Thursday, October 13, 2011

Ben Witherington on Taxes & Economics

Ben Witherington is a brilliant New Testament scholar. I love his work. I have read and profited from a number of his works. I don't always agree, but I am always challenged. And I would venture a guess that most times the weight of scholarship is on his side.

However, I am becoming more and more convinced that pastors and theologians should not weigh in much on economics, taxes and politics. The more a read when theologians jump into the political and economic fray (particularly the latter) the more I think it is wise not too.* Two of the few exceptions are Michael Novak's work for example his The Spirit of Democratic Capitalism or Jay Richards' Money, Greed and God.  We often don't know what we are talking about the way we do in our own field. (I guess I should not break my own conviction here, but I will). 

In my estimation Ben Witherington's recent post of Elizabeth Warren jumps the shark. He writes for example:

Frankly there are two things needed for that to happen: 1) of course we need to be fiscally responsible, and 2) no matter what, we need to RAISE TAXES.  Yes you heard me, raise taxes.  We need to all pay our fair share for living in the country we do, with the lowest tax rate in any industrialized Western democracy.  Sooooooo, it’s time to stop whining about taxes.    Do we need to reform the tax code so the wealthy pay their fair share—– you bet we do.  Do we need to reform the tax code to eliminate ridiculous loop holes?  Of course we do.  Should major corporations have to pay their fair share of taxes?  Of course they should.   Are there some people paying a disproportionate amount in taxes—- yes there are (see Warren Buffet’s point about himself and his secretary).
It is interesting that one of the things that both Jesus and Paul insist on is——- paying your taxes!    I’m just sayin’ –do your civic duty and stop whining. The fact that the tax code is not perfect is no excuse for screaming for lower taxes—- fix the code, and make sure everyone, including major corporations pays their fair share.   Enough said. 

Here's my response (I've added links which I didn't put in the post in his comments section):

Dear Ben Witherinton,

You are an excellent Biblical scholar and I have tremendous respect for you. I have benefited from many of your published writings. However, on taxes and economic policies, this short blog post without actually discussing numbers and rates in effect “jumps the shark.” I think a fair examination of the facts leads to an alternative conclusion. Let me highlight a few points of response.

First, Elizabeth Warren is deconstructing arguments that no one--not even the Tea Party is making. There have been so many responses to this already. Two problems in short order are (1) Warren assumes corporations aren’t paying enough already and (2) Warren assumes that corporations contribute little or nothing back in terms of societal benefits. This false to consider the jobs they provide and the skills and education that often give directly to workers. In effect, she assume corporations don’t pay it forward, when indeed they already do. This is Adam Smith 101, that even though they may not intentionally do good, the aggregate effects are that they do pay it forward in multiple ways. 

Second, show me any person in this country that does not pay for police, fire and roads? Warren and others debunk a straw man. Even a company that owns its property where its factories and warehouse reside pays for these services. In fact, local regulations often require a company putting in a new facility to upgrade local roads. Antidotal evidence, up the road from my house a Lowe’s is building a large facility. They have had to pay for re-pavement and widening of two major intersections nearby. This is true of the nearby WalMart distribution center as well.

Third, our corporate tax rate is actually one of the highest in the world. In 2005 it was near 40%. Only Japan was higher. The effective U.S. corporate tax on new investment was 34.6% in 2010. In 2010 only Argentina, Chad, Brazil and Uzbekistan were higher. Yes some corporations exploit loopholes which are unjust when not comprehensively offered. The tax code needs to be reformed but corporate taxes need to be reduced because it results in unfair double taxation (money is tax 1st in the corporation’s earnings, and again in the individual earnings received out of what the business made). However, we will not continue to attract corporations or retain them given increased regulatory burden and our high corporate tax rate in comparison to the rest of the world (including the 1st world).

Corporate tax rate:

Fourth, I don’t think Warren Buffet is a fair example of someone genuinely thinking his tax rate is unfair. His own investment has been delinquent for several years on the current taxes that they owe. So if he really wants to pay more taxes perhaps he should have is company pay the ones it currently owes. Buffet own statements have been debunked again and again. In fact a few years ago buffet claimed that his his secretary making $60,000 was charged a 30% tax rate. One IRS tax chart would simply dissolve this perpetual misrepresentations by Warren.

Take note that Buffet probably profits more from the taxes he supports:

Although see here for an analysis that favors Buffet's statement a bit more:

Fifth, what exactly is the “fair share” the wealthy owe? The top 1% of wages earners already pay 38% of the income taxes while they make only 20% of all the income. The top 10% of wages earners shoulder 70% of the income tax burden while making only 46% of the income. How is that not more than “fair”? In fact, it is more than fair by any reasonable definition. This is not necessarily an argument against reducing their taxes but it is at least an argument against raising their taxes claiming that they “don’t pay their fair share.” 

(addendum: The bottom 50% of wage earners pay 2.7% of the taxes while making 13% of the income)

Sixth the problem isn’t a revenue problem, it is a spending problem. This is true according the CBO’s own analysis. Average federal spending from 1950-2000 was 19.8% of GDP. During that time tax revenue averaged 18% of GDP. Projected tax revenues by the CBO between 2016 and 2021 will be 18.2% of GDP (even assuming the Bush tax cuts are made permanent). However federal spending levels are projected by the CBO at 23.8% of GDP far higher than historic averages. This examination of long term trends clearly demonstrates that it is not as if suddenly taxes are too low. Federal spending has markedly increased beyond historic levels (and these budgetary figures do not include items like social security).

Dan Mitchell summarizes the CBO numbers here:

If you are suspicious (because of his libertarian beliefs--everybody should check their presuppositions) check the CBO numbers yourself in the data:

I agree that it is our civic duty to pay taxes. Even the Tea Party is arguing for this. However the issue is fiscal restraint. It is also our civic duty (an option the first century did not have) to hold our government accountable through fair elections. Of course the tax code is not perfect. This is why Paul Ryan and most Tea Party folks are in favor of closing loopholes. Here they agree with Demoncrat’s policy statement (N.B. Democrats are just as guilty of corporate favoritism as Republicans are accused of being). 

However an honest approach to the numbers demonstrates that tax rates are unbalanced and extremely high already. When the largest wages earners (individuals and corporations) are already paying the largest percentages of our taxes it is irresponsible to balk about their need to be “paying their fair share.” Given the percentages they already pay it is reasonable to ask what indeed is a fair share?

Tim B

I realize that most of my numbers come from Libertarians, especially CATO. However, from them you can track down the actual data--this was the short information that I had access to this morning. Most of the links documented above cite or link to original data that can be digested.

I in no way tend to be exhaustive here. Nor do I claim to be an expert on politics or economics. I am a amateur at best. However, I stand by what I have written.

At best, if you are going to use the concept "fair share" you should lay out numbers and argue for what a fair share is. It is a moral argument--one that not many advocates actually make. It has become an emotional appeal rather than a rational argument. Everybody in principle wants taxes to be fair--but very few are arguing what fair should look like.

Let me reiterate my tremendous respect for Ben Witherington. He is one of the best New Testament scholars of our day. His blog post on economics and politics... well not so much.

*This isn't to imply that these things can't be discussed, or people are idiots when they speak outside their field. Ben Witherington is obviously highly intelligent. I only mean people are more at home in their area of expertise. It opens up the potential of more vulnerability to an argument or opinion. Occasionally pastors make basic blunders because they aren't aware of the range of the field of knowledge and theories on a particular topic outside their area. I know as a pastor people often ask me questions about areas I am not conversant in and the danger is to weigh in on everything when I should just be more cautious because it is not my main passion or area of devoted study. 


Tim Bertolet said...

In his comments Ben Witherington had written:
"The notion that smaller government is inherently better makes no sense to me at all. Nor do I think devolving more power to individual states helps. We already have too many differences between the states in terms of taxes, laws and the like. The issue becomes is it possible to be ONE nation, not a federation of 50 individualistic states. There has to be balance between the One and the many when it comes to both structure and philosophy. Otherwise, we can say goodbye to either dealing with endemic NATIONAL problems that affect us all, and we can say goodbye to being a country of worldwide influence and importance as well. Do businesses think its a good idea to get smaller, have less revenues, hire fewer employees, and in general downsize? Not unless they are in survival mode. Why should we think this would help us govern this nation better and make it work more efficiently? I am all for cleaning up graft, waste, and corruption at any level of government, but that is no argument for smaller government. BW3"

Tim Bertolet said...

Here was my response:

I think several arguments for smaller government that are worth considering:

(1) The large ineffectiveness of the federal level to solve national problems. Better faster solutions often come from the local level or are employed by citizen's creatively employing their talents, abilities, and innovations.

(2) Hayek's argument of the fatal conceit, the idea that no distance centralizing organization can have all the knowledge quick enough to effectively solve problems. I think returning things to the local level and empowering people via liberty and local government is a far better solution. School choice and local control versus federal curriculum standards seems to be an apt illustration of this.

(3) I am all for cleaning up waste and corruption, however I think this can happen more effectively when power resides more directly through local government. This is one reason our federal Constitution is a document of negative rights limiting the expanse.

(4) People working together are the best solution for solving problems. I think people are able to best partner, work together and creatively innovate when individual rights are respected, guarded and things are not plained from a more centralized structure. Even large corporations that are successful are mobile, the better CEOs empowering people to make decisions on the ground. It seems limited (but not non-existent) federal government can accomplish this best.

People right now are protesting on Wall Street about the size and power of corporations and their ability to exert control over people's lives. While I don't agree with all of Occupy Wall Street, it does beg the questions why be suspicious about the power of one set of entities while desiring to increase the power of a single entity to rule all entities? Should we be equally suspicious? Even the largest corporations have reviles and must stay fresh and mobile in a changing economy or they can be their own undoing (witness Kodak). Yet without limited government diversifying power downward and back to the people, what will keep expanding government in check--it has little competition to curb its market.

(5) Power tends to corrupt. I think human nature is to try to rest control from other to solve problem and "fix things." I find it difficult to envision larger more centralized systems that won't break down with more corruption and less effectiveness. So the best way to allow for competing visions, views and methods is to allow power and activity to be diverted away from centralization of a larger federal government.

(6) We are still 'E pluribus unum' --I think our plurality will enhance unity as opposed to deriving unity first and then trying to maintain diversity.

Thanks for raising these issues and interacting with the discussions. While some can go too far in their desire to reduce government (almost to the anarchist level), I think by and larger a larger problem is the more common trend to sweep things up under one umbrella thinking that the best way to handle problems is that national level. Granted some problems should be handled at a national level, but too many get sent to the level under the guise of unity and ability to resolve.

Just my thoughts. Thanks for hosting them.
Tim B.

"The Voyages..." Forays into Biblical studies, Biblical exegesis, theology, exposition, life, and occasionally some Star Trek...