Recently someone asked us whether we thought that Hilaire Belloc's insistence on a "differentiated tax" (i.e., a progressive tax) is a Good Thing. Essentially, we answered "no." Here's why, in brief.
CESJ's single rate tax proposal — levying a single tax rate on all income above a meaningful exemption (that we've estimated broadly at $100,000 for a "typical" family of four) would in effect be a steeply "differentiated" (progressive) tax, but without violating the tax principles of equity (people should be taxed in accordance with their ability to pay) and benefit (people should be taxed in accordance with the benefits they receive).
By setting the tax rate as a straight percentage on all income above the exemption (calculated by dividing the budgeted amount by aggregate income above the exemption), it would be possible to balance the budget without borrowing more than necessary to cover a temporary shortfall in collections, and pay down the debt in approximately 20 years, based on current GDP and phasing out government entitlements except for what is truly necessary in extreme cases.
There is nothing sacred about progressive taxation (unless you're into envy worship), and it is, in fact, No. 2 on the list of items Karl Marx gave in The Communist Manifesto to destroy private property. Private property, however, is presumably the basis of distributism, so it is a little contradictory for a distributist to insist on a progressive income tax. Taxation is also one of the means by which Keynes sought to "euthanize" small investors so they wouldn't waste capital income on consumption instead of reinvestment.
A single rate levied on all income (we keep emphasizing that because most current flat rate tax proposals exempt the income of the rich due to the false belief that we need their money to finance new capital formation and stick it to the poor) also complies with Catholic social teaching that insists we not take proportionately more from somebody just because they have more; a rich woman has just as much right to keep 50% of her income above the exemption as the poor man does to keep his 50%. As Pius XI reminded us, quoting Leo XIII,
"[I]t is grossly unjust for a State to exhaust private wealth through the weight of imposts and taxes. 'For since the right of possessing goods privately has been conferred not by man's law, but by nature, public authority cannot abolish it, but can only control its exercise and bring it into conformity with the common weal'." (Quadragesimo Anno, § 49.)
Nor can we legitimately use the tax system to impose our idea of what the rich should be giving in charity — for forced redistribution (except in "extreme cases") is neither justice nor charity, but a violation of the natural law: "It is a duty, not of justice (save in extreme cases), but of Christian charity — a duty not enforced by human law." (Rerum Novarum, § 22.)
What inevitably happens, however, is that somebody decides that God can't or won't enforce His own laws, and insists that the State force people to "do what is right" . . . as they see it. They insist on enforcing their idea of God's law and on taking revenge against the rich or anybody else who gets in their way or protests, with the result that capitalism is replaced by the only thing worse: socialism, albeit under many names and justified as enforcing "God's Law."
All of this is an inevitable consequence of insisting on being enslaved by the past savings assumptions, and fighting with all your might against the possibility of financing new capital formation with future increases in production instead of past reductions in consumption.