torah does not create any authority with power to enforce these laws. Nor does it specify penalties for people who ignore the Jubilee requirements. OT history suggests that they were mostly ignored. Certainly, by Jesus time, land was accumulated in the hands of a few.
The Jubilee was a voluntary requirement. They are not a justification for compulsory state redistribution.
The challenge for Christians is to find a way to make a voluntary jubilee principle work in our modern world where capital is most plant and equipment, rather than land. I have shown in Secular Capitalism that free market capitalism solves the production problem, but it leads to concentration of wealth, because it rewards the successful, and punishes those who fail. It needs to be complemented by a process that pushes capital out and down to those who do not have any. State redistribution does not work, because it kills incentives, creates corruption, rewards failure and consumes capital.
Generous Christianity. is a better solution. The consequence of the gospel should be enhanced giving and sharing. Christians should be finding ways to voluntarily redistribute some of their capital, so that capital is more evenly distributed, and people whose parents lost their capital get an opportunity to be more productive. Unfortunately we have not been very imaginative in this area.
@Richard (77)
Good point! The whole verse being Jesus speaking in Mark 14:7 saying, “The poor you will always have with you,and you can help them any time you want. But you will not always have me.”
Yes, a truth (poor you will always have with you) and then a call to action on how we should respond and act in that regard.
I see Jesus’ instructions being toward the individuals he was instructing, and including us. I still don’t see evidence he is instructing a government entity to provide the assistance.
I’m not against all government involvement, but much of it lacks love, creates waste, and drives political agendas more than what we would hope it would do — and that is to aid the poor.
@88
“However, the Torah does not create any authority with power to enforce these laws.”
God was the authority that enforced many of the laws that Israel ignored.
“Nor does it specify penalties for people who ignore the Jubilee requirements. OT history suggests that they were mostly ignored. Certainly, by Jesus time, land was accumulated in the hands of a few.”
And this is highlighted by many of the prophets and Jesus. It’s central to understanding the judgment that came on Israel and why it came.
@89
Yeah, I didn’t get the sense you were using it that way but many do and I wanted to clarify it.
I think our disregard for the poor has less to do with “the government will take care of them” and more to do with an unwillingness to take the steps necessary to really make a difference a la CCDA: Relocation, Reconciliation, and Redistribution.
The scale of these issues (poverty, healthcare, etc) necessitate government action. And our hope isn’t in the government but we are called to speak, advocate, and vote prophetically to the world and call it to account with its Creator. I don’t think Jesus ever envisioned a democracy and it makes perfect sense to me to take the principles he modeled and apply them to our voting in the public sphere as well as how we live in the personal sphere.