Fiscal Indulgences


MICHAEL MUNGER, a professor of political science at Duke University, insightfully compares “tax expenditures” to the Catholic church’s practice of selling indulgences, which fomented the Reformation by sending Martin Luther into fit of righteous pique. Mr Munger reminds us that
Indulgences were “get out of purgatory free!” cards. Of course, it was the church that had created the idea of purgatory in the first place. Then the church granted itself the power to release souls from purgatory (for a significant fee, of course).As Luther put it, in his Thesis No. 27, “as the penny jingles into the money-box, the soul flies out.”

If high tax rates are a sort of purgatory (and who doubts it?), then tax credits are indeed akin to indulgences. Mr Munger writes:

We let people out of tax purgatory if they own large houses, if they receive expensive health insurance from their employer, if they produce sugar or ethanol, or any of thousands of special categories. These categories have nothing to do with need (is there a national defense justification for a protected sugar industry?), but instead depend on how much these sinners are willing to pay to members of Congress.

“As the campaign contributions jingle into the campaign funds, the tax revenues fly out”, he adds. As a result, “we have categories within categories within subgroups, all at different prices, deductions or exemptions that release some elites from the published tax rates.