By Paul Buchheit
Recent reports suggest that almost 50 percent of Americans are now living in poverty or at a “low income” level, even as the wealthiest Americans see their tax burdens diminish due to cuts enacted during the administration of former President George W. Bush.
That’s more than three-quarters higher than the official account published in September. The claim is based on a new supplemental measure by the Census Bureau that includes health care, transportation, and other essential living expenses in the poverty calculation.
Meanwhile, the very rich are poised to benefit from another year of Bush tax cuts that will trim
a further 1% to 2% off their tax burden. It is this growing inequality that has helped give birth to The Occupy Wall Street movement.
“There is something profoundly wrong with the way our democracy works and how it’s benefiting such a tiny fraction of the American population and the world population,” said Douglas Ficek, a philosophy professor and Occupy protester.
The concept of “low income” is itself controversial and has been defined as earnings between 100% and 199% of the poverty level. By this measure every American family making $50,000 or less is either poor or living at a near-poverty level, which was $24,343 for a family of four in 2010.
That’s 59 million households.
The case for a growing “consumption equality” is alternately defended and denied. With emotions running high on both sides, we need to take a balanced look at the available data to determine how well the highest-earning family of the poorest 50% – a family with a $50,000 income – can survive. The maximum individual income for the poorest 50% is about $30,000.
Let’s start with taxes.
It is frequently noted by conservatives that the richest 1% pay most of the federal income taxes. They contributed about 37 cents of every dollar of tax revenue in 2009, which is more than the poorest 90% of Americans combined.
However, the richest Americans also have experienced incredible income growth since 1980, while wages have remained flat for the rest of us.
During that time, the tax rate for the richest 5% dropped from 34 cents of every dollar of their income to 23 cents. That compares with 3 cents for the poorest Americans.
“The basic structure of the income tax simply exempts subsistence levels of income from tax,” according to the Tax Policy Center.
More relevant to the poverty issue is that federal income tax is only a small part of the overall tax burden shouldered by poor and lower-income families. They’re still subject to the same sales tax and governmental fees as many wealthy Americans, for everything from food to tolls to parking tickets – and there is no sliding scale for those costs.
According to a study by The Institute on Taxation and Economic Policy, poor and low-income Americans pay about 10 cents on every dollar of incomes in state and local taxes. That compares with 5 cents of every dollar of income for the richest 1%.
Poor and low-income Americans pay about nine cents of every dollar of income toward social security, compared with two cents for the wealthiest 1%, according to data from the Congressional Budget Office (CBO).
Poor and low income Americans pay about 2 cents of every dollar of income on excise taxes, per CBO, which is a negligible expense for the people at the top. Examples of these surcharges include environmental taxes, communications taxes, and fuel taxes.
Taxes claim about 24 cents from every dollar of income for poor and low income Americans, when you add up the data above. That compares with 29 cents for the richest 1%.
Other significant expenses for low-income people, based on the most conservative estimates from the Bureau of Labor Statistics, the Census Bureau, the National Center for Children in Poverty, the Carsey Institute, and the Economic Policy Institute, include food (10%), housing (27%), transportation (6%), health care (5%), child care (8%), and household expenditures (5%).
Expenses for insurance and savings and entertainment, although important to most households, are not being included here.
Conservative organizations believe the whole ‘poverty’ issue is overblown. The Cato Institute blames LBJ and Obama for reversing a declining poverty rate. Forbes blames the calculations.
“The average poor person, as defined by the government, has a living standard far higher than the public imagines,” according to The Heritage Foundation. “In the kitchen, the household had a refrigerator, an oven and stove, and a microwave.”
Energy costs hit low-income families especially hard, taking about 20% of their incomes. At the $50,000 income level the burden is closer to 12%, as generally agreed upon by the Bureau of Labor Statistics, the Coalition for Clean Coal Electricity, the Department of Housing and Urban Development, and the American Gas Association.
Even the poor and low income families with the largest incomes are struggling mightily. Here’s a breakdown of how their income is spent, based on government data:
-34% food, health care, child care, transportation, household needs
That’s 97% of their income just for essentials. They’re left with about $1,500 for discretionary spending on things like a car, appliances, a TV, a cell phone, a loan repayment, or an occasional night out. That total breaks down to $30 a week, which is barely enough to take the family out for pizza.
Critics bemoan the amounts of aid being lavished on lower-income Americans, making dubious claims about $16,800 in government funds going to every poor family and households with $90,000 incomes being classified as “near poor.” But those complaints fail to take into account the high cost of living in cities like New York and San Francisco, where it’s common for couples with incomes exceeding $90,000 a year to put off starting a family due to financial concerns.
The painful truth is that only 4.375 million of the 59 million poor and low income U.S. families received Temporary Assistance for Needy Families (TANF) in 2010, at a total cost of about $36 billion.
Current federal budgets include about $350 billion for food, housing, and traditional ‘welfare’ programs for needy children, elderly care, and energy assistance. This averages out to about $400 per month per family. Not $16,800.
Earnings have remained flat for most people even though productivity has grown 80% since 1980, as employers have pocketed the savings generated by automation and labor cuts.
A family with annual income of $50,000 in 1980 would bring home $90,000 today if they had received a fair share from their contribution to America’s growth during that span, and they wouldn’t need a dime from government.
Conservatives complain about the TVs and refrigerators owned by low-income people. But it’s the height of insensitivity to admonish people who are trying to survive in a perversely unequal society.
It’s this kind of inequity that has given rise to one of the most popular signs of the Occupy movement, which says “they only call it class warfare when we fight back.”
Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and main author of “American Wars: Illusions and Realities” (Clarity Press). He can be reached at paul@UsAgainstGreed.org.