Article II. Entrance into the Controversy

103. Matters to be treated. In the question of taxes, which is still involved in many doubts and controversies, we direct our attention to the rationale of justice, which belongs to us; but we omit or relegate to the scholia those things which pertain more to political and economic sciences. We examine, moreover, a twofold point: 1. By what title a tax is owed and of what nature that burden is. 2. What the just method of its distribution is.

Finally, in the subordinate little questions, we shall treat specifically of the obligation of undertaking military service, and we shall weigh more accurately what obligation in conscience the present-day tax laws produce.

104. Various opinions.

1. Concerning the former question, the Scholastic doctors had no doubt. With one voice they hand down that a tax is understood to be that which subjects, or members of the commonwealth, contribute for the common utility and public necessities.¹

¹ Cf. C. de Lugo, vol. 2, disp. 36, no. 1.

On the contrary, among those more recent writers who are altogether unversed in Scholastic principles and do not borrow rules from the theologians, there is a marvelous variety of opinions.

If you ask concerning the nature of the debt, some who favor liberal economics contend that it is a real burden which therefore immediately affects goods, so that citizens are formally obligated as possessors of a certain quantity of goods.² The opinion according to which it is an obligation of the person nevertheless prevails.

² Ginoulhiac professed this theory precisely—which ought to please those who advocate the proportional system: “The tax is not a burden, but a part of the products granted to the State by virtue of its cooperation.” For this opinion Cauwès (no. 1219) adduces Ménier, V. de Broglie, and Yves Guyot.

If you attend to the end toward which it is to be ordered, the system of taxation is placed by state socialists among the means by which they pursue a greater equality of fortunes. For the Hegelians, on the contrary, who conceive the State as a certain abstract being existing ultimately for its own sake, Selbstzweck (an end in itself)—to whose party many German economists, such as Wagner, in some manner incline—taxes are part of the worship owed to that divinity and have its good for their end.

Others, finally, being more solicitous concerning the title by which a tax is exacted, indicate that the source of the obligation is a contract. For them a tax is either the price by which the various benefits which the State procures for them are purchased by the citizens, so that there is here a mere exchange of services—thus Bastiat—or an insurance premium for the juridical protection of goods. Thiers, after Mirabeau, seemed to defend the latter.

Yet there are among them some who approach us with a more obscure formula. Thus Cauwès, no. 1218.

2. As regards the other question, the Scholastic doctors employ this principle: payment must be made according to one’s means, but they do not define the matter more precisely. Cf. Molina, vol. 3, disp. 668, no. 1; Lessius, ch. 33, no. 6; C. de Lugo, vol. 2, disp. 36, no. 23.

A very great controversy has arisen among more recent writers concerning the method or form of just distribution.

Two things, however, must especially be observed:

a) In this place, it is a question of that form which would shape the entire total of taxes and not merely some portion of them. For the fact that some taxes are constituted in a progressive form can also please those who embrace the cause of the proportionalists, if they wish in this manner to compensate for the inequality by which common people are thought by not a few to be burdened more than others by indirect taxes.

b) Moreover, the very form which appears preferable can be introduced by the direct means of a tax which would affect proceeds alone, or by indirect means, by aptly tempering the variety of taxes according to that form.

Come, then, in order now to arrange the various and diverse opinions: there have been some who established this rule, that each person ought to pay more in proportion as he had a greater share in the common goods; this rule is to be rejected altogether, since it both requires an assessment subject to excessive difficulties and perhaps appears likely to bring it about that the burdens of the poor are greater than those of the rich.³

³ Cf. Cauwès, no. 1220, at the end.

But while readily admitting this, not a few others at the same time consider that the shares which each person has in the common goods can be presumed to correspond uniformly to the quantity of private riches. Hence, from Adam Smith onward, another method gained currency among all those who are followers of the liberal school: they teach that a tax is to be measured according to the resources of each person in such a manner that the same portion of income is exacted from each. Nor, however, do they forbid that those who are pressed by true indigence be relieved from every burden from a certain compassion, or that, by way of reward, less be exacted from the fruits of one’s own labor, provided that many goods are not thus exempted from the common law.⁴ That system, to which the French name proportional tax has been given, is defended by them as though it alone rested upon a certain and definite rationale and alone warded off the danger of an inequitable exaction or one made by chance and rashly. D. Cauwès also adheres to it, as do several Catholics, such as D. Périn.

⁴ By these marks the system which in French is called degressive is distinguished from the system called progressive (Leroy-Beaulieu, Traité de la science des finances [Treatise on the Science of Public Finance], p. 180).

The socialists, on the contrary, cry out with one voice that so much greater portions of incomes are to be exacted from individuals, the greater the totals of their incomes are, so that the resources of the citizens may in this manner be reduced to equality.

They are also the most ardent advocates of placing a single tax upon incomes.⁵

⁵ A general, single, and progressive tax upon income.

Moved by a far different rationale, not a few of the Catholic writers who reject the opinions of the liberals think burdens are distributed more equitably if, as each person is wealthier, a moderately greater portion of his proceeds is exacted from him. Examples are Taparelli,⁶ Liberatore,⁷ and Rev. Fr. Cathrein, S.J.⁸

⁶ Saggio teoretico [Theoretical Essay], no. 1178.3, in the note.

⁷ Principi di economia politica [Principles of Political Economy], pt. 3, ch. 3, art. 4.

⁸ Moralphilosophie [Moral Philosophy], vol. 2, p. 566 in the second edition; p. 627 in the third edition.

A similar method is approved by most German writers, such as DD. Wagner and Schaeffle, who contend that this must be attempted: that the burdens be felt equally by all.⁹

⁹ “The tax must be based upon equality of sacrifices.”

That system, which by a French name is called a progressive tax, long ago obtained classical patrons in France: J. B. Say¹⁰ and Courcelle-Seneuil.

¹⁰ “I shall not fear to pronounce that the progressive tax is the only equitable one.” Traité d’économie politique [Treatise on Political Economy]. Cf. also the others cited by Cauwès, no. 1221.

Yet of those who do not wish the portions of taxes to correspond uniformly to portions of proceeds, very many do not disclose their opinion more fully. Hence this is explained by not a few, especially by adversaries, as though the ratio of increase itself must be constant and perpetual. Accordingly, for example, 3 percent would be exacted from an annual income of five thousand francs, 4 percent from ten thousand, 5 percent from fifteen thousand, and so on, so that after certain progressions the entire amount of incomes would consequently have to be consumed.¹¹

¹¹ Another form of progressive tax has also been invented, by which incomes indeed would not be consumed entirely, but would nevertheless be prevented from increasing beyond a certain total. It was proposed thus by Prof. J. W. Newman.

But not very long ago, another method of progression began to be proposed which could never exceed a moderate rate of taxation. Different forms are proposed by different persons.

There are some who define a few classes of incomes, whose burdens gradually increase indeed, but are the same within the class, whether you have more resources or fewer. The exaction is therefore uniform—proportional—for incomes of the same class, while the burden is not too heavy for any class, not even the highest.¹²

¹² In French, this system is called: système de la progression rationnelle limitée [system of limited rational progression]; système progressionnel [progressional system] (Joseph Garnier); impôt progressif par tranches [progressive tax by brackets].

Finally, they distinguish incomes themselves either according to origin or according to function or connatural destination.

According to origin, insofar as the income of one’s own labor is burdened with a lesser tax than the income of goods acquired by inheritance; momentary (temporary) income less than stable income; etc. Cf. H. Denis, L’impôt [The Tax], pp. 100, 122, 128, 129.

According to function, insofar as, whatever the total amount of the patrimony may be, the first portion of income, from which sustenance is to be procured (Existenzminimum [subsistence minimum]), is established as altogether or for the greater part immune from every burden; then the second portion, which is thought destined for almost necessary expenses, sustains a lesser burden than the third, which is of secondary utility; and this last, in turn, a lesser burden than that kind which can commonly be said to pertain to opulence. From this kind a contribution of one-twentieth or one-tenth would be sought.

The Income Tax of England is of approximately this character, and the systems which obtain in several parts of Switzerland do not differ greatly from it.

The following form of the proposal, in which the additions to the tax continually

| Income | Tax | |---:|:---| | 1–100 | 0 | | 100–1,000 | 3 percent upon the portion possessed beyond one hundred, that is, upon 900. Accordingly, 27 francs will be paid. | | 1,000–2,000 | 4 percent upon the portion beyond 1,000. | | 2,000–3,000 | 5 percent upon the portion beyond 2,000. |

And so on, so that with each new increase, in amounts up to one thousand francs—or shillings—a tax greater by one percentage point is commanded. In this manner, the total effective amount of income could never exceed 47,533.

For:

$$ \begin{aligned} 27 + (4 + 5 + \cdots + 99) \times 10 &= 27 + [(103 \times 96) \div 2] \times 10 \ &= 27 + 49{,}440 \ &= 49{,}467. \end{aligned} $$

97,000 − 49,467 = 47,533.

Cf. Bastable, Public Finance, bk. 3, ch. 3, p. 29, second edition. increase indeed, but by always smaller increments, appears more scientific, though in reality not dissimilar; so that the tax of each citizen tends toward a portion of income which is called the maximum: whether that movement reaches this portion and rests in it, or always approaches it more closely, as a mathematical limit, and does not arrive at it.¹³

¹³ In French, you would say it briefly thus: The taxation is progressive, but the progression of the rate decreases more and more, either so as to disappear and give way to a fixed maximum rate, or so as to approach this maximum indefinitely as a mathematical limit toward which one always tends without ever attaining it. Cf., at the end of this chapter, the diagram from which it appears at the same time that these differ little from one another in practice.

This will become clearer from a proposed example.

That system, which Leroy-Beaulieu considers should be neglected, nevertheless already has several patrons among economists. He himself indicates writers of Holland and, besides them, Seligman, Progressive Taxation in Theory and Practice; Emil Sax, professor at Prague, Die neuesten Fortschritte der nationalökonomischen Theorie [The Latest Advances in Economic Theory].

It will be helpful to place the various opinions precisely before the eyes in the French idiom:

1. Systems of uniform rate:

a) Pure proportional tax.

b) Tempered by a degressive combination.

2. Systems of differential rate:

a) Progressive tax at a constant ratio, adopted either to make the socialist ideal prevail or to equalize sacrifices.

b) Progressive tax by brackets, proportional within each bracket, and stopping at a moderate maximum rate. (Mixed system.)

c) Continuous progressive tax, but with progression that becomes slower and slower; tending indefinitely toward a moderate limit, and before long becoming appreciably indistinguishable from the proportional tax.

To these last two systems the recent epithet progressional is applied.