Poverty and Taxation

Last night, I was in Palo Alto having dinner with many of the National Fellows at the Hoover Institution. On my left there was a woman from Beijing who is studying how miscommunication occurs between totalitarian regimes and democracies. She has flawless English--had I not known better, I'd have assumed she was born in California. We got in a discussion about how China is perceived in the United States, but in the process, I learned a lot about how the United States is perceived in China.

It started when she asked me an very straightforward question about the Romney "47%" gaffe. She said, "Is it really true that 47% of Americans pay no taxes?" She clearly found this to be astonishing. Luckily, I'd been blogging about this stuff, so I didn't feel as uninformed as usual. Yes, that's true, I said.

Well, what's their income? she asked.

Duh. I didn't know, but I did make a guess that turned out to be fairly accurate. I said, "I'm not sure, but  I'd guess around $35,000 or under."

Now, that turned out to be about right. 83% of nontaxable returns are filed by people with incomes of $30,000 or less. (But there are some people who make a lot of money who pay no tax; see the figures in this USA Today article:  Who doesn't pay taxes? )

She was again surprised. "You mean people make that much money and pay nothing?!"

The conversation went from there to what poverty means in the United States versus what poverty means in China. For instance, she couldn't fathom why Chicago School teachers would think they had a moral right to higher pay.

China's per capita income is about $5,400 dollars; the per capita income of the United States is about $48,400, according to IMF figures for 2010 to 2011. This, of course, doesn't give us the range. People in China, however, are happy to get a job at $5 an hour.

My Chinese friend is a very courteous person and did not say that the citizens of the United States had lost touch with reality. So I said it, and then she agreed. "Most poor people in the United States would be considered wealthy in China," she said. (She's not a new-comer to the United States, by the way. She has spent years here, and is a professor at Rice University.)

How wealthy is someone below the federal poverty line in the United States? see this digest of census information from the Heritage Foundation: What is Poverty in the United States

Here's the Abstract for the Heritage study: "For decades, the U.S. Census Bureau has reported that over 30 million Americans were living in “poverty,” but the bureau’s definition of poverty differs widely from that held by most Americans. In fact, other government surveys show that most of the persons whom the government defines as “in poverty” are not poor in any ordinary sense of the term. The overwhelming majority of the poor have air conditioning, cable TV, and a host of other modern amenities. They are well housed, have an adequate and reasonably steady supply of food, and have met their other basic needs, including medical care. Some poor Americans do experience significant hardships, including temporary food shortages or inadequate housing, but these individuals are a minority within the overall poverty population. Poverty remains an issue of serious social concern, but accurate information about that problem is essential in crafting wise public policy. Exaggeration and misinformation about poverty obscure the nature, extent, and causes of real material deprivation, thereby hampering the development of well-targeted, effective programs to reduce the problem."

I wonder if China will get around to loaning us another trillion and a half. I wonder how we'd ever pay it back. The sad fact is, fellow Americans, altogether we don't work hard enough, we don't pay enough to cover our benefits, and we seem to think the world owes us a living. The world, I'm finding out, has a different idea.