Business Week's recent cover story, "How to Pay No Taxes"

You’ve got to give some credit to Business Week for their recent cover story, “How to Pay No Taxes”. After all, who else has the blazing audacity to publicly endorse our rarely discussed national pastime: complete selfishness when it comes to one’s  fiscal responsibilities to the state.

Let there be no mistake: Business Week has not  invented this idea. Every year, particularly around tax time, we do everything we can to “maximize our deductions”, basically a cleaner way of saying “minimizing our contribution to public expenses”. You do it. I do it. In a sense there’s not much to feel too guilty about; public finance rests on the principle of self interest. The government wants more from you, and you want to give less to the government.  Private markets work the same way, after all, and most of the time do a good job of distributing resources.

It’s just odd that this model of selfish behavior would govern something so explicitly related to the common good. I think this is something that should change, and (surprise!) I think this has a lot to do with what the Baha’i Faith has been designed to do, specifically to raise the level of spiritual consciousness and uprightness to the benefit of both our spiritual and material well-being.

If you need an economic argument for why the selfish approach to taxpaying is sometimes bad, look no further than recent news that General Electric paid no federal corporate tax in 2010, despite earnings of $5 billion in earnings within the US, and thanks to a tax code which allows for an array of exemptions and loopholes. Once again, remember that GE is playing by the rules of the game (from what I can tell), it’s just the game is an inherently selfish one, and for that reason I don’t think GE deserves to be singled out. In fact, lots of profitable companies find ways to pay little or no corporate taxes every year. (This doesn’t mean that powerful interests can’t actually write the rules of the game, which is of course not OK and deserves its own separate discussion.)

From a sheer economic perspective, however, the system is flawed, and the reason is that certain individuals or elements of society can much more readily find tax exemptions and loopholes than others (this is different from the argument that the actual exemptions and loopholes exist for the benefit of certain entities, which is its own can of worms). Looking at the US income tax scale on its face, it looks like we here in the US have quite a progressive system that favors the poor and puts the burden on the rich, unless you realize that this is mostly a facade, thanks to all the deductions an exemptions heavily skewed towards  the wealthy. Not to mention, of course, that it takes money to hire someone with the talent and discipline to find all of these deductions for you.

But eliminating these loopholes only solves part of the problem. The system is also mostly ambivalent as to who really needs the money and who can afford to pay more. Notice that I use the word “somewhat”; our progressive income tax system (you pay more if you make more) and certain deductions for people or households that are more likely to need the money, like for those with dependents or the earned income tax credit, are aimed at this. But individual cases vary, of course. The single person making $100,000 may look like someone who can afford to pay a higher share than the family of four subsisting on $50,000, unless of course the single individual has some unique case which makes his/her higher tax burden look much larger, like, for instance, the discovery of a soon to be expensive medical issue or the need to help out an older relative in financial need. Other than the assorted deductions, there’s nothing to bail this individual out of a higher tax burden and shift payments to someone who isn’t in a pressing financial situation and can more readily pay. Likewise, there’s nothing that asks the less stressed individual to shoulder a heavier burden.

Note the contrast with the Baha’i concept of Huquq’u’llah, the “Right of God”, which requires members of the community to donate 19% of their income, after necessary expenses, to a public fund. Note that what is deemed “necessary”‘ is left entirely up to the judgment of the donor, and there is no IRS-type enforcement. Each individual or family decides a fair amount to pay based on their unique situation, and they pay it or they don’t, compelled only by their sense of faith and feeling of obligation to contribute to the common good.

Note also that Huquq’u’llah doesn’t work without such faith and with honesty. Selfishness ruins the system, as individuals look either to pay less than they should or shirk their responsibilities altogether. But of course that is the point of the Baha’i Faith and of religion in general: to purge out the selfishness and other symptoms of spiritual disease and open the way for a better world.

I’m not sure we’ll ever be without traditional taxation, even if we are in fact able to purge out all that selfishness. My guess is probably not. But it doesn’t mean that taxes and public spending can’t benefit from a healthy dose of goodness. The sooner the better.