Taxing and Spending - Hard but Needed Choices
So, President Biden is preparing to announce $2 billion in tax hikes. Why? Because, he says, it’s time “we” — that is, the government in Washington — “start making people pay a fair share.”
By now, it should be axiomatic that whenever a politician talks about “fair share” in the same breath as taxes, you should grab your wallet.
According to White House press secretary Karine Jean-Pierre, the president’s plan “proposes tax reforms to ensure the wealthy and large corporations pay their fair share while cutting wasteful spending on special interest interests, like Big Oil and Big Pharma.”
Who could be against anyone or any corporation not paying their “fair share?” Fairness is one of the central ideas of the American republic. Any country founded on the organizing principle of the equality of all persons cannot but affirm that each of her citizens merits impartial and comprehensive justice in all matters.
Yet when persons on the Left talk about tax “fairness,” they never define the term. How much money should be taken from private individuals and the companies where they work is never clarified. This open-endedness means, ultimately, that nothing is ever quite enough. “The leech has two daughters,” we read in Proverbs 30:15, “‘Give’ and ‘Give’.” Had the writer of that text known about today’s federal government, the “Give Twins” would have been triplets.
First, some clarity about tax rates and payments. According to the Tax Foundation, “The top one percent’s income share rose from 20.1 percent in 2019 to 22.2 percent in 2020 and its share of federal income taxes paid rose from 38.8 percent to 42.3 percent.” The math is not complex; in one year, the proportion of taxes paid by those in the top one percent of income more than doubled their percentage of income increase. More broadly, the Tax Policy Center “estimates that 68 percent of taxes collected for 2019 came from those in the top quintile,” or 20%, of income earners.
Now, the president says he will only tax people who earn $400,000 a year or more. Depending on whether taxes are filed by individuals or couples, this means at least 32% to as much as 37% of one’s income will go to Uncle Sam. Add to this consumption, property, and social insurance (for example, Social Security and Medicare) taxes, and the rates on high income earners are substantial. And in 2023, more than 40% of American households, accounting for 72 million households in total, will pay no federal income taxes.
Of course, government costs money. From the defense of our country to our interstate highway system, it costs to keep America safe, free, and prosperous. Moreover, Christians are called to “pay taxes to whom taxes are due” (Romans 13:7). When Paul gave this command, the government in Rome was far from just in all its activities, yet followers of Jesus were required to submit to Caesar’s tax regime.
There’s another component to all of this, too. Issues of tax policy and federal spending are hard to discuss because they involve making choices we would rather avoid. It’s human nature to want benefits without costs. When those costs soar, fiscal and budget decisions become painful. So, when spending restraints of any kind are proposed, invariably they are opposed by various groups either out of principal or self-interest.
In a nutshell, “fairness” is in the eye of the politician and his or her philosophy of governance. Is the federal government, at the most basic level, a provider of needs or a protector of rights and safety? This question displays one of the greatest gulfs between left and right. And then there’s the reality that most of today’s conservatives actively support such things as Social Security, something that historically their political forebears regarded as a dangerous intrusion by the federal government into private financial affairs. While this view is no longer widely held, it points to the fact that people of all political allegiances become aggravated when faced with limited options affecting their own bank accounts.
This does not mean that choices cannot or should not be made. Our federal debit is more than $31 trillion, an amount that is, by any formulation, incompatible with sustained economic growth. Nor do limited options mean that massive tax hikes are wise. To the contrary, as my one-time boss, former Congressman Bill Baker (R-Calif.), used to say, “I never met a poor man who created a job.” Penalizing people of means through confiscatory tax rates makes little sense.
President Reagan once said, “There are simple solutions. There are just no easy ones.” May God grant our political leaders the moral courage and constitutional fidelity to act accordingly.
Rob Schwarzwalder is Senior Lecturer in Regent University's Honors College.