Updated: 1/13/20
Christian Economics: Teacher's Edition
So Samuel told all the words of the Lord to the people who were asking for a king from him. He said, “These will be the ways of the king who will reign over you: he will take your sons and appoint them to his chariots and to be his horsemen and to run before his chariots. And he will appoint for himself commanders of thousands and commanders of fifties, and some to plow his ground and to reap his harvest, and to make his implements of war and the equipment of his chariots. He will take your daughters to be perfumers and cooks and bakers. He will take the best of your fields and vineyards and olive orchards and give them to his servants. He will take the tenth of your grain and of your vineyards and give it to his officers and to his servants. He will take your male servants and female servants and the best of your young men and your donkeys, and put them to his work. He will take the tenth of your flocks, and you shall be his slaves. And in that day you will cry out because of your king, whom you have chosen for yourselves, but the Lord will not answer you in that day” (I Samuel 8:10–18).
The people of Israel were in rebellion against God. They wanted a king. Why? Because the nations around them had kings. Israel had done without a king or anything like one ever since the death of Joshua. Now they told Samuel to anoint a man to serve as king. This displeased Samuel. He prayed to God.
And the Lord said to Samuel, “Obey the voice of the people in all that they say to you, for they have not rejected you, but they have rejected me from being king over them. According to all the deeds that they have done, from the day I brought them up out of Egypt even to this day, forsaking me and serving other gods, so they are also doing to you. Now then, obey their voice; only you shall solemnly warn them and show them the ways of the king who shall reign over them.” (vv. 7–9)
High taxes and centralized civil government go together. Kingship represented a major move in Israel toward centralization. God told Samuel to warn them what this would mean in terms of taxation. The king would tax them at a rate of 10%, which was equal to the mandatory tithe they paid to the Levites. This threat did not impress the people. They demanded a king.
A tax of 10% was half of what the Pharaoh of Egypt collected before (Genesis 41:34) and after (Genesis 47:24–26) the famine. This tax rate was twice as oppressive as the tax that Israel’s king would impose. Yet in terms of taxation in the West during and after World War I (1914–18), the level of taxation in Egypt would be regarded as a major reduction of taxes. The central government of the United States consistently collects about 20% of Gross Domestic Product. State and local governments collect another 15%. In the nations of Western Europe, tax rates are often above 50%. On average, taxes are close to one-third. But this counts government payments as a productive sector of the economy (GDP). If we compare taxes with the private sector, as in Egypt under Pharaoh and Israel under the kings, tax rates are much higher than one-third in Western nations. They would approach 50%. So, the West’s taxpayers have grown accustomed to rates of taxation that are double or triple the onerous taxes of Egypt. Israel under the kings would be regarded as a tax haven.
The nation of Israel divided over the issue of taxation under Solomon’s son, Rehoboam. The ten tribes of the North seceded.
Rehoboam went to Shechem, for all Israel had come to Shechem to make him king. And as soon as Jeroboam the son of Nebat heard of it (for he was still in Egypt, where he had fled from King Solomon), then Jeroboam returned from Egypt. And they sent and called him, and Jeroboam and all the assembly of Israel came and said to Rehoboam, “Your father made our yoke heavy. Now therefore lighten the hard service of your father and his heavy yoke on us, and we will serve you.” He said to them, “Go away for three days, then come again to me.” So the people went away.Then King Rehoboam took counsel with the old men, who had stood before Solomon his father while he was yet alive, saying, “How do you advise me to answer this people?” And they said to him, “If you will be a servant to this people today and serve them, and speak good words to them when you answer them, then they will be your servants forever.” But he abandoned the counsel that the old men gave him and took counsel with the young men who had grown up with him and stood before him. And he said to them, “What do you advise that we answer this people who have said to me, ‘Lighten the yoke that your father put on us’?” And the young men who had grown up with him said to him, “Thus shall you speak to this people who said to you, ‘Your father made our yoke heavy, but you lighten it for us,’ thus shall you say to them, ‘My little finger is thicker than my father's thighs. And now, whereas my father laid on you a heavy yoke, I will add to your yoke. My father disciplined you with whips, but I will discipline you with scorpions’” (I Kings 12:1–11).
The Bible is hostile to high taxes. High taxes are identified as rebellion against God.
But taxes are inevitable. They are legitimate when lower than the tithe owed to God. Jesus made this clear in his rejection of a tax revolt by Israel. The Pharisees tried to trap him.
Then the Pharisees went and plotted how to entangle him in his words. And they sent their disciples to him, along with the Herodians, saying, “Teacher, we know that you are true and teach the way of God truthfully, and you do not care about anyone's opinion, for you are not swayed by appearances. Tell us, then, what you think. Is it lawful to pay taxes to Caesar, or not?” But Jesus, aware of their malice, said, “Why put me to the test, you hypocrites? Show me the coin for the tax.” And they brought him a denarius. And Jesus said to them, “Whose likeness and inscription is this?” They said, “Caesar's.” Then he said to them, “Therefore render to Caesar the things that are Caesar's, and to God the things that are God's.” When they heard it, they marveled. And they left him and went away (Matthew 22:15–22).
The denarius was a coin used to collect taxes. It was also used to conduct commerce. It was the basis of the division of labor. The coinage was provided by Rome. So was protection from gangs and other criminals. Jesus made it clear: the coinage belonged to Caesar. Israel was using Rome’s coinage to conduct business. Taxes are legitimate. High taxes are a curse. But God-fearing men should pay them to avoid trouble, Jesus said (Matthew 17:27).
There is no discussion in the Bible about the right level of taxation, as long as the rate is under 10%. If it is as high as 10% for the central government, it is equal to the tithe owed to God. The state is claiming equivalence with God. Such a level of taxation is clearly tyrannical. It should be resisted politically on principle.
There is no biblical case for graduated income taxation: higher percentage rates for people with higher incomes. Graduated taxation violates the principle of the tithe: a flat rate mandated by God on all adult church members. Graduated taxation is a mark of moral and political corruption. The Bible specifies the rule of law: the same punishment for a crime. “You shall do no injustice in court. You shall not be partial to the poor or defer to the great, but in righteousness shall you judge your neighbor” (Leviticus 19:15). This principle applies to tax rates.
The payment of half a shekel at the time of a military census prior to a war was not a civil tax. It was not a head tax. It was a judicial covering: atonement. It was an offering paid to the tabernacle, not a tax paid to the state. The state had nothing to do with atonement.
The rich shall not give more, and the poor shall not give less, than the half shekel, when you give the Lord's offering to make atonement for your lives. You shall take the atonement money from the people of Israel and shall give it for the service of the tent of meeting, that it may bring the people of Israel to remembrance before the Lord, so as to make atonement for your lives (Exodus 30:15–16).
It is a theological mistake to argue that this payment to the temple was a head tax. The state is not limited to head taxes.
A buyer has less money after the payment of a tax. This is a cost of civil government. The payment of money shifts ownership to the state. The state is now in a position to buy goods and services and make other payments. This shifts demand from the private sector to the state sector.
The state pays for resources. This payment shifts resources to different buyers from what a private buyer would have determined. This benefits those people who sell to the state or who collect welfare payments from the state. Sellers re-direct production to these new holders of money.
A buyer receives some benefits from this transfer. Benefits provided by the state include protection from private coercion and fraud, including military invasion. Citizens do not have to pay as much for protection. The state also provides a system of courts for resolving disputes without private violence.
There is a huge risk of unfair taxation. When politics is involved, voters may see the state as a way to extract money from the rich. This is especially true of income taxes. They are never set at a flat rate, unlike the tithe. Poorer voters see higher taxes on the rich as a way to get even. Yet in practice, the rich hire lawyers and pressure legislatures to create loopholes. The rich get richer and more powerful.
The citizens grow fearful of the tax collectors. This is another liability of unfair taxes. The tax collectors are arbitrary. This is because the laws are complex. The United States federal tax code in 2016 was about 76,000 pages long, plus regulations. Only specialized lawyers and accountants can interpret the specialized language. There are always rival interpretations of the meaning of these provisions. In addition to federal taxes, there are state tax codes: 50 more jurisdictions, plus the District of Columbia, where the federal government is located. There are over 3,000 counties. There are over 19,000 towns and cities. Each jurisdiction has its own tax codes. The common man is helpless to decipher the tax laws that affect him: federal, state, and local.
A seller sells to buyers. He usually knows little about them. A seller does not care if a buyer works for a government, or receives payments from a government, or works in the private sector. He wants money from buyers. As long as buyers are not criminals, they find willing sellers. Sellers may fear selling to criminals.
He wants safety. So do buyers. The state promises to protect law-abiding residents in their jurisdiction. This is a benefit if the protection actually is provided.
A seller pays business taxes. He may collect sales taxes from buyers. If he does, he becomes an unpaid tax collector of the state. He becomes legally liable for the collection of these taxes. It is not in his interest to live in a jurisdiction that imposes sales taxes. Sales taxes reduce sales. They impose unpaid tasks on sellers.
Tariffs are sales taxes on imported goods. Some sellers want high tariffs to reduce competition from foreign sellers. Other sellers want lower tariffs. They import goods and sell them retail. They prefer not to pay taxes on the goods they import.
There is a widely believed idea that a seller can raise prices when he has to pay new taxes. This is incorrect. Not all sellers can do this. Sellers cannot raise prices just because they want to, with or without higher taxes. Some sellers can get away with raising prices. Others cannot. Some buyers refuse to pay higher prices. In this case, the seller bears the brunt of higher taxes. Prices are set by competition: buyers vs. buyers and sellers vs. sellers. There is no way to know in advance what the effects on a particular price will be after a new tax is imposed.
Tax exemptions are economic subsidies. They benefit those sellers who receive them. It is common for sales taxes to be imposed on some products but not others. The exemptions redistribute wealth from sellers who must pay the tax to sellers who do not.
High taxes reduce output. Sellers worry more about the tax collector than the unsatisfied buyer. Sellers adjust production to meet the requirements of the tax code. This redistributes wealth to the government. This reduces the economic authority of those buyers who are not recipients of government money. It therefore redistributes wealth away from sellers who would otherwise have sold to these buyers. Sellers who sell to the recipients of government spending prosper at the expense of sellers who cater to the private sector’s wage-earners.
A seller may be able to pass the tax to consumers. But this might reduce sales and therefore profits. The outcome must be tested by the market process.
A pencil is an inexpensive item. Few people must adjust their budgets in order to deal with the tax consequences of higher sales taxes on pencils. So, pencils are not tax-sensitive. In contrast, cars are tax-sensitive. They are a large expenditure item.
The cost of production will rise when taxes rise. While pencils are not tax-sensitive, the products that are used to make a pencil may be. So are the products that are used to make the products that are used to make pencils. The complexity of the production process is high, despite the fact that a pencil looks simple. We do not get something for nothing. Some sellers must pay the higher taxes. Competition sorts out which sellers these are.
The Bible authorizes some taxes. It does not authorize graduated income taxes. It in principle prohibits them. This is an aspect of the biblical principle of the rule of law. The Bible also does not authorize the central government to collect taxes as high as the tithe’s limit of 10%. A government that does this is tyrannical. By this definition, almost all central governments since 1914 have been tyrannical. The voters do not care. Christian voters do not care. This is because they do not take biblical law seriously. They declare: “We’re under grace, not law!” They are therefore under the tender mercies of tax collectors.
These limitations have been denied by voters ever since the early decades of the twentieth century. When politicians imposed income taxes in the years immediately before World War I, they always imposed graduated taxes to “soak the rich.” This enabled some national legislatures to raise the top rates above 75% after the war broke out. These top rates never reverted to the rates that had prevailed prior to the war. There was a ratchet effect. The voters were willing to pay confiscatory rates to win the war. The politicians never allowed them to escape after the war was over.
Any attempt to impose a flat rate tax is attacked by Left-wing politicians as favoring the rich or subsidizing the rich. The predecessors of these politicians persuaded voters to accept the principle of graduated taxation, which is a violation of the rule of law. Then, when tax reformers call for a return to the principle of the rule of law, the Left defines this as a subsidy to the rich. The predecessors of these politicians persuaded voters to accept the principle of graduated taxation, whis is a violation of the rule of law. Then, when tax reformers call for a return to the rule of law, the Left defines that as a subsidy to the rich. Tax justice is opposed as injustice.
____________________________________
For the rest of this book, go here: https://www.garynorth.com/public/department193.cfm
© 2022 GaryNorth.com, Inc., 2005-2021 All Rights Reserved. Reproduction without permission prohibited.