Is there a day in the year that strikes more dread in the working man’s heart than April 15th; the day when the tax man cometh to fill his coffers? Dread indeed. Unless, that is, the man is in the middle class and has received the latest tax break. Or he is a wealthy man who has discovered loop holes in the tax code that greatly reduce his overall payment. Or he is a poor man whose low wages have earned him a tax credit. The only constant in the tax code is that it is guaranteed to change, shifting the burden from rich to poor to middle class and back again, subject only to the fiscal attitude of the ruling party and administration. In fact, the shifting of the tax burden is arguably the most hotly contested political debate of our times. Yet with all this talk of deciding who should find taxes the most taxing, there is little discussion of taxes themselves. Determining whether the distribution of the tax burden is just presupposes that taxes themselves are just, something that is far from self-evident. Therefore, with the IRS watching over us, it is enlightening for us to examine taxes in general.
In our day and age there are essentially two types of taxes. As the name suggests, administrative taxes are those that are collected for the administration of the State. This includes the costs associated with maintaining public safety (like police and military), the building up and upkeep of public properties (like roads, courthouses, parks, etc.) and as remuneration for the work of civil servants (like lawmakers, judges, etc.). In essence, administrative taxes are collected to fund legitimate governmental functions. There may be reasonable debate as to which functions are considered legitimate, but these functions must always conform to the principle of subsidiarity which keeps the arms of Big Brother from over-reaching. Only tax systems within this context of a limited government (not in the Libertarian sense) can be considered just. As a State moves away from a limited government the tax system will move accordingly towards injustice.
Most of us intuitively grasp that administrative taxes are necessary and in justice each man ought to pay his share. What an individual man’s share is can legitimately be debated, but administrative taxes are just in principle. But this debate tends not to be as hotly contested as the debate over the second type of taxes—redistributive taxes. It is here that social welfare programs exist and every man is fighting for his favorite pet program. Redistributive taxes take from one man and give to another, necessarily setting up an inequality in the tax burden and pitting rich versus poor.
Most of the debate today centers around how to justly allocate the payment of these types of taxes. Yet no one really asks whether these taxes are just in themselves. They are not unjust simply because of the inequality. In order to see this we must first speak briefly about private property.
Private property is not just about owning, but also about using. A man has a right to own his own property and use it in any manner that he sees fit, provided he uses it in accord with the moral law. But this right is not absolute. Assuming he is able to fulfill his own needs and those whom he has care for as well as having enough to maintain his station in life, a man has an obligation to give to the man in absolute need from his superfluity. Our tax code recognizes this to a certain degree in the way in which it grants deductions that adjust for absolute needs and those of one’s station in life. These deductions are meant to target the rich man’s superfluity, but end up instead leading to further injustice.
First, the obligation is towards a man who is in absolute need. In other words, our obligation to help the poor extends no further than those who are destitute. We may (and should) give freely to those in need, even if they are not destitute, and hopefully not just from our superfluity, but this constitutes a move from strict justice to to love of neighbor. Such giving cannot be codified in any way as it must be done freely and not by force, even if it is the force of civil law.
The obligation also rests with the individual himself. Although he may freely choose to transfer that obligation to something like a charitable organization, only he can determine exactly how much of his property is superfluous. Herein lies the primary injustice of any tax system that is redistributive in nature—there is no formula that can be applied to determine exactly how much of a man’s property is superfluous. There are too many variables. Should the man who helped to pay to replace his neighbor’s leaky roof (which is not a “deduction”) really pay more taxes than the miser who only gave to “tax deductible” organizations even if he paid significantly more to help his neighbor?
This exposes another problem with redistributive tax systems—it discourages face to face giving and encourages faceless giving. Most certainly I am my brother’s keeper, but now it is Big Brother who controls what I give. Society as a whole suffers because real bonds between individual occur when a man gives of his property directly to another person in need. It also leads to an institutionalizing of envy because the poor begin to see the rich as stealing from them and look to the State to play Robin Hood.
We have heard much recently about the need for a “tax overhaul.” Unfortunately, this just means looking at how our current tax system distributes its burden. What becomes obvious after discussion here is that what is truly necessary is an examination of taxes in general. We have institutionalized injustice and any society in which this occurs will eventually crumble.