The economic news of the past week (in Canada) has focused on the new rules regarding the taxation of income trusts. No longer will these popular vehicles be able to distribute their earnings tax free and will now be treated like all other corporations paying taxes on earnings. While Canadians debate the impact and appropriateness of such reversal of government policy, what might Jewish ethics say about this?
Issues of tax policy have long engendered much debate and disagreement. While it is only in our generation that we have a Jewish state faced with such questions, in reality Jewish communities in the pre-modern period had to constantly grapple with these issues. Jews, granted autonomy would collect taxes to fund Jewish communal life as well as paying taxes to the non Jewish governments for the right of residence. Yet surprisingly there is relatively little in our sources outlining a systematic approach to the levying of the tax burden. Jewish law granted much latitude to design a tax system based on local conditions. This is readily understandable as Jewish monetary law operates on a much different system than “religious” or even criminal law. Whereas the latter is a fixed and potentially rigid system of law – allowing for interpretation only – the former can be abrogated and modified with the agreement of those involved. For example, though the Torah obligates an employer to pay a worker every day, the employee may waive his right to such prompt payment.
On a communal level an even more powerful mechanism is in place – hefker beit din hefker – the courts may declare all monies ownerless and thus at the mercy of the government to do with as it pleases. This power must be used to promote communal welfare and not to enrich the state or certain members of the state. Thus in essence any taxes declared by a legitimate government Jewish or non Jewish, are morally legitimate. What Jewish law demands, however, is that the taxes be fair and consistently applied. Discriminatory taxes are immoral taxes. While such discriminatory taxes are extremely rare in the democratic societies of the western world, we who reside in Ontario are witness to one such immoral tax policy. While a government has the right to fund only a public school education system it does not have the moral or even legal (at least from a Jewish perspective) right to fund of one religious system to the exclusion of others.
While many may argue on the definition of fair taxes, non-discriminatory tax policies of a democratically elected government, almost by definition, would meet the fairness criterion. Nonetheless Jewish teaching would seem to indicate that fairness is best achieved by minimizing the numbers of special exemptions, credits etc. in the tax system. The present tax code with its myriad of rules, exceptions and exceptions to exceptions, while absolutely binding runs the risk of potentially unfair treatment of certain segments of the population. A Jewish tax system should try to eliminate differing rules for different sectors. Thus equalizing the tax treatment of investment trusts and corporations would appear to be the proper thing to do. One may even argue that Jewish values might tend to look favourably on a flat tax system with all forms of income being taxed at a similar rate. This would be similar to our charity obligations where, with exceptions for the extremely poor and wealthy, one is expected to donate between 10 20% of one’s earnings regardless of what they may be. Determining what that rate might be would be decided based on the priorities and values that society would like to promote.
Comments rabbijay@torahinmotion.org
Rabbi Jay Kelman is a Founding Director of Torah in Motion, an adult education institute dedicated to exploring the intellectual richness of Judaism and applying that wisdom to our everyday challenges. www.torahinmotion.org
Rabbi Jay who teaches Talmud and Ethics at TanenbaumCHAT a community High school of over 1,400 students in Toronto is a Chartered Accountant (CA) and writes a monthly column Money matters for the Canadian Jewish News.
