Tax interests me around some maths. It is fascinating to think that some advantage sought via lowering or raising the current rates may not be achieved. Changes to tax rates can have unintended consequences! Then there is the question of what are 'fair' rates of tax. For the life of me I cannot see how taxing the higher parts of incomes at higher rates is 'fair.'
A fair tax rate would be the same rate paid by each taxpayer. (For this paragraph's discussion, let's assume that salaried taxpayers cannot rearrange their income to pay less tax than designated by inland revenue). At 20%, say, a person on $50k pays $10k tax and a person on $2m pays $400k. At the same rate one pays 8x the tax of the other. On a regressive system on which, say, the latter pays ever higher rates beyond certain levels of income, even more tax will be paid, which no doubt benefits the Treasury. But is it fair to assume that the rich (which on a standard rate always pay more than the poor) must pay an even greater share simply because they are rich? Implicitly, moving beyond the same tax rate for all carries an assumption that the rich should have their income distributed across society in a way which makes them less rich. That is socialism via taxation more than it is a system of fair taxation!
Yet, lurking in this debate are various presuppositions which could do with theological examination.
Here is Jamie Whyte, leader of the ACT Party (for overseas readers, a party dedicated to reducing tax and therefore government intervention in society):
"Guyon Espiner interviewed me on Radio New Zealand a few days later. He claimed that by cutting the top rate of tax from 33% to 24% I was making a gift to people who earn over $70,000. This language is used all the time but it is bizarre. Of course, the government could tax all the money you earn. But it does not follow that your post-tax income is a gift from the government. You might as well argue that your TV is a gift from your local burglar because he has chosen not to steal it.
These journalists are not biased. They have simply internalized the prevailing economic ideas in New Zealand. During that debate on The Nation it became clear that all my opponents, with the possible exception of Peter Dunn, did not believe in private property.
On the topic of Auckland house prices, Winston Peter’s claimed that “we are selling our houses to foreigners”. When I pointed out that houses are not collectively owned and that individual New Zealanders were selling their houses to whomever they chose, he insisted that I was wrong about this. And, as you can imagine, Russell Norman and John Minto agreed that the government should decide who you may sell your house to – or, in other words, they agreed that it is not really your house.Russell Norman’s enthusiasm for the State is so great that he believes not only that all property is the creature of the state but that all children are too. When I suggested that paid parental leave should be abolished, he claimed that this would mean no more children being born in New Zealand."
Now I am inclined to agree with Jamie Whyte that it is utterly extraordinary to have reached a situation re taxation where otherwise sane and sensible people such as Guyon Espiner (however unwittingly it may have been that he did so) can speak as though every dollar I earn is really the government's and every dollar they do not take from me is an act of mercy and grace!
Nevertheless is the strict opposite true, every dollar I earn is mine and thus every dollar taken from me in tax is a kind of act of legalised theft?
Whether we draw on a theology grounded in creation or redemption (or both) for our understanding of the individual in relation to society, it is very difficult to see where Christians could develop a strict individualistic, "there's no such thing as society" view of money and property. Nothing material is utterly our own since everything belongs to God. God created humanity for companionship, we are our brother's keepers, we belong to one another. To be human is to take on obligations of care and share for the well-being of all.
Further, money is complicated when we analyse it. In order to engage the services of a competent CEO, the labour market may determine that the company needs to offer a salary of $2m per annum. But the last thing which is going on at that point is that the CEO 'deserves' that amount of salary. A true sense of desert such as the CEO deserves the pay rate of the best paid worker in the company topped up by a premium for responsibility with a bit extra to respect previous experience might yield, say, $500k as a 'deserved' salary. $1.5m is a bonus, an undeserved grace served up by the nature of capitalist markets. Does it 'belong' to the CEO or is it at the mercy of the government and (noting various ways in which society makes a play for donations from the wealthy) able to be called upon by charities concerned with welfare or promotion of the arts?
More importantly, the $2m p.a. comes from somewhere. Mostly workers within the business who are paid a lot less generate the income for the business which pays the $2m. (A very recent protest in the USA concerned MacDonalds' workers paid less than $10 an hour protesting the (?)$9m annual salary of the CEO). Our hypothetical $2m salary in at least one sense belongs to the workers who generate it and one consideration re taxation is that its distributive effects across society reconnect the generative capacity of poor workers with the fruits of their labours.
Counter-balancing this kind of analysis, nevertheless, is a properly theological recognition of the role an individual plays in society by making various choices in order to reach certain goals. A bright young person could choose to avoid university and launch straight into earning money, albeit in a job which may never lead to high levels of income. Another person of similar intellectual aptitude might choose to achieve more highly by making early sacrifices. Many years later, deep in debt with a student loan, offering the benefits of sacrificial study as a doctor, it is arguably entirely reasonable to expect to be paid well, not only in recognition of a choice made, but also in terms of responsibilities before society to serve it with work which only a well trained few are able to accomplish.
I think all this brings us back to choices we make as a society through elections. They are mandates for governments to act in certain directions rather than in other directions. Effectively a general election result is a renewal of contract between society and government in respect of taxation. One of the reasons why the ACT Party has never been elected to lead a government in Aotearoa New Zealand is that insufficient numbers agree with the general direction of ACT re tax.
By contrast, sufficient numbers agree with a Labour or National led government which, typically, offer a taxation contract in which we will be taxed to a significant degree with redistributive benefits across society, the difference between their offerings being a few percentage points re tax taken and a relatively few dollars re benefits received by individuals across society.
At certain points one party may offer a incentive re their economic proposals by promising to borrow more money than the other party to fund government initiatives but the general suspicion of the voting public for over twenty years now has been that borrowing is a recipe for long-term disaster and only tolerable by voters for short-term periods (of which 2008 till now has been one).
Generally, in the run up to this election, we are going to see a battle over which party can offer the biggest redistributive bangs for their/our(!!) tax bucks while each avoids giving the impression that they will take more from us through tax increases. Our appetite in these "contractual negotiations" is for the government to be more efficient in the use of their/our tax dollars than for them to take more of what is theirs/ours.
But, interestingly, in a post-Christian society, their remains a deep Christian commitment in these negotiations to understand society in a theologically responsible manner, because the one thing not being negotiated is giving away commitment to others in favour of strict individualism.
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Incidentally, for a few thoughts on the virtues of socialism (i.e. arguing there are none) watch Daniel Hannen:
If you disagree with Hannen's analysis, what are the virtues of socialism?