taxes

Do the American rich realize how far the poor are slipping?

The Great Recession has affected some more than others. Mainly, the poor have gotten poorer. Meanwhile, the rich, who've been far less affected, still perceive America as a land of equality.

In a recent PBS NewsHour investigation, Paul Solman polled several upper and upper-middle class individuals in New York City to identify a pie graph of inequality in the United States. Either from unrealistic optimism or simple ignorance, most of those polled choose a pie graph reflecting the levels of inequality in Sweden. However, the United States has much higher levels of disparity than Sweden. According to PBS, the United States falls into the category of extreme inequality "where the richest fifth owns 84 percent of the nation's wealth, while the bottom two-fifths, 40 percent of the population, owns an almost invisible 0.3 percent of the nation's property."

In jobs speech this month, President Obama declared that billionaire "Warren Buffett pays a lower tax rate than his secretary—an outrage he has asked us to fix." Buffet, an outspoken advocate for taxing the "mega-rich," was also interviewed by PBS. He contends that the rich have really no conception of how bad things are for the poor—even the middle class—in America. In a recent New York Times Op-Ed piece, Buffet concluded that the rich should bare some of the economic burden. In his own words, "it’s time for our government to get serious about shared sacrifice."

Watch the full PBS NewsHour short above.

Defunct Tax System Harms Pakistan's Poor

In Pakistan, the wealthy can afford elaborate celebrations, though much of the country remains poor. Photo: <a href="http://www.flickr.com/photos/telachhe/4641589801/in/photostream/">Tela Chhe (flickr)</a>
In Pakistan, the wealthy can afford elaborate celebrations, though much of the country remains poor. Photo: Tela Chhe (flickr)

Pakistan’s economy is growing, but only the upper crust of society enjoy the gains.

Pakistan's economy has grown each year since 1951, despite severe drought, political instability, and the global recession. This economic success is apparent in the Times' description of high-rolling lifestyles in Islamabad.

Much of Pakistan’s capital city looks like a rich Los Angeles suburb. Shiny sport utility vehicles purr down gated driveways. Elegant multistory homes are tended by servants. Laundry is never hung out to dry.

But, while some are well-off, many still struggle to get by. Pakistan ranks in the bottom quarter of the Human Development Index in terms of quality of life. And more than 60 percent of Pakistan's population gets by on less than $2 a day, according to UNDP figures. Two professors from the Lahore University of Management Science argue that Pakistan's skewed tax system is a driver of poverty:

[T]he single most devastating factor for increased income and wealth inequalities in Pakistan remains the regressive tax system. Incidence of tax on the poor in the last 10 years has increased substantially (by about 35 per cent), while the rich are paying almost no direct tax on their colossal income and wealth.

The skewed tax system in Pakistan contributes to poverty by increasing income disparities and redirecting funds for social spending back in to the pockets of the rich, explains the New York Times. But only about 2.5 million out of an estimated 10 million who should be paying taxes actually cough up the money estimates Akbar Zaidi, a political economist with the Carnegie Endowment. As a result, Pakistan has had to apply for a $10.66 billion loan from the IMF.

All in all, the rich gain either because they don't have to pay into the system, or because, when they do, they reap the benefits. In an effort to get some of the lost tax dollars, local communities have adopted a creative strategy. They've started paying transvestites to rap on the doors of the wealthy and collect owed taxes. The New York Times captured these "tax collectors" all dolled up in heels and full make-up, but also swathed with the Islamic hajab in a recent video. Often the rich will pay up just to avoid having these "outcasts" linger.

But, this localized effort is really just a stop-gap measure until real reform is achieved. Many look to the U.S. as the necessary catalyst for change say watchdog groups, such as Probe International. The U.S. essentially subsidizes Pakistan’s economy by providing billions in foreign aid, giving the Pakistani government little incentive to reform the tax system. Thus, indirectly, U.S. aid inevitably hurts Pakistan's poor.

Many are fed up, such as Zaidi, the Times reports. Zaidi believes “[t]he Americans should say: ‘Enough. Sort it out yourselves. Get your house in order first. But you are cowards. You are afraid to take that chance,” he challenges.


Stories We're Watching

Jobs for Billionaires - By Joshua E. Keating

Foreign Policy - Thu, 05/24/2012 - 07:25
A few problems back here on Earth in need of some serious capital.

Panda glasses are Toms shoes for your face

Washington Post - Innovations - Thu, 05/24/2012 - 02:30
Growing up in a Chinese home, Vincent Ko saw the many uses of bamboo — in the kitchen utensils, decorations and even furniture. Years later, as a recent Georgetown University graduate, Ko began to wonder if the trendy Asian grass had a place in fashion — in sunglasses, to be exact.

Old Ways Disappearing In The New Mongolia

NPR - Thu, 05/24/2012 - 00:17
With desertification, drought and a booming mining industry, Mongolians are leaving the traditional life of herding. Herdsman Bat-Erdene Badam says he will be the last in his family to tend livestock. His children are trading in their nomadic lives for more stable, often urban jobs.

Two Worlds, One Climate - By Peter Passell

Foreign Policy - Wed, 05/23/2012 - 14:35
Forget Kyoto. There’s a much better way to persuade the developing world to fight climate change.

Brazil and China, Oiling the Wheels of Business

Inter Press Service - development - Mon, 05/28/2012 - 06:21
China's voracious demand for energy has prompted it to embrace Brazil as a major oil partner, fuelling the dramatic expansion of Chinese companies in this South American country. But while some see this as a boost to the Brazilian economy, others fear that it poses a risk to this country's future self-sufficiency.

Recent comments

Countries

An initiative of Mercy Corps
“You must be the change
you wish to see in the world”
Mahatma Gandhi
Learn more about Mercy Corps >

Efficiency

Over the last five years, more than 89% of Mercy Corps' resources have been allocated directly to programs

Excellence

America's premier charity evaluator gives Mercy Corps four stars in organizational efficiency. Click here to learn more.

High Value

Every dollar you donate to Mercy Corps helps us secure $11.16 in donated food and other critical supplies.

Mercy Corps — Dept. W — 45 SW Ankeny — Portland, OR 97204
All original content Copyright © 2009 Mercy Corps. Quoted and linked content is property of the creator(s). Mercy Corps will not sell, rent or trade your personal information.