Poverty has two main causes. The first cause is an economy that does not produce enough goods and services to support its population. When this happens, someone has to suffer. The second cause is the hoarding of goods and services by a small segment of the population; they suck up goods and services as a sponge soaks up water. This hoarding can only be accomplished if the hoarders have power, either political or economic.
Those who can hoard, do hoard. All the different economies produce hoarding by those who have power. Whether the economy is communist, socialist, capitalist, or mixed, there are those with more power than others, and they will hoard as much as they can get away with, thinking they have earned the right. Often the power that enables people to hoard is political, but in a capitalist economy, the power is more often economic.
Capitalism has proven to be a partial solution to poverty. Because it produces more goods and services, there is more to go around. Capitalism, though, is not perfect and has problems with hoarding as other economies do. In a free political and capitalistic society, the power is with those who have gained economic clout. These are the capitalists and managers of large companies. Do they deserve their economic clout? Often they gained that clout by hard work and skill, so they may deserve some of it. Those who work hard do deserve more. I am not arguing that everyone should make the same income and have the same stuff. But:
A small number of people own most of a society. Here is an example of hoarding In the United States. In 2007, 80% of the households received 50.3% of the income, while just 20% received the other 49.7% of income. Of that wealthy 20% of households, 5% received 21.2% of the income. If 20% of the people are receiving half of the income, that represents goods and services denied to the rest of the population. This is what I mean by hoarding. Sure, they may deserve more and capitalism requires that those who produce more to have incentives to motivate them to keep producing (we will assume they are producing something), but do they need half the income within a nation to be motivated to continue producing? The answer is no.
But if it is their money, shouldn’t they be able to keep it? If you make $2000 a month, but you owe $800 for rent, is all of that $2000 yours? Only in a limited sense is it yours. In the same way, if you earn a billion dollars a year, you earned it because you live in a very stable society, and you owe something to that society. (The same is true if you make $30,000 a year.) Sure the money you earned may be yours in a sense, but we all owe something to the society we live in, just as we owe money to the grocery store when we buy food, or owe money to the landlord. Why should some people pay more than others? They may have to pay more, but they have also gotten more from their society.
We should accept taxes as our patriotic duty to preserve the society we live in. Part of the solution to poverty is capitalism. The other part of the solution is to redistribute income, an idea that is no longer popular but still necessary. Our society needs lower income households to have more money. By insuring the bottom half and especially the bottom quarter of the population has enough income to have a good life, we not only create a more stable society, we also create more demand for products and services that those rich people produce.
This is why that the richest 49.7% of the population should pay more taxes. They can afford to pay the extra taxes, and the lower-income population needs the wealth transfer. We live as a society, and we depend on each other; the rich depend on the poor just as much as the poor depend on the rich. We are not talking about making rich people poor; they will still have plenty of money. And we are not talking about removing the incentives of poorer people because they will still make much more money by working.
Most tax money can help the poor indirectly. Money does not have to be given directly to the poor, but can help them in other ways: better police protection of their neighborhoods, better justice through the courts, and better neighborhood parks, schools, and healthcare are just a few ways. The income given directly to the poor, such as food stamps and direct payments can be kept at a minimum, which will help them survive, but still give them a strong motivation to work so they can earn more.
A bit of perfume always clings to the hand that gives the rose. –Chinese proverb