Government and Paying for the Poor- Part Two

posted Aug 2, 2013, 7:24 AM by Willie T. Butler   [ updated Aug 2, 2013, 8:15 AM ]
(Originally Published | November 08, 2010)

By the time this article was posted Americans had cast their ballots which sent many new politicians and some old political warriors back to Washington, DC to change what has been perceived as a runaway government spending strategy. The hope—according to the polling outcomes—is for the Tea Party elected officials and the Republican Party to unite in their determination to roll-back several legislative decisions by the Obama Administration. Among those decisions are healthcare and financial service reform amendments enacted into law in 2010, and repeal of spending along with an extension of the Bush-era tax cuts which expire this year.

Undoubtedly we are in for a wild ride on Capitol Hill as both side spar over these and hundreds of amendments that were passed by Congress and sat on by the Senate throughout 2010. Whether anything that benefits the average wage-earner or unemployed American will emerge is what will hopefully follow.

Where Part One of this article is concerned, I have addressed what I think is a Kingdom perspective on the issue of whether the rich should pay more in taxes than the poor? (Please reference Part One—below—for the article). Accordingly, I cite the following restatement as my conclusion of this article:

"And here is the key point regarding whether the wealthy should bare a greater share of responsibility to care for the poor:

(15) The rich shall not give more, and the poor shall not give less than half a shekel, when they give an offering unto the Lord, to make atonement for your souls.  (Exodus 30:15)

So, as you can see, those ages twenty and older were required to pay the Temple Tax but also note here that God specified that “the rich pay no more than a half a shekel, and the poor pay no less.” It signifies to me that God was not asking the wealthy to pay higher taxes because they were rich but rather an equal share.

Part Two picks up on the justification for changing some of our current tax code, but not expecting the wealthy to pay more in taxes except as an equal percentage of their annual income, and not just what today’s tax laws permit.

As always, we at would love to hear from you, so feel free to email us with your response. While you’re at it, please visit us at our website and discover other Kingdom activities being designed to help you in your pursuit of a better quality life.

Our Tax System- What is really fair?  (PART TWO)

Based on this Old Testament model for taxation, I would conclude there is no legal basis to expect that more taxes are to be paid by the wealthy of the world than anyone else. In fact, I would argue that our problem is not that the wealthy should pay more than an equal share. Our problem in many cases is that our wealthy exercise legal and established tax avoidance strategies and pay zero or a smaller percentage than what was considered legislatively required and reasonable to ensure fairness throughout our society. An example of this occurred in 2010—and within plain view of all Americans—when two billionaires died whose estates paid zero-dollars due to the failure of our legislators to amend or extend the federal estate tax code.

Billionaires Dan Duncan (TX) died with an $8 billion estate and New York Yankees Owner George Steinbrenner (NY) died leaving an estimated $1.2 billion in his estate. Under current tax law, both of their estates enjoy a “free ride” as the Bush-era tax laws had expired and no new laws were enacted. Instead of Americans collecting something from either estate and despite both having sophisticated estate and trust planning strategies that would probably have reduced their estate tax liability were a law in force, neither has paid any estate tax.

These examples merely highlight one of many problems with today’s tax system which tends to favor the wealthy taxpayer despite well-designed disinformation campaigns that say otherwise. Our current tax laws allow many wealthy to significantly reduce or legally avoid having to pay taxes which then imposes an even greater tax burden on those with few to no legal means of reducing or eliminating their personal liability.

When you consider that even under the expired Bush tax code that at least a 45 percent top estate tax rate could have applied (on estate amounts in excess of $3.5 million or $7 million for married couples), it means there could have been billions or—at the very least—millions of dollars not collected. And neither example reflects the handful of other wealthy estates held by individuals who also died in 2010 who are not subject to any estate tax.

Couple this practice with our current tax laws favoring corporations doing business outside the U.S.  In its October 21st report, Bloomberg reported that major U.S. companies Google, Microsoft and FaceBook have been using tax havens in the Cayman Islands to shuffle money made overseas in other countries that permit such shuffling, such as Ireland. This tactic has helped Google alone save over $3.1 billion over the past three years and an estimated $60 billion in U.S. taxes. Now multiply that by thousands of U.S companies and you can see that the wealthy are real tax miscreants, although their tactics are legal and endorsed by Congress.

The Flat Tax Alternative- Is It Really Better?

Ancient Israel dealt with the Temple Tax in a way they thought would ensure fairness, so they had hoped. Shekels were a unit of measure that weighed 5.05 kgs and was made of gold or silver. As stated previously in Exodus, shekels were the specific type of currency that was used as tribute and every citizen—rich or poor—was responsible to pay a half-shekel. So once paid, it was evident that everyone did in fact pay equally into the temple tax.

However, because the wealthy could purchase their temple money from an exchange at a discount, they could actually end up paying less in the conversion process than what the poor person paid. It is believed by some bible scholars that this is one of the actions which incensed Jesus as He looked on at the money changers before He turned over their tables in the Temple. And it is believed to be one of the reasons that Jesus said that the widow (in Luke 21:2-3) paid more than all of the wealthy because she paid in full for what she gave making its value even greater in His eyes.

But America’s tax system is based upon percentages and under such a system it is possible for a wealthy person to pay considerably less than an equal share or even an amount equivalent to a reasonable percentage of their wealth. Ten-percent of a $30,000 annual income would be $3,000, which represents the amount that over 25% of Americans are taxed today based on their federal per capita income tax bracket. Ten-percent of $150,000 in annual income, an earnings base enjoyed by less than 10% of working Americans, would yield $15,000 or $5,000 more in federal income tax that the larger taxpayer segment pays. So, as a means of fairness, a flat percentage tax against all taxpayers equalizes the rate (or levy) imposed but not the amount paid.

Instead, the U.S. enjoys a progressive tax structure which allows for a higher percentage to be imposed against someone with much higher earnings.  Accordingly, while 35% is the top federal income tax bracket, it usually only applies to those whose AGI (Adjusted Gross Income) exceeds the top income bracket of $373,650. However, there exists a myriad of special tax deductions and credits which can be used to significantly lower the 35% rate to an effective rate between 10% - 33%, and sometimes even lower. In this context, if you have someone earning $150,000 or more annually and they deposit a considerable portion of their earnings into qualified retirement or pension plans that are tax-deferred, this can serve as one strategy to reduce the amount of annual income subject to federal and (in many cases) state income taxes.

And to be fair, every taxpayer is provided access to use the same tax deductions and credits as the wealthy where they might be applicable. Business-related expenses, home ownership and medical premiums, as examples, are viable options for reducing taxation, however, not every taxpayer has the income or net worth to take advantage of these additions.

Another strategy is to live on the income produced through investments that—if left on deposit for more than one year—can result in exercising the long-term capital gains tax- code rate on earnings which has a highly favorable rate of only 15 percent.  Looking at this from another favorable angle for the wealthy, even if the wealthy taxpayer pays an actual tax rate reflective of their earnings, there is still the matter of interest and dividend earnings on their investments which effectively offset the amount of taxation they pay. Say they pay 30% on their total income but also realize a 15% yield on their investments. Depending how their accountant advises them there could be realized a rather significant reduction in the effective tax rate that applies.  And while this could be true of every American with savings and investments, it has not been the case for a number of reasons, not the least of which has to do with the poor economy and flailing stock market. The wealthy can sometimes enjoy return rates that the average mutual fund or IRA account holder will never realize.

This might seem like wealth-bashing were it not for the fact that during this same economic period the average wage-earner and investor loss as much as 60 percent in overall net-worth according to a myriad of financial reports by the most credible market-watchers. Meanwhile these same reports noted that the rich got richer having earned on average about thirty-percent in their investments, which represents about 82 percent of all profit earned in 2010.

So, what should you do?

If you are Christian and acknowledge that we are subject to living in accordance with dual sets of laws: those established by God and those established within human governments (in every nation), then we must understand fully how both apply to us and exercise our God-given rights and privilege to live accordingly. That said, God’s law will always take precedent, and where a government’s exercise of law contradicts what God has decreed, we need to pursue a change in that law.

God establishes governing authorities, according to Scripture, and He assigns them specific duties to perform on His behalf and on behalf of the people they govern. In my view because governing authority is an extension of God and represents one side of a two-sided coin, the other side being the Church, then the duty to care for all citizens, which means the poor, is one that God has conferred on both institutions, and it is one they perform best when these duties and responsibility are shared.

Fairness is a quality trait of God’s kingdom model, as demonstrated in the Temple Tax example. If all Americans were to remember that God is the Owner and distributor of all material possessions (Psalm 24:1), we would probably find more fairness in society as each individual acknowledges God in their blessings. But because there are wealthy and poor who do not acknowledge God and therefore do not profess to be Christians, our pluralist’s democracy allows for different standards of fairness to blur any single view or application. Fairness towards all and having Church and State working in unity are hallmarks we must strive to practice at all times.

These issues are all the more reason why as Christians we must exercise kingdom standards at all times and hold others accountable to do the same. Leviticus 25:35 provides one such reminder of our kingdom standard and why we must expect all Americans to do what is just and within God’s ordained order:

“If a brother falls into poverty, help him by simply giving him what he needs.”

I might add, who does it simply does not matter!  Instead, let’s exercise our first priority--as exhorted under Kingdom law--as Christians called of God to take dominion in the earth over all things.