It hardly requires the Delphic Oracle to predict that a day of reckoning is fast approaching for the much-criticized American tax system. Whether the long-awaited change takes the form of a more-or-less dramatic overhaul of the present system of graduated income taxation or its complete replacement by one of the schemes being proposed—the flat tax and the national sales tax being among the most discussed—a national debate is looming. To this national conversation, like any other, Catholics will have their contribution to make. (Two opinion pieces, one advocating a flat tax, the other advocating the national sales tax, follow this article.)
Catholic theologians usually venture into the public square with a considerable amount of specialized moral teaching behind them, but in the case of the tax debate their ability to appeal to an antecedent authority with a ready-made solution is rather limited. This can be verified by a casual perusal of some of the more widely circulated manuals of moral theology, which are the standard references for moral problem solving and case studies. The nearly 3,000 pages of Germain Grisez’s monumental three volumes of The Way of the Lord Jesus contains a scant four pages collected under the dour heading, “Citizens Ought to Pay Their Taxes.” A generation earlier, Bernhard Haring’s groundbreaking Law of Christ dispensed counsel only apropos restitution for taxes evaded. On the one hand, this lack of ready counsel can be a frustrating reminder of recent Catholic moral theology’s failure to be proactive in the politico-economic sphere, a deficit that Michael Novak, Richard John Neuhaus, George Weigel, and others have labored mightily to overcome. On the other hand, this same dearth of ready guidance from the usual resources presents an opportunity for some creative thought.
Catholic theology best approaches the tax debate by carefully reviewing the Catholic moral tradition regarding the law in general, then applying this framework to the principles of the Church’s social doctrine. Tax legislation, if it is to be just, must by definition fulfill the ordinary requirements for any just law. According to the classic formulation of St. Thomas Aquinas, to be just, a law must derive from the law of nature in accordance with the rules of reason and usefulness to man. The just law must also be possible within the context of the nation’s customs. It must be formulated by the legitimate governing body. Finally, the subjects of the law should bear its burden in accordance with proportional equality.
Translated into the case of a tax law, any proposed legislation must satisfy a set of conditions, including need (is there a legitimate necessity for new tax laws?); opportunity (is it the right moment to impose such taxes?); form (are the proposed taxes proportionate and equitable?); and level (are the proposed taxes moderate or excessive?).
This tradition of moral reasoning has come down essentially unchanged into the present day. Pope Pius XII, the only modern pontiff to have directly tackled the principles of taxation, relied on it to point out in a 1956 address to the International Association for Financial and Fiscal Law that:
It cannot be doubted that every citizen has a duty to bear a part of the public expenditure. But on its side, the state, which has the task of protecting and promoting the common good of the citizens, is obliged only to levy such taxes are necessary and to the extent that men’s resources will allow. Taxation must never become a means by which the public authorities bolster up improvident administration, or favor one industry or branch of trade at the expense of others which are equally useful.
Perhaps a little less felicitously worded, although essentially in the same tradition, is the pastoral letter of the National Conference of Catholic Bishops, Economic Justice for All:
First, the tax system should raise adequate revenues to pay for the public needs of society, especially to meet the basic needs of the poor. Second, the tax system should be structured according to the principle of progressivity, so that those with relatively greater financial resources pay a higher rate of taxation. . . . Third, families below the poverty line should not be required to pay income taxes.
With all this mind, the following general principles would seem to be applicable for moral discernment of any proposed tax system changes:
All things being equal, Catholic theology does not recommend a “preferred” tax system. Further, the present income tax system does not enjoy any particular advantage in the national debate. On this point, Pope John Paul II has been exceptionally clear in affirming that “Christian truth is not of this kind . . . the Christian faith does not presume to imprison changing socio-political realities in a rigid schema.” This is an important principle to remember as, no doubt, certain defenders of the status quo will try to transfer the burden of proof onto proponents of change when, in fact, the burden of moral justification is equal to proponents of all schemes.
The moment must, in the judgment of prudent reason, be opportune for a new tax system. Proponents of change must demonstrate that the good to be achieved by the implementation of their proposals outweighs any harmful effects. On the other hand, defenders of the present system must answer for the large amount of data indicating the problems and inequities of the status quo.
The tax system ultimately retained, modified, or adopted must be proportionate and equitable. The classical ethical dictum was that each citizen, as a matter of strict justice, is obliged to contribute to the common good as he is able. A just system of taxation would therefore ideally be one in which all citizens participate. Justice, however, is not to be confused with strict equality. Hence, some provision must be made for the tax relief of the poorest members of society.
The tax system must result in a moderate level of taxation. Pope Pius XII’s claim that taxation should collect only what is necessary to maintain the common good is still valid. A consensus must be achieved as to what the government’s responsibilities truly are and the reasonable costs thereof. Any system of taxation should contain limits on the total amount of revenue to be raised. The budget process should not be a legislative tug of war in which the government estimates its revenues and the legislative and executive branches then battle for pieces of the pie. Rather, it should be a question of ascertaining what the government should be doing and then raising sufficient funds to do so.
The principle of subsidiarity must be respected. Just because a thing can be done does not mean that it should be done by the government. The budgetary process outlined above should take heed of this point. Furthermore, the tax system should encourage responsible decision making at the most basic levels. Thus the tax system should not be an instrument of social engineering on the part of a self-appointed “enlightened” governing class.
Any morally just system of taxation must favor the liberty and responsibility of individuals. Further, it must not hinder the nurturing of virtues necessary for the exercise of that freedom. While there are certain tasks that only common action can undertake, many other obligations of social justice can better be implemented by individuals acting either alone or in voluntary concert. Tax policy should, in the case of the latter, make allowances for individual initiative instead of preferring taxation and state action. Furthermore, tax legislation borders on the immoral when it discourages individual initiative and creativity, such as high capital gains taxes that penalize the entrepreneurial spirit.
The most vulnerable members of society should be protected. The application of this principle means not only tax relief or exemption for the poorest as outlined above, but also that the system of tax incentives and disincentives must not penalize those who exercise their preferential option in favor of the economically poor, children, and others. For example, the proposed tax credit for daycare necessarily places those mothers who choose to stay at home and nurture their children at a disadvantage.
From the theological perspective, any human political, economic, or social system is necessarily flawed: Perfection is not to be expected before the advent of the heavenly City of God. Until then, the Catholic Christian, along with all men and women of good will, is called upon to construct a civil polis that, by careful balance of political, economic, and social systems, allows a measure of respite along the pilgrim’s way. By all accounts, the present American income tax system has swung toward a disequilibrium in favor of the political arm. Perhaps, with careful discernment, a measure of creativity, and a bit of inspiration, Catholic theology may contribute in the present national conversation toward a restoration of the precious balance.