The 47%

Margaret Thatcher is credited with saying, “The problem with socialism is that you eventually run out of other people’s money.” I whole-heartedly agree with that sentiment.

Concerning capitalism, Talcott Parsons wrote in his forward to The Protestant Ethic and the Spirit of Capitalism (by Max Weber), “If capitalism begins as practical idealism…it ends…as an orgy of materialism.” I agree with that sentiment as well.

There is an old Polish proverb that states, “Under capitalism man exploits man. Under socialism the reverse is true.”

I would put it this way: The problem with socialism is that it creates apathy and diminishes ingenuity and creativity. The problem with capitalism is that it creates envy, selfishness, and greed.

The combination of both causes class warfare, and class warfare, regardless of which side is firing bullets, is counterproductive and only hurts those both sides claim to be helping.

The political left strives to divide the classes by convincing us the rich need to pay more taxes. After all, why wouldn’t a billionaire (or someone making over $200,000) want to pay more to help the less fortunate? Only 5% of the U.S. population are in the upper-class, which means only 5% of households make more than $200,000 per year for a family of four. However, the majority people in the upper-class make far more than $200,000. This group (the 5%) also pay the majority of all federal taxes, approximately 53% of all federal income taxes.

Five percent of the households pay 53% of the taxes. Is that fair? Well, it depends on how you look at it. Take Mitt Romney’s 2011 tax returns for example: According to released documents, the Romney’s paid $1.94 million in federal taxes on a reported income of $13.7 million. Two-million dollars in federal taxes is far more than I will ever pay (or even make) in my lifetime. It seems like an excessive amount. He shouldn’t be asked to pay more. That is, until you consider that $1.94 million is 14.1% of his income, about the same rate of the average family making $50,000 a year. Now, all of the sudden, it doesn’t seem quite fair. Why should the average middle-class family pay the same percentage in taxes on his income as a millionaire pays on his?

The answer experts give is found in the type of income a person receives during the course of a calendar year. But I am not convinced that answer makes it fair. Here is what I mean:

The reason the Romney’s tax percentage was only 14.1% is because all of his income during 2011 was on investments. In other words, he didn’t really “earn” any money in the “traditional” sense. He did not “work” anywhere for a salary. He simply invested his money and from that investment, in one year’s time, made $13.7 million. I am no math expert, but I do wander how much money a person has to have invested to earn almost $14 million in interest in one year! I would assume it is at least in the hundreds of millions. So, in reality, a guy with hundreds of millions (if not billions) of dollars paid the same amount of taxes, percentage wise, as a guy making only $50,000. I am not a socialist, but something just isn’t right about that. It doesn’t seem fair.

The reasoning behind the low tax bracket on investment income is because the original capital invested was taxed at the highest level already, possibly as high as 40% or more. So, the argument goes, taxes on investment profit is a double taxation. But is it really? I don’t think so. The original money (capital) is not taxed again, only the new profit. Just like a blue-collar worker makes “new money” his “new money” is also taxed. If a blue-collar worker paying taxes on food with money he has already paid taxes on is not double-taxation, then neither is taxes on money made from investments.

I do understand the argument that if you tax profits on investments to high it will discourage those who have money to invest from investing. I get that, and I can see how people could cut back on their investments. But come on, how can taxing a millionaire the same percentage as an average middle-income earner, regardless of how the money was made, be fair?

I don’t begrudge anyone making lots and lots of money. And the Romney’s, according to their tax return, are very generous people, donating a sizable amount of their income to charity. (They gave more to charity then they paid in taxes, and they should be commended for doing so.) But it is a little disingenuous to say people in a higher tax bracket are already paying their fair share in taxes when their percentage based on income is no different from mine.

On the other hand, it is the wealthy who create jobs for everyone else. After all, no one ever got a job from a poor person; and a rising tide lifts all ships.

It is also disingenuous to lob character assassination rockets on the 47% who, quote, “pay no taxes.”

First of all, it just isn’t true! That 47% reported to have paid no taxes represents the amount of federal taxes not paid during one calendar year. Many in that 47% would have paid state and local taxes where applicable, as well as sales-taxes, taxes on gasoline, and all the other taxes we are subject to. Furthermore, many within that 47% would have paid taxes all (or at least most) their adult lives, but because of the recession, lost their jobs and during one particular year had no income and so paid no taxes. Plus, if they had any sort of job throughout the year, even a part time job, they would have paid payroll taxes (FICA). It just simply isn’t true to say they paid no taxes. All the reports say is that during a 12 month period they paid no federal taxes. In actuality, the percentage of people paying “no” federal tax was 36%. The 47% represent those who at the end of the year neither got a refund or owed any more taxes than what was withheld from their pay-checks during the year.

Some of those, who paid no taxes, actually received governmental assistance, or received more back from the government than they paid in. This makes people really angry and brings up images of that lazy person, who could get a job but would rather get a handout. In reality, however, regardless of what the political right says, that stereotype represents a small minority of those receiving help. A large portion of people who receive without giving are retirees who, while they no longer put anything in the kettle, did so for many, many years. Another large portion of those receiving without contributing are the handicapped and legitimately disabled. Plus, the largest group of people receiving governmental assistance are children. Those who abuse the system are a small, but visible minority. We must be careful not to lump everyone who receives help into their camp, and we have to be careful that we don’t harm those who really need it because of the abuse of a few.

Furthermore, it should go without saying that people receiving the help do not contribute as much as those not receiving help. Why? BECAUSE THEY HAVE NO MONEY TO CONTRIBUTE! That’s why they are receiving help. What are we suppossed to do, take the taxes the wealthy paid and give it back to them in governmental assistance? As rhetoric increases, logic decreases.

Who are the 47%? Below is a breakdown. (Here is a link to a longer article.)

  • 60% of the 47% are “working poor.” This group has jobs and do contribute to the payroll tax.
  • The elderly; most of which did pay taxes while working, but now do not, although they do receive benefits.
  • Low-income families who survive on less than $27,000 a year total household income.
  • And get this, an estimated 24,000 people in the 1% category of the wealthiest citizens pay no federal taxes in any given year because of tad-deferred bonds and other nifty tricks.

Please understand the point I am trying to make. Our country is in serious financial trouble. We are imploding! Something drastic has to be done and it will involve cutting back on entitlements and defense and infrastructure, and every other part of government. But class warfare has to stop! We need to quit blaming the poor and assuming all people receiving help are abusing the system. We need to quit blaming the wealthy, assuming they are all stingy and greedy. Neither is true! Class warfare is nothing more than friendly fire.

The rest of us, caught in the middle, need to wake up and realize we are being played by the power elite in both political parties. It’s all about getting the votes to stay in power and the strategy for receiving those votes is to divide and conquer the populace. Right now the strategy is working to perfection.

If our country fails, it will not be the fault of the republicans or democrats or wealthy or poor. It will be all our faults because we have bought whatever lie the group we like best is telling us. We have allowed the two-party system to divide us. We, the populace, need to stand together and say, “Enough is enough!” If we don’t, we will have no one to blame but ourselves.

At least that’s what I think.

What about you, what do you think?

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About Pastor Kevin

I am a husband, father, pastor, teacher, scuba diver, reader, bike rider...in that order.
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8 Responses to The 47%

  1. Pingback: The 47% « revkev43

  2. Steve Lytle says:

    An excellent analysis, Kevin, with good documentation and an effort to be objective and fair to both sides. I wish the wealthy had a heart for the poor such as is taught in the Old Testament and by Jesus and the Apostle Paul. And I pray that the “welfare mentality” that characterizes so many could be overcome by a strong work ethic, stronger family structure, and better self-image. You have raise some issues most people don’t even consider during this election year, or at any time.

  3. Kevin,
    Your argument here is well organized and sound. The problem for me lies in the fact that our government tends to overtax success and yet subsidize laziness. I’m currently working three jobs to keep myself afloat planting a church in the Denver metro area. I’m not complaining but yet, I’m paying plenty in taxes. Not nearly as much as the Romneys are but I sure could use what I have to send quarterly plus the large amounts being taken out of my checks in my secular work.
    The nation in its present state would be better served with a Flat Tax. The proposal made years ago by Steve Forbes, Dick Armey, and others would fix the issue of how much versus how to get around paying it. There would be no more IRS so we the money saved would be substantial not to mention the amount paid would be more than enough to take care of our country. The problem many have with that is that it would cause many who aren’t paying a dime to have to cough up some cash.

    On the benevolent side, we in the Christian community have failed in our ethic to help those who truly need it. We have become overconsumed with larger buildings, better sound equipment, and more amenities to reach a populace that is less connected to Christ’s heart than I’ve seen in my lifetime. Instead of biblical ethos, we are feeding a social pathos that will never be satisfied.

    Our country needs a radical reboot which is going to hurt. I’m not sure any politician has the wherewithal to do it.

    • revkev43 says:

      Thanks Scott. I understand your dilema perfectly. I am also a bi-vocational pastor, trying to stay afloat. I think if everyone had to write a personal check to the IRS four times a year, they would really understand how much taxes they are actually paying and would revolt.

      Keep up the good work.

  4. tnfwb says:

    I agree with much of what you have said in this post. You raise some interesting thoughts on the double taxation issue. As to whether to include sales tax, etc. or to focus on federal income tax, I believe that for most people, unless they specify otherwise, in a campaign such as this, they understand themselves to mean income tax. That may not always apply, however. It is about the only tax however that depends on the outcome of federal elections, and that changes merely because one receives a raise, etc.

    However, I would diverge on the issue of whether paying the same percentage of income is fair for a working family and a gazillionaire. That’s the beauty of percentages, and that’s how the Lord arranged things for ancient Israel. Our political climate would improve if everyone paid the same rate, on all income regardless of source. I’m willing to entertain an extremely low amount to serve as a cutoff below which one would pay no tax. If one receives welfare, etc., then there should be a deduction for income tax on that as well. When everyone is treated the same in this respect, then everyone can have a better chance of understanding the consequences of government budgets, etc. In fact, it would allow someone like the CBO to publish the results of proposed legislation as a percentage rather than as a huge number of billions of dollars. What will communicate better with the average worker: “This will require $300 billion in additional tax revenue next year,” or “This will increase your income tax percentage by one percent.” People can easily calculate the one percent and decide if they are for the proposal or not, and let congress know. Keeping it simple will be the best hedge against corruption and class warfare.


    Allan

  5. Brad says:

    Romney paid 14% in taxes due to the loopholes and rules established by the IRS. He is no different than any other wealthy person, Republican or democrat. They did not become wealthy by being foolish with their money. I think it is unfair to criticize a person for simply taking full advantage of all resources at their disposal to maximize profits for themselves knowing full well that if we were in his shoes we would do the same thing. Who here would pay 20% to the IRS if they only had to pay 14%?

    The best thing this country could do would be to do away with the IRS and establish a federal sales tax system. Placing a low percentage sales tax on all goods, and services would ensure that everyone is paying taxes, and that those with more means would pay more because they would be buying bigger and more expensive items. But that will never happen, and since we are stuck with the IRS for the foreseeable future I plan to do all I can, within the legal limit, to lower my tax liability. Just like Romney, Warren Buffet, Obama, and every other US citizen does.

  6. Brad says:

    As a side note, when Christ was asked about paying taxes he simply responded to pay to Caesar (the government) what was required and to God what belonged to Him. No where in there does Christ say to pay the government more than what is legally required.

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