Equality or Need
A Theological Look at the 2020 Democratic Presidential Candidates’ Tax Plans
Many Christian theologians of the past two thousand years would likely have supported a wealth tax, but not for the reasons given by the current Democratic presidential candidates. Using the tax system to redistribute resources from the wealthy to the poor has been a matter of controversy in American history, but it has had its Christian advocates for much longer than there has been a United States. This three-part essay examines the explicitly redistributive tax plans of the 2020 candidates, the ethical commitments that underlie them, and insights into those commitments that the history of Christian theology offers. Part I summarizes the candidates’ tax plans and identifies long-standing tax policy questions that they raise. Part II will analyze some of the candidates’ specific proposals in tax policy terms. Part III will then evaluate the policies and philosophies underlying those proposals through a theological lens.
Taxes are used to pay for public services, change resource use, and alter the distribution of wealth and income. 1 See Richard A. Posner, Economic Analysis of Law (Boston: Little, Brown and Co., 1973), 223. Everyone understands that public services must be funded, even if they disagree on which public services to fund and by how much. Changing resource use through tax incentives and disincentives has become a standard and accepted goal of tax policy. Any tax other than a lump-sum head tax inevitably redistributes wealth and income, 2 See Alex Raskolnikov, “Accepting the Limits of Tax and Economics,” Cornell Law Review 98 (2013): 525. but the degree to which taxes should deliberately change the allocation of wealth is a perennially contentious issue. That issue has come to the fore in the current presidential campaign, not least because of interest in a wealth tax on the part of some of the Democratic candidates.
Redistribution of wealth and income
Determining which of the presidential candidates’ tax proposals are designed primarily to raise revenue and which are focused first and foremost on reducing economic inequality is a judgment call. The wealth-tax proposals, for instance, are designed to do both. That said, the current interest in wealth taxes seems driven more by concerns about the effects of economic inequality than about raising revenue. More on that issue below. First, a summary of the Democratic candidates’ proposals specifically targeting the wealthiest Americans. Michael Bennet wants to expand the Affordable Care Act (ACA, also known as Obamacare) rather than replace it with a Medicare-for-all system; would restore the 39.6% top individual income tax rate in effect before the 2017 Tax Cuts and Jobs Act (TCJA); add a 44% bracket for the wealthiest individuals; impose an annual “smart wealth tax” on income from wealth at the same rates as earned income; eliminate the step-up in basis on inherited assets; restore the pre-2009 federal estate tax exemption; and add higher estate tax rates for very large transfers at death.
Joe Biden would fund an expanded version of the ACA by, among other things, reducing “incentives for tax havens, evasion, and outsourcing,” increasing the top personal income tax rate from 37% back to 39.6%, capping itemized deductions for the wealthiest taxpayers at 28%, eliminating the step-up in basis for inherited capital assets, and ending favorable capital gain rates for anyone making over $1 million.
Michael Bloomberg recently entered the race and has provided few details to date.
Pete Buttigieg has suggested that he would raise individual income tax rates, enact a financial transactions tax, impose social security payroll taxes on wage earners making more than $250,000 annually ($500,000 for married couples), restore the federal estate tax to pre-2010 levels, and consider a wealth tax.
John Delaney would increase the top marginal income tax rates, repeal TCJA tax breaks for wealthy taxpayers, adjust the federal gas tax annually for inflation, tax capital gains at ordinary income rates, and increase the payroll tax.
Tulsi Gabbard has provided few details of her tax plans and policies.
Amy Klobuchar would return the top individual income tax rate to 39.6%; limit capital gain deferral through like-kind exchanges; tax carried interest at ordinary income rates; subject income over $250,000 to social security payroll taxes; raise capital gains and dividend rates for taxpayers in the top two income tax brackets; and impose a 30% minimum tax for people with incomes over $1 million. She has indicated that she is “open” to a wealth tax.
Deval Patrick has not provided details but has suggested that he would tax all income—including investment income and carried interest—as ordinary income and would raise federal estate tax rates by an unspecified amount.
Bernie Sanders’ wealth tax proposal has garnished more attention than any other such proposal except for Elizabeth Warren’s. The Sanders wealth tax would have a progressive structure. In its lowest bracket, married couples with net assets totaling more than $32 million and less than $50 million would be subject to a 1% tax on the value of their assets. In the highest bracket, a couple whose net asset value exceeded $10 billion would be subject to an 8% rate. Sanders would also levy a 40% exit tax on the net value of all assets under $1 billion, 60% over $1 billion, for expatriating taxpayers.
In addition, the Sanders tax plan would expand the federal estate tax, with a progressive rate structure ranging from 45% on estates between $3.5 million and $10 million to 77% on estates worth more than $1 billion.
To fund his Medicare-for-all plan, Sanders would also increase the top individual income tax rate to 70% on taxpayers earning more than $10 million per year and limit deductions for anyone in the top bracket, and would enact a financial transactions tax, eliminate the payroll tax exemption for wages over $250,000, and end the lower rates on capital gains.
Tom Steyer would impose a 1% wealth tax on assets over $20 million and enact an unspecified increase in federal estate tax rates.
Elizabeth Warren has talked more about taxes than any other candidate. Although her wealth tax proposal is simpler than Sanders’, it has attracted more attention. That tax would be imposed at a rate of 2% on net worth over $50 million and at a rate of 6% on net worth over $1 billion. It would include a 40% exit tax on net worth over $50 million of taxpayers who renounce their U.S. citizenship.
The Warren plan would also reinstate the 2009 federal estate tax, but with more progressive rates, and would eliminate the step-up in basis for inherited assets. In addition, Warren would impose mark-to-market taxation on the wealthiest 1% of households and increase capital gains rates to ordinary income rate levels. The Warren plan would enact a 0.1% financial transactions tax and impose a 14.8% payroll tax on wages over $250,000 (for married couples, half that amount for single taxpayers) and a new 14.8% social security tax on net investment income for individuals making more than $250,000 per year ($400,000 for families).
Andrew Yang’s plan is unique among the candidates’ tax plans. It would provide universal basic income of $1,000 per month to every American adult, paid for by a 10% value added tax (VAT). Yang would also end favorable treatment of capital gains and carried interest and would enact a financial transactions tax.
Using the tax code to influence behavior and, thus, bring about a new social norm is nothing new. For example, proposals for a carbon tax fall in the category of behavior-influencing taxes and aim to incentivize the use of clean energy alternatives. Leaving aside the ethical questions raised by using taxation to incentivize certain kinds of behavior, taxation for revenue-raising and wealth distribution purposes raise their own concerns. Specifically, tax policies require us to grapple with how to balance equity and efficiency, and with whether wealth should be redistributed and to what extent.
The question of equity and efficiency is this: assuming that taxation to raise revenue is a fact of life, how can we structure a tax system that inflicts the least amount of hardship on taxpayers (equity) and on the economy (efficiency)? The question of redistribution is as follows: in light of the fact that any actual tax reallocates wealth among taxpayers whether we like it or not, and the fact that tax is “the one real-world tool that is regularly employed toward achieving” distributive justice, 3 Linda Sugin, “Theories of Distributive Justice and Limitations on Taxation: What Rawls Demands from Tax Systems,” Fordham Law Review 72, no. 5 (2004): 2014. to what extent should we exploit taxation’s redistributive potential?
The first question is a modern one, often answered by the utilitarian principle that those with the most ability to pay should pay the most taxes. The second question is an older, deeper one, stemming in part from the nagging suspicion among Christians that—as John Chrysostom put it in the fourth century—it is not possible to be “good” with respect to one’s wealth except by distributing it, that it is “characteristic” of the good “to get rid of” wealth in any way possible. 4 John Chrysostom, “Twelfth Homily on 1 Timothy,” in From Irenaeus to Grotius: A Sourcebook in Christian Political Thought, 100-1625, ed. Oliver O’Donovan and Joan Lockwood O’Donovan (Grand Rapids: William B. Eerdmans Publishing Co., 1999), 103.
The Democratic plans have brought these two questions to the fore in a way we haven’t seen in recent decades. In the next part, we will explore how the current presidential campaign has breathed new life into these two tax policy questions.
Following a number of years practicing law and working in legal publishing, Allen Calhoun obtained a PhD in theological ethics and legal history from the University of Aberdeen. He is currently a McDonald Distinguished Fellow at Emory University’s Center for the Study of Law and Religion and an adjunct faculty member in the Religion and Philosophy Department at Averett University. You can follow him on Twitter @allen_calhoun1.
Image source: Pete Buttigieg courtesy of Gary Riggs / Wikimedia / CC BY-SA 4.0. Tom Steyer courtesy Gage Skidmore / Wikimedia / CC BY-SA 3.0. Andrew Yang courtesy Gage Skidmore / Wikimedia / CC BY-SA 2.0.