DINNER ECONOMICS & POVERTY in AMERICA

Forwarded E-mail


This is beautiful, this guy need to get a medal for this

Suppose that every day, ten men go out for dinner and the bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men eat in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.
“Since you are all such good customers, he said, I'm going to reduce the cost of your daily dinner by $20.”
Drinks for the ten now cost just $80. The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still eat for free. But, what about the other six men the paying customers? How could they divide the 20 windfall so that everyone would get his 'fair share?'
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to eat his dinner. So, the restaurant owner suggested be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before, and the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.
'I only got a dollar out of the $20,'declared the sixth man. He pointed to the tenth man, 'but he got $10!'
'Yeah, that's right,' exclaimed the fifth man. ‘I only saved a dollar, too. It's unfair that he got ten times more than I!'
'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!'*
'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!'
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had dinner without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill! (The 10th man was originally paying $59 of $100, then $49 of $80)
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.


Ok, so along with the first forward of the company policy in honor of Obama being elected, I received the above as well. The above one on our tax law is really the only constructive thing to which I should reply. I didn't bother pasting a third e-mail which was quite personal and I thought inappropriate. This e-mail on tax actually looks at the actual tax policy and doesn't make personal attacks like we saw in the campaign. So, let's take a look at it.

IF this is really from a Professor of Economics at University of Georgia, I first must applaud her because she gives us something we can study and analyze and look at. It's not just complaint but an alternative (well it's the status quo but an alternative to what Obama or a stereotypical Democrat would do). So thanks for that. Let's clear up a few things.

1.I think the wording of the e-mail can be confusing to people. Notice the colored words like eat and dinner. It might give the fallacy to some that the metaphor of dinner or eating corresponds to eating food and spending the money you receive in life. To clarify, that is not what it refers. Eating dinner in the above dinner economics refers to receiving the benefits of citizenship or any services, products, security, or structure the government provides. So having a U.S. Postal Service where you can pay money for someone to mail something is like eating dinner. Having volunteers run voting polls where you can vote is like eating dinner. Government programs, social security, and the military are like eating dinner. I hope that helps. Eating dinner is NOT getting money without having a job and working. This is very important to understand because the e-mail may make you think that the poorest people who “pay” nothing for the “meal” have no jobs. That's not necessarily true. The meal is not income; the meal is government provision—everything the government does.
2.The second point to realize is that it is just analogy. Analogies tend not to be perfect. So make sure you don't think that the poorest people are jobless. That is not necessarily true. You can be in the poorest category and below the poverty line and have a full-time wage-earning job. So please don't association personality characteristics, drive, or lack of motivation with the poorest people. Eating for free does NOT mean you are not working. It represents receiving benefits of being a citizen without paying taxes.
3.The third point to remember is that though the analogy is simple, in reality all 10 people do not eat the same meal at the same restaurant receiving the same care. Not all 10 men would have access to the same FOOD (if the analogy were perfect). Just one example would be public schools (a type of food). If you are the poorest and you live the poorest neighborhoods, there is a high probability you go to the worst or one of the worst schools in terms of performance, supplies, teaching, etc. You have less of an ability to learn, do well, and pull yourself out of the position and system you feel locked. The 10th guy has children who go to an amazing school that all teachers would like to teach at. There are more than enough supplies and the children have less distractions to performing well. Of course I'm polarizing it. You can do well in a poor school and poorly in a rich school. But go and look up the correlation between income-level of parents and children's school performance. I'm not making it up. So just remember the food is not the same. The service is also different.
4.The numbers used by the professor look good. A different perspective is to show the percentage the tax payment (dinner price) comprises of the income of the person. You could also look at the percentage the tax saving comprises of the income of the person. That shows a different spin.
5.I'm not sure about the last part where the 10th man didn't show up. I'm assuming that's doesn't actually correspond to anything happening in today's society, just an apocryphal prediction. I don't think rich people leave the US in any appreciable numbers due to being taxed too much. I could be wrong, but I'm not worried about that.

What's the point? The people paying the most for dinner get better food and service and access to the managers. But even if we assume the food is the same and the service is equal, there is still a point. The point is that it actually DOES make sense for the people who pay the most in taxes to receive the largest benefit from tax reduction. It makes completely sense. I expect rich people to think so. It follows according to what is fair and according to self-interests. It's the natural way to think. It makes sense.

I'm just looking for a higher way.



In “Mountains Beyond Mountains” Paul Farmer (medical anthropologist and medical doctor who has done amazing work in Haiti, Peru, Rwanda, Russia, etc. in raising life expectancy rates, lowering infant mortality rates and diagnosing and treating MDR and XDR TB) was amazed that his friend who financed a lot of his work would vote against his interests. This rich friend was willing to vote for someone who would not reduce tax burdens on the rich or on corporations. This was not in his direct interests. But this rich man saw something higher or better.




There's a others-focused way that we are talking about. For a rich person, receiving more tax reduction seems fair. But we are searching for what is just. There is a difference. And justice is the higher ground.

In the last update, I wrote about liberation theology and the preferential option for the poor. I wrote about siding with the rich, even if completely sincere or unaware, was unjust, and the cause of the poor (no matter their motivation or characteristics) is always just. Why? According to the Judeo-Christian tradition, that's how God's mind works (even in Buddhism [especially the Tibetan form] and Islam the poor are very important to God).

Thomas Jefferson had a Bible in which he cut out all the passages that he didn't agree with. I think it is called the Jeffersonian Bible. It had a lot of holes. Many pastors quote this story as an example of someone who selectively follows God. Yet, simultaneously without physically cutting out passages, many people selectively follow parts of the Torah or Bible.

Jim Wallis (author of a number of books including God's Politics, editor of Sojourner's magazine) had a group of friends in seminary that met together. They were a group of “activist evangelical seminarians” who began to look at the Bible on their own (they went to a conservative seminary—Trinity in Chicago). They did a study to find every verse in the Bible on the poor. They found several thousand verses on poverty, treatment of the poor, and God's reaction to the injustice. It was the second most prominent them in the Hebrew Scriptures (old testament) behind idolatry. And the two (money/poverty and idolatry) were often related. In Matthew, Mark, and Luke poverty appears in one out of very ten verses. In Luke alone it is one in seven.



They took out a pair of scissors and began to cut every single verse on the poor. It took a long time, says Jim. They had to cut through any prophet who spoke out against nations for neglecting the poor and the rich who ignore the poor (sound familiar). They cut through Amos, Isaiah, Micah, much of the Psalms, Leviticus, etc. In the New Testament there was more work with Jesus quoting Isaiah when he said he was sent to bring good news to the poor, Mary's Magnificat, the Beattitudes, the Sermon on the Mount, the early church in Acts, James and his social gospel (faith without works is dead), etc. On and on.

When they were done the Bible could barely stand together because it was so full of holes. From then on Jim would take the Bible to speak (it was very damaged and fragile) and show people that the American Bible was full of holes. It's a good reminder to take our religious texts and cut out holes of verses we pay no attention to. It started Jim on a movement that lasted his whole life long.

I'm using his book as I write this and I want to share three stories from the summer of 2003 that he points out in a chapter called “Isaiah's Platform” in the section called Part IV Spiritual Values and Economic Justice, When Did Jesus Become Pro-Rich? (the other main sections are when did Jesus become pro-war and when did Jesus become a selective moralist)

Story 1:
Susan Hamill, a University of Alabama tax law professor (someone who could understand the above e-mail forward and answer it) decided to go get a masters in theological studies during a year sabbatical. Her thesis was entitled “An Argument for Tax Reform Based on Judeo-Christian Ethics.” She applied Judeo-Christian ethics to Alabama's tax system which she saw as imperative toward ensuring that Alabama's kids (especially from low-income families) had an opportunity for a positive future.

Alabama has long had one of the worst (regressive) tax systems in the country, according to Jim Wallis. A family of four earning $4600 a year has to pay income taxes, the lowest threshold in the entire U.S. (the 50 states). Property taxes are the lowest in the nation (71% of the land is timber so the timber industry is happy); sales tax is 4%, but cities can add to it. Some counties (after adding to it) it is as high as 11% and even on groceries. Watch this: People with incomes below $13,000 pay 10.9% of their income in taxes while those who make more than $229,000 pay only 4%. This was point number 4 in the above. The rich who complain about wanting a larger reduction in their taxes because they pay more, feel the reduction much less. They even feel the payment of taxes less. The poor feel it heavily. Percentage of income is another way to look at it. And if you want to talk about fairness, is that fair?

Long story short, her thesis was published in the Alabama Law Review. The governor Bob Riley (a conservative Republican) saw it and read it at a time there was a budget deficit ($700 million) in Alabama. But states are required to balance their budget (unlike the federal government). So he made a plea to State Congress: We can't balance the budget with cuts alone unless we want to lay of teachers, cancel extra-curricular activities, open prison doors, kick people out of nursing homes, etc. He gave a plan, a tax-reform package to raise property taxes, higher income taxes on the wealthy, and no income taxes on the poorest people. He proposed to raise the threshold to $17,000 paying for it by tax from the timber industry.

Though the churches were behind it, it failed (large anti-proposal campaign by big business and special interests). When asked why he had a change of heart and proposed this plan the governor said “According to our Christian ethic, we're supposed to love God, love each other, and help take care of our poor. And this is a step in the right direction.”

Story 2:
This story shows what happens many times with the poor and poor children in the halls of the legislature. This is just one example, but a big one.
There was a $350 billion tax cut passed by Congress (do you remember this? I do). It primarily benefited the wealthy (I didn't realize this at the time). Each millionaire would receive $93,000. But not even 1% ($3.5 billion) could be used for poor families. Part of the money was for middle and upper income families. Each family would get a check for $400. An amendment was added to make sure it was refundable so that working families earning between $10,500 and $26,625 would also get money.

Then the New York Times revealed that House and Senate Republicans removed the child tax credit from families who make under $26,625 in a late night revision of the bill that Bush signed into law. It prevented 12 million kids from getting any benefit (1 in every 6 kids in the U.S.). Middle and upper-middle income families would get an increase from $600 to $1,000 but nothing for low-income families. They were originally in the package, but they were removed to make room for more dividends and capital gains tax cuts for wealthy Americans (this happened in a late night conference). When this was revealed only two senators both women, one a Democrat and the other a Republican, Arkansas' Blanche Lincoln and Maine's Olympia Snowe demanded that it be corrected. The Senate voted to fix the omission” in a 94-2 vote. Republican leadership in the house used the correction to tack the low-income family child tax credit onto another tax cut for wealthier families! Then the issue deadlocked. Some Republicans admitted their tactic was an attempt to kill the low-income family child tax restoration. So when checks went out, none went to low-income working parents. Tom DeLay said that “There are a lot of other things that are more important than that.”

Story 3:
For it's annual 2000 tax analysis, the IRS found that the top 400 taxpayers (only 0.00014% of the population) take in more than 1% of the total income of all taxpayers (assuming equal distribution you might expect 1% of the population to take in 1% of the income of all taxpayers or 0.00014% of the population to take in 0.00015% of the income of all taxpayers). A the same time their tax payments were dropped significantly lower due to reductions in capital gains taxes. From 1992 to 2000 the average income of the top 400 increased to $174 million while the average income of the bottom 90% was $27,000. The inequality becomes a moral issue for many. The income gap has become a “vast chasm” according to the Wall Street Journal, “so much money in so few hands. . .a startling accumulation of wealth at the very top of the income pyramid.”

So that's that. Whenever you bring these issues up, wealthy Americans or people who label themselves conservatives accuse you of engaging in class warfare. But you have to understand, as Wallis says, there was warfare already going on: “warfare of tax cuts and budget priorities that make the rich richer while further decimating low- and middle-income families.” We shouldn't stand for it.

Budgets are moral documents. Tax cuts for the rich and the Iraq war have killed hopes for America's poorest children. Here are some of them below.

http://edition.cnn.com/2008/US/11/18/hungry.kids.ap/index.html

I could go on for pages, but you get the point. I could talk about corporate greed and Enron, WorldCom, and the current financial crisis related to the poor. I could talk about it globally and talk about debt forgiveness and justice for the world's poor by the rich countries (especially the WTO, World Bank, IMF, fair trade and rich country subsidies that hurt the world's poor). But you get it and this update is long already.

I actually don't mean to mention Bush a lot. Wallis doesn't pull any punches and he'll talk about Republicans for favoring the rich and using religious rhetoric or God to do or Democrats for not even using God at all and favoring the middle class over the low-income or immediate needs for the needy verses long-term solutions and the root causes.

A lot of the faith-based initiatives (any faith) felt their work was futile because programs that reduce poverty (domestic tax and spending policies) were ignored or neglected because of the war in Iraq. So these faith based communities who often bear the weight of taking care of the poor and needy felt they were acting in a hollow manner without the government partnering with them in this work. So they called a meeting with White House with the top domestic policy officials in the Bush administration. US Conference of Catholic Bishops, faith-based social services, advocacy organizations, Salvation Army, World Vision, Bread for the World, Evangelicals for Social Action, heads of mainline and evangelical Protestant denominations—everyone was there.

At one point in the meeting, a leader confronted the officials and said, “I voted for President Bush, I supported you all because I liked the language of 'compassionate conservatism.' But I am just a hair's breadth away from concluding the whole thing was a trick, just to focus our attention away from poverty policy and put the whole burden of reducing poverty back on the shoulders of the faith community.” Jim Wallis writes that you could hear a pin drop in the room. The officials were quiet and agreed to meet again with the leaders and talk about this more.

Space doesn't permit me to write more, but it very possible to be a married couple in the U.S. and have both spouses working and still not make enough money for transportation, food, housing, etc., for basic needs. This has been shown. So go research this or find a contrary research article saying the opposite, but educate yourself and do something about it.

Finally from Wallis's book he concludes this section in this chapter in the Part of the book with an excerpt from E.J. Dionne's comment on the religious leaders letters sent to the White house.

“. . .it's precisely because I don't want the faith-based approach to be a cover for the wholesale abandonment of government's responsibilities that I share the dismay of the religious leaders who wrote to Bush. Millions of working people are poor—and lack health insurance and adequate child care—even though they do all the things that society and our religious traditions say they should. Religious groups will never have the money to transform the material conditions of these families. But relatively modest government outlays could make their lives much better.
There is a religious mandate for such an approach. “Jewish prophets and Catholic teaching both speak of God's special concern for the poor. This is perhaps the most radical teaching of the faith, that the value of life is not contingent on wealth or strength or skill, that value is a reflection of God's image.”
Those thoughtful words are George W. Bush's. Is it too much to ask him to explain how his policies live up to that vision?
Washington Post June 10, 2003

Lastly, as I said, not all wealthy people support more privileges for the wealthy as Wallis would put it. Look at Bill Gates, Sr. President Teddy Roosevelt proposed an estate tax to counter wealth aristocracies. It's meant to moderate the enormous passing on of wealth from one generation to another and is levied on the top 2 percent of American people. The Bush administration (at the time) was trying to phase out the estate tax starting in 2001 with a complete repeal in 2010 and a restoration in 2011 (as an attempt to sell the package). The government would lose $982 billion in 20 years if that had happened. So Bill Gates Jr favored the tax cut and was at a rally on the Capital grounds with Jim Wallis. In a Sojourners article based on Gates' book Wealth and Commonwealth: Why America Should Tax Accumulated Fortunes, Gates and co-author Chuck Collins wrote:

“Society has an enormous claim upon the fortunes of the wealthy. This is rooted not only in most religious traditions, but also in an honest accounting of society's substantial investment in crating the fertile ground for wealth-creation. . . .Judaism, Christianity, and Islam all affirm the right of individual ownership and private property, but there are moral limits imposed on absolute private ownership of wealth and property. Each tradition affirms that we are not individuals alone but exist in community—a community that makes claims upon us. The notion that 'it is all mine' is a violation of these teachings and traditions. . . .Society's claim on individual accumulated wealth is a fundamentally American notion, rooted in recognition of society's direct and indirect investment in an individual's success. In other words, we didn't get her on our own.”