Sunday, February 27, 2011

A Few Thoughts on Taxes

Since I use the original 1928 Book of Common Prayer Lectionary, the first lesson for Morning Prayer this morning was Genesis 41:15-37, where Joseph -- having been hauled out of prison to interpret Pharaoh's dream -- delivers the bad news that seven years of prosperity are to be followed by seven years of famine. In response to this unfortunate news, Joseph advises Pharaoh that he should set up overseers who will take one-fifth (20%) of the produce and put it in storage so that when the lean years come the people of Egypt will not starve but will instead be cared for. That -- and the fact that my income tax return needs to be filed soon -- got me thinking about taxes.

What Joseph established was a de facto tax, but it was a tax that was dealing with a specific coming crisis. The 20% that was gleaned would pay rich dividends in the future when famine came to the land. In contrast to this, too much of the taxes that are payed today go to servicing debt -- debt that continues to grow, and grow, and grow with the printing of fiat money. Elsewhere in Scripture, when the people clamor for a King, Samuel warns them about some of the things that this King -- Saul -- will do. Among the warnings that he lists are that the King will take a tenth of their grain and flocks (1 Samuel 8:15, 17). Clearly, he sees a 10% tax as excessive. That's even lower than the 20% that Joseph advised -- when, after all, he was dealing with an emergency.

In comparison, many in the United States pay between 32-40% in taxes once the direct and indirect (the so-called "hidden taxes" that are embedded in the products and services that we buy) are taken into account. That's considerably more than the sub 10% rate that Samuel seemed to hope for! Furthermore, taxes in the United States are progressive, meaning that if you work hard and earn more money you get more taxes, meaning that a raise can quickly morph into a pay cut. For people in the top tax bracket of 40%, they can easily pay more than 10% in local taxes, meaning that most of the fruit of their hard work is taken from them. That's an effective way to disincentivize success. It's interesting to note that when God established the Census tax in Israel, progressive taxation was forbidden.

There are numerous other problems with the way that we do taxes and I'll try to address those in the near future. Suffice it to say, though, that the current system isn't working. Perhaps returning to the old paths outlined in Scripture are worth more than a passing glance.

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