Bueller . . . Bueller . . . Bueller . . . Bueller . . . . Put simply, the rich pay a lot of taxes as a total percentage of taxes collected, but they don’t pay a lot of taxes as a percentage of what they can afford to pay, or as a percentage of what the government needs to close the deficit gap.
Mr. Buffett compiled a data sheet of the men and women who work in his office. He had each of them make a fraction; the numerator was how much they paid in federal income tax and in payroll taxes for Social Security and Medicare, and the denominator was their taxable income. The people in his office were mostly secretaries and clerks, though not all.
It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office. Further, in conversation it came up that Mr. Buffett doesn’t use any tax planning at all. He just pays as the Internal Revenue Code requires. “How can this be fair?” he asked of how little he pays relative to his employees. “How can this be right?”
Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.
“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”
This conversation keeps coming back to mind because, in the last couple of weeks, I have been on one television panel after another, talking about how questionable it is that the country is enjoying what economists call full employment while we are still running a federal budget deficit of roughly $434 billion for fiscal 2006 (not counting off-budget items like Social Security) and economists forecast that it will grow to $567 billion in fiscal 2010.
When I mentioned on these panels that we should consider all options for closing this gap — including raising taxes, particularly for the wealthiest people — I was met with several arguments by people who call themselves conservatives and free marketers.
One argument was that the mere suggestion constituted class warfare. I think Mr. Buffett answered that one.
Another argument was that raising taxes actually lowers total revenue, and that only cutting taxes stimulates federal revenue. This is supposedly proved by the history of tax receipts since my friend George W. Bush became president.
In fact, the federal government collected roughly $1.004 trillion in income taxes from individuals in fiscal 2000, the last full year of President Bill Clinton’s merry rule. It fell to a low of $794 billion in 2003 after Mr. Bush’s tax cuts (but not, you understand, because of them, his supporters like to say). Only by the end of fiscal 2006 did income tax revenue surpass the $1 trillion level again.
By this time, we Republicans had added a mere $2.7 trillion to the national debt. So much for tax cuts adding to revenue. To be fair, corporate profits taxes have increased greatly, as corporate profits have increased stupendously. This may be because of the cut in corporate tax rates. Anything is possible.
The third argument that kind, well-meaning people made in response to the idea of rolling back the tax cuts was this: “Don’t raise taxes. Cut spending.”
The sad fact is that spending rises every year, no matter what people want or say they want. Every president and every member of Congress promises to cut “needless” spending. But spending has risen every year since 1940 except for a few years after World War II and a brief period after the Korean War.
The imperatives for spending are built into the system, and now, with entitlements expanding rapidly, increased spending is locked in. Medicare, Social Security, interest on the debt — all are growing like mad, and how they will ever be stopped or slowed is beyond imagining. Gross interest on Treasury debt is approaching $350 billion a year.
And none of this counts major deferred maintenance for the military.
"Much will be required of the person entrusted with much, and still more will be demanded of the person entrusted with more. "
"For unto whomsoever much is given, of him shall be much required: and to whom men have committed much, of him they will ask the more."
Applying Catholic social thought, with prayer and consideration to the economic issues of taxation in the State of Iowa, we find that there are two basic moral principles that should govern the collection and distribution of taxes as they benefit the State of Iowa and its people.
The principle of contributive justice, as explained in the US Bishops. pastoral letter, Economic Justice for All (1986), suggests that all members of a society have a responsibility to contribute to the common good. A just and equitable system of taxation ensures that everyone contributes to society according to his or her ability to pay. Through contributions collected by taxes, we share the blessings that God has given us so that these resources can be used for the good of all.
The principle of distributive justice, also described in the economics. pastoral letter,
suggests that the distribution of wealth among the members of a society should first address the basic material needs of all people. As explained in the pastoral letter, the goal of distributive justice is to obtain a just and equitable distribution of income, wealth and power. This goal should be evaluated in light of how this allocation affects the poor and most vulnerable in a society.On the basis of these moral principles, we make the following suggestions as a guide for tax policy in the State of Iowa. We understand that these applications of moral principles do not have the same moral certainty as the principles themselves and that people of good will can agreeor disagree on the application of moral principles.
1. Spending by the State of Iowa should first assure that the basic needs of all people -- especially those who are poor and vulnerable - are addressed as a priority before other
appropriations are made. Just as in a family's budget, spending for recreation and entertainment should come only after paying for shelter, food, clothing and other necessities.2. All citizens have the right and responsibility to contribute to the common good through the payment of taxes.
The collection of taxes is an important and justifiable role of government. Taxes are an individual's contribution to the common good. In any society, the common good should be viewed of greater importance than the good of any individual or special interest group. Paying taxes is one way that citizens give something back to society.
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4. Taxation in any form should be based on one's ability to pay. If Iowa tax policy is to
remain faithful to Catholic teachings, it should first assure that the system collects taxes according to one's ability to pay.Catholic social teaching supports a more progressive form of taxation. Our contribution to the common good should reflect our blessings. From those to whom much has been given, much should be expected. Those who make the most profit from our economic system benefit most from the structures and infrastructure that make economic enterprise possible. Tax exemptions and tax incentives should not change the fundamental requirement that taxes should be based on one's ability to pay.
