Matthew Schmitz errs when he suggests, in his critique of the Wall Street Journal editors, that the Journal‘s position is dishonest. The editors have not only made the morally right case, they have been honest and consistent in doing so. Schmitz doesn’t see this because he has misunderstood the case.
Schmitz admits, in the face of Robert Miller’s refutation, that R.R. Reno was wrong to suggest that the position taken by the editors can only be justified by moral relativism. In fact, as Miller demonstrates, the editors have selected the morally preferable policy. The rule of law is a much higher moral imperative for government than encouraging fertility. The rule of law is our only defense against arbitrary (and therefore, ultimately, tyrannical) use of political power. Fertility is encouraged through many social systems; no one argues either that government is the social system with primary responsibility for fertility, or that promoting fertility is a core competence of government. However, preserving the rule of law is government’s core function and only the government can preserve it.
What the rule of law requires above all else is stable rules that are fair and the same for everyone. Our current tax code is one of the primary threats to that core value, which is why the editors of the Journal have invested so much of their time, effort and social capital over the years in fighting to restore the rule of law to our tax policy.
Having conceded that the editors’ position is not intrinsically relativist, Schmitz’s fallback position is that they’re dishonest. Sure, the position could be moral if it were advocated by people who consistently took a moral view, but Schmitz thinks the editors come to the bar in this case with unclean hands:
In the Journal’s op-ed, I see an argument that purports to be neutral and principled being wielded very deliberately and specifically against a thing the Journal doesn’t care for. Encouraging investment through reduced tax rates on capital gains? Sure. Encouraging family formation through a tax deduction? Not so much.
Schmitz is wrong because he fails to see the crucial moral distinction between changing a tax rate and creating a tax deduction. The whole moral case hangs on this difference.
Changing a tax rate doesn’t implicate the rule of law very much because the rate is the same for everybody. If we are going to tax capital gains at all, we have to set a rate, and that makes it legitimate to argue about what the rate should be. You can make a case that it should be higher or lower, but whatever case you make, you’re asking for the same rate for everybody. You’re not asking the government to tax capital gains at one rate for one set of people and another rate for another set of people. You’re not encouraging the government to use its power to create two sets of rules for two classes of people.
Creating a tax deduction does implicate the rule of law. You’re taxing income, but you’re taxing it at one rate for one class of people and at another rate for another class of people. You’re reinforcing government’s perennial and pernicious habit of dividing the public into classes and showing favoritism to one over the other. This is the road down which the destruction of our freedoms awaits.
Does this mean all tax deductions are wrong? No, but a tax code that is sinking under the weight of thousands and thousands of such deductions is definitely wrong. Our monstrous tax code is a dagger pointed right at the heart of our liberty. The last thing we should do now is push government further down that road. We should be working to reverse the flow and get a simpler code with fewer deductions whenever we can.
I admit that there is no such thing as a tax system that does not facilitate some kinds of favoritism. If we’re going to tax at all then we’re going to have to make some decisions about tradeoffs between the interests of different groups. The argument for lower capital gains taxes is an instance of that kind of argumet.
But that doesn’t mean it makes no difference how you handle those tradeoffs or how extensively you entangle the government in making them. There is an honest case to be made, and the Journal editors have made it, that 1) to the extent we have no choice but to make some decisions over what behavior the tax code is going to favor, it should favor investment, but 2) it is morally preferable to minimize the extent to which we have to make such decisions at all.
Honest people can disagree about the tradeoffs involved in these difficult decisions. In fact, honest people can disagree with my whole argument here. Honest people could look at everything I’ve just written and think it’s all bunk.
But honest people could also agree with what the Journal editors, and I, believe. All I’m really asking for here is that we not draw the boundaries of honest argument in such a way that people who believe what the editors and I believe are branded dishonest merely by virtue of our having taken this position.
January 17th, 2012 | 2:02 pm
That’s a vigorous defense of the WSJ point of view. But it’s not at all clear that Forster’s assumption about the Rule of Law is true. A ‘personal deduction’ is applied to people based on the assumption that that a certain amount of family income should be set aside as ‘tax free’ to accommodate the expenses of that person. Adding people – dependents – means adding to this deduction.
This is an instance of treating two groups of people – those with small families and those with large – differently for an entirely fair reason. If Forster thinks this is wrong, fine. But he can’t assume that ‘fair’ means only what he says it means.
January 17th, 2012 | 2:07 pm
I am glad for Greg’s response. First let me say that I do not admit Reno was wrong because I do not think Reno made quite that claim.
My objection was that the Journal is more eager to club social conservatives on this issue than it is to club other groups when similar things arise. This applies only to them and not to anyone who happens to agree with them — like Greg and Robert and countless other ROFTers, no doubt.
Nor, I think, is it such a simple matter as drawing a distinction between tax rates and tax deductions. A system with, say, an 85 percent tax on sales, a 5 percent tax on income, and a 0 percent on capital gains could be said to be neutral but it would be very far from neutral in effect.
January 17th, 2012 | 2:10 pm
It’s certainly true that I didn’t have space in this blog post to develop a full moral theory of how best to handle all the difficult tradeoffs involved in these decisions. And if I didn’t have space in a blog post, I certainly won’t have space in a comment on a blog post.
My main focus is to establish that the Journal has taken a position that is morally serious, and has been honest and consistent in doing so. I think the question of whether it’s possible for honest people to disagree about these issues should be resolved before we descend to adjudicating the narrower details.
January 17th, 2012 | 2:11 pm
“Nor, I think, is it such a simple matter as drawing a distinction between tax rates and tax deductions.”
If it’s not a simple matter, we should be all the more careful throwing around accusations about people’s motives and agendas.
January 17th, 2012 | 2:12 pm
All I’m really asking for here is that we not draw the boundaries of honest argument in such a way that people who believe what the editors and I believe are branded dishonest merely by virtue of our having taken this position.
It is probably better to say inconsistent rather than dishonest.
January 17th, 2012 | 2:14 pm
But if it really is necessarily “inconsistent” to favor both lower capital gains rates and fewer tax deductions, that would at least somewhat justify suspicions of ulterior motives. I think it’s not inconsistent at all, it’s just a position you disagree with.
January 17th, 2012 | 2:14 pm
“If it’s not a simple matter, we should be all the more careful throwing around accusations about people’s motives and agendas.”
Here we agree. My suggestion was considered and very far from careless. To think it applied to anyone other than the Journal is a misreading of the post.
January 17th, 2012 | 2:16 pm
Your post seems to me to say that the Journal’s position appears to be “principled” but in fact is not. Am I misreading it?
January 17th, 2012 | 2:17 pm
“It is probably better to say inconsistent rather than dishonest.”
David Nickol is right on this point. I only suggested the Journal was inconsistent, not dishonest.
January 17th, 2012 | 2:19 pm
“Your post seems to me to say that the Journal’s position appears to be “principled” but in fact is not. Am I misreading it?”
Simply put, my comment was about the editorial stance and preoccupations of a specific journal, not about the possibility of a consistent libertarianism.
January 17th, 2012 | 2:22 pm
Simply untrue. Or at least, not necessarily true. Americans are already taxed at varying rates depending on income, even discounting deductions and credits. Nothing at all prevents the Congress and President from enacting a law that varies the rate of capital gains taxes—or any other taxes, for that matter—according to some criteria.
January 17th, 2012 | 2:22 pm
Well, I don’t know what “libertarianism” has to do with it, since the Journal editors aren’t libertarian (and neither am I). It seems to me that you accuse the editors of being unprincipled and your evidence is that they oppose the child tax deduction while arguing for lower capital gains taxes. If that’s a misreading on my part, I’d love to hear it, but if it isn’t, then it seems to me I’m as guilty as the editors of that “unprincipled” stance.
January 17th, 2012 | 2:25 pm
The WSJ article’s criticism of the increased child tax credit proposal seemed clear. It claimed the proposal was “social policy masquerading as economics.” It was more concerned with economic growth than the rule of law.
I think Greg Forster is reading into the WSJ article what isn’t there. No mention was made of the increasing amount of deductions, at least not in connection with it’s criticism of the child tax credit proposal.
I’m also curious as to what Mr. Forster believes is a “wrong deduction” and what is an acceptable one.
January 17th, 2012 | 2:36 pm
Well, I am reading into the article something that isn’t there; namely, many years’ worth of Journal editorials in which they’ve consistently articulated a certain moral view. They would have done better to remember that a major article attacking Santorum’s tax proposal would be likely to reach a wide audience of people not familiar with the Journal’s larger philosophical framework, and gone a little into that framework for the benefit of that audience.
The Journal follows a school of economics that argues the best thing we can do for economic growth is preserve the rule of law, so the two aren’t separate concerns for them. It’s actually the most morally serious approach to economics among the major schools in the field right now.
As for what deductions are right and wrong, like I said above, that’s a much larger question and I don’t really think I can do it justice in a comment thread.
January 17th, 2012 | 3:30 pm
I don’t know what moral system would demand the exclusion of the tax code to promote having children (or reward taxpayers who have children, as the WSJ put it). Though I understand they didn’t say that in the article, a complete exclusion is what it looks like they’re advocating when the authors dismiss the proposal as a “hobby horse of the Christian right” and “social policy masquerading as economics.”
If the WSJ wanted to implicate the rule of law, the writers there are competent enough to do so. Instead, their concern is more for incentives to save, work or invest (or to use the WSJ phraseology, rewarding those who save, work or invest over those who don’t).
I understand that you can’t use the comment section to extrapolate on what is an acceptable deduction, but I have to imagine that any deduction (or credit) would be justified with social policy reasons.
January 17th, 2012 | 3:33 pm
Forster’s standard for fairness and universal applicability seems naive or at least insufficiently explained. Sure, a rate on capital gains lower than other income is “the same for everyone” in its formulation, but in its effect it is obviously and flagrantly not the same for everyone. Similarly, a deduction for those with children is not applicable to all citizens, but on the other hand the government doesn’t tell people they can’t have children.
I submit that for many people it’s a lot easier to join the class of those with kids than to join the class of those with capital gains. So the universality in the Forster-WSJ position is really about a kind of formal fairness that seems rather arbitrary. That said, I’ve not read as many WSJ editorials as Forster has, so maybe he can explain this.
Another point: even if the WSJ editors think that the rule of law and economic growth are goods that go hand-in-hand, they can still be rightly faulted if their conception of the former is constrained unduly by their devotion to the latter. I think it highly likely that that’s what’s going on here, though again I’m open to being corrected.
January 17th, 2012 | 3:49 pm
I think it’s not inconsistent at all, it’s just a position you disagree with.
Greg Forster,
What may seem inconsistent to one person may not seem inconsistent to another. On the one hand, for the sake of charity and civility, one should not be quick to accuse someone who seems inconsistent of being hypocritical or dishonest. On the other hand, I don’t think one need hesitate to say, “You are being inconsistent.” I suppose one could say, “From my point of view, you seem inconsistent, but I am sure from your point of view you do not, so let me point out why you appear inconsistent to me, and then you can point out why you don’t think I am correct in viewing you as inconsistent.”
Disagreeing with the WSJ editors need not be approached as if it were a matter of delicate diplomatic negotiation or interfaith dialogue.
January 17th, 2012 | 4:03 pm
I credit the WSJ editors for their opposition to all deductions. However, I insist that given the myriad deductions for which there is no plausible public-good justification, they have spilled a disproportionate amount of ink on what they disparagingly call a “hobby horse of the Christian right.” That term expresses a lot more than principled opposition; it absolutely oozes with cultural disdain.
January 17th, 2012 | 4:11 pm
This line of inquiry seems like a more promising way of approaching the issue. I agree that the Journal editors did not take a constructive approach in this article. Neither, in my view, have their critics here on First Things. It looks to me like a lot of “cultural disdain” is travelling in both directions. Can’t we all just get along?
January 17th, 2012 | 10:59 pm
As I pointed out in response to Robert Miller, tax credits are a form of almost zero-overhead income assistance to poor families and were favored by Milton Friedman.
Now, you can trump Friedman’s libertarianism and insist the government has no role at all in providing assistance to low-income people if you want. But if you are not willing to go that route, I think we need an explanation of why, exactly, the child tax credit is a threat to the rule of law and a “dagger pointed right at the heart of our liberty.”
Sure, nobody wants a tax with thousands of deductions and credits that no one can understand but the type of tax credit we are talking about here simply means that families will pay less in tax than single people.
This is justified on the principle of simple arithmetic: a single person earning $60,000 per year has a comfortable life in most places but divide that $60,000 by five people in a family and you are looking at a much tighter squeeze. It’s not a complicated concept and I would really question the math skills of anyone who thinks it adds much complexity to the tax code.
January 17th, 2012 | 11:10 pm
I didn’t say that the child tax deduction (it’s a deduction, not a credit – that’s a point the Journal gets wrong) by itself was a threat to liberty. I said the tax code buried under thousands and thousands of deductions and credits was a threat to our liberty. Therefore there is a principled case we should make it a priority to enact a tax reform that would streamline the code. Obviously you can’t do that at the same time you’re carving out huge new tax deductions. Even in Washington that level of cognitive dissonance would stand out.
You also seem to be mixing up the child tax deduction with “assistance to low-income people.”
And for the record I’ll say again that I’m not arguing against all tax deductions, and I’ll say again that I’m not libertarian and neither are the Journal editors.
January 18th, 2012 | 7:34 am
it’s a deduction, not a credit – that’s a point the Journal gets wrong
I’m going with the IRS on this one. It offsets one’s tax liability rather than one’s taxable income, therefore it’s a credit. The additional child tax credit can also result in 0 tax liability and a check from the government.
Therefore there is a principled case we should make it a priority to enact a tax reform that would streamline the code. Obviously you can’t do that at the same time you’re carving out huge new tax deductions.
But Santorum did not propose carving out huge new tax deductions (or credits). He proposed merely increasing the size of one such credit to reduce the tax liability of poor to middle class families.
I don’t believe I am confused on the topic of low-income assistance versus tax credits. Tax credits like the child tax credit (and the earned income tax credit, which WSJ also opposes) are specifically designed to provide more income to poor families. They also provide additional income to middle class families but that is because they gradually phase out as AGI increases. You don’t want a sharp eligibility threshold because that can give people a disincentive to earn more money.
The child tax credit and the EITC are very much in the spirit of what Milton Friedman advocated as an alternative to welfare.
January 18th, 2012 | 9:01 am
“I’m going with the IRS on this one. It offsets one’s tax liability rather than one’s taxable income, therefore it’s a credit.”
What Santorum is actually proposing is an increase in the exemption, therefore it *is* a decrease in taxable income, not liability. I don’t disagree with your take on the IRS’s definition of a credit, but that’s not what Santorum is proposing.
January 18th, 2012 | 12:38 pm
A couple can honestly debate whether or not getting new carpet in the living room is more important than fixing the leak in the roof. But to do so while the kitchen is on fire is dishonesty on the part of both.
The “rule of law,” from the perspective of some segments of humanity — the child in the womb and often those in hospice “care” — has been entirely abandoned. Lethal anarchy reigns from this perspective, kind of like economic recession is a depression from the perspective of the unemployed. This deadly anarchy has been imposed upon these members of the human family by the raw power of government, not by its legitimate authority. The fundamental task of Caesar is not to bestow or withdraw the inalienable rights of humanity; to do either is far beyond his competence. His “core function” is to protect our inalienable rights; he is simply unable to bestow or withdraw them – they are inalienable; our nation’s founding document makes this very plain.
The Supreme Court abruptly withdrew the protection of law from innocent children in the womb, striking down laws enacted by the elected representatives of the people. Caesar’s sudden and unprecedented claim to have the authority to sanction the taking of innocent human life, in terms of the “legalization” of the killing of the child in the womb, makes it difficult to credibly accuse the state of “encouraging fertility.” Caesar’s claim to have the authority to sanction the killing of innocent human beings is the real “dagger pointed right at the heart of our liberty,” not the tax code, as unjust as it may be. It seems that the common good would be served by the population becoming less top-heavy with the elderly. The state could address this situation with social policy that “encourages fertility.” It could also be addressed with a Roe-like decision striking down laws prohibiting euthanasia. Such a decision would simply be another application of the authority over innocent human life Caesar has already illegitimately claimed for himself.
If “The rule of law is our only defense against arbitrary (and therefore, ultimately, tyrannical) use of political power,” then that is because humanity brings the state into existence to enforce a “rule of law” that protects the inalienable rights of all humanity. If the state doesn’t do that it is no longer enforcing a “rule of law” at all; it is instead a matter of some people illegitimately wielding raw power over others – brutal injustice masquerading as a legitimate exercise of the authority of the state.
We can hardly expect to establish a just tax code when we can’t even establish the basic justice that separates civilization from savagery, a “rule of law” that protects the weak, especially the very old and very young, from those more powerful. Restoring this basic justice is by far the “higher moral imperative.” This restoration of the original spirit of constitutional government that guided our nation’s founders, the spirit that from the beginning made the demise of the institution of slavery inevitable, the spirit that demanded and led to the enactment of laws protecting the life of the child in the womb – laws which could only be struck down after a strange, new spirit took possession of our government – will be the beginning of the end of much injustice of all kinds.
As for the various problems afflicting our governmental “house,” it is time we stopped debating whether we should get new carpet for the living room or fix the leak in the roof and turn our attention to the blaze in the kitchen. The strange, new spirit possessing contemporary government is indeed a consuming fire that must be dealt with in a manner commensurate with the urgency of the situation. And it is urgent. It wasn’t all that long ago that Germany let such a spirit take possession of its government, a spirit that demanded for mere mortals god-like authority over innocent human life. It didn’t take long for it to consume and destroy everything. This result was not at all surprising. Catholic Cardinal Clemens von Galen alluded to its inevitability in a sermon delivered on Sunday, August 3, 1941, in Münster Cathedral in which he condemned “legal” euthanasia:
Woe to mankind indeed. 2.5% of the population of the entire world had lost their lives and much of Europe and Japan had been reduced to rubble by the time that spirit was exorcised. And speaking of exorcism, a very wise man once commented regarding it:
Our governmental “kitchen” is on fire; a once exorcised evil spirit has returned with seven others. And we moralize about the tax code. Before doing that we must reestablish just what the purpose of government is; we must establish an interpretation of the constitution that constitutes legitimate government – then the process of enacting just policies can begin. Step one in bringing about justice is insisting on government acknowledgment that humanity possesses an inalienable right to life and brings the state into existence primarily to protect it. The state exists for humanity, not humanity for the state. If our government will not acknowledge that its very purpose is to protect humanity’s right to exist, and that its own right to exist is not inalienable but is bestowed upon it by humanity, or if those in power acknowledge these things only in their rhetoric but refuse to actually do so with effective policy, then, according to our nation’s founders, it is our right and duty to alter or abolish the government. “Woe to mankind” if we fail to do this.
January 19th, 2012 | 10:02 am
[...] “The Moral Case Against Child Tax Deductions,” Greg Forster, First Things [...]
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