THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Wednesday, February 14, 2024

Five Levers of Change: Tax Policy

Today’s blog posting is adapted from the book, Economic Personalism, which you can get free from the CESJ website, or from Amazon or Barnes and Noble.


In 1891, Pope Leo XIII declared that “Many excellent results will follow” from expanding ownership to as many people as possible (Rerum Novarum, § 47). As he said,

Pope Leo XIII


[F]irst of all, property will certainly become more equitably divided. . . . A further consequence will result in the great abundance of the fruits of the earth. Men always work harder and more readily when they work on that which belongs to them; . . . And a third advantage would spring from this: men would cling to the country in which they were born, for no one would exchange his country for a foreign land if his own afforded him the means of living a decent and happy life. (Ibid.)

Solving the wealth gap, poverty, and immigration with the same program is surely a desirable outcome. Leo, however, reminded us that,

. . . [t]hese three important benefits, however, can be reckoned on only provided that a man's means be not drained and exhausted by excessive taxation. The right to possess private property is derived from nature, not from man; and the State has the right to control its use in the interests of the public good alone, but by no means to absorb it altogether. The State would therefore be unjust and cruel if under the name of taxation, it were to deprive the private owner of more than is fair. (Ibid.)

It is not enough, however, merely to say that taxation should not be “unjust and cruel.” In order to be practical — for social justice must always be effective — tax policies must reflect and be consistent with the goal of turning as many people as possible into capital owners.

There must, therefore, be legislative initiatives introduced to encourage businesses to finance their growth and expansion in ways that also grow and expand the base of capital ownership in an economy. Tax policy must make it possible for those who own little or no capital to use pre-tax (i.e., tax-deferred) future savings to accumulate a significant amount of capital in as short a time as possible.

Louis O. Kelso


To avoid disrupting an entire economy by introducing a new system all at once, an industry or region could be used as a test case. Once the test case has proved the concept and demonstrated its desirability for the whole economy — accelerated non-inflationary economic growth, expanded purchasing power, increased government revenues from a restored tax base consisting of new capital owners — there could be an overhaul of the tax system as a whole to support and maintain the State and the common good.

Louis Kelso’s Employee Stock Ownership Plan (ESOP) illustrates the power of just tax reform. Prior to the tax advantages enacted in the mid-1970s, there were relatively few ESOPs. Once, however, dividends from future profits became tax-deductible at the corporate level if paid through an ESOP, and lenders could exclude from taxable income a certain amount of interest earned, the number of ESOPs increased dramatically. Today in the United States thousands of companies with millions of employees have become worker-owned whole or in part.