The Poorest Fifth of Americans Out-give the Richest Fifth – Guess which Candidate Bucks the Trend?

Andrew Sullivan had an interesting take at The Dish this week. He notes that a key component of any plan to reduce the amount of money the U.S. government spends on entitlement programs will have to involve churches, ministries, and not-for-profit groups. These groups will have to shoulder more of the burden for caring for those on the margins of our society if the government turns off the spigot.

The big question is will churches, ministries, and not-for-profit groups be able to fill the gap? It’s an open question in my mind. I’ll say this: I think we should be able to. However, over the past 20 years of ministry I’ve been involved with, I’ve met very few ministry or justice oriented organizations (religious or secular) that are flush with cash. Most of the ones I know are always struggling to make ends meet.

One thing is for sure. In the coming presidential election those on the left will do everything they can do to try to convince us all that those on the political right are moustache twisting daddy-war-bucks who only get excited when they are screwing the poor. It’s a caricature, to be sure, but is there any truth to it? Sullivan notes that red states consistently out pace blue states in charitable giving.

Part of the narrative the Republicans rely on is a “trickle down” effect. If we protect the rich, they’ll take care of the rest of us by being generous with their money, building businesses, providing jobs, and supporting charities, etc. That narrative seems to have one major problem according to Sullivan: the poorest fifth of Americans give twice as much to charity as the richest fifth.

The Bureau of Labor Statistics’ latest survey of consumer expenditure found that the poorest fifth of U.S. households contributed an average of 4.3 percent of their incomes to charitable organizations in 2007. The richest fifth gave at less than half that rate, 2.1 percent.

Paul Ryan and Mitt Romney fall into that riches fifth category who give at less than half. How do they stack up?

The Ryans donated $12,991 to charity in 2011, and $2,600 to charity in 2010 — which are 4 percent and 1.2 percent of his income, respectively.

The reality is that most voters won’t care, but it’s troubling to me for one simple reason: A key component of the narrative that Republicans are advancing is that the best way to care for the poor is not for the government to do it, but for churches, ministries, and non-profit groups to do it. If Paul Ryan is an example of how it will work… it won’t work. Sullivan continues:

How much did the Obamas give in 2010? 14.2 percent – compared with Ryan’s 1.2 percent – and Santorum’s 1.7 percent. Romney was far more generous, largely through tithing – but he was still beaten in percentage terms by Obama in 2010. But it’s Ryan who is the most prominent advocate of replacing state care with private charity. It’s just that others will have to supply the charity. Judging by his past, he sure won’t.

I think Sullivan might be a little bit harsh. I gave up long ago expecting politicians to live up to their beliefs. But I do think trickle down is a myth, and Paul Ryan helps to prove the point. Any society is obliged first and foremost to care for those on the margins. The government will have to play a role in that. The question is what role? How can we care for the poor without causing our country to go broke. I don’t think Ryan is a bad guy. But I think Sullivan is right to point out that his actions seem inconsistent with his rhetoric.

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  • What?? A politician whose record and rhetoric part ways? What is this world coming to.

  • You also have to remember that freeing up this money is also supposed to stimulate spending so our consumer-based economy can get moving again. I know I’d be more likely to spend the money on myself (especially if I have the “helping the economy” excuse), but maybe I’m just more selfish than the next person.

  • Ruffin Bailey

    If you are going to look at giving habits, I think a track record is better than one year. Let’s look at what the Obamas gave before he was running for President:
    2005: $77,315 to charity out of income of $1.66 million (4.6 percent)
    2004: $2,500 out of $207,647 (1.2 percent)
    2003: $3,400 out of $238,327 (1.4 percent)
    2002: $1,050 out of $259,394 (0.4 percent)

    Looks a lot different when you aren’t in the spotlight, doesn’t it? I love the overall point of this article however I think it unfairly looks at the giving habits of the politicians mentioned.

    • Joe

      I thought the article was quite fair. It points out how the republican’s idea that the government has no social roles is just plain not workable. People acting on their own either will not step up, or can not step up enough.

  • Ben Deane

    I am curious as to how the other three-fifths of America hold up. It’s crazy to think that the more money we have, the stingier we are. I would love to see some stats that show actual dollar amounts. Some would argue that the percent that the richest fifth give makes a much bigger impact from a shear dollars stand point (no excuse, however) but I bet the actual dollar amount given in 2011 by the richest fifth is not so much higher than most would assume than what the actual dollar amount of the poorest fifth give. Just curious.

    Also curious how anonymous donations are accounted for in some stats. I wonder if more people from the poorest fifth give in such a way that it isn’t as trackable. They don’t want the attention and/or don’t care about the tax write-off like I would assume the richest fifth care a bit more about so they don’t report it or give it in such a way that anyone can tell who gave it, let alone how wealthy they are.

    I making a bunch of assumptions without any fact or evidence to back it up, but just curious.

  • Tim Suttle

    Hey Ryan, It’s my understanding – check me if I’m wrong, that the short term impact to cutting the deficit will not be lower taxes or “freeing up money,” at least not for the shrinking middle class. The short term impact of cutting the budget deficit is that it is supposed to bring down interest rates & that frees up lending, which frees up the flow of money. But, our interest rates are already low & cannot go any lower. Consumer spending is not growing very fast at least in part because banks stopped lending money & issuing credit cards to anyone with a pulse ( I think this is probably a good thing.

    What Sullivan is asking, and I think it’s a fair question, is: What does it say about our society that the bottom 20% by income, out give the top 20%? At least part of what it says is that trickle down economics is a myth. Another thing is says is that even the leaders who espouse this myth (Ryan in particular) don’t live by it.

  • While I think it’s indicative of the priorities of the two different groups mentioned here, it’s not as bad as it sounds. Charities and non-profits don’t operate on “percent of income,” they operate on actual dollars donated. The richest American’s lesser portion is still worth more to the organizations in real dollars because they are more dollars.

    Mitt Romney, according to this article, is bucking the trend as well. Any good Mormon walks the walk more often than most politicians. At least give credit where credit is due.

    More disconcerting is the assumption that giving is the only way people can care for the poor. While I don’t subscribe to the “trickle-down” theory as stated above, those who have capital accumulation, not the poor, create productive jobs for the economy. Creating a job is a great (dare I say the best?) way of helping the poor! It is foolish to believe that the only measure of caring for the poor is to give them something sans exchange. Investing in resources that create jobs, while not officially “charity,” can be a tremendous vehicle for caring for “the least of these.”

    • Loki

      So much wrong with this Doug. First off Mitt Romney’s charity mostly goes to the Mormon church, and while calling any donation to a church “charity” is a dubious claim, it is particularly wrong headed in calling donations to the Mormon church anything resembling charity. That particular church is rather notorious for having a lengthy set of byzantine rules for actual aiding people, including all aid comes with evangelism.

      Of course Jesus himself disagrees with you on the question of percent of income.

      Oh, and those who have “capital accumulation” do not create jobs. That’s a lie, and I don’t know who told it to you, but they were lying to your face. In a capitalist system, consumer demand creates jobs. And consumer demand is driven by the poor as they spend all the income they get. No amount of capital accumulation can create consumer demand where there is none, or else Disney’s John Carter would have been a massive hit.

      • Joe

        You said it well Loki. Rich people don’t create jobs. Increased demand, usually the result of more spendable income, usually the result of higher wages, creates jobs.

  • Tim Suttle

    Good point, Doug.

  • Tim Suttle

    BTW – what is the libertarian take on trickle down?

  • Scott Stone

    I’m not sure you have a complete understanding of “trickle down”. I actually am a strong believer in the idea. I’ll use myself as an example. As an employer I pay an incredible amount of confiscatory taxes. I don’t think most people have a clue how much small businesses pay. We now have the highest corporate tax rates in the world. If my tax liability wasn’t so great I’d be able to hire one of those unemployed people. He or she would have an income stream which generates new business wherever that individual spend money. It does trickle down. Combine that with the false notion that trickle down means tax cuts for the rich (it’s actually about tax cuts for everyone) you can see how individuals allowed to retain more of their income can help all.

    One last thing on the charitable givingd of the candidates. Let’s complete the picture. From 2000-2004 the Obamas gave $10,722 on income of $1.2M. Just under 1%. ’05 and ’06 were just over 5%. Not until ’07 when their income went up dramatically and he became a national candidate, did charitable giving really increase. I’m a bit cynical but that seems to be convenient.

    Also, Joe and Jill Biden gave 1.4% in 2010.

    • Loki

      Oy vey. America’s effective corporate tax rate is one of the lowest in the world, with many businesses actually paying negative taxes. And why no, you are just flat out wrong about your “tax liability,” so wrong you are most likely lying, because that is not how taxes work. Hiring a new employee has precisely zero effect on your taxes, as you are only taxed on the additional profit generated by that employee. If anything, hiring an additional employee would give you a tax break. And if there were actually consumer demand to support the hiring of that employee, you would have already done it.

      Oh, “tax cuts for everyone” are actually tax cuts for the rich as the rich are disproportionately helped by tax cuts, while the poor are disproportionately hurt by those tax cuts. In fact, across the board tax cuts always shift the tax burden towards those with less money as those with less money have smaller portions of their budget that go to discretionary spending, and inevitably aid programs which help those same people get their budgets cut in the mad dash to figure some way to pay for those tax cuts.

  • Tim Suttle

    Yeah, that’s pretty funny about Biden & not that surprising.

    Okay, Scott. You know way more about business than I do. So help me out. If what you are saying is true, then why has income disparity grown so drastically over the past three decades? NYTimes says, “In its report, the budget office found that from 1979 to 2007, average inflation-adjusted after-tax income grew by 275 percent for the 1 percent of the population with the highest income. For others in the top 20 percent of the population, average real after-tax household income grew by 65 percent.” All of this while Citigroup and other top corporations pay no income taxes. Where is the trickle down effect? (see links below)

    My understanding is that trickle down economics is really about the wealthy (not merely corporations, although now in our society, corporations are people). How does U.S. tax policy treat the wealthy? Right now tax policy overwhelmingly favors the wealthy. This is why wealth has continued to concentrate in the hands of a few while the disparity between rich and poor continues to grow at an alarming rate. Trickle down isn’t happening. In fact, since capital gains taxes are so low, the rich have even more incentive to keep their money in Wall Street and off main street.

    That’s what I’m seeing… but, what am I missing?

  • scott stone

    Lots to chew on. First let me state my position about tax policy. Nobody in the US pays enough taxes to properly fund a vibrant fair economy. If you take a standard 1040 IRS form and use a family of 4 that makes $60,000 in income, take just the standard deductions, no additional credits for mortgage interest, medical, etc., their effective tax rate is 6.92%. Most people don’t realize this.
    Secondly, I disagree with your statement that tax policy favors the wealthy. I know it favors some of the rich, but I can’t agree with a blanket statement. The top 10% income earners pay 71% of all federal income taxes collected. I know people want to point to all of the “tax loopholes” out their and the term is usually used as a pejorative. Here is another interesting little know fact. The largest tax loophole (which are actually laws in the tax code) is mortgage interest deduction, which affects the middle class more than any other group. The federal government “loses” more tax revenue from this deduction than any other. Tax policy shouldn’t be about winners and losers anyway. It shouldn’t be used for social engineering. We hear about corporations and individuals that skirt tax responsibility but for the most part those are just anomalies. Drive down main street in any city and just reflect on all of the small businesses. The vast amount of corporations are small local companies. We tend to point to the large anomalies and then use them as a benchmark for determining policy for all.
    Thirdly, I have to correct you on capital gains. The fact is that things are the exact reverse of what you state. When capital gains tax rate is high, money and assets do not move. Rich people will hold on to an asset far longer when the rate is high. The lower the rate the more fluid the system is. I’m much more apt to sell an asset and invest in another when I know I’m not going to take a 35+% hit. The dollars collect by the fed specifically from cap gains increased when rates went down. A great example of the Laffer curve.
    From a personal perspective, I’ve spent 15 years sacrificing to build a company from scratch. My wife and I’ve have poured blood, sweat and tears into this thing. We’ve been able to give 10 others a great place to work. I consider it part of my social giving. Someday when I go to sell and ride off into the sunset, why should the federal government get 30, 40, or 50% of it? I’d like somebody to answer that question.

    • Joe

      Show me hard evidence that higher capital gains rates stifle job growth or investment. It will be hard to find.
      All taxes are a form of social engineering. What is the problem with that?

      • Joel Barret

        Joe, you’re revealing a basic difference in assumptions about conservative and liberal views of the purpose of taxation: conservatives see taxation as necessary to fund the legitimate functions of government; liberals not only have a much broader view of the legitimate functions of government, they also see taxation itself as a direct means to correct a perceived injustice of income disparity. In other words, those who have an a priori belief that inequities of wealth are inherently unjust tend to see taxation as a valid form of punishment for being disproportionately successful.

        Apart from the theological problems with a faith statement so rooted in the sin of covetousness, we’re also left with the practical reality that using taxation (and subsidies, for that matter) to regulate economic choices distorts those choices by masking the real cost of goods and services for both producers and consumers. This inefficiency actually creates more scarcity and less wealth overall for the community as a whole. A similar phenomenon of distortion is in effect in “fair trade” to circumvent market forces by propping up the price of coffee so that impoverished farmers keep growing coffee beans instead of, say, more organic vegetables.

  • scott stone

    One other quick thought. I do actually have an issue with income disparity. It is not my major concern but I do view it as a societal negative. I just don’t like how the left wants to correct the problem. Their cure is to raise taxes on the wealthy which will in essence shrink the disparity. It will do nothing for the poor other than to make them feel better that the rich guy is paying more in taxes. They’ll still be poor but the fed will have more money.
    I have this cynical theory that the left really does’t love the poor, they just hate the rich. They really seemed to be obsessed with other peoples money. The one policy you hear President Obama speak about more than any other is returning to the Clinton era rates for those making more than $250K. I’ve expressed previously that I don’t have a problem with this but I also point out that this won’t amount to anything. $80B a year in relation to a $1.4T deficit. Why would he spend so much time taking about “takes breaks for millionaire and billionaires”? He’s playing to peoples weaknesses. Those who can’t critically think about the issue.
    I’m not a Romney fan either but I find the Presidents rhetoric repulsive. This from Mr. hope and change. The guy that was suppose to be so much better than anything we’ve ever seen. He’s just another dem pol.
    Kind of frustrating. I’m not sure I want Romney as Pres but at the same time I really don’t think President Obama deserves another term.

    • Joe

      This position ignores history. What were our tax rates pre-Reagan? And I would submit to you those 2-3 decades before Reagan were some of the most stable and prosperous in our nations recent history.

  • Tim Suttle

    Hey Scott, thanks for posting. I’m still reflecting, but have a couple of comments.

    I don’t think it’s fair to say liberals hate rich people, nor that they don’t really love the poor, nor do I see them as obsessed with other people’s money. I would never say that conservatives hate poor people. I’m not a liberal, but I think it’s unfair to paint them as hateful toward the rich, or obsessed w/other’s money. I always say that Barak Obama is not bad as far as politicians go, but as a Christian, I think my primary concern should be stewarding the world’s resources so that everyone has enough to live, and all can live in peace.

    The hate is not hard to find: liberals don’t hate the rich, conservatives don’t hate the poor. However, Liberals and conservatives so seem to really hate each other. That’s what breaks my heart for our society. The hatred the two political ideological poles hold for one another is causing them to refuse to work together and try to compromise and more things forward. What is crushing our society is the hatred D’s have for R’s and vice versa. This is why I’m a post-liberal. Christianity doesn’t belong on a plane between conservativism and liberalism. It belongs on a completely different plane or dimension which doesn’t believe that peace comes through hatred, but when we hold the kingdom of God as our motivating vision.

    On capital gains – Low cap gains taxes provide incentive to invest new monies in the market because you’ll pay fewer taxes on that money than if you put it in a profit making small business which, as you point out, pays a higher tax rate than it should. My critique is not about what you will do w/money already invested. It’s what you’ll do w/new monies.

    To your point, “From a personal perspective, I’ve spent 15 years sacrificing to build a company from scratch. My wife and I’ve have poured blood, sweat and tears into this thing. We’ve been able to give 10 others a great place to work. I consider it part of my social giving.” I couldn’t agree more. I wrote a whole chapter on vocation in Public Jesus arguing that we should learn to count that as mission.

  • Scott Stone

    My apologies regarding the hate/love comment. It was really meant to be tongue-in-cheek. I couldn’t agree more with you regarding your comment about stewarding. That is really at the heart of my argument. I believe we have failed the least amongst us. I fear we will fail them in the future. I firmly believe the federal government, both sides, have not been good stewards of what we have provided them. If I am correct, and I clearly could be wrong, then why on earth would we want to give them more so they can repeat processes that have failed.
    Here’s the interesting thing. I think we both have a great concern regarding poverty and social justice but from different perspectives, not unlike many others. So how is a bridge created so we all can be effective?

    • Tim Suttle

      yeah man, I know that’s your heart. It’s why I’m so glad you’ve been engaging with me here on the blog. I really crave someone who comes at politics from a more conservative side who shares a heart for justice and the poor as well. It is really helpful to me to have you putting forth ideas that come from a different place in the conversation. -ts

  • Scott Stone

    By the way, loved the book.

  • Joe

    A couple things. Could we please stop, not just you but all writers, calling Medicare or SSI entitlement programs? Workers pay into these programs their entire working life, so getting something back on what they paid in is more like a conservatively managed group investment plan, and one without the big brokerage fees and cuts.

    As to non-profits having to “shoulder more of the burden for caring for those on the margins of our society if the government turns off the spigot”, yes, this is the Ayn Rand / Libertarian dream. There is no society. We are not our brothers keeper. Let’s just call it what it is, social Darwinism. And please, I can see the replies now, “we can’t afford these programs, let alone single payer health care”. Nonsense. For at least two reasons. Where were those voices when we started two wars, on the nations credit card? Where were those voices when we passed huge tax breaks for the rich in the early 80’s, and again under GWB? Why are those voices silent as we escalate the chasm at an alarming rate between the well-off and the worker bees?

    But perhaps even more important but much less talked about, is the fact that the government – we the people – the government is us as a nation, a community, a giant family – is the only entity that can step in and cover the needs of the poor, the sick, the long-term unemployed among us. Charities do an ok job of feeding the very hungry / homeless, but that is about all they can do. Nearly one in five Americans, at least in my area, are on food stamps. There is absolutely no way on earth the churches and non-profits could bridge this gap. And it won’t get any easier as church attendance continues it’s slide downward, hovering around 19% currently.

    Here is a great article shining light on this very problem. The writer is Gina Knudson, of High Country News, and she writes about a new kind of “Spaghetti Western”, in which a town in Idaho – although you have seen these elsewhere, but especially in red states – holds a spaghetti dinner to raise funds for those without health care, never mind that the funds raised would not even cover an emergency room visit, let alone a serious illness.

    So when you hear those in red states give more than those in blue states, look deeper into the statistics. Giving more obviously is not enough. Perhaps much of the giving in these red states is compelled by desperation, such as the article by Knudson suggests.
    With almost no exceptions, the blue states are where people with an education want to live, and where the jobs are, as well as most of the Fortune 100 companies.

    I’m surrounded by those who vote red in a blue state. Many of them struggle to provide for their families. However when it comes time to give birth to the new baby, they eagerly sign up for the “socialist” Medicaid option. They take classes at the community college, highly subsidized by tax dollars, then tell you they pay too much in taxes. Except they don’t pay any income tax.

    • Tim Suttle

      “Could we please stop, not just you but all writers, calling Medicare or SSI entitlement programs? Workers pay into these programs their entire working life, so getting something back on what they paid in is more like a conservatively managed group investment plan, and one without the big brokerage fees and cuts”

      Joe, it’s actually a point I never even considered. It’s a fair point.

      What I can’t figure out is why defense spending is never part of the conversation? Raise taxes on the top 2%, cut tax loopholes for corporations, Lower defense spending by 10%, and find ways to cut spending as well. We can do this sensibly and slowly over a decade.

    • Joel Barret

      Joe, despite the negative connotation, Medicare and SSI are in fact, by definition, entitlements because they are pay as you go systems, not a group investment plan. The current recipients receive money paid in not by themselves but by the current workers. It is this very fact that makes these entitlements so unsustainable as population growth subsides and the cost and length of a person’s retirement rises. Recognizing this, the Supreme Court ruled that people who pay into Social Security, have no inherent claim to a return on the money they paid into the system.

      If we truly care about the poor, we need a more sustainable model for charity.

      Also, the “libertarian ideal” of individualism is more of a caricature than anything. Libertarians may claim to embrace individualism for lack of a better mode of expression, but they also tend to embrace the reality of human interconnectedness with optimism that there is sufficient voluntary goodness throughout the various domains of human culture without the state running roughshod over individual conscience in the name of compassion.

      I find this view attractive because generosity and gratitude are part of the glue that hold society together through the voluntariness that is essential to grace and goodwill. Paying obligatory taxes is not an act of generosity for the giver, any more than receiving a benefit to which you are entitled typically engenders gratidute, and if one does feel gratitude for an entitlement they deserve, whom do they thank? Hopefully, God, but realisticaly, the politicians who are pandering for their votes. As benevolence has become understod as more the domain of the impersonal state than a collaborative effort between a personal God and a compassionate community. No question, entitlements provide a much-needed safety net, but in their current form they do so at the cost of stripping society of a critial mass of the generosity and gratitude that hold it together.

  • scott stone

    Hi Joe,

    Couple of things. Federal income taxes, which is predominately the topic of conversation because it is the largest revenue stream to the federal government, were not designed to be used for social engineering. It is a very slippery slope when the express interest for taxes and fees to be social engineering. Why not mandate that everyone should buy a Prius because a) the gov’t is heavily invested in GM and b) it is better for the environment.
    Regarding the economic climate prior to Reagan, I’m not sure how old you are but I remember gas lines and rationing throughout the 70’s. Gerald Ford with his slogan WIN (whip inflation now), high unemployment, 20% interest rates on mortgages, etc.
    Most people who view lower tax rates as a negative, especially cap gains rates, tend to view the economy from a static position. When we do any type of dynamic analysis, including appropriate multiplier effects, we see that the net effect is increase in jobs and thereby revenues. The actual revenue loss “ex post,” after including the other consequences of the rate change, such as the increased hiring and business formation that occurs when tax systems are friendlier to capital, would be only $8.2 billion. Employers, finding capital cheaper, would have more cash to hire. Cutting the rate to even 5 percent would add roughly 711,000 new jobs per year.
    This is according to a study from about 2 years ago.

  • Bob Seidensticker

    Are Republicans eager to help the poor? That’s great to hear. But instead of just trusting that church members will be generous, why don’t we do it as a society? Doesn’t that make sense–that society has those in need of help, and society wants to help them?

    If so, let’s take some of our tax revenue and do what we should be doing–not expecting someone else (churches, in this case) to do what needs to be done.