Tag Archives: The Poor

Commentary

New paper on income inequality: Does taxing the rich hurt the middle class?

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Aparna Mathur (right)
Aparna Mathur (right)

Here’s an article by Indian economist Aparna Mathur.

She writes (in part):

In a recent paper that I co-authored with Kevin Hassett, we explored the effect of high corporate taxes on worker wages. The motivation for the paper came from the international tax literature (summarized by Roger Gordon and Jim Hines in a 2002 paper1) that suggested that mobile capital flows from high tax to low tax jurisdictions. In other words, in any set of competing countries, investment flows are determined by relative rates of taxation. The current U.S. headline rate of corporate tax is 35 percent. The combined federal and state statutory rate of 39 percent is second only to Japan in the OECD. With Japan set to lower its statutory rate later this year, the U.S. rate will soon be the highest in the OECD and one of the highest in the world. What effect do these high rates have on worker wages?

When capital flows out of a high tax country, such as the United States, it leads to lower domestic investment, as firms decide against adding a new machine or building a factory. The lower levels of investment affect the productivity of the American worker, because they may not have the best machines or enough machines to work with. This leads to lower wages, as there is a tight link between workers’ productivity and their pay. It could also lead to less demand for workers, since the firms have decided to carry out investment activities elsewhere.

Our paper was one of the first to explore the adverse effect of corporate taxes on worker wages. Using data on more than 100 countries, we found that higher corporate taxes lead to lower wages. In fact, workers shoulder a much larger share of the corporate tax burden (more than 100 percent) than had previously been assumed. The reason the incidence can be higher than 100 percent is neatly explained in a 2006 paper by the famous economist Arnold Harberger.2 Simply put, when taxes are imposed on a corporation, wages are lowered not only for the workers in that firm, but for all workers in the economy since otherwise competition would drive workers away from the low-wage firms. As a result, a $1 corporate income tax on a firm could lead to a $1 loss in wages for workers in that firm, but could also lead to more than a $1 loss overall when we look at the lower wages across all workers.

Following our paper, several academic economists substantiated our results, using different data sets and applying varied econometric modeling and techniques. Some examples of these studies include a 2007 paper by Mihir A. Desai and C. Fritz Foley of Harvard Business School and James Hines Jr. of Michigan University Law School, a 2007 paper by R. Alison Felix of the Federal Reserve Bank of Kansas City, a 2009 paper by Robert Carroll of The Tax Foundation, and a 2010 paper by Wiji Arulampalam of the University of Warwick and Michael Devereux and Giorgia Maffini of Oxford.3 A recent Tax Notes article that I co-authored summarizes these various studies and also the lessons from the theoretical literature on the topic. The general consensus from theory and empirical work is that while we may argue academically about the size of the effect, there is no disagreement among economists that a sizeable burden of the corporate income tax is disproportionately felt by working Americans. On average, a $1 increase in corporate tax revenues could lead to a dollar or more decline in the wage bill.

Conservatives and liberals have the same goal. We both want to help the poor. Liberals think that taking money from the rich and giving it to the poor helps, but all it does it cause the rich to move their capital and jobs elsewhere, leaving the poor poorer. Conservatives let the rich keep their money and encourage them to risk it trying to make more money by engaging in enterprises that create wealth – creating products and services from less valuable raw materials. In a socialist system, the rich get poorer, but so do the poor. In a capitalist system, the rich get very rich, but the poor also gain more wealth. That’s what happens when corporations like Apple make IPads out of junky raw materials. That’s how wealth is created – by letting people who want to make things keep more of what they earn. We all benefit from encouraging people to make new things and provide value for their neighbors.

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Commentary

The Becket Fund assesses Obama’s “compromise” on the contraception mandate

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Eric Metaxas shared this on Facebook, so here it is.

Full text:

Facing a political firestorm, President Obama today announced his intent to make changes to a controversial rule that would require religious institutions, in violation of their conscience, to pay for contraception, sterilization, and abortifacient drugs. But this “compromise” is an exercise in obfuscation, not a good faith effort to solve the problem. Thousands of churches, religious organizations, businesses, individuals, and others will still be forced to violate their religious beliefs.

For example, the fake compromise will not help the Becket Fund’s clients Belmont Abbey College in North Carolina, Colorado Christian University, and Eternal Word Television Network (EWTN), a Catholic media organization. They will still be forced to pay for insurance that provides contraceptive coverage. The White House’s claim that “the insurance companies will pay for it” is silly. For-profit insurance companies aren’t going to donate contraceptives and abortion drugs to employees; the employer will pay for it one way or the other. More fundamentally, the Becket Fund’s clients still face the same chilling dilemma they did yesterday: choosing between helping their employees buy immoral abortion drugs or paying huge fines.

“This is a false ‘compromise’ designed to protect the President’s re-election chances, not to protect the right of conscience,” says Hannah Smith, Senior Legal Counsel for The Becket Fund. “No one should be fooled by what amounts to an accounting gimmick. Religious employers will still have to violate their religious convictions or pay heavy annual fines to the IRS.”

According to a White House “fact sheet,” some religious employers will no longer be required to provide insurance coverage for contraception, sterilization, and abortion-causing drugs; coverage for those services will instead be provided for free directly by insurance companies. This does not protect anyone’s conscience. First, the problem is helping employees get abortion drugs, not the cost of providing those drugs. Since providing insurance benefits would still help employees get insurance, religious employers still have to choose between providing health benefits that help employees get abortion drugs, and paying annual fines. Second, thousands of religious organizations self insure, meaning that they will be forced to pay directly for these services in violation of their religious beliefs. Third, it is unclear which religious organizations are permitted to claim the new exemption, and whether it will extend to for-profit organizations, individuals, or non-denominational organizations.

“It is especially telling that the details of this fake ‘compromise’ will likely not be announced until after the election,” said Smith. “Religious freedom is not a political football to be kicked around in an election-year. Rather than providing full protection for the right of conscience, President Obama has made a cynical political play that is the antithesis of ‘hope and change.’”

My previous post in which I chastised the Roman Catholic bishops for supporting Obamacare is here.

News

Obama revises contraception mandate but Catholic groups still pay for abortion drugs

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Life News explains.

Excerpt:

The Obama administration has revised its controversial mandate that had forced religious employers to pay for health insurance coverage that includes birth control and drugs like Plan B, the morning after pill, and ella that can cause abortions.

Responding to a firestorm of opposition from pro-life organizations, Catholics groups and even some Democrats, the Obama administration has revised the mandate in a way that pro-life advocates are saying is even worse.

The revised Obama mandate will make religious groups contract with insurers to offer birth control and the potentially abortion-causing drugs to women at no cost. The revised mandate will have religious employers refer women to their insurance company for coverage that still violates their moral and religious beliefs. Under this plan, every insurance company will be obligated to provide coverage at no cost.

Essentially, religious groups will still be mandated to offer plans that cover both birth control and the ella abortion drug.

According to Obama administration officials on a conference call this morning, a woman’s insurance company “will be required to reach out directly and offer her contraceptive care free of charge. The religious institutions will not have to pay for it.”

The birth control and abortion-causing drugs will simply be “part of the bundle of services that all insurance companies are required to offer,” White House officials said.

“We are actually more comfortable having the insurance industry offer and market this to women than religious institutions,” the White House said on the conference call LifeNews listened to because they “understand how contraception works” and it “makes sense financially.”

[…]Republican Study Committee Chairman Jim Jordan told LifeNews in response to the revised mandate that it violates the right to religious freedom guaranteed by the First Amendment to the Constitution.

“This ObamaCare rule still tramples on Americans’ First Amendment right to freedom of religion. It’s a fig leaf, not a compromise. Whether they are affiliated with a church or not, employers will still be forced to pay an insurance company for coverage that includes abortion-inducing drugs,” he said. “This is not just a problem for church-affiliated hospitals and charities. Under these rules, a small business owner with religious objections to abortion-inducing drugs and contraception must either violate his religious beliefs or violate the law.”

“The liberal Obama administration thinks its political goals trump the religious faith of American citizens. That isn’t right, fair, or constitutional,” he said.

The abortions will still be paid for by the religious groups. They are going to pay for the drugs through medical insurance premiums. So religious organizations are still being forced to provide abortions for their workers.

Who is to blame for this? I blame Catholic bishops. Catholic bishops do believe in socialism. They do want a secular government to take money from religious people. And they do want government to hand out medical care to people, instead of letting individuals, businesses and charities provide health care.

Rick Santorum agrees with me on this.

Consider this interview with Rick Santorum in which he reacts Obama’s health care mandate.

Excerpt:

HH: Now I want to talk to you about two substantive issues, Senator Santorum. The first are these new regulations from the Obama administration. I read the letter from Archbishop Olmstead of Phoenix on the air. Archbishop Jose Gomez of Los Angeles has written a new article in First Things. It’s shocking, actually, what’s going on. Should this be a centerpiece of whoever the nominee’s campaign is?

RS: I talked about it in every speech I’ve given today. And here’s what I said, though, Hugh. I said that I took issue with the Catholic Bishops Conference, because Hugh, you may remember, they embraced Obamacare.

HH: Yes.

RS: They embraced it and said…here’s what I said to them. Be careful when you have government saying that they can give you rights, that you have a right to health care, and government’s going to give you something, because once you are now dependant on government, they, not only can they take that right away, they can tell you how to exercise that right, and you can either like it or not. And that’s the problem. That’s what the Catholic Bishops Conference didn’t get, that there’s no free lunch here, folks. If you’re going to give people secular power, then they’re going to use it in a secular fashion. And that’s why, you know, I hate to say it, but you know, you had it coming. And it’s time to wake up and realize that government isn’t the answer to the social ills. It’s people of faith, and it’s families, and it’s communities, and it’s charities that need to do this as it has in America so successfully for so long.

HH: Rick Santorum, what do you advise Catholic hospitals, Catholic colleges, Catholic…the centers of poverty assistance, the adoption agencies? What do you advise them to do in the face of, as Archbishop Olmstead said, we cannot comply with this unjust law?

RS: Civil disobedience. This will not stand. There’s no way they can make this stand. The Supreme Court, eventually, this thing’s going to get to the Supreme Court just like the ministerial hiring issue that was just decided by the Supreme Court the other day. And it was a 9-0 decision that said the Obama administration can’t roll over people of faith when it comes to hiring. Yet in the face of that decision, this radical, secular government of Barack Obama continues to have faith be the least important of the 1st Amendment. And I just think they fight. They fight in the courts, and they fight by civil disobedience, and go to war with the federal government over this one.

Evangelical protestants feel comfortable with Catholics like Rick Santorum. He gets it. If the bishops are wrong on socialized medicine and wrong on the death penalty and wrong on other things, then so much the worse for the bishops.

Obama did very well with Catholics in 2008 even though Obama is the most pro-abortion president in the history of the United States. Catholics tend to be more liberal on economic issues than evangelicals, which is why many of them voted for Obama. Evangelicals oppose economic liberalism, because they oppose government taking tax money from workers in order to provide services for other people aren’t trying to be self-sufficient. Evangelicals oppose increasing the dependence of individuals on a secular government. Evangelicals don’t want a secular government to take money from individuals and then use it to push secular leftist ideas like global warming, Darwinism and sex education in government run institutions, e.g. – public schools, public broadcasting, etc. Evangelicals trust individuals to care for the poor, and they don’t want to make it too easy for people to make reckless decisions and then get a check in the mail or a free abortion.

What causes this difference between Catholics and evangelicals? Evangelicals believe in salvation through grace ALONE through faith ALONE in Christ ALONE. Evangelicals put the emphasis on what you believe – it has to be true in order to please God. Catholics, just like Mormons, Jews and other religions, emphasize good works as a requirement for salvation. Many Catholics also support inclusivism, which is the view that you can be saved in other religions like Judaism and Islam. This means that for these Catholics, specific Christian doctrines are not essential for salvation, so long as you have sincerity and good works. On the other hand, evangelicals are exclusivists who emphasize the need for each person to arrive at true beliefs about God in order to be saved, and good works are just natural outworkings of their beliefs.

Evangelicals emphasize the responsibility of the individual to discover truth with their Bibles, reasoning, science and history. This belief in individual responsibility carries over into their approach to charity. Evangelicals believe individuals are responsible for deciding what to do about charity – you earn your own money and then you choose yourself how to share with others. But the responsibility to give away money wisely is an individual responsibility – you share your money in a way that is consistent with your beliefs. Evangelicals don’t generally accept the idea of handing money off to someone else and letting them decide what to do with it. We think that everything is our responsibility, starting with Bible study and theology, and going on through to economics and politics.

And this emphasis on individuals over big government has this effect:

(Source)

Note that this chart puts evangelicals together with born-again Christians. But evangelical Christians differ from born-again Christians, because they are firm on exclusive salvation and evangelism. Evangelicals like to study so that they can discuss their beliefs in public, using reasons and evidence to persuade others. A born-again Christian does not have that same emphasis on study and persuasion, because they don’t focus on evangelism. So, if you separate out the born-agains from that 26%, number for Obama support, then you are likely to get a much lower number for evangelicals who support Obama. We don’t like health care mandates covering abortion. Evangelicals are used to having to puzzle things out for themselves – so they puzzled out what Obama believed and then they voted against him.