How does Trump’s tax plan line up with Catholic social teaching?
Criticism has trailed the recent White House proposal for cuts in corporate and personal income tax rates, but few have been as direct as Jesuit Father Fred Kammer’s assessment. “The whole thing is basically—what can I call it?—a scam to pay back wealthy donors with more tax breaks,” he says. The plan has been promoted by the White House as a reform meant to simplify the tax code and lower the burden on working and middle-class taxpayers.
Father Kammer is convinced the measures proposed by the president will not achieve the advertised outcome. Analysts at the Tax Policy Center, a joint project of the Brookings Institution and the Urban Institute, agree, refusing even to refer to the Trump plan as a tax reform, but just a new round of tax breaks.
Referring to the center’s analysis, Father Kammer points out that the lion’s share of the tax relief offered by the plan will be consumed by the nation’s top 1 percent—the same folks who have already enjoyed previous and substantial rounds of tax reductions under the Reagan and Bush administrations. Those cuts had been similarly promoted as tax “reforms” aimed at the middle class.
The lion’s share of the tax relief offered by the Trump plan will be consumed by the nation’s top 1 percent.
According to Catholic social tradition, paying taxes, like voting and other forms of civic participation, is part of the way Catholic citizens contribute to the common good. Father Kammer says the clearest statement of Catholic thought on a morally sound tax system can be found in the U.S. bishops’ pastoral letter “Economic Justice for All,” published in 1986.
The bishops urged then that the tax system “should be continually evaluated in terms of its impact on the poor” and should be based on three criteria: those below the poverty line should pay no taxes at all, burdened enough by the costs of basic needs; the system should raise revenue adequate to pay for the public needs of society, especially to meet the basic needs of the poor; and, with an eye on reducing inequalities of income and wealth in the nation, it should be structured according to the principle of progressivity, so that those with relatively greater financial resources pay a higher rate of taxation.
Though many details still remain to be ironed out, the president’s proposed framework for “fixing our broken tax code” does not appear to satisfy the bishop’s requirements for a morally defensible system.
“In an era of rising populism, the [proposed] tax framework is a major tax cut for businesses and the very highest income Americans and only a small tax cut for middle-income households,” an analyst for the Tax Policy Center reports. “Seeking to balance the demands of their dueling business and working class constituencies, President Trump and the congressional Republican leadership have tilted heavily towards traditional GOP business interests.”
The framework proposed by the Trump administration is “sure not for the well being of the country,” Father Kammer says, and “certainly not to help working families and poor families.”
The proposed new tax policy cuts the corporate tax rate from 35 to 20 percent. It eliminates the estate tax and significantly rearranges the individual income tax rate structure, reducing top bracket percentages and the number of income brackets from seven to three: 12, 25 and 35 percent. The plan nearly doubles the standard deduction, to $12,000 for individuals and $24,000 for joint filers, but ends personal exemptions and simplifies tax filing be eliminating individual deductions and various loopholes primarily used by higher-income taxpayers. It includes an increase in the child tax credit.
Under President Trump’s current proposal, in 2018 middle-income earners can expect a break of about $660 annually—1.2 percent of their after-tax income, according to the Tax Policy Center. “By contrast,” the center reports, “it would boost the after-tax incomes of the highest-income 1 percent by an average of $130,000, or more than 8 percent. The top 0.1 percent would get an average boost in after-tax income of $720,000 or 10.2 percent of their after-tax income.”
According to the center, the nation’s top 1 percent (those making $730,000 or more) would receive 50 percent of all the plan’s tax cuts while middle-income households (those making between $50,000 and $90,000) would get about 8 percent of the total benefit. Worse news for middle-class payers is delayed about 10 years, when the overall tax burden bumps up for most taxpayers. That is because the plan replaces personal exemptions, which are indexed for inflation, with additional credits for children and non-child dependents that are not indexed for inflation.
Worse news for middle-class payers is delayed about 10 years, when the overall tax burden bumps up for most taxpayers.
By 2027, the center reports that a quarter of taxpayers, including nearly 30 percent of those with incomes between $50,000 and $150,000 and 60 percent of those making between $150,000 and $300,000, would actually pay more than they would if current tax policies were maintained. About 80 percent of the continuing tax relief in 10 years under the Trump plan would accrue among taxpayers in the top 1 percent.
The Tax Policy Center reports that the Trump administration proposal will reduce federal tax revenue as much as $2.4 trillion over the next 10 years. Father Kammer worries about what that shortfall will mean to the second of the bishops’ criteria for a just system. Will government, especially if it finally seeks to make more progress toward universal health care, have the resources necessary to ensure the common good? Or will revenue gaps mean deeper cuts in social spending that will harm the society’s most vulnerable members?
Father Kammer wryly notes that former budget hawks in the Republican Party have abruptly gone silent on pledges that tax relief would be revenue neutral. And traditional GOP anxieties about increasing the deficit and federal debt appear to have vanished now that a Republican president is proposing revenue-threatening tax breaks.
Of course, the Trump administration does not see it that way, arguing that its tax cuts will spur enough economic growth to prevent revenue losses. This has become a fixed notion among supporters of supply-side economics, despite little evidence that the calculus has ever worked. Bruce Bartlett, a domestic policy adviser to President Ronald Reagan, argues that one would be hard-pressed to demonstrate a definitive connection between tax cuts for the wealthy and economic growth. Though the co-author of the 1986 Reagan plan cutting taxes and reducing the number of brackets for individual filers, he now describes the notion of growth-producing tax cuts as the “Republican tax myth.”
The U.S. Conference of Catholic Bishops has so far not directly commented on the president’s tax plan, but in recent months the conference has been deeply critical of administration budget proposals that have continued a preferential option for military spending while threatening substantial cuts in health, education, housing and other services for poor and vulnerable Americans.
Criticizing proposed cuts in discretionary social spending in the 2018 budget in a letter to the Senate on August 31, the conference’s administrative committee wrote: “Such deep cuts would harm people facing dire circumstances and would place the environment and natural resources at risk. When the impact of other potential legislative proposals, including the proposed reduction of spending on health care by hundreds of billions of dollars over the next decade and implementation of tax policies that would offer trillions of dollars in tax cuts to the wealthy over the same period are considered, the prospects for vulnerable people become even bleaker.”
“Wave after wave of tax cuts since the 1980s have disproportionately benefited the wealthy far beyond the amount of taxes they pay, while offering token cuts to lower brackets.”
And in July Bishop Frank J. Dewane of Venice, Fla., chair of the U.S. Bishops’ Committee on Domestic Justice and Human Development, expressed concern over a U.S. House of Representatives budget resolution. “A nation’s budget is a moral document,” he said in a prepared statement. “Reducing deficits through cuts for human needs—while simultaneously attempting a tax cut, as this proposal does—will place millions of poor and vulnerable people in real jeopardy. Congress should choose a better path, one that honors those struggling in our country.”
A spokesperson for a Catholic economic think tank, the Acton Institute, which is more favorable toward market-based solutions to social inequities and challenges, could not provide a response to the latest Trump proposal by publication time. But its founder and president, Father Robert Sirico, in an interview with the National Catholic Register in July, found much that he liked in the initial outline of the plan. “A refundable tax credit, instead of a direct subsidy from the government, is more in line with the principle of subsidiarity,” he said.
“When the parents work outside the home and they purchase childcare, I think they can derive some benefit without it being directly a subsidy from the government,” he added. Father Sirico worried that “our current tax policy doesn’t give couples incentives to get married or stay married,” arguing that intact families led by couples in stable marriages remain the best anti-poverty program possible.
Though it is considered near anathema in U.S. politics, Catholic social teaching has always endorsed the role of wealth redistribution via tax policy.
But Vincent Miller, Gudorf Chair in Catholic Theology and Culture at the University of Dayton in Ohio, is concerned the president’s plan will exacerbate inequities in the tax system while laying the foundation for a kind of intergenerational injustice, forcing greater deficit spending now and passing the tab to future generations.
Previous tax cuts, he says, produced “spikes of inequality.”
“The argument has been that the wealthiest pay more taxes, so they get a higher percentage of the cuts,” he says, “but they don’t pay 80 percent of the taxes”—the percentage of the tax break the top .01 percent will enjoy—“they pay about 40 percent.”
In an email, Mr. Miller writes: “Wave after wave of tax cuts since the 1980s have disproportionately benefited the wealthy far beyond the amount of taxes they pay, while offering token cuts to lower brackets.
“The result has been a systematic shifting of the tax burden downward, and through deficit spending forward onto our children. These policies have contributed directly to the explosion of income inequality during the same period.”
He says, “The tax cut being proposed now continues that practice,” adding, “It is hard to read this proposal as a serious attempt to fund the government to serve the common good.”
Though it is considered near anathema in U.S. politics, says Mr. Miller, Catholic social teaching has always endorsed the role of wealth redistribution via tax policy. In St. John XXIII’s “Mater et Magistra,” Mr. Miller says, “The church explicitly embraces the progressive tax”: “In a system of taxation based on justice and equity it is fundamental that the burdens be proportioned to the capacity of the people contributing” (132).
The social ethics of the Trump tax proposals aside, Mr. Miller wonders about the present urgency of new cuts after a long period of excessive federal fiscal and monetary stimulation and while the economy continues to perform reasonably well. With unemployment low and growth up, it may be a better time, he argues, to reduce deficit spending and pay down some of the national debt, not create more of it via a tax break.