Are Taxes Fair, Good, or Jewish? A Defense of the Progressive Taxation
For several months, the whole nation has been intensely debating what constitutes a fair system of taxation. It is very peculiar that there are American Jews today who adhere to the Tea Party mantra that all government is bad, that taxes should always be reduced, and that a flat tax should be embraced. While Jewish law cannot be applied to the U.S. tax system to advocate for an individual policy, it is clear that Jewish values support taxation to achieve a just society. A flat (regressive) tax system will harm the middle and lower classes, so we are obliged to embrace a progressive system.
Jewish Law & Thought on Taxation
Jewish law is unequivocal about the obligation to obey the law and pay taxes (Bava Kama 113a, Nedarim 28a, Bava Batra 54b-55a and Gittin 10b). The principle of dina d’malchuta dina explicitly includes tax money (Bava Kamma 113a, Hilchot Malveh ve-Loveh 27:1), and tax evasion is prohibited by Jewish law (Hilchot Gezelah ve-Avedah 5:11). As tax evasion is also a felony according to secular law, and evokes harsh criticism from the public, Jewish law also describes it as a “chillul Hashem” (desecration of G-d’s Name). Additionally, one cannot pay cash for a service where it is known that the receiver will not pay taxes on it since the consumer is enabling the wrong. Finally, Jewish law is clear that it is legitimate and important for the government to collect funds for collective benefit as long as there is a transparent system in place, and the tax collecting individual is not dishonest or arbitrary (Bava Kamma 113b, Gezeilah V’Aveida 5:11). As Rav Moshe Feinstein explained, Americans live in a legitimate and just society that can be trusted (“medina shel chesed”). We benefit from the public goods supported by the collective to create the possibility for a good life for each individual. At the very least, we must pay what we are required to but ultimately we must do more and advocate for a just taxation system.
The Gemara explains that our public financial matters as Jews are the paradigmatic opportunities for creating a kiddush Hashem or chillul Hashem, a consecration or desecration of G-d’s name (Yoma 86a). While there is one flat tax (machatzit ha’shekel), this is not regressive, as some advocate today, and it is an anomaly in any case. This was an important statement that all citizens have a responsibility to build and support their government and that it is not only the responsibility of the wealthy. Yet the potential harm that would be caused by today’s proposals for a flat (more regressive) tax structure would be immense, and is not sanctioned in Jewish tradition. The other required contributions in Jewish law are proportionate to one’s wealth (terumot, maasrot, matanot aniyim, etc.). The rich take more responsibility in society so that we can create a more equitable society. This is the Jewish way.
Historically, the rabbis themselves have imposed taxes to sustain local infrastructure. Jewish law embraces different categories for local, city, and national taxes: hilchot shecheinim (rights of neighbors), ben ha’ir (obligations of the citizen), and din hamelech (rights of the king). There are different types of taxes and different levels of obligation based upon utility of public goods and personal wealth. For example, “Rav Nachman bar Rav Hisda levied a poll tax on the Rabbis… Rav Papa levied an impost for the digging of a new well on orphans… Rav Yehudah said: All must contribute to the building of doors in the town gates, even orphans” (Bava Batra 8a). All citizens have a responsibility to pay taxes but the level of responsibility varies.
The Rashba, the great 13th-century Spanish Talmudist, taught that tax should not be collected from each person equally; rather, one’s responsibility in paying taxes is proportional to one’s wealth (Responsa Rashba, 3:381). Aaron Levine, discussing the position of the Rashba in Welfare Programs and Jewish Law, explains: “If we assume that the rationale behind [the Rashba’s] call for a wealth tax is the ability-to-pay principle, the use of a progressive income tax would serve as a good substitute equity guidepost for the charity levy in modern times.” We are all blessed with various levels of financial stability and our public responsibility is proportionate to our abilities.
Discussing the Rashba, Dr. Meir Tamari, Director of The Center for Business Ethics and Social Responsibility in Jerusalem, and author of With All Your Possessions, writes, “He points out that the poor are unable to contribute a pro rata share. This is the pattern that is repeated in many different countries and periods: a basic premise that justice demands is? That each one contribute according to his benefit (from the system supported through tax); considerations of righteousness, however, demanded that the rich contribute a greater proportion of the communal budget.” In theory, one should only pay for what they benefit from but Jewish law took a turn from individualism toward righteousness. Rabbi Eliezer Waldenberg, the great 20th century Jewish legal authority, embraced a progressive tax model as necessary to meet the needs of society (Tzitz Eliezer, 2:22).
The Jewish tradition understands dual financial duties as it distinguishes between taxation and charity. According to Jewish law, one must give a minimum of 10% (Deuteronomy 14:22, Tosafot Taanit 9a) and a maximum of 20% of one’s income to charitable causes (Ketubot 50a), unless one could comfortably exceed this limit (Shulchan Aruch, YD 249:1). One might conclude that tax money paid to the government could be considered one’s charitable contributions, but Jewish law rejects this (Shulchan Aruch, YD 259:6). Rabbi Moshe Aleppo, in the early 20th century, ruled that tax payments due to “an obligation from the king” must not be conflated with one’s tzedakah (Divrei Moshe, YD 19). Further, Rabbi Moshe Feinstein wrote, “we never find that the law is that since the government takes money you are exempt from charity” (Iggrot Moshe, YD 1:143). Tax payments fulfill an enforced requirement to sustain a society reciprocally based on a collective commitment. Tzedakah, on the other hand, is an unenforced obligation to support those who have not been adequately assisted by the collective system. The two cannot be equated.
These obligations pertain both to a Jewish and non-Jewish government and its contributors. “The rabbis taught: we support the non-Jewish poor with the Jewish poor, visit their sick with the Jewish sick, and bury their dead with the Jewish dead out of the way of peace” (Gittin 61a). Rabbi Ovadia Yosef teaches that “even from our own charity we are obligated to support the non-Jews” (Yabia Omer, 7 O.C. 22). We cannot only contribute to our family, friends, and fellow Jew. Being a part of a nation-state requires that we support the larger system that sustains us.
The Jewish voice must be a voice advocating for the needs of a more just society, since G-d designated us as to be a “mamlechet kohanim v’goy kadosh,” a kingdom of priests and a holy nation (Shemot 19:6). We as a nation are to be advocates for the just and the good ensuring that “the good life” is accessible to all. How can we argue that taxes should be lower when we know that Americans, on average, donate only about 1% of their income to charity? Who will ensure that the education system is maintained and improved, that the elderly have care, that the sick are provided for, and that the country is defended? Some suggest that charity should replace government to take care of those in need, but private funds cannot possibly meet the needs of the 45 million Americans dependent on food stamps, the 15 million who are unemployed, or the 50 million who lack health insurance. It is simply not the Jewish way to naively hope that millionaires will all of a sudden become exceedingly charitable.
In addition to the problem that most citizens are not actualizing their charitable potential, many dodge their tax commitments as well. Dr. Tamari explains: “Contrariwise, it seems that it is possible to attribute the growth of an underground economy in the United States (which has the lowest tax rates in the Western world) to the ‘loopholes’ used by the wealthy to pay little if any tax.” The Torah does not embrace some modern secular notions of liberty that claim our freedom is infringed by asking the wealthy to take more responsibility. Rather it is the opposite: taxes support the operating environment that enables individuals to earn their high salaries and live in freedom. It is incumbent upon us to reduce the disparity in net pay of American citizens, to lessen the economic divisions between different members of society and bridge the gap between the “haves” and “have nots.” The alternative is the perpetuation of social forces that block social mobility and this is antithetical to Jewish values.
Poverty in America & Barriers to Social Mobility
In addition to ensuring that tax money is distributed wisely and fairly, we must be sure it is collected in the fairest manner. Flat taxes are regressive. For example, if everyone paid a flat rate of 30%, the teacher earning $50,000 per year would be left with $35,000, while the principal being paid $150,000 would be left with $105,000. They would both pay the same tax rate, but the teacher would have a heavier tax burden, and would be much less likely to be able to pay for housing, food, transportation, and other basic living expenses after taxes.
Even when we don’t have a technical obligation to give of our own, the tradition teaches us to embrace the path of compassion. The Rashbam explains “’And I will hear them because I am compassionate’: Even if, according to the law you have the object and you have no obligation to return it except to go beyond the letter of the law, one might think that I [God] will not hear his cry, but I will because I am compassionate and merciful” (Commentary on Exodus 22:26). At times, the value of being compassionate and creating the just society must outweigh the value of the right to private property ownership.
The prophets teach us that the paradigmatic wicked society is one that collective neglects its poor. “Behold, this was the iniquity of your sister Sodom: pride, fullness of bread, and careless ease was in her and in her daughters; neither did she strengthen the hand of the poor and needy” (Isaiah 16:49). Further, the rabbis teach that one who embraces private ownership at the expense of the poor living by a principle of “Mine is mine, and yours is yours” is like the paradigmatic evil Sodomite (Ethics of the Fathers, 5:10). A model of capitalism that allows for significant wealth accumulation but doesn’t also enforce levels of wealth redistribution is not a model Judaism can promote. Economic equality and care for the poor are Jewish values to be defended, and Jews should be on the front line advocating for ethical taxation.
The rich are getting richer and the poor are getting poorer in America. From 1981 to 2010, the bottom 90%’s income share fell from 65 to 52 percent while the income of the top 10%’s rose from 35 to 48 percent. Further, the top 1% of earners now takes home more than 18% of national income – a startling increase from 1973, when the rich’s share of income was only 7.7%. The richest 5% are making 37% of consumer purchases. Since the late 1970s, the middle and lower classes have been progressively weakened and Robert B. Reich argues that the economy won’t recover until we revive the middle class.
The government must intervene to ensure that the “American dream” is still attainable for all and that social mobility is a reality. Social mobility is a sign not only of a just society but also of a dynamic economy indicating that one of the most important tenets of capitalism is being met: a meritocratic system where smart and bold people have a better chance of achieving success regardless of whether they start out rich or poor. But social mobility is on a rapid decline in the U.S. today. Since the 1980s, the very rich do very well while the typical American makes little-to-no gains. The average American is losing incentive to work harder. Only the rich can get rich while others find their social mobility blocked even if they do everything right as they are caught in a poverty trap. Even when poor individuals seek to upgrade their skills through years of work experience or by going back to school, they can’t keep themselves afloat while trying to advance.
So who is to blame? Charles Karelis, a philosophy professor at George Washington University, explains that we cannot blame the poor or the rich for today’s crisis of poverty in America. Rather, our traditional way of thinking of economics just doesn’t apply to the poor. When one is poor ones economic worldview is shaped by deprivation, and one sees the world around oneself not in terms of goods to be consumed but as problems to be alleviated. Karelis explains that when in poverty one no longer prioritizes addressing the need for goods since they are fully consumed by the need to address major problems such as survival. Economists considering the purchasing of goods and the health of the economic system too often neglect that the poor don’t fit into their models. If one can’t afford to pay their credit card bills, rent, day care, car insurance, or even for food even when working multiple jobs then there is a huge disincentive to work at all.
We need to treat poverty as its own problem within economics and have specific solutions to address it systemically making everyone stronger. Too often economics remains on the theoretical level aimed at the achievement of “pareto-optimum.” A pareto-optimum is a situation where it is impossible to make one person better-off without making some other person worse-off. But today, we can find economic solutions that are win-win creating a stronger, safer, and more just society for all.
Several recent studies have shown the United States to be less mobile than comparable nations. Markus Jantti, an economist at a Swedish university, found that 42% of American men raised in the bottom fifth of incomes stay there as adults. Meanwhile, just 8% of American men at the bottom rose to the top fifth. How can America be understood as classless if 65% born in the bottom fifth stay in the bottom two-fifths (Economic Mobility Project of the Pew Charitable Trusts)? Our country is not only less equal but also less mobile!
The late Harvard moral philosopher John Rawls argued for the redistribution of wealth as a moral imperative. Rawls explains, in “A Theory of Justice,” his thought experiment of the veil of ignorance “no one knows his place in society, his class position or social status; nor does he know his fortune in the distribution of natural assets and abilities, his intelligence and strength, and the like.” To ensure social mobility, Rawls argued for inheritance taxes on the basis that a completely unregulated transfer of wealth from parent to child would result in the entrenchment of wealth in some segments of society while others would be blocked from mobility. As wealth continues to amass in the family from generation to generation, the problem of wealth disparity increases.
The poverty is not as some have described as a lack of motivation. Rather the problem is that our system no longer enables one in poverty to climb out. And we can’t rely upon some naïve notion of charity that values free will and the cultivation of virtue through giving over the needs of the poor. Spoken nobly, this is one of the great philosophies only the rich can embrace. Virtue in the rich cannot take priority over the survival needs of the most poor in our midst. Enhancing social mobility is not only a moral imperative it is also an economic need. The Organization for Economic Co-Operation and Development (OECD) notes. “First, less mobile societies are more likely to waste or misallocate human skills and talents. Second, lack of equal opportunity may affect the motivation, effort and, ultimately, the productivity of citizens, with adverse effects on the overall efficiency and the growth potential of the economy.”
Creating more social mobility will not only allow for a more just state and a stronger economy but perhaps also for a happier society. While ethics, of course, are not determined solely by what makes people happy, it should be noted that a new study has shown that people are happier in countries with more progressive taxation, because they are more satisfied with basic government services, such as quality of health care and education. Among the world’s developed nations, the United States taxes its citizens at one of the lowest rates, as a percentage of GDP. According to Citizens for Tax Justice, the bottom 20% of income earners are paying around 21% of their income in taxes while the tax rate for the 400 richest Americans was only 18%.
The Jewish Mandate
Jewish law is opposed to the radical laissez faire economic policies that many advocate today.
The obligation to help the poor is of utmost importance in the Jewish tradition, and this is achieved most successfully in a sophisticated collective system of government and not-for-profit agencies. Taxes in the United States are collected on three levels—federal, state, and local—comprising taxes on property, income, sales, imports, estates, and gifts. These taxes ensure that we can achieve our collective goals to improve our education system, provide quality health care, defend our country, and protect our environment. A progressive tax structure ensures the proper distribution of money, helps to protect the poor in society, and ensures a more stable income stream for the government in times of recession. It is our responsibility to ensure that the most vulnerable in society are protected and that our nation is strong. Progressive taxation is a crucial part of the solution especially in a country that taxes as little as the American government does in comparison to other countries around the world.
Without a more fair tax system, who will ensure the old, sick, poor, and unfortunate are cared for? Jews must continue to take leadership in advocating for progressive taxation.
Rabbi Shmuly Yanklowitz is the Founder & President of Uri L’Tzedek, the Senior Jewish Educator at UCLA Hillel and a 5th year PhD candidate at Columbia University in Moral Psychology & Epistemology. Rav Shmuly’s book “Jewish Ethics & Social Justice: A Guide for the 21st Century” is now available for pre-order on Amazon.