Is There a Moral Limit to Taxes?

While the state has a claim to taxes, that claim is not unlimited

On Thursday, May 25, the U.S. Supreme Court handed down an important decision in the case of Tyler v. Hennepin County, Minnesota et al. Bottom line up front: a unanimous Supreme Court swatted down Hennepin County’s property tax collecting policy. I’m commenting on it because there are aspects of the case that should interest moral theologians.

The facts of the case are this: Hennepin County, Minneapolis, and Minnesota tried to take $40,000 from a 94-year-old woman for a $15,000 debt. The Supreme Court said no.

Ms. Geraldine Tyler had a Minneapolis condominium. As she aged, her family decided she was better off in a senior community, to which she moved in 2010. Somebody — Ms. Tyler or her family — forgot about paying annual property taxes on the condo. By 2015, she’d accumulated $2,300 in unpaid taxes, for which the county tacked on $13,000 in interest and penalties. Eventually, the county seized the property and sold it, getting $40,000 for it. But rather than keep approximately $15,000 for taxes, interest, and penalties, the county kept the entire $40,000. That’s when Ms. Tyler sued.

Ms. Tyler asserted that Hennepin County’s actions were unconstitutional violations of the Fifth Amendment (the government cannot take property without due compensation) and Eighth Amendment (the government cannot impose “excessive fines”). The Court upheld her on her Fifth Amendment claim and, since that sufficed to get her money back, did not address the Eighth Amendment claim (though Justices Gorsuch and Jackson filed a separate concurring opinion, saying the Court should have gone there, too).

How did Hennepin County justify its $25,000 profit at the expense of a nonagenarian? The justification shifted. At times, it argued simply that Minnesota law allowed them to keep it all. At others, they maintained that the expenses connected with having to sell tax delinquent property entitled them to it. Still another rationale was that Ms. Tyler had other debtors (unpaid mortgage and homeowner’s association fees) which outstripped the profit.

The Supreme Court thankfully had none of that. In its most memorable turn-of-phrase, the Court adapted the Bible to make clear “The taxpayer must render unto Caesar what is Caesar’s, but no more” (p. 14 of Opinion). One commentator suggested the Court might have added that Hennepin County tax collectors shared a lot in common with New Testament ones: after resolving debts owed to the government, they tacked on their own margins just because they could.

It’s striking that politicians who would normally be quite vocal about the needs of senior citizens and the elderly were not coming out in full-throated defense of this woman on whom Hennepin County hoped to make a tidy profit. I raise this case, however, because I think moral theologians have a duty to speak to moral questions around taxation.

Catholic social thought affirms that the state has the power to tax. Being responsible for the common good and having the obligation to look at the common good holistically, Catholic social thought would also affirm that the state has broad leeway when it comes to setting tax rates. But that discretion is not absolute.

Ms. Tyler owed her county $2,300 in property taxes. The fact that penalties and interest (at a time that interest rates were relatively low) managed to increase her base debt almost two-and-a-half times its sum total may seem alright to tax policy makers but should probably elicit some ethical scrutiny. The fact that, even after resolving her base debt and what I would deem inflated penalties and interest, the County still claimed nearly double that sum can only be defended as a sovereign out of control.

I know that Pope Francis, during an audience in 2022 with Italian tax collectors, delivered a paean to the Roman IRS, but I’ve criticized his remarks elsewhere [here]. Several aspects of taxation require Catholic moral theology to do some thinking.

First, while the state has a claim to taxes, that claim is not unlimited. In the end, one’s earnings are one’s own money, not the state’s. While some politicians are apt to insist “you didn’t build that” and that, by creating favorable infrastructure and economic conditions, the state actually facilitates wealth acquisition, that claim is not open-ended.

Welfare states which increasingly expand the scope of their “entitlements” are, nevertheless, constrained by economic reality: that money has to come from somewhere. Inasmuch as many welfare states seem resistant to spending self-control, it becomes imperative to establish ethical red lines regarding the degree to which states may tax. That task cannot be left to the state because the state is an interested party in the outcome of that question and, arguably, in avoiding any such constraint.

Second, Catholic social thought with regard to society does not always talk the same language as modern state policies. Traditional Catholic social thought would probably have resisted the claim I just made—that the task of setting limits on taxes cannot be left to the state—because it would insist that the state, as guardian of the “common good,” has the big picture in mind.

Well, that’s not the economic thought that motivates at least much of the Anglo-American world.

That, of course, brings us back to the compatibility of various strains of Enlightenment thought with Catholicism. Contra various thinkers whom I respect (Michael Novak comes to mind), I continue to entertain doubts about their efforts to treat the American Founding project as some collection of “anonymous Catholics.” According to many of the Founders, e.g., James Madison, the “common good” is established by the interplay of conflicting interests. There is no Platonic sovereign sitting around, determining that “A better serves the common good than B.” There is the political rough-and-tumble of competing and often conflicting policy interests that cobble together coalitions to advance transitory goals, but to imagine that the typical several-thousand-page omnibus budget bill that has passed Congress each year for the past several years embodies some kind of rational “common good” calculus suggests such thinkers need more than elementary-school civics. The “balancing” of “interests” may eventually serve the “common good,” but it hardly is a direct and ineluctable path to it.

Another area where Catholic social thought seems to be talking at cross-purposes with contemporary politics is its notion of the “sovereign.” The classical sovereign who adjudicates common good claims seems to embody some measure of benign paternalism. Modern democratic thought cautions against seeing in elected politicians the benevolent embodiment of the patria potestas and reminds of the need to erect guardrails against an ever more ambitious and expansive state power.

In light of those considerations and the fact that most politicians rarely see a benefits program they cannot say “no” to, where ethically should the line on the ability to tax be drawn?

Ms. Tyler nearly lost $25,000 to a state that claimed a virtually unlimited taxing power. The Supreme Court, in Kelo v. City of New London back in 2004, split 5-4 to give that local jurisdiction almost unlimited authority to seize private property under eminent domain rules, even if that property would then be conveyed to private parties rather than developed directly by the state. In light of the Tyler decision, one hopes that today’s Court might not put such unbridled faith in the goodness of local jurisdictions.

I imagine the Court sidestepped the “excessive fines” aspect of the case because, like the Eighth Amendment’s prohibitions on “cruel and unusual punishments,” it did not want to get into trying to set boundaries that were Constitutionally timeless while there were still people pushing for “evolving standards” approaches to those clauses. But, like “excessive fines,” there comes a point where “excessive taxes” require ethical if not legal discussion. In face of the modern welfare state, that moment is certainly coming — if not (as I would argue) already here.

One of the most revered axioms in American Constitutional jurisprudence, from the 1819 case McCulloch v. Maryland, is that “an unlimited power to tax involves, necessarily, a power to destroy.” The Court in Tyler checked an unlimited claim but we would do well in better defining those limits.

 

John M. Grondelski (Ph.D., Fordham) was former associate dean of the School of Theology, Seton Hall University, South Orange, New Jersey. All views expressed herein are exclusively his.

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