On Money, Wealth and Taxes

At the time of the writing of this article, there are several major protests being held in cities throughout the world under the “Occupy Wall Street” banner. In the midst of one of the greatest economic downturns in the past hundred years, citizens are taking to the streets to protest the gross disparity in wealth between the wealthiest Americans and the large majority who are struggling to get by. This movement has brought the issue of economic disparity to the  forefront of the mainstream media. As the Obama administration proposes a special tax on annual income over a million dollars, it is pertinent to discuss what money really is, how it is accumulated, and the effects of taxation on individuals, corporations, and the economy as a whole.

Money
I remember first gaining an understanding of the existence of money as a child while shopping at a toy store. Learning that I could not have a toy that I wanted because it was too expensive was a harsh reality to take in. This was clearly a problem. There are all these amazing toys out there, but for some reason I can only have the cheap ones? Something was clearly wrong.

I thought that I had solved the problem of money not too long after my discovery of its existence. “Why doesn’t the country just give everyone a million dollars so that we can all be rich and have all the toys we want?” It seemed like a great idea.

Of course, we all know why this doesn’t work. If the country gives me a million dollars, then it must give the guy who works at the store a million dollars and the guy who makes the toy a million dollars. The worker will quit his job, and the toy maker will stop making toys. The price of the toy will have to go way up to make it worth it for the toymaker to produce the toy and the worker will demand more money to sell the toy. All of the sudden I’m paying 100,000 dollars for the toy that once cost 100 dollars, and before you know it, my million will be gone.

The principle that I learned is that the value of money is only related to the fact that there is a disparity in how it is distributed. The fact that only a select few have a lot of money gives money its value. This principle goes back to the first monetary economies.

Before money, economies were based on a system of barter. The hunter would give meat to the berry gatherer, who would provide the hunter with berries in return. Once additional products were demanded, the barter system broke down. If the hunter needs shoes, the clothier needs meat and the shoemaker needs clothes, the hunter will have to trade his meat for clothes from the clothier, then trade the clothes to the shoemaker for shoes. Every individual would have to carry a variety of goods to trade, depending on what was to be demanded by a trading partner. With the introduction of money, the hunter can sell his meat for money, and then purchase what he wants with that money.

The money that the hunter receives in exchange for his meat is the value of the hunter’s contribution to the economy. If one chicken’s worth of meat is worth one pair of shoes, then both will be worth the same amount of money. When the hunter makes a purchase with money, it is as if he is using a chicken, or a pair of shoes to make the purchase.

Even in a modern economy, this truth still holds. The value of all money is still based on the product of the individual producer at the bottom of the chain. The worker in a factory in China, the farmer on a mega farm in Nebraska, and the homebuilder in Orange County create the wealth that gets distributed up the economic chain. When I make a purchase at 7/11, it is as if I am exchanging the work that produced that money for what I am purchasing.

With modern technology, of course, it takes fewer and fewer workers to produce base goods. The worker at the bottom of the chain actually contributes a huge amount of wealth to the economy. In America, only 2% of individuals work on farms, but those individuals provide enough food for more than the entire population of the country. Fortunately, a new level of the economy arises once our basic needs are accounted for; the service economy. New products and services are demanded which go beyond the basic needs of the individual. Attorneys are required to settle disputes, doctors fix the sick and graphic designers create images. This new level of service providers takes the wealth that has been created at the bottom and redistributes it again at the next level of the economy. Individuals in the service economy only have this luxury, however, because of the money creators at the bottom of the chain.

Wealth
Going back to our primitive economy, another phenomenon exists which affects the distribution of money. With the introduction of money, the rise of a middle man will likely occur. The shopkeeper collects goods from those who produce them, and provides the producers with money that they can then exchange for other goods. The  shopkeeper will sell goods for more money than he pays for them, thus making a profit. Once the shopkeeper has paid for all of his needs, he will likely still have money, which leads to savings, and the accumulation of wealth.

On his own, the hunter is limited in the amount of wealth that he can accumulate. He is limited by the amount of food that he can produce in a given day minus his expenses for himself and his family. The hunter can only increase his wealth by becoming a middleman. He can train several other hunters to hunt, then collect their spoils, give them money, and sell their meat to the shopkeeper at a profit. The hunter now has a hunting business, and is essentially operating like the shopkeeper.

The shopkeeper’s accumulation of wealth is only limited by the number of customers purchasing goods and suppliers providing him with goods. In the modern economy, the shopkeeper’s limitation has grown to an enormous extent. The shopkeeper can sell goods to billions of customers. Bill Gates became the richest man in the world by selling billions of copies of Windows at $100 a copy. Gates produced a product that was useful. Individuals purchasing a computer with Windows purchase that product with money that they have earned. The money they have earned has a value based on the initial creation of wealth by the producers in the economy. Bill Gates was able to accumulate his billions in profits because the producers at the base of the economy pushed their wealth up the chain, with billions eventually landing in his pocket.

Wealth is created based on a pyramid. The producers at the bottom of the pyramid push wealth up the chain, and the business owners at the top are the eventual benefactors. In essence, the rich can only become rich because of the contributions of the poor. In an economy with 10 individuals, the wealthiest individual can only accumulate a fraction of the money that can be produced by the other nine individuals. In an economy of 7 billion individuals, the wealthiest individual can accumulate a fraction of the wealth that can be produced by the other 6,999,999,999 individuals. The wealthiest 1% in America could only become wealthy because of the other 99%. Anyone who is wealthy got that way because other individuals gave them money in some way shape or form.

Many wealthy individuals would say that they became wealthy because of their own hard work, ingenuity, and perseverance. This is true, and the wealthy need to be commended for what they have done. Becoming wealthy is not easy, especially in a world with so many people who want to be wealthy, and so few who actually are. Even those who have inherited their wealth only did so because someone in their family line figured out how to accumulate wealth so that his or her heirs would not have to worry about doing so. This point, however, does not detract from the fact that the wealth was created because of the contributions of the poor and middle class, and this principle must be remembered when determining how wealth should be redistributed.

Taxes
Going back to our primitive economy, there is another factor which arises that affects how money is distributed. The early shopkeeper accumulates his wealth, and stores it in his home. The jealous hunter breaks into the shopkeeper’s home, kills the shopkeeper and takes his wealth. The hard work of the shopkeeper has now been destroyed by one criminal act. Enter the King.

The King, or the Government in modern times, organizes society so as to allow individuals to keep their wealth. For the early shopkeeper, it is worth it to dedicate a portion of his wealth to the king, who will maintain order. If the hunter kills the shopkeeper, the king will punish the hunter with death. The hunter is thus detracted from committing a crime. If a neighboring village invades, the king assembles an army to fight them off. The king is the absolute protector, and is in charge of the general welfare of all in the kingdom.

Of course, the king is also responsible for wealth redistribution. If the shopkeeper loses his wealth, the king will provide him with food, so that he has the opportunity to rebuild his shop, and accumulate wealth once again. By providing for the poor, the king redistributes wealth from those who have accumulated it back to those who produced it, or will produce it in the future.

The issue then arises over how much in taxation can be appropriated by the king. If the king takes too much, the shopkeeper will lose his incentive to maintain the shop. If he can no longer accumulate wealth, then there is no purpose in continuing the process of shop keeping. He will simply resort to working. However, if the king takes too little, the shopkeeper won’t receive adequate protection, and the society will fall apart.

In modern society, the role of the government has expanded greatly. With more and more money being created by producers, citizens come to expect that more and more money will be spent by their governments on maintaining a good society. Economic downturns lead to situations in which society demands high sums from its government to maintain a decent existence. Government expenditures are needed to put money into the pockets of the producers, who will make purchases that allow the shopkeepers to accumulate more wealth. All of the workers who produced the wealth when times were good now require that the wealth be redistributed to them when times are bad.

There is no ideal rate of taxation. The rate should be high enough for the state to acquire the revenues required to provide the services that its citizens demand. Of course, there is also no ideal level of services that the state must offer to its citizens. The role of the government is to find this equilibrium. The state must redistribute money from those who have accumulated it to those who produced it in order to create more spending and producing. The government should not be afraid to raise taxes to meet the tax revenue equilibrium.

United States Taxation
A country that taxes 90% of the income of its wealthiest citizens would likely not experience a great increase in revenues by taxing 95%. At a certain point, incentives are lost, and the producers can no longer accumulate wealth because of the unnecessarily high tax burden. However, the tax burden in the United States is quite low for the extremely wealthy.

An individual earning over a million dollars a year should pay an additional tax on his or her income in order to pay for programs that will boost the economy and bring back jobs to the wealth producers. Of course no one wants to pay more taxes than they already do. The wealthiest currently pay 35% in Federal Government taxes on income above $357,701. On capital gains income, the wealthiest only pay 15%, no matter how much they make. Of course, there are also state taxes and payroll taxes that the wealthiest pay, but in the end those with high incomes take home a lot of what they make after taxes.

Total government revenues actually went up when the Bush administration lowered the tax rates that Americans pay. This phenomenon, however, coincided with a massive asset bubble in the real estate industry. Tax revenues increased because wealth was being created artificially. Rather than wealth being created based on production, it was being created based on an artificial increase in the value of real estate. Banks essentially used an increase in property values as an excuse to print money, which was then redistributed through the economy. As soon as the real estate bubble crashed, tax revenues began to fall again.

Increasing tax rates on the extremely wealthy would only lead to a decrease in tax revenues if it caused a significant slowdown in an economy. The argument goes that small business owners won’t make investments if their tax burden is too high, since they will have less disposable income to reinvest in their companies. I find this logic to be unsound.

Take an individual with a successful small business that gets $5 million in annual revenues. After expenses, the company makes a profit of $1 million. If the business owner takes out all $1 million as personal income, he or she will pay about $300,000 to the IRS and another $100,000 in state taxes. This individual now has $600,000 in disposable income. If the Federal tax rate was higher and the individual had to contribute another $50,000 to the IRS, he would now have $550,000 in disposable income.Will this 8% decrease in spending money really make any difference in whether the business owner decides to hire more workers for his company?

Now assume that the owner reinvests $500,000 in to the company to open another office and hire more workers. The owner now earns only $500,000 in pre-tax income. He takes home $300,000 at a lower tax rate or $275,000 at a higher tax rate. The 8% difference is not the factor that will guide the owner’s investment decision. Regardless of the tax rate, the investment decision is going to significantly lower his after tax income in the short run.

The owner is only going to make the investment decision if he thinks that it will lead to more revenues for his company in the future, which will give him more profits before taxes. If he anticipates $6 million in revenues in the following year due to his $500,000 investment, then he will make the investment. His after tax income will only affect the spending

decisions he makes with his personal money, not the spending decisions he makes for his company. If anything, a higher tax rate will encourage the owner to spend more on the company so that he makes more profits in future years and takes home more money after taxes.

The thing that is going to determine the business person’s investment is anticipated revenue. This revenue will be determined by the amount of customers that demand her product. The amount of customers who will demand her product will depend on the amount of people who have disposable income, and the amount of disposable income that they have. If the economy is bad and people do not have disposable income, then there will not be anyone to purchase the business owner’s products.

The government’s role in a recession is to create more purchasers of products so that businesses can expand. The government cannot create more purchasers without additional money to invest in creating those purchasers. The government cannot raise more money without taking more money in the form of taxes.

Conclusion
A minor increase on taxes for the wealthy should not be looked at as the government punishing the wealthy for accumulating wealth. Rather, it should be looked at as the government returning to the masses a small portion of the wealth that the wealthy have accumulated so that the wealthy can have more opportunities to sell their products and services to the masses and accumulate more wealth in the future. The wealthy can only become wealthy if the masses are producing money. The masses can only produce money if they have jobs and security. The masses can only have more jobs and security if the Government makes investments that give them more opportunities and gives businesses incentives to expand. The Government needs money to make these investments, and the wealthy have the money available. Increasing taxes is the right thing to do, and the government should not be afraid to do it.

Understanding the Debt Ceiling Debate

Anyone who has watched cable TV in America over the last few weeks has probably seen ads attacking the Obama administration and calling for an end to an increase in the debt ceiling. The ads point out several truths about the economy since Obama took over in 2009. The unemployment level has gone up and the federal debt level has increased by a large margin. The problem with these ads is they use true facts to lead to a false conclusion and an even worse policy prescription for America.

 

The Debt Ceiling

Regardless of who should be blamed for America’s economic woes, not raising the debt ceiling would probably be the stupidest thing that the government could do. The fact is that the United States government has not had a balanced budget since 2001. It has been running a deficit for the last decade, and with a deficit, the total amount of debt will inevitably increase.

The United States Congress has to approve of any increase in the total amount of debt that the American government takes on. This is the debt ceiling, which must be adjusted to reflect deficits. The ceiling currently sits at $14.3 trillion, but must be increased to reflect new deficits that the government needs to take on to function.

Obviously the size of America’s deficits is a problem that needs to be addressed. However, the fact is that there is currently a deficit and the debt ceiling needs to be increased to pay for the American government to run. If the debt ceiling is not increased, the government will not have the money to pay its obligations to employees, debtors and federal programs.

Imagine a guy who owns a house worth $500,000.00 and a home business. He has borrowed $200,000.00 and is making payments on the $200,000.00 debt. The bank is offering to give him another $50,000.00 in debt to finance his home business and make the payments on the debt. He refuses and decides that $200,000.00 in debt is too high, and that rather than taking the loan, he will leave the debt as is. However, his income is not enough to make the monthly payments on the loan and pay his business’s employees. So, he doesn’t make his interest payments or pay his employees. What will happen? The bank will foreclose and the employees will be out of work. The person will lose his home and business. Game over.

Rather than a home, the American Government has its economy as collateral for its debts. Investors have lots of confidence in the strength of the economy, and are therefore willing to lend money to the government. By not increasing the debt ceiling, the government is refusing to take on the debt that it needs to survive.

If the American government doesn’t increase the debt ceiling, we will see a financial crisis like the world has never seen. It will be even worse than the one that happened in 2008.  Investors and foreign countries will lose confidence in the US government. There will be a massive sell off of government bonds and treasury bills, which are normally considered the most secure instruments. Total Armageddon could ensue, especially with the world economy already in a fragile state. The Federal Reserve would likely use its reserves to delay the problem a little longer, but eventually the ceiling will have to budge for the economy to survive.

 

The Republican Strategy

Fortunately, the Republican Party is mostly filled with rational actors who are aware of the necessity of raising the debt ceiling. The Republicans, however, have used this opportunity for their own political purposes. They realize the power that they hold with respect to approving of the increase in the debt ceiling through their control the House of Representatives.

The Republicans are using the opportunity to starve the government, fire government workers, take health care away from senior citizens, and take away regulatory agencies that protect the environment and the general public. Federal government programs that help the poor and underprivileged are being cut.

The Paul Ryan plan for Medicare reform will certainly be a step in the wrong direction. This plan intends to pass off the costs of the deficit to the senior citizens of the future (i.e. people currently under 55). The Plan will take away insurance coverage for seniors and instead provide seniors with a voucher to purchase insurance from private companies. Of course, eventually the laws of economics will send prices for health coverage higher than the vouchers, and seniors will have to dig into their savings to purchase health insurance. Seniors without savings will end up with inferior healthcare plans, which will lead to deaths from treatable illnesses.

Of course, the Republicans would say that this is an opportunity to get deficits under control for the long term future of America. This comes after several studies have shown that at its current rate, the government’s deficits will keep on expanding, and eventually the country will no longer be able to afford to pay for government programs or make interest payments on government debt. This is scheduled to occur in the 2020s without any changes under the status quo. This obviously is a serious concern, which can’t be passed off to future generations.

The problem with the Republican solution to this issue is that they refuse to budge on the revenue side of the equation. With an increase in revenues, the government could afford to pay for its obligations like Medicare, Medicaid and Social Security, although these programs do need some minor reforms to save on costs.

Think about the U.S. government as a company. The company is operating at a loss. Revenues coming in are less than expenses. The company has to take on debt to pay its expenses. To balance its budget, there are two options: cut expenses or increase revenues. Of course, the company could do both and return to profitability.

 

Taxes

So, how does the U.S. Government increase its revenue? Taxes! The government should be paying its expenses with tax dollars from its Citizens, not from money that is borrowed, right? Not necessarily. Debts can be good for governments, allowing them to expand at a quicker rate and increase ownership of the country by its citizens, who buy government debt. It can help relationships with other countries, allowing countries to invest in each other and become interconnected. Of course, debts do need to be manageable to prevent a default on interest payments.

So if the Republicans are really so concerned about the deficit, why don’t they just increase taxes? The answer is that there is a pervasive dogma that has infiltrated the Republican Party. This dogma states that any increase in taxes will actually lead to a decrease in total revenue. The logic goes that lower taxes allow the economy to expand, which will actually increase total government revenues.

A company or person that pays 40% in taxes with profits or income of $100,000.00 will pay $40,000 to the federal government. A company or person that pays 25% in taxes with profits or income of $200,000.00 will pay $50,000 to the federal government. Therefore, if cutting the tax rate from 40% to 25% will allow the company to double its total profits, then the tax cut will actually lead to more government revenue!

Of course, the major caveat with this theory is that lower taxes must lead to increased profits or income to compensate for the decrease in government revenue per dollar earned. The Republican theory has basically become that any decrease in taxes will lead to an increase in total profitability that will more than compensate for the decrease.  If the theory were really valid, then taxes should just be decreased to 1%, because with taxes this low, the economy would expand exponentially.

What is to say that the company’s profits will double if its taxes are cut in half? The truth is that with any economic principle, the results are inevitably parabolic. At a certain rate, you can cut taxes, but the effect will not increase the company’s profit to account for the decrease in revenue. There is going to be a tax rate at which total revenues are maximized.

The Republicans would make the argument that this rate is lower than the current rate, and that taxes must continually be slashed until the perfect rate is found. However, this would assume that the “incredibly high” taxes that companies and individuals are currently paying are keeping them from making money. The thing is, companies are making tons of money, even after taxes. Many individuals are also making lots of money, and even after taxes, are still walking home with a lot. Yet, the economy is still stagnant.

The federal government does need to make spending cuts as part of its deficit reduction plans, but the Republicans want to turn America in to a third world country to do this. Any nation that punishes its poor, elderly and unfortunate is not going to be successful in the long run. These are long term problems, and the government needs to come up with long term solutions, which must include increasing revenue by raising taxes.

 

The U.S. Economy

The U.S. economy is not stagnating because taxes are too high. Companies are making huge after tax profits, and individuals who do have jobs have lots of disposable income after taxes. The problem is that after a decade of insane consumption and borrowing, followed by an economic meltdown, businesses and individuals are still in a state of shock. Companies are reluctant to hire new employees, and people are more likely to save than to spend. Companies have become more efficient, and can make the same revenue with fewer employees. This problem will only be solved by an increase in confidence, technological innovation, and government investment.

The compromise made at the end of 2010 shows that keeping taxes low did not have a serious stimulating effect on the economy, at least not enough to compensate for the loss in revenue associated with the cuts. The compromise prevented taxes on the rich from going up to pre-Bush levels of 39.6% (from 35%). It also changed the estate tax so that heirs to multi-million dollar fortunes would no longer have to pay taxes on the first $5,000,000 of their inheritance (or $10,000,000 for estates of couples), and would pay a tax rate of 35% on any inheritance above that amount. There may have been a small effect from this cut, but it has not had the stimulating powers that the Republicans promised.

The US economy is getting better, but it is happening very slowly. The biggest lie being spread by Republicans is that the stimulus package failed. The U.S. has had 7 consecutive quarters of positive GDP growth. Employment has been trending upwards since March, 2010, and there hasn’t been a month with net job losses since September, 2010.

The Republican Party is trying to take advantage of the short term memory that people have and blame the US economic problems on the person who has been fixing them, not on the people who caused them. The bad economy that we are experiencing is still the result of the horrible catastrophe that was caused by the Republican Party’s deregulation of the financial sector. This is still Bush’s recession, even though Obama has been trying to make it better.

Many parts of the stimulus package kept the economy from getting worse than it did. For example, the extension of unemployment benefits in the package kept money in the pockets of the millions of unemployed. They were able to use that money to buy food, rent apartments, and generally remain consumers in the economy. Each expenditure within the stimulus package can be directly related to an infiltration of dollars into the U.S. economy.

When Obama took over, the economy was in a horrible downward spiral. Hundreds of thousands of jobs were being lost every week. After the bailouts and the stimulus package, the economy stabilized and things began going in the right direction. The stimulus worked. It will take a long time to dig out of this whole, but at least we are no longer in the bottom and are on our way out. Obama did all that could possibly be done. He’s a politician, not a God.

Of course, if the debt ceiling isn’t raised, we could go right back in to the hole. Hopefully an agreement will be reached that solves some long-term problems, doesn’t punish the poor too much, and increases revenues. Until then, we can only watch the farce go on and hope for the best.

Re-examining tax exemptions for religious organizations in the aftermath of proposition 8

CWSL Scholarly Writing Paper
By Dan Revich

March 23, 2009

INTRODUCTION

On November 4, 2008, the Proposition 8 ballot initiative was passed in California with a vote of 52.1% for and 47.9% against. The Proposition added to the California Constitution the statement “only marriage between a man and a woman is valid or recognized in California.” Approximately $39 million was raised by the campaign to support Proposition 8.

This paper will discuss how religious organizations influenced the movement to ban gay marriage, and more specifically how those organizations receive their funding. Federal tax law gives religious organizations tax-exempt status, and allows individuals donating to religious organizations to deduct large portions of those donations from their income taxes. The 1970 Supreme Court holding in Walz v. Tax Commission of City of New York found that tax exemptions for religious organizations are not in violation of the Establishment Clause of the 1st amendment to the United States Constitution , and gave taxing authorities the right to grant tax exemptions to religious organizations.

This paper will analyze the constitutionality of those tax exemptions, and re-examine whether they violate the Establishment Clause of the 1st amendment, using the test applied in Lemon v. Kurtzman as a framework for analysis.

Part I of this paper will provide a background to relevant issues, cases and laws relating to Proposition 8 and tax exemptions for religious organizations. Part II will analyze the legality of the religious involvement in Proposition 8. Part III will examine whether tax exemptions are in violation of the Establishment Clause of the 1st amendment using a Lemon Test framework as a basis for analysis.

I  BACKGROUND

Part A of the Background section will outline the federal laws governing tax exemptions for religious organizations. Part B will provide a background to the Walz case. Part C will provide a background to the Lemon test that will be used as a basis for analysis in Section III of this paper. Part D will outline the involvement that religious organizations played in the passage of Proposition 8.

A. Tax Exemptions for Religious Organizations

Section 170(c)(2)(b) of the Internal Revenue Code allows tax deductions for donations to “A corporation, trust, or community chest, fund, or foundation organized and operated exclusively for religious charitable, scientific, literary, or educational purposes…” Section 501(c)(3) of the code gives religious organizations tax exempt status, so long as “no part of the net earnings of [the organization] inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation… and [the organization] does not participate in, or intervene in… any political campaign….”

Under the current system, an individual in the 35% tax bracket receives 35% of any donation he or she makes to a charity as a tax deduction. For example, an individual who pays taxes at a 35% rate will receive $35 in tax deductions from the government for every $100 donated to charity. In the proposed federal budget submitted by the Obama administration, the maximum amount deducted would be reduced to 28% in order to raise money for health care reform. Once the law is in effect, an individual would only receive $28 in tax deductions for every $100 donated to charity.

B. The Walz case

In Walz v. Tax Commission of City of New York, the Supreme Court, under the opinion of Chief Justice Burger, upheld a New York state property tax exemption for property used exclusively for religious purposes. Walz, the owner of real estate in New York, sought an injunction to prevent the New York City Tax Commission from granting property tax exemptions to religious organizations for properties used solely for religious worship. Walz argued that the tax exemption indirectly required taxpayers to make a financial contribution to religious bodies in violation of the Establishment Clause of the 1st amendment, which states that “Congress shall make no law respecting an establishment of religion.”

The majority noted that to the framers of the United States Constitution, the “establishment of a religion connoted sponsorship, financial support, and active involvement of the sovereign in religious activity.” It discussed how the court had struggled to find a neutral course between the Establishment Clause and the Free Exercise Clause of the First Amendment, concluding that any judgment would turn on whether the “particular acts in question are intended to establish or interfere with religious beliefs and practices, or have the effect of doing so.” The court’s opinion will be discussed later in this paper.

C. The Lemon Test

One year after the decision in Walz, the Supreme Court decided the case of Lemon v. Kurzman. In Lemon, Rhode Island and Pennsylvania statutes providing state aid to church-related elementary and secondary schools were challenged as being in violation of the first amendment. The Court found that the subsidies were unconstitutional, in that they presented excessive government entanglement with religious institutions.

The significant aspect of this case is the three part test that the court created to determine whether government entanglement with religion is excessive. The court writes “we must determine the character and purposes of the institutions that are benefitted, the nature of the aid that the State provides and the resulting relationship between the government and religious authority.” I will use the Lemon test as a guideline to discuss the constitutionality of tax subsidies for religious organizations in section III of this paper.

D. Religious Support for Proposition 8

The full extent of religious support for Proposition 8 became public after the 2008 election. It is estimated that approximately half of the financial support in the Yes on 8 campaign came from Mormons. The Latter Day Saints (LDS) Church itself donated $55,000 in monetary and $134,774 in nonmonetary expenditures (mostly staff time by church employees) to support the Yes on 8 cause. Two weeks prior to the election, the Yes on 8 campaign issued an urgent appeal for donations. The campaign sent an e-mail to the 92,000 individuals who registered on the Yes on 8 website www.protectmarriage.com with an urgent plea for funds. It raised $5 million shortly after that appeal, including a $1 million dollar donation from Alan C. Ashton, a computer executive and grandson of a former LDS president.

It was not just the LDS church that gave money to the Yes on 8 campaign. The LDS church was actually the last major church to join the Yes on 8 campaign, according to the New York Times. The campaign was supported by the Catholic Church, Evangelical Christians, and a myriad of ethnic church groups. The full list of contributors to the Proposition 8 campaign is listed on a searchable website hosted by the San Francisco Chronicle newspaper. Entering a search of “Church” in the Contributor Name field for financial supporters of Proposition 8 yields a list of 75 supporters who made various financial contributions. The San Diego Rock Church, for example, which states “The Rock will be a global and highly trusted model of relevant and innovative evangelism” as its vision statement, donated $25,679.16 to the Yes on 8 campaign. The Grace International Church, based out of Texas, donated $6,301.63 to the campaign. These churches, funded by donations from their members, who in turn received tax breaks for those donations, funneled money into the campaign to end gay marriage.
Religious support extended beyond financial contributions.

It is estimated that 80-90% of the volunteers who canvassed door to door for the Yes on 8 campaign were Mormons. Canvassers were instructed to first determine if the voter believed that God created marriage, and then to emphasize that Proposition 8 was in conformity with God’s will if the voter did. If the voter believed that marriage was a creation of man, then canvassers were to emphasize that Proposition 8 was merely about restoring marriage law. The LDS Church announced its support of Proposition 8 in a letter that was read in every Mormon congregation, in which the church encouraged members to donate time and money to the Yes on 8 cause.

The impact that church sermons and rhetoric had on voters also likely contributed to the success of the ballot initiative. An acquaintance who attended the aforementioned San Diego Rock Church shortly after the vote claimed that the pastor gave a sermon about the importance of the passage of the law. The impact of numerous pastors, priests, and rabbis throughout California instructing their congregations to vote Yes was likely significant.

Finally, religious organizations have also played a role in the fight to prevent Proposition 8 from being overturned. The day after the passage of Proposition 8, a group of gay couples initiated a Petition for Writ of Mandate enjoining state officials from “enforcing, taking any steps to enforce, or directing any persons or entities to enforce” Proposition 8. The Petitioners argue that Proposition 8 is invalid, as it is not an amendment to the California constitution, but a revision.

Briefs in support of respondent (and intervener siding with respondent) were filed with the California Supreme Court by several religious organizations, including Kingdom of Heaven, California Catholic Conference, The United States Conference of Catholic Bishops, The Union of Orthodox Jewish Congregations of America and The Church of the Messiah.

II  LEGALITY OF RELIGIOUS INVOLVEMENT IN PROPOSITION 8

A primary issue is whether the religious involvement discussed in the background section is in violation of current laws regulating political activities of religious organizations. Section 501(c)(3) of the Internal Revenue Code prohibits charitable organizations from undertaking in any political campaign activity, and requires that they only engage in minimal lobbying. There are three requirements that charitable organizations must meet in order to receive tax-exempt status: No part of the net earnings may benefit a private shareholder or individual; No substantial part of the organization’s activities may consist of lobbying or attempting to otherwise influence legislation, and; the entity may not participate in or intervene in a political campaign for any political office.

IRS regulations state that “the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to… a candidate” is prohibited. Organizations may participate in voter education, voter registration and voter encouragement, so long as they do not favor one candidate over another. Political candidates may speak to religious organizations, so long as the organization provides an equal opportunity for competing candidates to participate, does not indicate whether it supports or opposes the candidate, and does not use the event to fundraise. 501(c)(3) organizations can take positions on issues, so long as they do not favor one candidate over the other.

In Branch Ministries v. Rossotti , Branch Ministries Church challenged the IRS’s revocation of its tax-exempt status, which occurred after the church published an ad in USA Today and the Washington Times four days before the 1992 election. The ad urged Christians not to vote for presidential candidate Bill Clinton because of his views on social issues. The court of appeals for the District of Columbia found that the IRS’s revocation of the Church’s tax-exempt status did not violate the U.S. Constitution or exceed the IRS’s statutory authority. The court noted that withdrawal of tax exempt status only violates the first amendment if it is “…denie[d] … because of conduct mandated by religious belief, thereby putting substantial pressure on an adherent to modify his behavior and to violate his beliefs.” The Court stated that: “Although its advertisements reflected its religious convictions on certain questions of morality, the Church does not maintain that a withdrawal from electoral politics would violate its beliefs.” The court found that the burden of losing tax-exempt status was not constitutionally significant. It is clear that losing tax exempt status would place a burden on churches, as most of a church’s income is derived from donations.

A complaint was filed against the LDS church by Fred Karger, founder of the group Californians Against Hate, for violations of the California election law in supporting Proposition 8. California law requires that Churches disclose all contributions to political campaigns made by religious organizations. The complaint launched an investigation by the California Fair Political Practices Commission. The Church subsequently disclosed all contributions to California authorities, but claimed that “the filing is in no way prompted by an investigation by the California Fair Political Practices Commission.” Proposition 8 supporters also attempted to get an injunction to prevent donor lists from being made public, but U.S. District Judge Morrison England Jr. ordered that the names be released, arguing that disclosure laws are in place to protect the public.

Recent internet campaigns seek to file complaints with the IRS to remove the LDS church’s tax exempt status because of its support for the Yes on 8 campaign. However, as Barry Lynn, president of Americans United for Separation of Church and State asserts, “while the tax code has a zero tolerance for endorsements of candidates, the tax code gives wide latitude for churches to engage in discussions of policy matters and moral questions, including when posed as initiatives.” The LDS Church would only lose its tax-exempt status if a substantial part of the Church’s funds went towards political activities. Generally, charitable organizations that spend less than 10% of total revenues on non-charitable activities will not lose their tax-exempt status. The LDS church is so large that the amount spent on the Proposition 8 campaign would not meet the 10% threshold.

Thus, under current tax law, it appears that the involvement of religious organizations in the passage of Proposition 8 was within the confines of acceptable political activity, and was therefore not in violation the law. Supporting the Yes on 8 campaign did not amount to actually supporting a particular candidate, but simply supporting a political cause. I would argue that religious organizations are inherently political, and therefore attempting to stifle their political activities is inevitably futile. The free reign of religious organizations in their political activities would not be a problem but for the fact that religious organizations receive tax-exempt status. The alternative to attempting to control what religious organizations do in order to receive tax-exempt statues would be to simply remove that status completely.

III THE CONSTITUTIONALITY OF TAX EXEMPTIONS FOR RELIGIOUS ORGANIZATIONS

This section will discuss whether tax exemptions for religious organizations satisfy the three prongs of the lemon test. Part A will discuss the nature of the aid that the state provides, examining whether tax exemptions for donations to religious organizations are equivalent to government subsidies. Part B will examine the resulting relationship between the government and religious authority, discussing whether tax exemptions for religious organizations serve to establish a state religion. Part C will examine the character and purposes of the institutions that are benefitted, discussing whether religious organizations are beneficial to society.

A. Are Tax Exemptions for Religious Organizations Equivalent to Government Subsidies?
“The nature of the aid that the state provides”

In the Walz case, the majority argued that “The grant of a tax exemption is not sponsorship since the government does not transfer part of its revenue to churches but simply abstains from demanding that the church support the state.” The court used the analogy of libraries, art galleries and hospitals to show that other organizations receive tax exempt status, but are not considered arms of the state.
In his dissent to Walz, Justice Douglas argues against the claim that a tax exemption is not a subsidy. He makes the analogy of giving a federal grant to a church to construct an edifice, and claims that a tax exemptions would serve the same purpose. Douglas refutes the majority’s argument that many other private institutions receive government subsidies, arguing that these organizations represent “social welfare programs within the reach of the police power.”

In Mueller v. Allen, taxpayers fought a tax deduction that was available for parents of children attending sectarian schools. In a 5-4 ruling, the majority, led by Justice Rehnquist, argued that “…financial assistance provided to parents ultimately has an economic effect comparable to that of aid given directly to the schools attended by their children. It is also true, however, that under Minnesota’s arrangement, public funds become available only as a result of numerous, private choices of individual parents of school-age children” . He continues “Where, as here, aid to parochial schools is available only as a result of decisions of individual parents, no ‘imprimatur of State approval’… can be deemed to have been conferred on any particular religion, or on religion generally.”

In his dissent to Mueller, Justice Marshall argues that “By ensuring that parents will be reimbursed for tuition payments they make, the Minnesota statute requires that taxpayers in general pay for the cost of parochial education and extends a financial ‘incentive to parents to send their children to sectarian schools’.” He continues that “it makes no difference whether the qualifying ‘parent receives an actual cash payment or is allowed to reduce … the sum he would otherwise be obliged to pay over to the State.”

When applying Marshall’s arguments to tax exemptions for donations to religious organizations, it is clear that the same logic applies. Taxpayers in general pay for the operating costs of religious organizations because of deductions, and individuals are given a financial incentive to donate to and support religious organizations.

The true private choice doctrine discussed in Mueller has been upheld by the U.S. Supreme Court as recently as 2002, in Zelman v. Simmons-Harris. In Zelman, The court stated that “…our jurisprudence with respect to true private choice programs has remained consistent and unbroken. Three times we have confronted Establishment Clause challenges to neutral government programs that provide aid directly to a broad class of individuals, who, in turn, direct the aid to religious schools or institutions of their own choosing. Three times we have rejected such challenges.”

In his dissent to Zelman, Justice Stevens argues that “the voluntary character of the private choice to prefer a parochial education over an education in the public school system seems to me quite irrelevant to the question whether the government’s choice to pay for religious indoctrination is constitutionally permissible.”

The private choice doctrine attempts to distinguish tax exemptions from government expenditures. However, even Justice Rehnquist admitted that those tax exemptions lead to the same effect that would arise if a direct government subsidy were provided. The only difference is that individuals are given the ability to dictate state expenditures based on their private decisions.

The government’s provision of a tax deduction for a donation to a religious organizations is financially equivalent to a government’s provision of a direct financial subsidy to that same organization. By refunding $35 for every $100 that an individual gives to his church, the government is essentially contributing $35 to that church for every $65 donated by the individual. By refusing to collect $10,000 in property taxes from a church that the it would otherwise collect from another tenant, the government is giving $10,000 to the Church to spend that the Church would not otherwise have. It is thus clear that the aid that the government is providing to religious organizations through tax incentives is economic in nature, and is functionally equivalent to the provision of direct subsidies.

B. Do tax exemptions for religious organizations establish a state religion?
“the resulting relationship between the government and religious authority”

In the Walz opinion, Justice Burger argued that “nothing in this national attitude toward religious tolerance and two centuries of uninterrupted freedom has given the remotest sign of leading to an established church or religion…”. The Court reasoned that the state law challenged in Walz did not single out any particular religion, and therefore the “federal or state grants of tax exemptions to churches were not a violation of the Religion Clauses of the first amendment.”

I submit that the majority in Walz is incorrect in arguing that the United States does not have an established religion because of tax subsidies. The United States government is subsidizing religious organizations with billions of dollars of taxpayer money. The government is giving far greater amounts of funds to certain religions because those religions already have greater numbers of practicing members who donate more money.

The court in Zelman affirmed the reasoning that “We would be loath to adopt a rule grounding the constitutionality of a facially neutral law on annual reports reciting the extent to which various classes of private citizens claimed benefits under the law.” To me, it would not be loath, but diligent to determine where money that would otherwise be in State coffers is being distributed to.

Donations to religious organizations accounted for approximately 35% of total donations in 2004 (down from 53% in 1985) . They account for between 45% and 53% of total household giving. It is estimated that households alone gave $83 billion to religious organizations in 2002 . If those households deducted those donations at a 35% deduction rate, it could amount to approximately $29 billion dollars in personal income tax deductions. That’s $29 billion dollars of funds going to religious organizations that would otherwise be in the hands of the government, or in the hands of other charitable organizations. Of the estimated $83 Billion, approximately $60 billion went to Protestant organizations (72%), $9 billion to Catholic organizations (11%), $3 billion to Jewish organizations (3.5%), $3 billion to non-denominational religious organizations (3.5%), $2 billion to LDS organizations (2.4%), and $600 million to Islamic organizations (0.7%).

The government has established Christianity as the religion in America via these exemptions. The figures above show that 72% of household donations are given to Protestant churches and 11% to Catholic churches. Billions of tax dollars that would be in government coffers if these tax deductions did not exist are being funneled to Christianity, allowing it to claim its role as the dominant religion in America.
The major exception to this is in Utah, where the Latter Day Saints Church is the established religion. Much of the hundreds of millions of dollars that the LDS church receives in government subsidies through tax exemptions are being funneled in to it in Utah, where the church is headquartered. This allows the church to maintain its power in that State, and have an abundance of control over state law.

In his dissent, Justice Douglas reframes the question presented in the Walz case. “The question in this case is whether believers organized in church groups can be made exempt from real estate taxes, merely because they are believers, while non-believers, whether organized or not, must pay the real estate taxes.” He argued that one of the best ways to establish one or more religions is to subsidize them with a tax exemption. He stated “government may not provide or finance worship because of the Establishment Clause any more than it may single out ‘atheistic’ or ‘agnostic’ centers or groups and create or finance them.” He concluded that the New York state-property-tax exemption treated believers and nonbelievers differently because of the articles of their faith. Since the Establishment Clause was intended to keep the government neutral not only between sects, but between believers and nonbelievers as well, he found the exemption to be unconstitutional.

The majority in Walz argued that by removing tax exemptions, the role of government’s involvement in religion would be expanded, because it would give rise to tax valuation of church property, tax liens, tax foreclosures and the conflicts that would follow. It argued that there is less involvement between church and state in foregoing taxation than there would be if the state collected taxes.

I would argue that if the government treated churches as any other private, mutual benefit non-profit, such as a country club, which does not receive tax exempt status, the involvement would be similar to what it is currently. There is no movement arguing that the government has too much involvement in taxing country clubs, and similarly there would not be too much involvement if the government taxed religious organizations, or collected taxes from donations thereto. Although the right of free exercise to join country clubs is not protected under the religion clauses, that right is protected under freedom of association. Yet there is no movement arguing that individuals’ right to freedom of association is hampered by the fact that their country club must pay taxes.

If a church cannot pay its taxes and faces a foreclosure, then that church does not have enough financial support from its members, and should be allowed to fail like any organization that is unable to raise revenue. Enforcing tax subsidies requires a lot of government involvement, including monitoring and registering religious organizations so that they maintain their tax exempt status, and distributing tax refunds to individuals who make donations to religious organizations. The amount of government entanglement necessary to tax religious organizations would not be significantly different from the amount of entanglement under the current system.

Under the current state of tax exemptions, the state is supporting one religion with billions of dollars, and prioritizing its financial subsidies to other religions based on the relative wealth of individuals who belong to those religions and how much money those individuals contribute. Through these tax exemptions, the law has established Christianity as the American religion, and has propped up religion in America.

C. Are religious organizations beneficial to society?
“the character and purposes of the institutions that are benefitted”

In Walz, the majority justified tax exemptions for religious organizations because the State considers religious organizations to be “beneficial and stabilizing influences in community life”. In his concurrence, Justice Brennan argued that tax exemptions for religious organizations served to carry out secular purposes and not “essentially religious purposes.” He claimed that the state encourages religious activities because religious organizations contribute to the diversity of the Nation, and that there is no non-religious substitute for religion. Essentially, he believed that religion is a good thing, and therefore that it is justifiable for the state to support it.

In his dissent, Douglas refutes Justice Brennan’s argument that religious organizations perform many secular purposes by arguing that a ‘church qua nonprofit charitable organization’ is so intertwined with the ‘church qua church’ that the welfare activities it undertakes may in fact “merely be a phase of sectarian activity.” “Its sectarian faith sets it apart from all others and makes it difficult to equate its constituency with the general public. The extent that its facilities are open to all may only indicate the nature of its proselytism.” In other words, religious organizations may undertake in beneficial secular activities, but the root of those activities is entrenched in the perpetuation of the religion and its religious dogma. He writes: “…Subsidies either through direct grant or tax exemption for sectarian causes, whether carried on by a church qua church or by church qua welfare agency, must be treated differently” from subsidies for secular public welfare institutions.

The majority and concurring writers in Walz tended to operate under the assumption that religion is in fact good for society. However, It is the same religious organizations that claim to be authorities on morality that made extreme efforts, and succeeded, in supporting the cause to convince a majority of Californians to vote for a law that limits the rights of a minority of individuals in Californian society. Based on religion’s effect on Proposition 8, it is apparent that religion may not in fact be good for society. Although some religious organizations may have actually been against Proposition 8, the facts indicate that the majority of religious activity attempted to support the Proposition.

Proposition 8 exposes some of the negative influences that religion has on society, but it only represents the tip of the iceberg. Many religious organizations make efforts to subvert science, enforce outdated and unrealistic moral viewpoints, and in extreme cases provide refuge for sexual deviants or even terrorists.

Although many religions may perform altruistic secular services, Justice Douglas makes a strong argument that many of those services are simply used as a method of proselytizing. Religions have self-preservation as their foremost goal, which is why they have been able to flourish for thousands of years. Part of maintaining their power involves gaining public support, which they do by performing altruistic acts. These same altruistic acts could be performed by secular organizations, or even by organizations like the Red Cross, which are affiliated with religious organizations, but are not formed for religious purposes. Non-religious services performed by religious organizations could be performed by these secular, religiously affiliated organizations.

Religion is becoming more and more irrelevant as science progresses, and the tenets of religious dogma are continuously being attacked for their lack of a basis in reality. Richard Dawkins’s 2006 best seller The God Delusion makes a strong case against the primary tenet held by most religions, that of the existence of an invisible, all-powerful god. Religions may have represented a stepping stone in the advancement of human civilization, but science has advanced to a point in which humans no longer need to resort to the supernatural to explain earthly phenomena. The existence of tax exemptions allows religious organizations to flourish, and prevents the advancement of viewpoints that can be legitimately supported by scientific knowledge.

The government should not be directly or indirectly supporting religious organizations with taxpayer dollars under the guise that they are promoting the public welfare. By subsidizing religion via tax exemptions, the government is prioritizing religious belief over atheistic or agnostic belief. Although atheists and agnostics could organize atheistic religions that also receive tax exemptions, this is antithetical to the beliefs of many atheists, who would not want to equate themselves with religious organizations. Atheist organizations do not have the ability that religious organizations do to convince members to donate to them in return for receiving advantages in the afterlife. They have less ability than religious organizations do to proselytize and gain more donations, as most religious doctrines are designed to recruit non-believers under a theory of future salvation, whereas the precepts of atheistic beliefs are much more difficult to use as a recruitment tool. It is thus apparent that atheist and agnostic beliefs are disadvantaged by the organizational structure that federal law demands in order to receive tax breaks.

Attitudes towards religion are increasingly swaying in favor of anti-religious sentiment. A recent study found that only 75% of Americans call themselves Christian, compared to 86% in 1990. The only remaining stronghold is in the evangelical religious sector, which has actually risen in popularity from 200,000 individuals claiming to be evangelicals in 1999 to 8,000,000 in 2009. This is probably attributable to the fact that religion is increasingly having to resort to fundamentalism in order to survive, as fundamentalist religions are better able to fight against secular, external influences. It is still likely that religion will continue to flourish, however, so long as the government is supporting it with tax exemptions.

III SUMMARY AND CONCLUSION

Although it is important that individuals have the right to choose their religion, it is also important that individuals have the right to not choose any religion. The government prioritizes religious beliefs by giving religious organizations tax exemptions, dispensing a disproportionate amount of funds to Christian organizations, and funding other religions based on the number and relative wealth of their members. These actions have led establishment of a state religion in violation of the Establishment Clause of the first amendment.

The influence of religious institutions in the passage of Proposition 8 should give America a wakeup call. Religious organizations do not benefit the public, but rather serve their own interests, impede civil rights, and stifle scientific advancement. They should be treated as mutual benefit organizations that serve only their members, not as public benefit ones that serve society as a whole.

Accordingly, the law should not allow religious organizations to receive tax exempt status. Charitable organizations should be distinct from religious ones, and should be monitored to ensure that their actions are charitable and not religious in nature. Individuals and corporations should not be able to receive tax deductions for their donations to religious organizations. Finally, churches should be forced to pay property taxes like any other owner of property, and should face the same consequences for nonpayment.

Why America Needs The Public Option

The health care reform debate has been at the forefront of the national media spotlight since Americans got tired of talking about the economy. What amazes me is how few economic discussions are involved in assessing what should be done to fix America’s broken health care system. Instead, the discussions focus on hyperboles, emotions, and a whole lot of fear mongering. This is my analysis of the situation.

Part I: The Problem

Profit Maximization
Insurance companies are corporations. Corporations have one underlying goal: to maximize profits for their shareholders. This is not necessarily a bad thing, but it is a fact. Insurance companies are not in business to make sure everyone is insured, they are in business to sell policies and make money.

Think about insurance policies like TVs. If it costs you $50 to make a TV, but you can sell just as many for $100 as you would for $50, it would be stupid not to sell the TVs for $100. Let’s say you can sell ten TVs for $100. That’s $1000 in TV revenues and $500 in costs, with a profit of $500. What if you could sell eight TVs for $200, with two fewer people buying TVs because they’re too expensive? That’s $1600 in revenues and $400 in costs, with a profit of $1200. It would be stupid not to raise the price to $200. But what about those two poor suckers who don’t have TVs anymore? Well, they’re just TVs so it’s no problem.

Health insurance operates in the same manner. Insurance companies are incentivised to charge higher and higher rates, up to the point where profit is maximized and any increase in price will cause companies or individuals purchasing the insurance to drop coverage at a loss to the insurer. But, unlike with TVs, not having an insurance policy means risking sickness, death or bankruptcy. This makes health insurance highly inelastic, in that a large increase in price will cause only a few people to drop coverage. Letting people die by forcing them to drop coverage because costs are too high is thus built into the private system.

Market Power
In a purely competitive economy, insurance companies would not be able to charge rates as high as that which would maximize profits, because other companies would charge cheaper rates. Going back to the TV example, imagine if your competitor sold similar TVs for $100. Lets say that if you charged $200, you could only sell 2 TVs with a profit of $300, which is less than the $500 you would make if you sold them for $100. It would make sense to buy your competitor out so that you can jack up the price to $200 and sell just as many TVs. Or, you could talk to your competitor, and agree to both sell the TVs for $200. Or, even better, you could buy the factory that sells the TVs to your competitor, make that company stop selling to the competitor, then jack up the prices and watch your competitor fizzle out. This is called gaining market power, (monopoly power if you are the only seller).

Most of the health industry is not competitive. There are a limited number of health providers, and they collude on prices. Healthcare companies gain market power in a way that is similar to the third example in the previous paragraph. The factory producing TVs is like a hospital providing health services. Insurance companies often own hospitals, or have exclusive agreements with hospital operators. They make sure no other insurance companies have access to those hospitals, or make agreements with other companies to charge the same prices for access to those hospitals.

Insurance companies will charge rates that are as high as they possibly can, and squeeze people out of coverage. In a recession, more people and businesses are forced to drop coverage because they don’t have jobs. Insurance companies raise rates to compensate for having fewer customers, because they know that the remaining customers will fork over more money for an essential service like health care.

Pre-existing conditions
Insurance companies are also disincentivised from providing coverage to people with pre-existing health conditions, the people who need health insurance the most. Think about it like a life insurance policy. Would you sell a policy for $100 a month that paid out $100,000 to someone who was likely going to die in 2 months? That would be stupid, since you know you would lose almost $100,000 on the deal. Similarly, health insurance companies would not provide coverage to someone who has suffered from cancer, since that person is likely to rack up a lot of medical bills if their cancer comes back. Health insurers are in the business of risk, and sick people present too high of a risk.

Society loses
The result of all of these issues is that society loses. Health care should not be a scarce commodity like TVs. It should be a universal commodity available to all. Anyone who disagrees with this thinks that people should die because they are poor. This is a viable argument that can be made: if you can’t afford health insurance, then you should die if you are sick. We live in a capitalist system, and people who haven’t figured out how to manipulate the system to maximize their financial gain should die. This argument is completely inhumane, and I can’t understand the thought process of those who make it.

Many would argue that under the current system, hospitals are forced to provide emergency coverage, and therefore the poor do get care. But, many are forced to go into bankruptcy because of this situation, which prevents them from having an equal opportunity to participate in the capitalist system. Further, there is more than emergency coverage necessary to have proper health care. What about diseases or operations? What about checkups that can prevent or catch sickness early? What about insane deductibles and denials of coverage for those who do have healthcare? Everyone should have a right to a basic level of health care. Lack of money should not be grounds for receiving the death penalty.

Corruption
Why has nothing changed? A problem that has persisted due to the current system is widespread involvement of insurance companies in spending money to sway people to support their companies and the current system. Again, this is just a part of the system. If your company is making $1 billion a year in profit, it’s worth $100 million to pay someone to make sure that you keep making that profit if you only will make $500 million a year in profit if you don’t make the payment. It’s worth $400 million in savings to spend that $100 million.

There’s no point in blaming insurance companies for spending hundreds of billions of dollars to fight the public option by giving money to lawmakers and spending money on expensive advertisements to sway public opinion in their favour. They are private companies, and those funds are a worthwhile investment. After all, it works. As of the writing of this article, the insurance companies have almost completely squashed the public option as a legislative solution to the health care problem. But, in reality, the public option is the only solution.

Part II: The solution

The Band-Aid
Any solution without a public option is essentially a band-aid. The current solution being sent through the senate serves to force insurance companies to take losses on people with pre-existing conditions and the poor who can’t afford insurance. The government would have to subsidize those losses in some way shape or form. Prices will keep going up, and inevitably the taxpayer will have to pay. These band-aid solutions are just another way of funnelling taxpayer money to shareholders of insurance companies. The poor will likely receive inferior and inadequate coverage.

Medicare and Medicaid are essentially band-aid solutions. Health insurance is provided to seniors or the poor with billions of dollars of government handouts. Medicare costs continually increase because basic health care costs continually increase. These costs put a greater and greater burden on the taxpayer, and lead to trillions of dollars in government debt.

The Public Option
A public health insurance provider would have a different incentive system from a private corporation. Rather than maximizing profits to shareholders, a public insurer would want to minimize profits, or even take losses, so as to make sure the maximum number of people are able to get the best possible coverage. A public organization’s incentives are directed towards pleasing voters. Thus, the more happy voters, the more support for the organization. The more people that have coverage, the more happy voters.

The public option is like a competitor selling TVs for $50, or even $40. What are you going to do if your competitor is selling TVs for $40 that cost you $50 to produce? Well, you either go out of business or build a better TV that you can make money off of.

The public option would force insurance companies to sell better and cheaper plans that would compete with the public plan. The public plan would slowly swallow up the cheap and inefficient side of the health coverage market. Many employers would switch their coverage to the public option to cut costs. Private options would be a premium service offered by certain employers. They would be forced to compete with public providers.

This scenario would be better for America. Employers would be able to see more profits because they can save money on giving health care to their employees. All Americans would be covered, and not be forced into bankruptcy to survive sickness. Medical costs would go down because the government insurer would be able to bargain with medical providers to lower medical costs. Doctors will still be rich, just not as rich.

Many people are afraid of this scenario unfolding because they think it represents socialism. Perhaps a complete government takeover of healthcare, hospitals, and the destruction of private competition as exists in Canada and other countries would be socialistic. But just providing a government option that competes with the private options is no different from a public school system, or a public parcel delivery system. Private schools have to offer an education that is better than the public system can offer. The public system thus encourages better education for all.

Some things are best done by governments, who serve the best interests of society, not their shareholders. Coming from Canada, it is astounding for me to hear the hell that Americans go through just to get health care. When I needed health care in Canada, I went to the hospital or doctor, filled some paperwork out, and showed my government insurance card. That was it. No bills, no questions, no deductible. Nothing. Just health care. Which is not to say that the Canadian system is perfect, but it is much better than a system where poverty is a death sentence.

Health care should be a right ensured by the government, not a purchased commodity like TVs. Americans need to stop listening to the rhetoric presented by the insurance companies. These companies are fighting for their lives. Fortunately for them, the people in charge of making the decision to put a public option in place are corrupt and ignorant, and will shift their position in return for kickbacks that will get them re-elected.

The only way things will change is if American support for the public option increases, and the only way that will happen is if Americans get educated about the issue, and realize that the public option will make life better for everyone except the shareholders of insurance companies.