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The "Better Angels Statement"
Imagine Rick Warren, pastor of the evangelical Saddleback
Church and author of The Purpose-Driven Life, connected in the same sentence
with Richard Land, a leader of the Southern Baptist Convention, James Forbes of
the Riverside Church and Katharine Jefferts Schori, Presiding Bishop of the
Episcopal Church. It's a striking
combination, isn't it? Surely, whatever
text that follows would detail some issue of great contention among these
prominent Christian leaders of our day: political
leanings, styles of worship, interpretations of scriptures on social justice.
If you've seen some recent news, you may already know that
instead, just in the last few days, these people have joined with agreement in strong
statements on the same theme, the need for civility and respect in public
discussions of all kinds. Politics
especially at the moment, but also other weighty topics in our lives together
in this country.
We have to join in this, applaud these efforts and spread
this word.
Pastor Warren announced on August 23 that his
mega-institution would not host another Civil Forum for the presidential
candidates as they did in 2008. That
event then was very well received as providing an important platform for the
two candidates to discuss their views together in a thoughtful, substantive
way. However, Warren's announcement last
Thursday says this about the current campaign:
"[W]e feel the climate of the current presidential
campaign is the exact opposite of the values of the Civil Forums. We created the Civil Forums to promote
civility and personal respect between people with major differences. The forums
are meant to be a place where people of goodwill can seriously disagree on
significant issues without being disagreeable or resorting to personal attack
and name-calling. But that is not the climate of today's campaign . . . [which
is full of] irresponsible personal attacks [and] mean-spirited slander. . . .
We felt it would be hypocritical to pretend civility for one evening only to
have the name-calling return the next day. "
Saddleback Church will substitute a program on religious
freedom and First Amendment rights, featuring leaders of Catholic, Jewish and
Muslim communities in the U.S., which is certainly an important topic in its
own right.
Even as Warren identified and acted on the civility problem,
another group took a stand to try to counteract it. On the same day Warren made his announcement,
an organization called The Faith & Politics Institute released a major
statement of commitment to "model civil discourse with and respect for
those with whom we disagree". The
overall pledge is titled the "Better Angels Statement" and emerged
from the "Better Angels Summit", a meeting that took place June 27-28
in Washington. According to the Rev.
Land, the 18 signatories, representing a cross-section of Protestant and Catholic
leadership of both liberal and more conservative denominations and positions,
promise to "try to lead by example and by exhortation to get people to
elevate discourse by understanding that we can disagree with everything
somebody may say without attacking them as a person." The statement itself even says that signers
recognize that they need not undermine or compromise their own opinions in such
discussions. The statement aims
explicitly at a "ministry of reconciliation".
Here are the last two points of the Statement:
"III. We agree
to begin working toward a broad initiative that will influence church members,
media, and all of society toward greater civility.
"IV. We agree to pray for each other and for our
leaders of all different political views."
Last January, readers of Ways of the World may recall that
Barbara Crafton and I participated in such a "civil discourse" at a
forum at Trinity Church Wall Street. She and I disagree fundamentally on many economic issues of our time, but that day, we
addressed questions jointly, respectfully and cordially. If we listen and speak in measured tones, we
may be able to learn from each other. Such
conversations are prerequisite to the development of solutions. Everyone will
benefit.
Indeed, may we all "pray for each other and for our
leaders of all different political views" as this crucial election season
proceeds.
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Labels: American Society, Christianity, Episcopal Church, Government Policies
The Rich, Their Taxes and Economic Growth
Over the last couple of weeks, the House and Senate have each enacted a different version of legislation to extend the Bush tax cuts beyond their December 31 expiration. The most likely way forward in this highly charged political season is that nothing more will happen until after the November 6 election, and then a lame-duck Congress will pass something so taxes won't rise on everyone on January 1.
It's hard to talk about this without sounding political, but the issue is too important to be left, as they say, to the politicians. Here are two thoughts from this pragmatic -- and free-market-biased -- economist.
High Income Earners Do Pay Most of the Total Tax
First, it is said that it's only fair that the rich should
pay more. The question is, though,
"more" than what? Many in
upper income brackets have investment income that is taxed at lower rates than
wage income, so sometimes, as in the publicized example of Warren Buffet, CEO
of Berkshire Hathaway, and his secretary, he apparently pays a marginal rate of
about 18% on his income while the rate she faces on her regular salary is,
perhaps, 31%. It is seen as a scandal
that she must pay a higher marginal rate than he does. We don't know what his total income or his
total taxes run to, or hers either. But
what we do know from IRS and Congressional Budget Office data is that, in
actuality, the upper income brackets really do pay a disproportionately large
share of income taxes overall and they pay a markedly higher effective rate on
their income than people in the middle, contrary to what media headlines often
assert.
We've made this point before here, but in this season, it
seems important to say it again, and perhaps more concretely.
This table shows shares of income, average tax rates and
shares of total income tax at four rankings of income. The numbers come from a recent report by the
Congressional Budget Office, a non-partisan advisory body of the Congress. Their calculations encompass a broad
definition of income that includes workers' fringe benefits as well as wages
and investment income.[1] The top 1% of
taxpayers received 15.6% of this income overall during 2002-2009, a modestly larger
proportion than during the 1990s, which we refer to here as the "Clinton
Era". The Bush tax cuts indeed cut
the effective tax rate for the high-end, to 20.6% from the Clinton Era's 24.2%.
"Everyone Else" Loses Some Income Share, but Pays Basically No Income Tax
The tax rate cut is not the only fact evident in the
table. We do see the widening income
distribution that concerns many people these days. The movement here is not dramatic, but it
appears one-sided, with the top 1% and the top 20% getting larger portions of
total income in the Bush Era than in the Clinton Era, while the next tier down
has a basically unchanged share and the bottom 60% – a crowd we dub "Everyone
Else" – sees some erosion. Indeed,
data back to 1979 show that Everyone Else's share was as large as 33% then,
compared to the 27.5% in the recent 2000s.
That some people are unhappy about this trend is understandable.
However, the table also shows that tax rates were reduced
for everyone, not just the high-end, and the Everyone Else bracket has actually
received money back from the income tax system during these recent years.
It is also evident in the table that high-end taxpayers pay huge
shares of the income taxes: the top 1%
pay almost 38% of total income taxes and the top 20% of taxpayers pay 87% of
the total. These are both increases over
the Clinton Era, which were 33% and 79%, for the top 1% and 20%, respectively. This is what makes us ask the question, what
is a fair share for the high-end "rich" to pay?
There's lots more one could say on relative tax rates and
burdens, and we refer you to the Congressional Budget Office report itself[1]
and an interpretation of it published just yesterday in the Wall Street Journal[2].
Tax Progressivity Hampers Economic Growth
At the same time, the question of fairness has lots of
facets and there's one more we'd talk some on here now. In the short-run with the economy so fragile,
there's concern over raising anyone's taxes, but on the face of it, it seems
less onerous to hit the high-end who should be able to afford to pay more. That may be true on the surface, but it
doesn't take much to get to the incentive effects. How do taxpayers feel when the government
lays more burden on them or presumes on their capacity to fund public needs by
increasing the progressivity of the tax system?
They might well pull back or slacken off if gains they make are only
seen as a source for public funding.
We've thought this view was generally indicative of specific
political leanings opposed to income redistribution. But we lately encountered some research from a
quite objective source showing that more progressive tax structures are
associated with less economic progress.
Taxing higher income earners more can in fact lead to slower growth. The work is not new; it's from late 2008, by
Jens Arnold, an economist for the Organization for Economic Cooperation and
Development, the OECD, in Paris. The
OECD is multinational, with 34 member countries, hardly politically
conservative and seeks to promote policies that "will improve the economic
and social well-being of people around the world." Mr. Arnold's particular analysis "Do Tax
Structures Affect Aggregate Economic Growth?"[3] involves the relationship
of tax progressivity and per capita GDP growth in 21 countries across 35
years. With the group of countries and the
very long time frame, the study is not limited to one political party or
government and is not impacted by specific business cycle forces.
Arnold's statistical regression analysis finds that flatter
tax schedules are associated with more economic growth than progressive
ones. He attributes this to the
discouragement of risk-taking inherent in progressive tax structures. This has been one of our arguments, that if
business owners or financial investors take risks and are successful, the first
party to be rewarded is not the risk-taker, that is, the investor or entrepreneur,
but the government, and by a predetermined formulaic amount. Arnold's work shows further that the form of
taxation most detrimental to growth is the corporate income tax, where the
government takes directly from successful business operations.
Clearly, taxes serve important purposes in funding
government activity. But the capacity of
governments to conduct their activities can, ironically, be harmed by over-reliance
on the "rich" of the society.
Spreading and balancing the tax burden across the spectrum of taxpayers
is important in promoting and maintaining the vibrancy of the economy. That, in turn, gives citizens who are less
rich greater opportunities to better their own condition.
________________________________
[1]Congressional Budget Office, "The Distribution of
Household Income and Federal Taxes, 2008 and 2009". Washington, D.C.: July
2012. See "Supplemental Material"
on the CBO website for time series data and other information: http://www.cbo.gov/publication/43373
.
Why Everything You've Been told About the Economy Is
Wrong. New York:
Portfolio/Penguin. Page 84.
Labels: Economy, Government Policies
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