Any reasonable reading of the scriptures as a whole makes it clear that the attitude of the prophets toward excessive taxation is one of hostility.
In 1 Samuel 8, we see that the Lord condemns even a 10 percent level of tax. In Mosiah 11:3, we see that the evil King Noah imposed a hateful 20 percent tax. And we read that a 50 percent tax rate imposed by the Lamanites turned the people into slaves (see Mosiah 19:15). In Matthew 17:24-27, we see that Jesus says that the people who don’t pay taxes are “free” and that tax collectors impose taxes on strangers rather than their own children. As I show in this post, King Benjamin, who does not impose taxes, is held up as a righteous king in direct contrast to evil King Noah, who imposes a 20 percent tax. In addition, as I point out in this post, excessive taxes encourages breaking the commandments against theft and against coveting.
In short, any fair read of the scriptures shows that excessive taxation is unjust. This is not disputable.
But what many people do not consider is that excessive taxation is also futile. The truly rich will always find ways to avoid paying taxes, and the middle class will end up bearing the burden.
Let’s look at the most recent example, Puerto Rico.
Puerto Rico passed a law in 2012 to encourage millionaires to move to the island. So far, more than 77 have applied. The law calls for a 0 percent tax rate on investment income and a 4 percent fee on corporate income.
How much to millionaires pay in the U.S.? The new 2013 rates raised federal rates to about 44 percent. If you add in state taxes, property taxes, sales taxes, car taxes, etc, most rich people pay more than 50 percent (the Lamanite rate) on their income. Short-term capital gains are taxed at this rate.
Now it is true that long-term capital gains and dividends are taxed at 20 percent or more (the King Noah rate). However, keep in mind that capital gains are paid on capital that you have already earned, which has already been taxed. Capital gains are double taxation, which is why many countries, including Belgium, Switzerland, the Netherlands, Austria, Hong Kong and New Zealand, have no capital gains taxes at all.
Investment adviser Peter Schiff is moving himself and his entire company to Puerto Rico this year. “We are all doubling our pay,” Schiff said on his radio show today. It is easy to see why this might be attractive.
Excessive taxation incentivizes this type of behavior. The higher the tax rate, the more incentive people have to find ways not to pay it. High tax rates are wonderful for tax attorneys and accountants, but not so wonderful for the rest of us.
It is worth pointing out that higher tax rates are causing a record number of people to renounce their U.S. citizenship. I personally know an executive who lives in Hong Kong who renounced his citizenship a few years ago. The tax rate in Hong Kong: 17 percent. His tax rate before he renounced his citizenship: 50 percent. So, if this executive makes $300k per year, he saves about $100k a year in taxes. Why wouldn’t he make changes to save that much money a year?
I should not need to do this, but let me spend a small amount of time addressing the canard you will hear from progressives: “tax rates were higher in the 1940s, 1950s and 1960s.” Yes, tax rates were higher for the extremely rich in the 1940s, 1950s and 1960s, but nobody paid the higher rates. Here is why: 1)everything was deductible, including all meals, office furniture, business trips, presents that you bought a “client,” yachts used for business, etc, etc. 2)Much more business was done in cash, so it was much, much, MUCH easier to hide your income. 3)People would routinely ask that part of their income be sent directly to Swiss bank accounts rather than paid to them. Ask any older rich businessperson who has been around for some time, and he or she will confirm that they would much rather have the tax regime of, say, 1960, than the tax regime of today. Simply put: people pay a much higher percentage of their taxes today than they ever did when tax rates were higher.
The people who cannot escape paying the higher taxes today are the regular schmoes like you and me. And over time, the need for more tax revenue is going to get worse and worse. Social Security and Medicare are on the edge of bankruptcy — higher taxes will be needed to keep them solvent. We seem incapable of cutting the federal budget significantly — higher taxes will become inevitable. And, worst of all, as more truly wealthy people move to Puerto Rico or someplace else to avoid paying taxes, the tax collectors will be left with fewer and fewer people to harass.
And, consider this: under President Obama, the number of working age people without a job has increased by almost 10 million. The labor force participation rate is at a low not seen since the 1970s. This means there are fewer and fewer actual working people to pay all of those taxes.
The scriptures make it clear excessive taxation is unjust. Reality makes it clear that excessive taxation is futile. But yet supposedly moral people continue to call for more taxes on the rich. Very sad indeed.
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I await the day when most wall street trading companies relocate their main operations to a low tax state. Texas, Tennessee, Florida all have large cities that could handle any company headquarters and these states have zero income tax.
If you live in a reasonable tax state, you have to make a lot of money to be in the 50% tax bracket between local, state and federal withholding.
I think that the other problem you mention is worse from a long-term standpoint. There are currently many young americans who have never had a job for longer than 6-12 months at a time and are not learning the skills, discipline, attitude, etc. necessary to be a productive citizen. The country needs to encourage high performance individuals and groups in all areas of life.
One more reason why I’m a Libertarian. Even the Republicans are for a very big government anymore. I would rather let people who work keep most of their money, invest it, and allow those investments create new jobs for other people to get hired into. High tax rates just mean fewer jobs here, forcing people onto the dole.
I have never liked the progressive tax schedules. Read some interesting articles on Sweden, and I got the impression that Swedes are happy to pay very high taxes to their tax collectors and they extoll their quality of life. I wonder if there was a righteous use of taxes in the USA, coupled with a flat rate that applied to everyone, if I would be so grumpy about taxes. I am self employed and, on paper, would supposedly fall in the one percent category. Yet I live in the suburbs surrounded by hundreds and hundreds of homes of people who appear to make the same amount of money. Plus, a local paper did a comparison of income by areas, and I was actually below the average. Based on those numbers, I suspect the numbers offered by the government about who is “rich” in America are bogus.
El oso, I think people often forget property taxes, sales taxes and car taxes when looking at their total tax burden. Have you ever stopped to think how much you will pay in property taxes on your house over 30 years? It is nearly more than the entire house cost you. And then we forget sales taxes, which keep on being charged for everything we buy. In Colorado, we have a much-hated car tax that nearly adds up to the value of a car over 10 year or so. If you buy a new car, you pay more than $1000 per year every year in car taxes. Absolutely ridiculous. So, we cannot just count the income taxes — we need to look at the total tax burden, and for most working people the burden is absurd.
IDIAT, believe it or not, Sweden has lowered taxes recently, as have many other Nordic countries. Voters discovered they were not getting much value for their money.
“Voters discovered they were not getting much value for their money.”
Exactly. It’s voters who set tax rates. It’s us. It’s democracy. None of the scriptural examples come from democracies. How can a tax rate be slavery when it is self imposed? How can a tax rate be oppressive when it can be changed by the people? How are the rich subjugated when they can hide their assets overseas, or move to Puerto Rico?
Only taxation without representation is oppressive. But even a 90% tax rate WITH representation cannot be called oppressive.
Nate, you are confusing two separate issues. Are the oppressive taxes we suffer under legal? Of course. They have been approved by a representative body in our republic. Are they moral? Definitely not. Just because something is legal does not mean it is moral, and modern-day prophets have reminded of this repeatedly. I believe marijuana should be legal — I do not think anybody should consume it.
We get moral guidance from the scriptures. Unfortunately, many people these days don’t read the scriptures and lack a proper moral structure. When more people read the scriptures, in the 18th and 19th centuries for example, there was no income tax and indeed almost no taxes at all, and we had a much more just system. Our oppressive tax system is one of many signs that people are ignoring morality and justifying oppression for their own means.
Sterflu (and indirectly, Nate), you are taking this post in a direction that was not its intent. Sterflu, your comment (very well done) will not appear here because it is really not the subject of this post. Keep that comment for another post because it is a good one and deserves discussion. If you want, you could even post a guest post on M* and I will make sure it appears.
Let’s discuss futility and utility. Thanks.
(Edited)
Regarding the futility of unjust taxes, futility might not be your main point (morality is I assume), but when you consider the direction society is heading it’s far from futile. The government increasing knows and has an ability to enforce more.
We’ve given the state so much power in other areas, and the government is busily consolidating that power so it will only be a generation or two at most before futility can be brushed aside. I’m thinking specifically of banking, tax,and other “commerce” regulations. Combine with the the fact that everyone us is probably guilty of 100+ various laws, we are all indebted to the law. Yes, I’m also aware of the potential contradiction here with laws on morality as well. But I think that’s in the crafting of the laws and the legalese culture we have.
Regarding the (f)utility of higher tax rates on the wealthy, it would be important to know where you would draw the line. Are you proposing a flat tax where the poorest pay the same rate as the richest? How high is too high? How do you come to that conclusion? Most conservative politicians are easy to tune out on this topic, because they ardently oppose a high tax rate but are unwilling to make the necessary cuts to to balance it. The Bush years were a great example of this.
You being a libertarian, I assume that you’re in favor of the hard cuts to the military, oil/farm subsidies and Medicaid – that your Republican friends are not. But what about police and fire? What about National Guard?
Chris, I am not going to sideline this discussion with a discussion of marijuana legalization. It is just an example. If it makes you feel better, you can substitute the word “alcohol” for “marijuana.”
Christian J, my answer is very simple: lower taxes rates and lower spending this year and then lower next year and lower the year after that until the government returns to its constitutionally approved functions. A flat tax similar to what Jerry Brown supported in 1992 would be a nice start but it is just a start. In 1900, government spending was about 5 percent of GDP. It is now about 42 percent of GDP. When we get back to the single digits, we can start having a conversation. You also know that the constitution pushes issues of police and fire and the national guard to the states. In my state, I oppose every tax increase and support every government cut. Some services can be privatized. If my many, many state taxes supported essential services only (courts, police, fire, national guard) nobody would be having this discussion. We are having this discussion because government supports many functions that are not essential and can be privatized.
Guys, nobody is forcing you to read this post. The subject of the post is: raising taxes is futile. Rich people will find ways not to pay and the middle class will suffer. If you want to discuss other issues, please wait until another post.
Sorry, I am just not interested in this discussion going other directions. Thank you for understanding.
Chris, regarding your comment above, the state is growing and consolidating in harmful ways, but at the same time there are all kinds of interesting areas of society, indeed the most popular areas of society, which the state cannot control. The rise of bit coins and the use of gold and other commodities for barter will chip away at state control. The use of the internet and encryption will chip away at state control.
People will move to where they pay lower taxes. The Beatles and the Rolling Stones took steps to avoid high taxes in the UK in the 1960s. People will barter goods or pay in cash so they don’t leave a paper trail.
My point is: it is the people we supposedly want to protect (i.e., the least informed and most vulnerable members of society) who will be under the boot of the state. The better informed, richer and more agile members of society will find ways of avoiding state intrusion. In this sense, the higher taxes are futile (if our goal is truly to help the defenseless and most vulnerable).
Prophecy:) That’s all I have to say!
Geoff, as a libertarian, this may not apply to you, but I find it fascinating that American conservatives very often attempt to legislate Christian morality – *except* when it comes to greed – one of the most derided (in the case of the BoM, its at the top of the list) sins in scripture. Of course, the argument is usually that, “its impossible to legislate against greed” or at least, “taxing the rich is not the way to do it.”
Although I tend to vote for Democrats (which, in NY are in bed with Wall Street anyway) and favor a higher tax rate for the richest – I don’t pretend to know exactly what the exact numbers should look like or where to draw the line as far as how it affects overall economic health. As an American Mormon though, I do believe the following:
– Capitalism is the best economic system in the world – when coupled with a robust undercurrent of basic Judeo-Christian values about greed money and the poor. Capitalism in and of itself – with no check against its inherent selfishness, can be very damaging to both the worker and the soul of the capitalist. What that looks like as far as legislation I think is up for debate, but I don’t dismiss it outright.
Remember, our Church has no problem speaking out on liquor law restrictions. There a number of states that still have sodomy laws on the books. I could go on.
For all the strict libertarians out there, you have some room to stand on this. For everyone else, not so much.
Christian J, I partly agree with your comment, but I think you need to give some more thought to the exact definition of “greed” and how it applies to your philosophy. Steve Jobs was a billionaire, but he was definitely not greedy — he was just interested in new technology and doing new stuff. Plenty of poor people are very greedy — they covet the things that other people have. Is a man greedy if he goes to work and works 10 hours a day to make sure his family has a house and food? How about if that same man happens to make $1 million/year vs. $40k?
Greed is simply a very difficult thing to legislate, but yet people spend a lot of time worrying about the supposed greed of others and never considering the sin of covetousness, which is at least as bad if not worse.
As for liquor laws, I found the recent Church statement fascinating and I would like to read it carefully and consider it in a future post. I generally agree with you that many people need to think more carefully about how they want to legislate the morality of others.
I realize I am a week late into the conversation but do not forget about regulation and licensing fees. Some of which are so onerous that those wanting to start up a new company are unable to because of the cost involved. If you want to talk about taxation without representation Nate let us start there. We do not vote in the bureaucrats part of an ever increasing executive branch.EPA, DOE, DOT, DOA and the like who makes these laws.
“people spend a lot of time worrying about the supposed greed of others and never considering the sin of covetousness, which is at least as bad if not worse.”
I agree it has the potential to be as bad or worse.