flat tax code
People want a simpler tax code, but is flat tax the answer? NewsCom photo

A flat tax appears to be reasonable, even fair. 

Tax everyone at the same level. Eliminate the countless tax exemptions and simplify a needlessly complicated federal tax code. 

But critics say problems arise when one tries to square a flat tax plan with the Catholic Church’s social doctrine. 

“I don’t think there is any way to have a real flat tax and reconcile that with Catholic social teaching unless you modify it in such a way that it is no longer a flat tax,” said Vincent J. Miller, the Gudorf Chair in Catholic Theology and Culture at the University of Dayton in Ohio. 

Proponents say it generates wealth by spurring economic growth and creating jobs. Two Republican presidential candidates — Texas Gov. Rick Perry and Georgia businessman Herman Cain — have proposed competing versions of flat tax plans, with differing exemptions for low-income earners. 

Unfair share?

Critics say those plans are inherently unfair because they shift a greater share of the tax burden to the poor and middle class while decimating social services funded by tax dollars. Flat taxes, critics say, also violate a Catholic social principle of progressivity, which says those who can afford to pay more taxes should do so to benefit the common good. 

“For poor people to pay the same percentage of their income as a wealthy person would be unfair. Assuming you have a 15 percent flat tax, someone paying $1,000 out of a $15,000 income is not going to be the same as a millionaire who earns $15 million paying $1 million in taxes,” said Daniel Finn, a theologian and economics professor at St. John’s University in Collegeville, Minn. 

Finn told Our Sunday Visitor that policies such as Cain’s “9-9-9” tax plan — which would place a flat 9 percent tax on business, national sales and individuals — do not comport with Catholic social teaching, and said flat taxes are incompatible with a Catholic understanding that government has a role to play in securing the common good, economic justice and providing for the poor. 

However, Jeff Mirus, president of Trinity Communications, said there is no necessary conflict between a flat tax and Catholic teaching. 

“There is no single right answer to this question in Catholic social teaching. Fairness, feasibility, the impact of taxation on the economy as a whole, effectiveness of collection, suitability to the purpose: All these matters must be taken into account,” said Mirus. 

“Different cultures and political systems find all kinds of ways to fund government and the projects government is entrusted with for the common good. No particular form of tax or toll is necessarily immoral, unless it is rapacious — that is, places an undue burden on anyone — enforced prejudicially on the powerless for the benefit of those in power, or used for evil,” Mirus said. 

Simplifying the system

Father Michael Orsi, chaplain and research fellow in law and religion at Ave Maria University in Florida, told OSV that he is glad the presidential candidates have talked about the need to reform the tax code. 

“The real issue people are skating around is [that] the present tax code is a mess. Nobody knows what’s in there. It favors the people who are rich and corporations who can afford to pay for accountants to figure out what is in there,” said Father Orsi, who believes a flat tax would address the issues of corruption and people not paying their fair share. 

“It is more equitable in many ways compared to what we have now,” he said, adding he’d like to see such plans have exemptions for low-income people.

Principle of progressivity

Catholic social teaching does not prescribe specific tax policies. When evaluating tax proposals, Catholics must analyze them through a prism that encompasses the common good, the “universal destination of goods” and solidarity. 

Blessed Pope John XXIII touched upon just taxation in his 1961 encyclical Mater et Magistra when he wrote that “in a system of taxation based on justice and equity it is fundamental that the burden be proportioned to the capacity of the people contributing.” 

In essence, he approved of a progressive tax, where the wealthy are expected to pay taxes at higher percentages because they are in a position to give more. The principle of progressivity has roots as far back as the Renaissance, when Cardinal John De Lugo, a 17th-century Spanish Jesuit, wrote of a “geometric proportion” on imposing taxes. 

The U.S. Conference of Catholic Bishops endorsed progressivity in the 1986 pastoral letter, “Economic Justice for All.”

Serving common good

Stephen S. Schneck, director of the Institute for Policy Research & Catholic Studies at The Catholic University of America, told OSV that the Catholic tradition leans toward progressivity, but does not infallibly endorse it. 

“I don’t see progressive taxation as a principle of these teachings,” Schneck said. “What matters in tax policy is whether it best serves the common good of the whole community, as measured by the needs of the poorest in the community and in light of the universal destination of all goods.” 

In light of Catholic social teaching, a flat tax would be considered immoral if it was proven to deprive society and people’s basic material needs. 

“With a flat tax scheme, where the rich pay the same rate as others, I think it comes down to the details,” Schneck said. 

“If the scheme only taxed the fat of the rich while taxing the meat, or even the bone of others, then it would be unjust. But, if such injustice could be avoided and if the flat tax resulted in the betterment of all, as measured especially by the life of the poor, then it would comport with the Church’s teachings.” 

Miller said flat tax schemes presented by the candidates would “undeniably” benefit the rich at the expense of the poor. 

“This reappears on the American political scene because it serves the interests of some very wealthy people,” Miller said. “The flat tax is appealing to many because of its simplicity, but it would result in a massive tax increase for most people. Once that becomes clear, I think the attraction fades rather quickly.” 

Distributive justice

Daniel J. Mitchell, a libertarian economist and senior fellow at the Cato Institute, defended the flat tax in 2005 when he was a research fellow at the Heritage Foundation, a conservative Washington, D.C., think tank. Mitchell wrote that the current tax system punishes the economy, imposes heavy compliance costs on taxpayers, rewards special interests and makes the country less competitive. 

“A flat tax would dramatically reduce these ill effects. Perhaps more important, it would reduce the federal government’s power over the lives of taxpayers and get the government out of the business of trying to micromanage the economy,” Mitchell wrote. 

That view aligns with conservative commentators who argue that government violates subsidiarity when it creates social programs whose services would be more efficiently provided by charities. Finn called that a libertarian view that absolves government from securing justice. 

Finn also said that view violates biblical principles stretching back to the Old Testament, when God instructed the wheat field owner to show concern for the widow, orphan and alien. Others cite the apostles and early Church donating to a common purse, but Schneck said it would be wrong to confuse the apostles’ Christlike practices with modern tax policy. 

“Taxation and the government are not the same things as caritas and the common good,” he said. “Confusing them risks affronting our inherent rights of property and freedom. But those long ago practices of the apostles do point to an ideal of distributive justice. And, that ideal should indeed inform our efforts to construct fair systems of taxation.” 

Brian Fraga writes from Massachusetts