Taxes and Fairness

The editorial in left-leaning Christian Century this month is in defense of progressive taxation--the concept that people who make more money can and should pay taxes at a higher rate. The editorial responds to the McCain campaign's rather desperate accusation that Obama's proposal to raise taxes on the rich and lower them for the middle and lower class is a kind of "socialism."

So is "progressive" taxation the right thing, morally? Does it strike a "good-enough" balance between the conflicting goods of a) protecting an individual's right to keep what they earn and b) society's obligation to offer a basic level of human welfare (food, housing, medicine, education) for all of its citizens?

Progressive taxation is absolutely morally sound. Only the hardest of hearts thinks it's "fair" to make a person trying to raise a family of 3 on $20,000 pay %15 of their income on taxes, and ask the same rate of a person who makes $200,000... or $2,000,000. The burden falls more heavily on the lower-earner because at their level of income, they struggle to afford basic necessities. $3000 hurts--it leaves only $17,000 to live on. The person paying $30,000 in taxes still has $170,000 to live on--this person could pay a good deal more until they felt the same level of deprivation. Progressive taxation makes sense because higher earners don't have to skimp on basic necessities in order to pay incrementally higher tax rates. With less pain, they can bear a greater load of the cost of society's essential services.

The Century, however, didn't address a perspective which should moderate too-earnest support for highly-progressive taxation. High tax rates for the wealthy presumably slow the investment by wealthy individuals in stocks and other business development vehicles. A wealthy individual, after all, doesn't hide their wealth in a mattress--most often, they put a sizable amount of money into investments that capitalize businesses and allow them to grow. Not only does such growth have the potential to yield the famous Reagan-esque "trickle down" benefits for workers, but a successful business without a doubt puts more revenue into the public coffers through corporate taxes (presuming they're not hiding their assets offshore). The actual effect of tax rates on economic growth is the subject to an ideological struggle. See opposing articles from the left-leaning Washington Monthly and the right-leaning Heritage Foundation to get a gist of the conversation.

Now, I'm not an economics guy. I got a D+ in Macroeconomics at Yale. But I think I understand this particular issue well enough to say that it's not clear that religious people (such as the Century's editorial board) should necessarily support strongly redistributive tax plans.

I think the Century's editorial in support of redistributive taxation comes from an authentically good motive. They believe in the provision of public goods--good schools, good roads, good parks, good drinking water, good police and fire departments. They also believe in the absolute moral obligation in a culture to provide the basic elements of life for all of its people. But this obligation, to me, is a religious one--not an obligation of the government. And I'm struggling more and more with the idea that the government is or should be the vehicle by which my private religious convictions should be enacted. I want all people to be housed and fed--I'm just not sure I want my government to do it.

My hesitancy on this is twofold. First, I don't think governments are often very good at providing services--I tend to trust private nonprofit institutions more than governments to be the more effective and efficient conveyor of social services. Second, I am leery of government overextending its role in the social contract. I think those of us that care deeply about human welfare are tempted to want government to take on those functions because it's the one sector (over private and nonprofit sectors, for sure) that can lay a claim to "universalizing" a policy. But I don't think that the psychological comfort that compassionate people derive from a government's commitment to, say, providing housing, should overshadow a careful analysis of whether that or any other functions of social welfare are most effectively or efficiently accomplished by government.

This is all to say that I'm surprised the Christian Century felt the need to defend progressive taxation. In doing so, they failed to note the legitimate concern expressed in the otherwise stupid charges of "socialism": that the government might well be the least well suited of the three sectors of society to provide for human welfare (which should be the ends toward which all Christians, left and right, are working). The true argument here is not about progressive taxation's morality--there is broad consensus on it. The bigger argument is about whether our highest moral ends are best sought by taxing the rich or leaving the rich less-heavily taxed so that they might have the means to invest in business development (which leads to higher collected taxes) AND investment in humanitarian nonprofits.