Taxation and Ethics: Further Reflection

I have continued to read the comments on Jeff Haymond’s blog about progressive taxation, and my own complementary blog, and have decided I should make another foray into this subject to address in more depth the ethical theory of policies such as taxes (but, indirectly, others as well).  The question to begin is:  Is progressive taxation unbiblical and therefore unethical?  On that, I do have to admit from a strictly exegetical standpoint, no tax is either moral or immoral per se.  The Bible is silent on the ethical status of taxes.  Of course the motives for imposing the tax may be bad, or the people imposing it may be tyrannical, but by itself a tax is biblically neutral.

That brings taxation generally back into the realm of prudence and efficiency.  Now that fact does not mean that taxes have no significance at all for human welfare, that they don’t make any difference in looking at their consequences.  Nor does it mean that because the imposition of taxes is not a strictly biblical issue, that the burden of taxation is not an ethical issue—if one accepts that it is acceptable to tax Group A to redistribute to Group B, then why is it not unacceptable to take from that Group A in the first place?  In other words, if someone says to me, “I believe since taxes are an indifferent issue biblically, so let’s tax the rich more,” why can’t I respond, “Well then why is it acceptable to tax only the rich more and not everyone proportionally equally?”  or “Why do we take from the rich—is it just because they are rich?”  Why is it ethical to take from the rich at all, regardless of who benefits?  One has a pretty tough ethical case to make.  We are reduced now to arguing why one is better than the other.

So why would one be better than the other?  The answer lies in considerations of what kind of behavior each taxation approach incentivizes and disincentivizes and what kind of relative position each taxed individual and each individual receiving benefits from taxation is in after the tax scheme is implemented.  The first has to do with efficiency, which Jeff Haymond addressed.  The second is different.  It actually touches on issues of fairness.

Now I am the first to agree that the concept of fairness is notoriously difficult and sometimes vague.  Fairness is a distributional concept—who gets how much—but more than that, it attempts to evaluate the outcome of the distribution from some sort of normative perspective.  But doesn’t that bring it back into the realm of ethics and therefore doesn’t it bring taxation back into ethical consideration?  It depends on how one characterizes fairness.  In fact, fairness also includes the question of how to “distribute” the negative aspects (the costs) of a policy, such as a tax burden.  Is it fair to tax one group, and not another?  Under what conditions, if any?  Does Scripture have anything relevant to say on this?  Does broader ethical theory have anything to say, and if so, what is the relationship of that particular type of ethical theory to “Divine Command Theory” (arising from special revelation)?

Fairness is sometimes defined as equivalent to justice (John Rawls, Justice as Fairness) or justice as a distributive quality.  Other times, the two concepts are seen as distinct.  One scholar tries to distinguish them this way:

“If justice demands that a citizen’s position in society is due to ‘relevant reasons’, then fairness is about a citizen’s position being determined by factors within her control, as opposed to influenced by luck. This is the principal difference between the concepts of justice and fairness.” (C. Cooke, “What is the Difference between Justice and Fairness?” nd, at http://www.oriel.ox.ac.uk/sites/default/files/Cooke,%20C%20Essay.pdf)

So justice demands that decisions be for relevant reasons, while fairness demands that the outcomes of decisions be determined by factors within a person’s control.  If you have no control over what “happened” to you, what you received, etc., then we may label the outcome “fair.”  It was a product of chance, it is argued.  It stands to reason, if one accepts this definition, that the closer one comes to judging people based on factors they could not control, the more likely one would favor greater equality of outcome with reference to that factor.  For example, one cannot control his particular birth parents or environment, so it would be unfair to allow that person to suffer in relation to others when it can be prevented by policies that would equalize or move toward equalization of the results of his deficiency.  In other words, fairness would dictate helping that person to raise him up toward a situation closer to his fellow humans.

That however doesn’t answer all the questions raised in relation to taxes, even if I agreed with this one.  We also collect taxes to provide public goods and services.  I suppose one could say it was fair to tax poorer users of those services more if they could not control their poorer status.  But being able to determine that is a nearly impossible task.  Relative poverty is due to many different factors.  In addition, another principle of fairness might require that those who benefit pay, much like purchasing a private good.  In fact, one might posit many different criteria of fairness, for example, keep all you earn, make people over certain incomes pay more, take everything from everyone and redistribute it in equal portions, etc.  So though I might be able to see the usefulness of the first definition, I still cannot see on what ethical foundation it rests—for that matter any of the criteria of fairness that might be suggested suffer the same fate.  And if one wants to accept the first definition, one still must determine what factors are or are not considered within a person’s control.

With this said, is it possible to say that since we cannot agree on an appropriate criteria by which to distribute a tax burden, perhaps we ought not to try to derive any other burden other than one that does not take into account the factors of control or non-control, but just tax either using the same rate for all, the same actual tax for all, or rates dependent on benefits received?  That sounds pretty radical I know.  But unless I am mistaken, only those approaches avoid the problem of classifying who has control and who does not in given situations.

That still does not address the explicitly ethical issue, though the fairness definitions are taken as normative, not merely descriptive.  More is needed.  Can any or all of the three criteria I suggested for taxation be considered consistent with (if not explicitly commanded by) special revelation—or forbidden by special revelation?  I am still committed to grounding my ethical views on principles derived from special revelation.

So, without answering that question, I will end this blog here and be back with another as I continue to reflect on this interesting and important issue of taxation.

 

7 thoughts on “Taxation and Ethics: Further Reflection”

  1. “With this said, is it possible to say that since we cannot agree on an appropriate criteria by which to distribute a tax burden, perhaps we ought not to try to derive any other burden other than one that does not take into account the factors of control or non-control, but just tax either using the same rate for all, the same actual tax for all, or rates dependent on benefits received? That sounds pretty radical I know. But unless I am mistaken, only those approaches avoid the problem of classifying who has control and who does not in given situations.”

    Conclusion= non sequitor. There are problems with taxing everyone at the same rate as well. In fact, there is no perfect way to tax; each approach is problematic,a and there are no simple answers.

    The way I see it, how a nation should decide to tax itself should be based on the value system it wants to reinforce. The reason I support high estate taxes is because I loathe privilege and sloth and value meritocracy and self-reliance (acknowledging most definitely that society has an obligation to aid those who cannot rely on themselves–the elderly, the disabled, and such). I could never work at a private university that caters to the silver-spoon carrying children of privilege; rather, I prefer to work with first-generation students who are hungry to be their best.

    Good points, though, on incentives. Glad you mentioned Rawls. Might be your best post here yet.

    1. Could you expand on what you meant by:
      “There are problems with taxing everyone at the same rate as well.”

      Maybe list what you see as problems and why? Thanks:)

  2. Marc–
    I will quibble with your characterization of my previous argument; I was not making a case based on efficiency, although I think that is a very good reason for a proportional tax. I was making a biblical case for proportional taxes based on implicit logic–the case for impartiality, which I argued could and should be extended to the tax system.

    I do think you are right to begin wrestling more broadly with “fairness,” since that is the central theme in public discussions. But it is also fraught with danger as there many non-biblical fairness standards. Rawls certainly fits in that category.

    1. No, no, I was not saying your efficiency part of the analysis was wrong, only that I wasn’t going to get into it. And I too am wrestling with the idea of impartiality as an attribute or characteristic of God as a principle applicable to taxation. I am still thinking about it, but I don’t disagree or agree with it yet. It sounds enticing, and I can make the logical argument that (1) God is impartial; (2) Impartiality then is an essential characteristic of God; (3) Man is made in God’s image and therefore is to reflect all of God’s moral/ethical characteristics; (4) Therefore a man-made tax system ought also to reflect impartiality; (5) The only true impartial system (that doesn’t favor one person over another on non-relevant grounds) is a proportional tax. If any of those premises fail, then the argument fails. I still have to work through it.

      Yes, fairness is a quagmire, and Rawls didn’t get it. But I hope to discover some Biblical principles of fairness upon further study. I do think fairness (on both sides of the equation) is central, but…

      Thanks.

      1. Is a proportional tax system partial though?

        I’m being punished for earning more money, there’s also the efficiency to consider, any kind of income based tax system is expensive to manage and disincentives productivity.

        What if we had a flat tax. One dollar amount per person, regardless of wealth of income. Isn’t that the most impartial system?

      2. An interesting note, this isn’t a black and white issue, it’s not progressive vs proportional, there are shades here, for instance most of the proportional plans are actually slightly progressive in that they don’t charge tax for the first x dollars.

        That tells me that just about everyone is in favor of a progressive tax, but the question comes down to how progressive?

        It’s not something I’ve studied thoroughly, but it appears that Sweden and Denmark have less progressive systems then the USA. Yet those countries are lifted up as models by the left.

        So if some distinction based on income is right, I think it necessarily isn’t a question of right or wrong, but a question of what works best.

        Dr. Clauson, I asked Jeff Haymond this in a previous post, but I wanted to get your opinion. How would you feel about being taxed at a higher rate for the express purpose of helping out the poor? Let’s say giving them education opportunities so they can get better jobs and help themselves in the long run.

        I’ll wait for your answer before sharing my thoughts :)

  3. Thank you for your thoughts on this subject. I appreciate how deep you were able to dive into the fairness, or rather, unfairness of tax systems. It is a very interesting point of view.
    I also agree with one of your first points, that the Bible is very neutral on this subject. With only a few instances of a “tax” (give to Caesar’s what is Caesar’s), it becomes difficult to have a Biblical perspective on this issue.

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