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.