Do the Ryan Plan’s Tax Cuts Pass the Moral Test?

In case you missed the news, the Catholic Bishops criticized the House Republican’s budget plan for its proposed cuts to programs that serve the poor and vulnerable. It urged Republican House leaders to “put the poor first in budget priorities.” Their implied target was the economic blueprint of Rep. Paul Ryan, the chairman of the House Budget Committee. In a defense of his party’s plan, House Speaker John Boehner suggested that the bishops’ criticism was short sighted. “(I)f we don’t make decisions (to reduce spending), these programs won’t exist, and then they will really have something to worry about,” Boehner said.

In other words, Boehner argued that the Bishops overlooked the importance of reducing the debt, which could pile up so high as to undermine the country’s financial stability. From the standpoint of Catholic social teaching, this argument sounds plausible. As my colleague Thomas Peters has argued, burdening future generations with crippling levels of debt is morally questionable at best.

Yet is the Ryan plan’s method of reducing the debt moral? From the standpoint of the bishops, the Ryan plan “fails basic moral criteria” because of its cuts to programs serving the poor and disabled. But they might have opened a related line of attack: The Ryan plan does not ask for shared sacrifice to reduce the debt.

The poor are asked to sacrifice; under the Ryan plan, housing programs and food stamps would be cut, while the child-tax credit for children of working-poor immigrant families would be eliminated. Middle-income workers are asked to sacrifice; under the Ryan plan, the rate of growth of Medicare benefits would be cut. Yet higher-income workers and the wealthy are not really asked to sacrifice. Under the Ryan plan, their federal income taxes would be reduced, as the top marginal rate would fall from 36 to 25 percent.

What is the economic rationale behind rewarding the upper classes? The Ryan plan’s implicit answer is that the upper classes generate much if not all of the country’s economic revenue:

Lower economic output mutes the revenue effect of top-rate tax increases. Top rates have risen and fallen dramatically in the past, with little overall effect on tax revenue as a share of the economy. The United States has set the top individual rate as high as 90 percent and as low as 28 percent, but income tax revenue has remained fairly steady despite these sharp rate swings. The biggest driver of revenue to the federal government isn’t higher rates – it’s economic growth. Growth is the key to fiscal sustainability – and low rates are the key to growth.

But the link between marginal tax rates and economic growth is much weaker than the Ryan plan states. While the summary of Ryan plan points to the lower tax rates and economic boom of the 1980s to justify its conclusion, it neglects to mention exculpatory evidence. The U.S. economy boomed from 1947 to 1973 when the top marginal tax rate was 91 and then 70 percent. And the U.S. economy did not boom from 2002 to 2008 when the top marginal tax rate had been reduced to 35 percent; the annual percentage increase in the gross domestic product was 1.1, 1.8, 2.5, 3.6, 3.1, 2.7, 1.9, and 0.0. In other words, low rates are not the key to growth, although they might be helpful.

What should Catholic conservatives think of the Ryan plan? Thomas and my colleague Stephen White have defended the plan’s proposal to reduce entitlement spending. Yet I think Catholic conservatives have been uncritical of its tax cut proposals, which should be thought of as the progeny of the supply-side and libertarian rather than Sam’s-Club wing of the GOP. This is not to say that taxes on the wealthy should be increased. But it seems to me that a morally serious plan to reduce the debt would ask all Americans to sacrifice and not just some.

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24 thoughts on “Do the Ryan Plan’s Tax Cuts Pass the Moral Test?

  1. Mary says:

    Okay, I’m a college student and a dependent, so my knowledge may be limited. However, I have a wide knowledge of my religion and American politics. I work minimum wage at a grocery store and trust me, if we cut food stamps we’d be cutting a lot of money that should be spent elsewhere, or paying off debts. Big government or nanny government is not the answer. People can get food from neighbors and their communities and their CHURCHES if they need it. Right now we have a lot of abuse of government programs, and I see it everyday I go to work. I do not want to disagree with the bishops obviously, because that seems like the American Catholic way of life, but they want to eat their cake and have it too. It’s simply NOT the government’s job to socialize everything. Religion is never compatible with socialization, because the individual’s rights-religious rights-are always going to get trampled on. I agree with Rep. Paul Ryan–we do not want people to fall into the net, we want to make a trampoline so they can bounce back up. Bishops, stick to social issues that are objective first. Rep Ryan’s proposal is in line with the Church’s social teaching.

  2. John Barnes says:

    Great article, Mark. Lots of good stuff to chew on. The Wall Street Journal published a guest opinion column today that fits with this topic — “High Tax Rates Won’t Slow Growth: We’re not close to the top of the Laffer Curve. Raising tax rates is part of a sensible deficit reduction strategy” (http://online.wsj.com/article/SB10001424052702303425504577353843997820160.html?mod=djemEditorialPage_h). How to craft a fair and just tax code in keeping with Catholic social teaching is a topic we ought to spend more time on here at this site. Of particular interest to me is the question of a flat vs. progressive income tax, and I hope to chime in with a post soon. Looking forward to the ongoing discussion.

    1. Joe M says:

      The economists that wrote that article are the same ones who made that dubious income distribution chart Nancy Pelosi used last year. It had to be retracted, revised, clarified, etc. These guys are dedicated to a political cause rather than scientific accuracy. For example, they are fond of not counting benefits as compensation, knowing that there has been a radical shift over the last 20 years of workers getting paid more via benefits. — The idea that taxes can be raised to 70% on any group, without consequence is laughable. Honestly, I hope that Democrats do embrace that idea and campaign on it. Would pretty much be a slam dunk for Republicans from there.

  3. Nerina says:

    Here’s what bothers me about many of these budget discussions: the Church’s over-reliance on the government. Haven’t we learned our lesson? While I agree that the State does have a moral duty to protect and care for its most vulnerable people, the Church is called to an even higher duty to care for the people of God. I believe the State’s role in helping the poor should be to minimize road blocks for the Church and other charitable organizations in ministering to those in need. You know, like not imposing a ridiculously narrow “religious exemption” clause in burdensome regulatory mandates.

    It’s time for the Church to own up to Her responsibility in our country. I don’t think I’ve ever heard a homily in which we, as disciples, were encouraged to make personal sacrifices for the poor, but I’ve heard many that demand we hound our government for more money. Again, I’m not saying that the government doesn’t have a place here, but our church should be leading the way.

  4. Luis says:

    What do you mean with “fair share”? Should we all proportionally suffer, fail and succeed? If we don’t all suffer, fail and succeed in the same rate, are we being unjust? You have to differentiate between potential and actual, between realistic and utopian. The “Paul plan” doesn’t suggest that if the rich have more capital they WILL (actuality) generate more capital, it suggest that if the rich have more capital they will have the OPPORTUNITY (potential) to generate more capital. As physical creates (the inmaterial is more important, but its existence by nature depends on the physical) any actuality needs to come from a potentiality. Further more, even for angels (inmaterial intelligences), their actuality still depends on a prior potentiality (in nature, not time). A very basic economic principle is that in order to generate physical capital you need both physical and human capital. Without physical capital, human capital cannot generate more physical capital. We are physical entities, it simply follow. Money is the most basic and versatile form of physical capital. Now, if rich people have more capital and they don’t generate capital, it is not the fault of the system, it is the fault of the rich people. Now if capital isn’t being generated because there is no initial capital, that is the fault of the system.
    The same for the life of a soul. The Church and its members (clergy and laity) cannot “force” someone to be happy, go to heaven. We can only provide the potential for that to happen. One must use that potential as a free rational, relational agent to actualize the gifts and graces of the Church. This is why the Church provides the Sacraments, catechism and intermediate institutions. And it is also why we strive for laws that respect our conscious and free will. Heck, even Aquinas defines virtue as “the full potentiality for human action.
    The “Paul Plan” wants to provide the able section of society with a certain potentiality. It is giving them the chance to use the capital that they earned to generate more capital.
    The problem with the current tax system is that it obstructs that potential, giving more power to the few that have money, because they can afford to find a way to retain it, and banks, which will support a way for them to retain it.
    Why should I fail if the rest of america fails? why should I be damn to the flames of hell if others are damned? And this is not individualistic, this is solidarity. Institutions relating to one another for the florishment of human nature. In this case those institution is between one family that has physical capital, and another family that has human capital. Because if there is physical capital out there that my fellow brethren and I can use with our human capital, there better be no institutions that keeps me from legitimately gaining it.

    1. andrew says:

      Go to bed earlier. Really.

  5. Baron Korf says:

    It’s still asking for 1/4 of their income, that seems like a sacrifice to me.

  6. Andrew Wolfe says:

    Wrong-headed.

    1. It is immoral to promise people money that is not there.

    2. For a poor person to take less free stuff from the government is not a “sacrifice” on his part.

    3. There is NO taxing the rich. If you can successfully tax them, they aren’t rich. This is not just because of political connection, but also because wealth conveys so many more options than us regular people have. It’s not immoral for the rich to minimize taxes.

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