An Excellent Spirit, in the spirit of Christmas, is bringing our readers perspectives that we believe will bless them. Knowledge is a blessing. Understanding is a blessing. Knowing the will of God, Creator and Father of Our Lord Jesus, the Christ is a blessing. Knowing Jesus as Savior and God as Father and the Holy Spirit as the Spirit of all Truth is the greatest blessing of all.
That brings us to this Jewish World Review column by Thomas Sowell. In it, Professor Sowell does what few economists and economic forecasters and absolutely no politicians or lamestream media do. He tells the truth. The title of the piece might give us a hint. Taxing the Poor. Professor Sowell is one of the foremost economists in America and when he talks, we listen. “With all the talk about taxing the rich, we hear very little talk about taxing the poor. Yet the marginal tax rate on someone living in poverty can sometimes be higher than the marginal tax rate on millionaires.”
How is that, you ask? Sowell explains: “While it is true that nearly half the households in the country pay no income tax at all, the apparently simple word “tax” has many complications that can be a challenge for even professional economists to untangle. If you define a tax as only those things that the government chooses to call a tax, you get a radically different picture from what you get when you say, ‘If it looks like a tax, acts like a tax and takes away your resources like a tax, then it’s a tax.’ One of the biggest, and one of the oldest, taxes in this latter sense is inflation. Governments have stolen their people’s resources this way, not just for centuries, but for thousands of years.” Emphasis ours.
We all have heard the word inflation. We all have experienced the loss of purchasing power and the rise in prices. We are in such an extreme time now as the prices we pay for gasoline, electricity, food and all staples rise and then rise some more. Knowing, experiencing and enduring, however, do nothing to help us do something about inflation. That is where Thomas Sowell’s column comes in. He gives us understanding and that can lead to freedom!
“Hyperinflation can take virtually your entire life’s savings, without the government having to bother raising the official tax rate at all. The Weimar Republic in Germany in the 1920s had thousands of printing presses turning out vast amounts of money, which the government could then spend to pay for whatever it wanted to pay for. Of course, prices skyrocketed with vastly more money in circulation. Many people’s life savings would not buy a loaf of bread. For all practical purposes, they had been robbed, big time.” We are not accusing anyone, but are we not printing money, propping up our economy and spending our own wealth and that of our children and grandchildren today in the same manner.
An Excellent Spirit has reported on Quantitative Easing (QE 1, 2 &3) here. Professor Sowell gives us an historical example of how this killer of wealth works. “Of course, prices skyrocketed with vastly more money in circulation. Many people’s life savings would not buy a loaf of bread. For all practical purposes, they had been robbed, big time.
A rising demagogue coined the phrase “starving billionaires,” because even a billion Deutschmarks was not enough to feed your family. That demagogue was Adolf Hitler, and the public’s loss of faith in their irresponsible government may well have contributed toward his Nazi movement’s growth.” Thank God there are no Adolph Hitler’s in America today, but the math is the same and the consequences on generations yet to come may yet spawn another maniac unless we do something to get this silent killer under control.
People putting up Christmas trees and wrapping presents; people struggling to buy those trees and presents; people who will not have many of either, all are the victims of inflation. Professor Sowell explains: “Most inflation does not reach that level, but the government can quietly steal a lot of your wealth with much lower rates of inflation. For example a $100 bill at the end of the 20th century would buy less than a $20 bill would buy in 1960. If you put $1,000 in your piggy bank in 1960 and took it out to spend in 2000, you would discover that your money had, over time, lost 80 percent of its value. Despite all the political rhetoric today about how nobody’s taxes will be raised, except for “the rich,” inflation transfers a percentage of everybody’s wealth to a government that expands the money supply. Moreover, inflation takes the same percentage from the poorest person in the country as it does from the richest. That’s not all. Income taxes only transfer money from your current income to the government, but it does not touch whatever money you may have saved over the years. With inflation, the government takes the same cut out of both.”
Last time we looked, that is exactly what QE 1, QE 2 and now, QE 3 are doing to everybody. We learned today that the Federal Reserve is doubling down on QE 3. Here So what we have now is more government spending of more of our wealth, or worse, the money we are borrowing from China, to cure a problem that is of their own making. Spending. Professor Sowell continues, “It is bad enough when the poorest have to turn over the same share of their assets to the government as the richest do, but it is grotesque when the government puts a bigger bite on the poorest. This can happen because the rich can more easily convert their assets from money into things like real estate, gold or other assets whose value rises with inflation. But a welfare mother is unlikely to be able to buy real estate or gold. She can put a few dollars aside in a jar somewhere. But wherever she may hide it, inflation can steal value from it without having to lay a hand on it. No wonder the Federal Reserve uses fancy words like “quantitative easing,” instead of saying in plain English that they are essentially just printing more money. Emphasis ours.
In our Election coverage, An Excellent Spirit wrote on the changes that have come to our country. Here Most will recall the appellation “The Food Stamp President” hurled at President Obama. Sowell, no fan of the President, talks to the “takers” when he says, The biggest and most deadly “tax” rate on the poor comes from a loss of various welfare state benefits— food stamps, housing subsidies and the like— if their income goes up. Someone who is trying to climb out of poverty by working their way up can easily reach a point where a $10,000 increase in pay can cost them $15,000 in lost benefits that they no longer qualify for. That amounts to a marginal tax rate of 150 percent— far more than millionaires pay. Some government policies help some people at the expense of other people. But some policies can hurt welfare recipients, the taxpayers and others, all at the same time, even though in different ways. Why? Because we are too easily impressed by lofty political rhetoric and too little interested in the reality behind the words.” As usual, Thomas Sowell has given us the finest present we can get in this Christmas Season, understanding. It will last, not fade and it could even lead us to a better country, if enough of us get it.
God’s Word is our greatest present in any Season. Proverbs 4 says, “Hear, My children, the instruction of a Father, And give attention to know understanding; for I give you good doctrine: Do not forsake my law. When I was my father’s son, tender and the only one in the sight of my mother, He also taught me, and said to me: “Let your heart retain My words; Keep My commands, and live. Get wisdom! Get understanding! Do not forget, nor turn away from the words of My mouth. Do not forsake her, and she will preserve you; Love her, and she will keep you. Wisdom is the principal thing; Therefore get wisdom. And in all your getting, get understanding. Exalt her, and she will promote you; She will bring you honor, when you embrace her. She will place on your head an ornament of grace; A crown of glory she will deliver to you.” (Proverbs 4:1-9)
Wisdom and Understanding. God’s greatest gifts to His children in any Season. Seemingly in short supply these days, but thanks to Thomas Sowell and to God, America is blessed. Stay tuned.