Jews and Taxes
Jewish ethics demand that we be scrupulous in paying taxes.
Finding creative--and sometimes criminal--ways to avoid taxes can sometimes seems like the norm in our society. The following article examines the extent to which Jewish law demands honesty in paying income and sales tax. Reprinted with permission from The Jewish Ethicist: Everyday Ethics for Business and Life (Ktav Publishing), a compilation of the author's weekly syndicated ethics columns.
One of the more onerous obligations we face as citizens is the requirement to pay taxes. By the time we are done with federal taxes, state taxes, property taxes, sales taxes, Social Security, user and license fees, and so on, a pretty substantial chunk of our income finds its way to the government. It is hardly surprising that citizens are always looking for ways to minimize their tax burden.
At the same time, today's citizen is, to an unprecedented extent, the beneficiary of government expenditures. In most advanced countries we take for granted an extensive system of roads and highways, an efficient legal system, well-planned neighborhoods with sidewalks and green spaces, national defense which gives most people lifetime security, an impressive level of public school education, and generous retirement benefits.
Enjoyment of these benefits implies an ethical obligation to be fair dealers in the tax arena. We are entitled to minimize our tax burden, but we must not engage in or abet tax evasion.
An instructive passage in the Talmud teaches us about the important relationship between the general obligation to obey legitimate laws and the special legitimacy of taxes that are used for our benefit. "Samuel stated, 'The law of the land is the law.' Rava said, 'Observe that this must be true. For [the government] fells trees and builds bridges, and we cross them.'" The passage suggests that if it were illegitimate for the government to appropriate private property through taxes (felling trees), it would be equally illegitimate for us to make use of the stolen property by crossing the bridges.
Let us examine some pressing dilemmas regarding tax evasion.
QUESTION: Some of my friends are taking advantage of an innovative and rather elaborate scheme to save taxes. They explained to me that it is based on a novel interpretation of the tax law. Is it ethical for me to take part in this scheme?
ANSWER: Your confusion is understandable. No less a genius than Albert Einstein is quoted as admitting that "the hardest thing to understand in the world is the income tax."
To begin, we must note the difference between tax avoidance and tax evasion--between exploiting the law and flouting it. It's okay to minimize taxes by taking advantage of legitimate provisions of the tax law, or even by taking a reasonable position on an unresolved question of law. But we cross the line into tax evasion, which is a criminal act, when there is no sincere claim of lawfulness. This is the basic ethical distinction; now let us examine some criteria that will help us evaluate any given scheme.