Wintery Knight

…integrating Christian faith and knowledge in the public square

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

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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Richard Epstein explains why economic inequality is required in order to promote innovation

My friend Matt, who blogs at The Conscience of  a Young Conservative, posted this on Facebook.

Epstein explains how the profit motive creates economic value that raises the standard of living of all people, who are able to exchange their money for valuable products and services that they did not create. He explains how wealth redistribution is wasteful and harmful to economic growth.

(Found here)

Now let’s look at some myths that Christians believe about economics.

We need to understand basic economics

Christian philosopher Jay Richards explains basic economics.

Excerpt:

THE ZERO-SUM GAME MYTH.

There are three kinds of games: win-lose, lose-lose, and win-win. Win-lose games, like basketball, are sometimes called “zero-sum games.” When the Celtics and the Bulls compete, if the Celtics are up, then the Bulls are down, and vice versa. The scales balance. It’s a zero-sum.

Besides lose-lose games, which most of us avoid, there are positive-sum, or win-win, games. In these games, some players may end up better off than others, but everyone ends up at least the same if not better off than they were at the beginning.

Millions of people think that the free trade in capitalism is a dog-eat-dog competition, where winners always create losers. This is the zero-sum game myth, which leads many to think that the government should somehow redistribute wealth. While some competition is a part of any economy, of course, an exchange that is free on both sides, in which no one is forced or tricked into participating, is a win-win game. When I pay my barber $18 for a haircut, I value the haircut more than the $18. My barber values the $18 more than the time and effort it took her to cut my hair. We’re both better off. Win-win.

THE MATERIALIST MYTH.

A similar myth leads people to think of the economy as some fixed amount of material stuff—money in safes or gold bars in a vault. Since two firms competing for one customer can’t both get the customer’s money, we might think the whole economy looks that way: wealth itself isn’t created, it’s merely transferred from one party to another.

A common image of this “Materialist Myth” is a pie. If one person gets too big a slice, someone else will get just a sliver. To serve it fairly, you have to slice equal pieces.

This isn’t how a free economy works, however. Over the long run, the total amount of wealth in free economies grows. We can create wealth that wasn’t there before. The “pie” doesn’t stay the same size. Under capitalism, someone can get wealthy not merely by having someone else’s wealth transferred to his account, but by creating new wealth, not only for himself, but for others as well.

THE GREED MYTH.

Friends and foes of capitalism often claim that it is based on greed. Writer Ayn Rand even claimed that selfishness is a virtue (see the accompanying feature article). But greed is one of the seven deadly sins. If capitalism is based on it, then Christians can’t be capitalists.

In truth, Adam Smith and other capitalist thinkers did not believe this “Greed Myth.” Rather, Smith argued that capitalism, unlike static economies, channels even greedy motives into socially beneficial outcomes. “In spite of their natural selfishness and rapacity,” Smith wrote, business people “are led by an invisible hand…and thus without intending it, without knowing it, advance the interest of the society.”3

Rather than inspire miserliness, capitalism encourages enterprise. Entrepreneurs, including greedy ones, succeed by delaying their own gratification, by investing their wealth in creative but risky ventures that may or may not pan out. Before they ever profit, they must first create.

In a fallen world, we should want an economic system that not only channels greed into productive purposes, but unleashes human ingenuity, creativity, and willingness to risk as well.

I think Christians who don’t understand economics really need to make the effort to understand the basics. I recommend Robert Murphy’s “The Politically Incorrect Guide to Capitalism” and Thomas Sowell’s “Basic Economics“. If you want to see how economics works together with Christianity, then you also want Jay Richards “Money, Greed and God” and Wayne Grudem’s “Politics According to the Bible“.

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Planned Parenthood loses fight for $397,000 in taxpayer-funding

Good news from Life News.

The Planned Parenthood abortion business has lost its battle to keep a $397,000 taxpayer-funded contract in Memphis, Tennessee after pro-life advocates contacted members of the county commission requesting that the grant be given to someone else.

Shelby County Health Department director Yvonne Madlock had announced in September that , after significant lobbying from pro-life advocates, Christ Community Health Services would receive the $397,000 contract with the county for family planning rather than Planned Parenthood. Then, in a 6-4 party-line vote, the Shelby County Commission decided to postpone its decision and allow Planned Parenthood more time to make its case that it should continue receiving the tax money.

Now, the Shelby County Commission voted 9-4 on Monday to give Christ Community Health Services the family planning contract instead of renewing it with Planned Parenthood Greater Memphis Region. However, the Memphis Commercial newspaper reportsthat the abortion business has a pending bid protest with the county government.

[...]The money comes from the Title X family planning grants states are given by the federal government and Davidson County, the location of Nashville, made the decision earlier this year to move the recipient of its funding elsewhere from the Planned Parenthood abortion business. Because Shelby County was the lone holdout, pro-life advocates focused their efforts on persuading the county government to de-fund Planned Parenthood.

So, it sounds like things are not quite settled yet. But still – good news so far.

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Were the Crusades unprovoked attacks against peaceful Muslims?

Here’s an article from a historian specialized in the history of the Crusades.

Excerpt:

For starters, the Crusades to the East were in every way defensive wars. They were a direct response to Muslim aggression—an attempt to turn back or defend against Muslim conquests of Christian lands.

Christians in the eleventh century were not paranoid fanatics. Muslims really were gunning for them. While Muslims can be peaceful, Islam was born in war and grew the same way. From the time of Mohammed, the means of Muslim expansion was always the sword. Muslim thought divides the world into two spheres, the Abode of Islam and the Abode of War. Christianity—and for that matter any other non-Muslim religion—has no abode. Christians and Jews can be tolerated within a Muslim state under Muslim rule. But, in traditional Islam, Christian and Jewish states must be destroyed and their lands conquered. When Mohammed was waging war against Mecca in the seventh century, Christianity was the dominant religion of power and wealth. As the faith of the Roman Empire, it spanned the entire Mediterranean, including the Middle East, where it was born. The Christian world, therefore, was a prime target for the earliest caliphs, and it would remain so for Muslim leaders for the next thousand years.

With enormous energy, the warriors of Islam struck out against the Christians shortly after Mohammed’s death. They were extremely successful. Palestine, Syria, and Egypt—once the most heavily Christian areas in the world—quickly succumbed. By the eighth century, Muslim armies had conquered all of Christian North Africa and Spain. In the eleventh century, the Seljuk Turks conquered Asia Minor (modern Turkey), which had been Christian since the time of St. Paul. The old Roman Empire, known to modern historians as the Byzantine Empire, was reduced to little more than Greece. In desperation, the emperor in Constantinople sent word to the Christians of western Europe asking them to aid their brothers and sisters in the East.

That is what gave birth to the Crusades. They were not the brainchild of an ambitious pope or rapacious knights but a response to more than four centuries of conquests in which Muslims had already captured two-thirds of the old Christian world. At some point, Christianity as a faith and a culture had to defend itself or be subsumed by Islam. The Crusades were that defense.

Pope Urban II called upon the knights of Christendom to push back the conquests of Islam at the Council of Clermont in 1095. The response was tremendous. Many thousands of warriors took the vow of the cross and prepared for war. Why did they do it? The answer to that question has been badly misunderstood. In the wake of the Enlightenment, it was usually asserted that Crusaders were merely lacklands and ne’er-do-wells who took advantage of an opportunity to rob and pillage in a faraway land. The Crusaders’ expressed sentiments of piety, self-sacrifice, and love for God were obviously not to be taken seriously. They were only a front for darker designs.

During the past two decades, computer-assisted charter studies have demolished that contrivance. Scholars have discovered that crusading knights were generally wealthy men with plenty of their own land in Europe. Nevertheless, they willingly gave up everything to undertake the holy mission. Crusading was not cheap. Even wealthy lords could easily impoverish themselves and their families by joining a Crusade. They did so not because they expected material wealth (which many of them had already) but because they hoped to store up treasure where rust and moth could not corrupt. They were keenly aware of their sinfulness and eager to undertake the hardships of the Crusade as a penitential act of charity and love. Europe is littered with thousands of medieval charters attesting to these sentiments, charters in which these men still speak to us today if we will listen. Of course, they were not opposed to capturing booty if it could be had. But the truth is that the Crusades were notoriously bad for plunder. A few people got rich, but the vast majority returned with nothing.

Since this question comes up in apologetics, and even William Lane Craig screws it up by calling the Crusades evil, I thought it might be a good idea for us to have some background so that we would be able to set the record straight if it’s called into question. It’s important to know this because a lot of people appeal to the Crusades to take shots at Christianity and introduce a kind of moral equivalence that excuses real wars of aggression and real terrorism.

The article also includes some of the real mistakes made by some of the Crusaders, so be ready to own up to those.

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New House GOP bill de-funds Planned Parenthood

Rep. Denny Rehnberg

Rep. Denny Rehnberg

Story from Life News.

Excerpt:

The battle over yanking federal taxpayer funding of the Planned Parenthood abortion business is back in Congress as House Republicans have unveiled new legislation attempting to remove its Title X funding.

Republicans tried earlier this year to de-fund Planned Parenthood but Obama refused overtures from pro-life Speaker John Boehner to do so when Republicans and Democrats were working on ironing out legislation to fund the federal government. Obama eventually agreed to a compromise that allowed both the House and Senate to vote on a stand-alone bill de-funding Planned Parenthood and, while House Republicans approved their measure, Senate Democrats defeated it in the upper chamber.

[...]Now, Rep. Denny Rehberg of Montana, the chairman of the House Labor, Health, and Human Services Appropriations Subcommittee has introduced new legislation to fund the federal government that prohibits any funds going to Planned Parenthood unless the organization stops doing abortions.

“This bill is the result of the cumulative effort of members of the Subcommittee, and Americans I heard from at 81 listening sessions and in countless meetings in Washington and in Montana.  Now, it’s posted online for the only test that matters, and that’s the approval of the American people,” Rehberg said.

Naturally, the head abortionist is outraged – someone is taking away her dollars!

Planned Parenthood president Cecile Richards issued a statement last week condemning the legislation.

“Eliminating funding for the Title X family planning program and prohibiting Planned Parenthood from providing preventive health care through federal programs will result in millions of women across the country losing access to basic primary and preventive health care,” Richards said.

The new bill also came under attack from both pro-abortion organizations and pro-abortion lawmakers.

“Another health-related provision prohibits any funding under the bill from going to any Planned Parenthood affiliate unless the organization promises not to perform abortions with non-federal funds,” Congresswoman Rosa DeLauro, a pro-abortion Connecticut Democrat and a member of the subcommittee, groused. “The main effect would probably be to prohibit Medicaid patients from choosing to receive services such as contraception and cancer screenings from Planned Parenthood clinics.”

I listed Planned Parenthood AND the Democrats as being interested in the dollars. It’s a vicious circle. Planned Parenthood gets the dollars to kill the babies, and then they make campaign contributions to the Democrats who give them the taxpayer money. It’s all about the money. They kill babies for money. It’s a big business, and we subsidize it with our taxes.

Hon. Maurice Vellacott

Hon. Maurice Vellacott

And even in Canada, some Canadian conservatives are trying to push to de-fund Planned Parenthood.

Excerpt:

Two more Tory MPs are taking swipes at the International Planned Parenthood Foundation.

One claims the group conned the government when it applied for and got a federal grant of $6 million over three years.

Another is linking it to the sinister and long-discredited science of eugenics.

Saskatchewan MP Maurice Vellacott says the federation was deceitful in claiming that the money would only go to countries where abortion is illegal.

Alberta MP Leon Benoit wants to condemn the foundation over an award named for Margaret Sanger.

Sanger was a pioneer in planned parenthood who embraced a type of eugenics.

Saskatoon MP Brad Trost started the ball rolling earlier this week with a web post condemning the decision to fund the international family-planning group.

While the Prime Minister’s Office is adamant that abortion is not an issue for the Conservative government, it still seems to be a touchy subject for backbenchers.

The Planned Parenthood grant is a case in point.

Trost said in his web post that the government’s claim that the money would be used in countries that bar abortion is “hair-splitting.”

Vellacott said the federation is “trying to dupe” the government over abortion.

“Even in those countries where abortion is technically illegal, it’s naive to think that Canadian tax dollars are not being used to promote abortion,” he said in a news release.

Maurice Vellacott is my favorite Canadian MP. He is the Canadian-equivalent to Iain Duncan-Smith in the UK. And don’t think these guys aren’t good on fiscal issues – they are. They just are also good at social issues, which should go together anyway.

Related posts on Planned Parenthood

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