Monday, April 18, 2011
As Rob Vischer noted in his post earlier today, "Tax Day" has arrived again. Rob takes the occasion to call for higher taxes (but only on the "wealthy," of course, and he acknowledges, sort of, the need for spending cuts as well). But let me here highlight an ongoing trend in taxation that raises other questions for Catholic Social Teaching about solidarity and the common good. Nearly half of Americans have little or no reason to be concerned about rising government spending or budgetary deficits because they're paying little or nothing in federal income taxes.
With only a slight shift in the trend from recent years, only 55 percent of Americans paid any federal income tax for 2010 (here). And, no, the 45 percent that owed not a cent of federal income tax obviously cannot be dismissed as the wealthiest who have cleverly used tax shelters to avoid paying their fair share. Rather, 93 percent of those who owe Uncle Sam nothing in federal income tax are those earning $50,000 a year or less (some 63 million families).
Should we be troubled by this development? Rob tells us that "payment of taxes" is "part of the duty of solidarity." But we have reached the point where the entire non-entitlement portion of the federal budget is funded by only a little more than half of Americans. Indeed, the top 1 percent of income earners pay 38 percent of the federal income tax revenue (here). Even if we look at all sources of federal revenue, including the federal payroll tax, the top 1 percent of income earners still bears 28 percent of the overall federal tax burden.
Moving a little further down the income ladder, the Tax Foundation reports that for the most recent year for which data is available (2008), "[t]he top 5 percent earned 34.7 percent of the nation's adjusted gross income, but paid approximately 58.7 percent of federal individual income taxes." And this calculation doesn't even begin to account for the fact that many of the top-earners effectively paid double taxes on much of that income: once through corporate income taxes and then again through individual income taxes on capital gains and dividends.
So what again is the argument that the top earners should be taxed at an even higher rate as a matter of "solidarity" or fairness? Even aside from the economic impact of imposing a tax penalty on those investing in the stagnant economy and creating any new jobs, the solidarity and equity arguments that the top five percent should pay for nearly three-fifths of the federal budget escapes me. And when a large segment of the population has nothing financially at stake in federal budgetary and tax policy, because they pay not a single cent in federal income tax, then what remains "common" about the tax burden part of the "common good"? What are the moral implications when half of the country is fully enjoying the benefits of the federal government, while the expense of that government is wholly borne by the other half (and most of that by an even smaller fraction of the population)?
I'm certainly not attracted to any suggestion that we ought to raise taxes on all Americans to ensure that everyone is invested to at least some degree in the federal budget and that everyone shares in the pain of excessive federal spending. I've never subscribed to the leveling-down inclinations of the political left. And, importantly, many (but not all) of the non-poor who pay no federal income tax are still paying payroll taxes to (supposedly) fund Social Security and Medicare (and paying state and local taxes as well). I'm not convinced that any part of the American public is "under-taxed." And transferring more money from a still-struggling economy to a still growing federal government doesn't strike me as a wise investment, especially at this time.
But if Rob Vischer is going to "jump[] onto this soap box" and argue that federal income taxes should be raised for deficit reduction, then shouldn't he be arguing that taxes ought to be raised for all and across-the-board, not just for the half of Americans that already are carrying the entire burden or the five percent of our fellow citizens that pick up three-fifths of the tab for federal spending? As the Tax Policy Center estimates, if all tax breaks were eliminated, then, yes, the wealthy would pay more, but the 45 percent who currently are paying nothing would drop to 27 percent, meaning more middle- and lower-income Americans would start paying taxes as well. Isn't that what is necessary for true solidarity by the lights of the "raise taxes" argument?
In any event, since half the country already is carrying the entire non-Social Security entitlement portion of the federal government and five percent is carrying nearly 60 percent of that tax load, the "tax the wealthy" slogan speaks more to present reality than future aspiration. And given how much of federal spending already is funded by the few, there certainly is nothing realistic about any suggestion that raising taxes on the wealthy will solve the fiscal crisis, especially after President Obama quadrupled the federal deficit (here). In my view, neither fiscal sanity nor "solidarity" and the "common good" are advanced by another tax hike on anyone.
Greg Sisk
Taking up the topic of the morality of lying (discussed at length on MOJ back in late Feburary), UST's Center for Catholic Studies Graduate Students and the Murphy Institute are hosting a disputation ("a probing, public examination of a controversial question about which faithful minds may be earnestly divided and which hold the promise of spiritual fruit if seriously addressed") on the question: "Can it be morally permissible to assert a falsehood in service of a good cause?" Our disputants will be Christopher Kaczor of Loyola Marymount and Christopher Tollefsen of the University of South Carolina & the Witherspoon Institute, whose on-line debate on this topic in Public Discourse was discussed in this post by Robby George. May 5th, 7:30 -9:00, in the John Roach Center for Liberal Arts Auditorium on UST's St. Paul Campus. Details here.
Thanks to Rick for his thoughtful reply to my dotCommonweal post. The post has many of the shortcomings of its genre (by genre, I'm referring here to the subcategory of little ditties dashed out on Saturday afternoon while your 2 year old is napping). In particular, I think I was way less clear than I might have been about the questions I was posing, especially by introducing the question of emprical support.
The most interesting question to me is why someone like Ryan shouldn't come in for the same treatment as pro-choice Catholic politicians have often received. In his case, it would be more than just the question whether a Catholic can in good faith support his plan (back to that question in a second). There are specific things about Ryan's relationship to Randian libertarianism -- his strange habit of requiring his staff to read Ayn Rand, his statement that Rand was his reason for entering public service -- that call into question his motives in structuring his plan how he has. I think it is worthwhile for Catholics to call attention to the utter irreconcileability of Rand's political philosophy, such as it is, with basic principles of Catholic teaching. Though I admit not decisive, the implausibilty of his empirical assumptions seems like a relevant data point for the inquiry into his likley principles. And the central point of my post was to observe that applying the wrong principles to produce policy suggestions that would otherwise fall within the ambit of permisisble prudential disagreement is not itself within the boundaries of that permissible prudential disagreement (as the hierarchs have defined those boundaries). In other words, from the standpoint of a Catholic politician, at least, the principles matter.
In part this relates to the second question -- can Catholics in good faith support the Ryan plan? I have no doubt that, subjectively speaking, they can. On the other hand, I think it's an important challenge to Catholics who are prone to accept the assumptions that would be necessary to justify support for that plan (e.g., that handing billions in dollars in tax cuts to the wealthiest Americans against the current baseline of historically -- and comparatively -- high inequality and low taxation rates would actually redound to the benefit of the poorest over the long run compared to the available alternative policies) to engage with the empirical support (or lack of empirical support) for those counterintuitive assertions. Moreover, given a Catholic commitment to social policy that is fundamentally oriented towards the well being of the poorest, I think its fair to hold a plan that appears on its face to simply transfer burdens from the poorer to the richer to a higher empirical standard than a plan that on its face appears to do the opposite. That last pont is probably controversial, but it is in a way independent from my bottom line, which is that I don't think retreating behind the protection of "prudential judgments" should be seen as absolving Catholics of various political stripes of doing the work of evaluating a plan like Ryan's against the principles of Catholic social teaching and the relevant standards of sound empirical analysis.
Our MOJ colleague Eduardo Penalver has this post, over at Commonweal, about the always-tricky "what are the obligations of Catholic politicians" question. As we all know, when answering this question, it is often emphasized that the resolution of some / many / most policy questions depends on reasonably contestable prudential judgments and so, with respect to these questions, there is rarely a so-clearly-correct resolution that it would be warranted to criticize a professedly Catholic politician for not embracing it. Eduardo asks, though, "[w]"hat are we to do when a Catholic politician seems to reject the principle underlying the prudential judgment?" (For example, it is clear to me that, say, Nancy Pelosi's views on abortion reflect her rejection of the "principle" that underlies the Church's clear teaching that the political community should not exclude unborn children from the protection of laws against violence.) This is, I believe, a very important question.
Eduardo is also right, I think, to say that we should "hold political figures to some standard of plausibility in the empirical assertions underlying their prudential judgments"; what's more, the plausibility of a politician's claim to embrace the principle can fairly be connected to the plausibility of the "empirical assertions underlying their prudential judgments." (Eduardo then says that "if a Catholic pro-choice politician says that he accepts the Church’s teaching on abortion but that he believes that legally prohibiting abortion will increase the abortion rate and so opposes legal prohibition for that reason, pro-life Catholics would argue that he is acting within the boundaries of a 'legitimate diversity of opinion.'" It strikes me that, in this example, such a politician might be confused about what the relevant principle is, or that he is, at any rate, mistaken to focus entirely on the "rate." An aside, for present purposes.)
But, although I share Eduardo's lack-of-love for the work of Ayn Rand, I think the argument, in the rest of the post, that the Ryan budget clearly reflects a rejection of the relevant principle is unconvincing. I think it is entirely plausible to think that budgetary and fiscal policy is in desperate need of re-orientation toward reduced debt & deficits and increased, sustainable growth, and that such a re-orientation (supplemented, of course, by adequate and appropriate social-welfare programs) serves well the interests of the poor and most vulnerable. Notwithstanding what sounds like Ryan's unfortunate attachment to Rand's books, I think there's evidence that he thinks about his budget in these terms, and not in terms of Rand's "objectivism."
To say this is not to say that, all things considered, Ryan's proposed budget should be adopted in its entirety (I am, I suppose, more sympathetic to its basic outlines than is Eduardo, but that's not the point.) It is only to say that Ryan's budget proposal is unlike, in important ways, Rep. Pelosi's abortion-related policy views.
Political parties have an (outrageous, in my view) tendency to take a zero-tolerance approach to even the most sensible legal reform that is perceived to intrude on one of the party's sacred issues. For Dems, don't even try a pilot school voucher programs for needy kids or limit the grisly and widely abhorred practice of partial-birth abortion. For the GOP, it now seems that the party has reached a near-consensus on an issue that holds significant peril (in my view) for the country going forward: taxes can be cut, but never raised. I know I've jumped onto this soap box already, but since it's Tax Day and there are new statistics available, I think it's worth revisiting the conversation.
Given the rhetoric about taxes coming from leading Republicans, a visitor from another era would think that we are currently laboring under oppressive tax rates. I have a hard time seeing an average federal tax rate of 17% as oppressive (9% if we include those who pay no taxes). Especially for the super-wealthy, these are the golden days. Government spending needs to be cut significantly, but ruling out any tax increases is irresponsible, especially for those who see the payment of taxes as "part of the duty of solidarity." (Compendium para. 355) Is the proper rate of taxation a matter for prudential judgment? Of course, but balancing the budget solely by cutting expenditures will threaten the well-being of society's most vulnerable to such an extent that, in my view, it's pushing the boundaries of legitimate discretion. I maintain that it is difficult to square an absolutist approach that precludes any possibility of increased tax revenue with the values reflected in CST.
UPDATE: Tax Prof Blog has an interesting paper and comment thread about current corporate tax rates.
