This blog started out as a companion piece to my book, Musings from the Christian Left (excerpts of which can be found in the July 2004 link) and to support a planned radio show. Now, its simply a long term writing project from a Christian Left Libertarian perspective (meaning I often argue for liberty within the (Catholic) Church, rather than liberty because the church takes care of a conservative view of morality.

Tuesday, October 06, 2009

Living wage as economic stimulus

Debate is beginning to intensify in our nation's capitol about the need for a second economic stimulus package to begin moving the economy. I suggest that Obama take a page from Catholic Social Theory in doing so, much the way FDR did when he asked Msgr. Ryan help him design Social Security.

A central tenant of Catholic Social Teaching is a fair and living wage, which can be defined as a wage large enough to provide for one's family. We have exemptions, the earned income credit and a child tax credit to move us in that direction - however these have not quite kept up with inflation. While the exemption is currently indexed, that indexing started after it had lost much of its purchasing power. Additionally, exemptions are not refundable - so they don't help you if you do not have tax liability. Finally, having three different sources of child income lends unneeded complexity to the system, forcing those who need it most (who often are the least educated) to turn to tax preparers - some of whom are very poorly trained.

I suggest combining several credits, deductions and exemptions - as well as most entitlement programs - into a single refundable child tax credit of between $500 and $1000 per month. The current monthly value of the child tax credit is a mere $83.33 That might by food. Shifting the exemption to a refundable credit would double that to $167. Ending the mortgage interest and property tax deductions and shifting those to the credit would bring the monthly value to $500. Now we are getting someplace. If you moved Food Stamps and some of the other entitlements to a refundable credit to children and the elderly you could raise it even higher. If state governments got into the act, especially those with a high cost of living, you could actually provide a living wage.

Many object to mandated living wage legislation because it would hit small business hard. Using the tax system to assure a living wage does not hurt employers at all.

Housing would not necessarily lose by this shift, since the biggest additional expense in adding a child to the family is additional housing. This might change the mix of housing demanded and it might even expand housing, as studies show that most wealthy people buy bigger homes regardless of whether they can deduct the mortgage interest. Most wealthy folks realize that even if you get thirty cents back on the dollar for mortgage interest, you are still paying seventy cents. Wealthy people most likely pay cash rather than incur interest to save on their taxes.

This proposal is economic stimulus for two reasons. In the short run, it will get more money into the hands of those who need it the most and who are most likely to spend it (and in a manner that won't increase the deficit). In the long run, when the economy is slow, increasing the credit could be a powerful tool to perk the economy up when it needs it the most .

If this idea appeals to you, spread it around, especially if you call yourself pro-life. The living wage is probably the most profound life issue there is. As his holiness, Benedict XVI said in Caritas in Veritate, the two are not separate.

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