A Catholic Approach to Tax Reform
Economics professor Jay Richards lays out a Church-centered vision.
As Congress and President Donald Trump work to enact comprehensive tax reform, Catholics are understandably asking about the key principles that might be considered when assessing the details of any reform that will have such a major impact on American economic life.
Jay Richards, Ph.D., is an assistant research professor in the School of Business and Economics at The Catholic University of America and a senior fellow at the Discovery Institute. He is also host of the television program A Force for Good, an EWTN coproduction with The Catholic University of America. Richards recently spoke with Register Senior Editor Matthew Bunson.
Jay, why is it so important for the Church to have an opinion about things like economics and capitalism?
Well, I honestly think whenever anyone is interested in economic questions, it’s almost always for moral or ethical reasons. When I give a lecture at a college, in fact, I never put the word “economics” in a lecture. Unless the kids have to be there, that’s a good way to have them not be there. But, if I talk about poverty, if I talk about how wealth is created, if I talk about “Why are some countries rich and some poor?” that brings people out.
We bring our moral concerns to these questions, and that’s because economics is about human beings and the ways in which we buy, sell and share goods and services and information. And so, insofar as it touches on the kind of basic physical flourishing of human beings, there is an ethical component to these questions. That’s one side of the question. The other side is that we often don’t realize there are actually facts about economics. We may make the opposite mistake. There’s one mistake, which is: “Okay, well, economics is just about math, and it has no ethical implications,” and there are some people who say that. The other side is: “Well, we don’t really need to know anything about economics, because as long as our ethical categories are right, things will turn out okay.”
I would argue that Catholic social teaching itself says, “No, in fact, there are true moral principles, there’s real moral knowledge, and there’s also economic knowledge, and what we want to do is integrate those so that we have a robust, informed and fully Catholic understanding of the world.”
Can we say that what we teach in Catholic social teaching is actually grounded in the teachings of Christ, in the Gospel, in justice and in the dignity of the human person?
That’s exactly right. I think the claim of Catholic social teaching — you’ll see it in the encyclicals — is that, in principle, these moral ideas, like the dignity of the human person, aren’t even exclusive to Revelation. In other words, if we use our reason properly, we’re going to know that there’s something like private property; we’re going to know that every individual has dignity; we’re going to know the importance of the family. And so, these aren’t just kind of the exclusive possession of Catholics.
Nevertheless, Scripture and special Revelation and thoughtful theological reflection has really brought it to the fore. I always say, “Look, when I talk about this idea of subsidiarity — which is just really the idea that the group or the entity closest to a problem is best able to deal with a problem, all things being equal — that’s embedded in Scripture, in Catholic social teaching, but it’s also really kind of common sense, really refined common sense.
All of this is helpful preparation for anyone who is trying to assess what the Catholic position is on what Congress is talking about, and certainly what the president is talking about, which is trying to fix a broken tax code to bring about real tax reform. So, in light of what we’ve just been talking about, what are a couple of key principles that Catholics should look at as we have this now-public discussion about tax reform (see related story on page 3)?
I honestly think, in any particular law, we ought to ask ourselves, “Does it tell the truth?” Because this is one of the biggest problems with our tax code: For decades, it has gotten more and more and more complex, so that ordinary people, families and small businesses just never quite know [what it means]. My wife and I, we always pay an accountant a lot of money [to help us] just because we live in fear that we’re going to break some law that we didn’t know anything about. Taxes shouldn’t be like that. We waste a lot of our time on that.
The other thing we should be looking at is: How is this going to affect families in particular? We already, in the tax code, have policies that essentially discourage people from getting married — and if they have children, getting married after the fact. That seems to me to be commonsensical that we wouldn’t want that. We want a tax code and a tax system that encourages people to stay married and encourages people to get married before they have children — and then to help them to do that. And that’s one of the things that’s kind of up for grabs right now: how much the tax code will favor the formation and maintenance of families or will disfavor it.
Pope St. John XXIII wrote in Mater et Magistra (Christianity and Social Progress), another social encyclical, that “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.” In other words, any tax code should be progressive. Do you agree with that?
Well, I would say that “proportional” can mean different things. We have what’s called a “progressive income tax,” in which higher tax brackets give a higher percentage. On the other hand, if we had what’s called the “flat tax,” where it was just a straight percentage, people who make more would still pay more, because you know 50% of $1 million is a heck of a lot more than 50% of $10,000. So I don’t think Catholic social teaching tells us at that level of detail, “This is exactly how taxes ought to be taken.” Honestly, I think actually a consumption tax would be better than income tax. But I think it’s almost impossible to get there. And so, I think, for sure, what you would not want the tax code to do is punish people who have the least ability to pay for it. And, fortunately, in any of these plans, really low-income people pay virtually no income tax. And for people in the middle who have a lot of kids — depending on how I think it will turn out — the tax reform, if it happens, I think could be very good news.
So would you say from your position as a philosopher, as an ethicist who looks very closely at public policy regarding business and finance, that there is an ethical or moral argument to be made in favor of something like a flat tax?
I think the danger with a strongly progressive income tax — where you can just charge a higher percentage of people’s income because they make more — is that it encourages people and voters to be at enmity with each other. So just take the extreme example: Imagine that a politician said, “If you vote for me, I will confiscate all the property of the richest 2% of the population.” Well, maybe 60% of the people would vote for that — having all the money of this small minority of rich people confiscated.
That’s always the danger — whereas if you have a kind of a fixed principle, something like a flat tax, or say, “Look, we’re going to do this proportionally, but everyone is going to pay the same percentage,” I think that is — all things being equal — less inclined to corruption than the system that we have. But the truth of the matter is: The higher-income people already pay almost all of the income taxes. And if you look at how people actually vote ... I mean really cynical people might say people vote based purely on their pocketbooks and what they think is in their self-interest. It’s not true, though: Most people vote based upon their worldviews and the moral principles that they think are most important.