Tax Heresy

Heresy is an ugly word. It's usually used as a curse to describe someone who disagrees with you. However ugly it may be, however, it can be an accurate term. We're not philologists here, but we think we read somewhere some time ago that the word "heresy" comes from a Greek word meaning to pick out. Thus, what a heretic does is "pick out" a legitimate and true doctrine, and exaggerates it beyond all rational bounds, without reference to other, equally true doctrines.

We have no idea if that derivation of "heresy" is correct, but it certainly fits an increasingly popular interpretation of an otherwise valid principle of taxation, the "benefit principle." The reason for raising this is that yesterday's posting on the need to build solidarity in the workplace somehow excited the ire of an occasional reader.

What seemed to stick in this person's craw was not anything in the posting itself, but a new principle of taxation that has developed over the past couple of years. The new principle is that everyone, regardless of how much he or she receives in income, must pay something in taxes, for everyone is responsible for contributing to the common good of whatever society of which he or she is a member. The problem is that the benefit principle cannot be taken in isolation from the other three principles.

To explain, the four principles of just taxation (and you can find these just about anywhere; the Wikipedia is a good source) are:

1. Efficiency: A tax system should raise enough revenue so that government projects can be adequately funded, without burdening the taxpayer too much, becoming a disincentive for investment and work.

2. Understandability: The system should not be incomprehensible to ordinary citizens, nor should it appear unjust or unnecessarily complex.

3. Equitability: Taxation should be governed by people's ability to pay. Wealthier individuals or businesses with greater incomes should pay more. Those with lower incomes should pay comparatively less.

4. Benefit Principle: Those that use a publicly provided service should pay for it. (Conflicts in principle often arise between this and the equitability principle.)

We can leave for another day the discussion as to how well the U.S. tax system conforms to these principles (any bets on number 2?). We'll stick to pure theory today.

When conflicts arise, common sense should rule. Thus, if someone cannot pay a tax without diminishing what he or she requires to meet common domestic needs adequately for him- or herself and his or her dependents, then that person should not be required to pay ("It is grossly unjust for a State to exhaust private wealth through the weight of imposts and taxes." — Pius XI, Quadragesimo Anno, § 49). Otherwise, the State would be forcing that person into a condition of dependency: slavery. Principle 3 trumps principle 4.

Further, it is also unjust to require that someone do that which is impossible. If someone does not make enough income to meet the ordinary expenses of living, he or she certainly cannot pay taxes. This new insistence that everybody pay, regardless of his or her ability to pay, bears a chilling resemblance to the "Poor Laws" as they operated in England in the early 19th century, in which the rich were ostensibly being taxed for the support of the (deserving) poor . . . and to meet the tax demands, simply raised costs to their tenants and employees.

The poor were, in effect, taxed for the support of the poor, with (of course) a rake-off for administrative costs, such as the Parish Officer, the Beadle, the Roundsman, etc., etc. The system did have the somewhat dubious benefit of providing Charles Dickens with some of his more hellish descriptions of life as a permanent dependent of the State in a Workhouse, and of supplying Karl Marx with massive data for his analysis of the capitalist system, described in Das Kapital.

The Poor Laws didn't do the poor much good, though.

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