Tax Policy, Progressivity, and Catholic Social Thought (Part One): Baseline Principles

As evidenced in our recent thread on Mirror of Justice about the estate tax, the invocation of “progressive” taxation as a canonical precept of Catholic Social Thought is repeated so often as to have become something of a mantra (if you’ll forgive my introduction of semantical religious syncretism). The underlying principle (“fair tax = good tax”) has considerable force to it, when genuinely understood, empirically verified, and qualified by other factors and principles. However, when cited by advocates on one side of a particular debate about taxation, the supposed progressivity standard frequently is misstated, overstated, or uncritically employed.

What looks progressive or regressive in the abstract simply may not be such in the actual application of a specific tax to real people and activities in a complex society. Progressivity is not a trump card or substitute for careful contextual analysis. When evaluating any scheme for procuring revenue to the government, progressivity (or more precisely, proportionality) is but one factor (an important factor to be sure) among many others to be considered (including economic disruption, consistency with dynamic social, cultural, and economic conditions, positive and negative incentives, reduction in liberty, etc.). And the progressivity of a tax is no answer at all to the ultimate question about the prudence of any proposed enlargement of the public fisc, which requires us to consider the wisdom of any expansion of government that may contract or suppress other beneficial social, cultural, and economic activities.

In three posts over the next few days, I will suggest and invite critique of certain general guidelines for evaluating tax policy in the light of Catholic Social Thought. In doing so, it is not my intent to focus upon or highlight any specific tax controversy or insist upon specific answers to any debate. Rather, in these three posts, I will suggest (1) baseline principles drawn from authoritative Church teaching about taxation; (2) the absolute necessity for empirical evaluation of the real-world impact of any tax upon real people before drawing conclusions about tax equity; and (3) prudential considerations involving other important principles and the secondary effects of taxation upon society.

The authoritative teachings of the Catholic Church about taxes are rather simple but often neglected in economic and political debates, even among those interested in Catholic Social Thought.

First, and most fundamentally, tax evasion is wrong. See Catechism of the Catholic Church ¶ 2436 (1994) (“It is unjust not to pay the social security contributions required by legitimate authority.”). (Michael Perry recently highlighted the “tax cheats” aspect of this subject). Beyond the dishonesty and fraud involved in evading the required report about taxation, complying with the tax laws is part of our obligation to support the common good, that is, the “social security” of the society in which we live.

Second, taxes should be collected from those who have the capacity to pay, a vital corollary of which is that those with no capacity to pay should be exempt. See Pope John XXIII, Encyclical Letter Mater et Magistra ¶ 132 (1961) (“In a system of taxation based on justice and equity it is fundamental that the burdens be proportioned to the capacity of the people contributing.”) While the pertinent papal encyclicals make no claim to infallibility, certainly we can agree upon the baseline proposition that a tax that is regressive in nature, falling more heavily upon those who can least afford it, simply cannot be squared with Catholic teaching regarding the preferential option for the poor.

Third, excessive taxation is improper, by draining the productive energies of the economy, dangerously expanding the power of the government, and unfairly confiscating the resources of those who have earned them. See Leo XIII, Rerum Novarum ¶ 47 (1891) (“The right to possess private property is derived from nature, not from man; and the State has the right to control its use in the interests of the public good alone, but by no means to absorb it altogether. The State would therefore be unjust and cruel if under the name of taxation it were to deprive the private owner of more than is fair.).

Fourth, no one may claim that any particular political proposal bears the magisterial imprimatur of the Catholic Church. Every economic proposal, of which tax policy is but one example, must be evaluated in light of prudential considerations, well-grounded in the context of the society in which it is proposed. See John Paul II, Centesimus Annus ¶ 43 (1991) (“The Church has no models to present; models that are real and truly effective can only arise within the framework of different historical situations, through the efforts of all those who responsibly confront concrete problems in all their social, economic, political and cultural aspects, as these interact with one another.”).

Fifth, in evaluating any proposal to create government program, regulate the economy, or tax economic activity, the ultimate goal is not aggrandizement of government, control of private economic activity, or forcible creation of artificial equality, but rather bringing about “a society of free work, of enterprise and of participation.” See John Paul II, Centesimus Annus ¶ 35 (1991). Politics is not the end but only a tool toward the end of a free society with opportunity for all. Liberty as well as opportunity is an essential element of this vision.

Greg Sisk