All individuals, families, civil society organisations and corporations, as well as the state, are responsible for promoting the common good and solidarity.
Andrei E. Rogobete
Associate Director, Centre for Enterprise, Markets and Ethics.
At one and the same time, the Christian faith recognises both our unique individual calling from God to holy righteousness (or sanctification) in and through Christ as well as our place within society, living in solidarity with others. This call to righteousness requires, as Pope John Paul II made clear in a papal encyclical, Centesimus Annus, published in 1991, that we are not simply treated as part of an economic system in which the individual and his or her free choice is suppressed. At the same time, however, given
our communal life in society, the state needs to perform certain functions that we cannot perform for ourselves to ensure that all have what is necessary for a dignified life.
Yet the Church has always taught that not everything that is good should either be paid for or provided by the state. Such a mission would be both beyond the state and not proper to the state. Rather, the virtue of solidarity demands that we meet our social obligations to others in society and we do that through a wide variety of mechanisms. There is a wide range of organisations in society which provide for the welfare of their members. All individuals, families, civil society organisations and corporations, as well as the state, are responsible for promoting the common good and solidarity. In ensuring that they do so, the principle of subsidiarity should also apply so that a community of higher level does not take away the functions of communities beneath it. The state should also not exhaust the resources necessary for communities to perform their proper functions.
John Paul II described that rich network of institutions in Centesimus Annus:
“Apart from the family, other intermediate communities exercise primary functions and give life to specific networks of solidarity. These develop as real communities of persons and strengthen the social fabric, preventing society from becoming an anonymous and impersonal mass, as unfortunately happens today. It is in interrelationships on many levels that a person lives, and that society becomes “personalized.” The individual today is often suffocated between two poles represented by the State and the marketplace. At times it seems as though he exists only as a producer and consumer of goods, or as an object of State administration. People lose sight of the fact that life in society has neither the market nor the State as its final purpose, since life itself has a unique value which the State and the market must serve. Man remains above all a being who seeks the truth and strives to live in that truth, deepening his understanding of it through a dialogue which involves past and future generations.” (Centesimus Annus 49)
And the particular requirement for the state to be limited in its functions and the extent to which it interfered with the family was put rather starkly by Pope Leo XIII in Rerum Novarum (1891):
“The contention, then, that the civil government should at its option intrude into and exercise intimate
control over the family and the household is a great and pernicious error. True, if a family finds itself in exceeding distress, utterly deprived of the counsel of friends, and without any prospect of extricating itself, it is right that extreme necessity be met by public aid, since each family is a part of the commonwealth. In like manner, if within the precincts of the household there occur grave disturbance of mutual rights, public authority should intervene to force each party to yield to the other its proper due; for this is not to deprive citizens of their rights, but justly and properly to safeguard and strengthen them. But the rulers of the commonwealth must go no further; here, nature bids them stop.” (Rerum Novarum 14)
The state is not limited in its functions because the state is somehow not important. Rather, it will be in a better position to carry out its most vital functions if it does not take on those responsibilities which are better left to families and other groups in society – including local government, something which is much diminished in the UK. It can also be said that, if the family is either not supported or is penalised as a result of the way in which government levies taxation, the basic social support mechanisms within a
country will be impaired and many more functions will fall to the government which are better done by other institutions or by the family itself. Indeed, we may get into a vicious circle by which the family breaks down, governments have to spend more on a range of functions and then have to tax families more, thus putting even more strain on working families.
In this essay it is argued that the UK tax system does indeed strongly penalise the family and, in particular, penalises families in which one of the adults undertakes caring or voluntary activities. This is a very poor starting point for a tax system based on the principles of Catholic social teaching. It is also an outlier in international terms.
The family as a unit gains even greater significance when viewed through the prism of Catholic teaching and the Judaeo-Christian tradition. The family is an intrinsic and fundamental part of creation. Within the Catechism of the Catholic Church, the family is considered to be the “principal cell or building block of human society”.66 God’s intended unity between husband and wife represents a profound connection where the two “become one flesh” (Genesis 2:24). We come together in families to share goods and share tasks, and those families in which individuals take on caring responsibilities should not be taxed much more heavily than families with the same income where both are in paid work as happens now.
The current income tax system in the United Kingdom is almost entirely based on taxing an individual’s earnings. This leaves single-earner families and low-income households at a significant disadvantage. Unlike other western democracies, such as France or Germany, the UK makes minimal provision for family dependants (i.e. non-earners or those on low earnings within a household). In practice, this results in very high levels of average tax rates for singleearner families with more than one adult – even at low incomes.
A fair tax system, designed to pay for goods and services required for public use (including a safety net for the poor), should tax families in a way that is linked to the number of dependants and the household’s overall income and ability to pay. In the UK, due to reforms in the late 1980s and the move to individualised taxation, this does not happen. Each individual is given a tax-free allowance and then there are bands of income taxed at progressively higher rates. But these bands cannot be aggregated within the family. If two individuals in a family are each earning £12,50067, totalling £25,000 as a household, they pay no income tax at all. On the other hand, if one individual is earning £25,000 and the other stays at home to look after children or frail elderly relatives, the family will pay income tax on £12,500 of their income.
This does not accord with the most basic Christian (or, indeed, economic) understanding of the family. We come together in a family to share love, income, goods and responsibilities. A family’s tax position should not depend on who within a family does paid work but on the resources the family has at its disposal. Furthermore, it can be argued that looking after children within the family is both a moral and legal duty.
There are, of course, debates about the extent to which the state should support the upbringing of children financially. However, as a minimum, the state should take into account the costs of bringing up children before determining the resources that a family has available on which tax can be levied. Many tax systems achieve this objective by providing additional tax allowances for children.
The extent to which our tax system discriminates against families, especially single-earner families, is demonstrated by the fact that a family with a single earner with earnings of £40,000 would be in the poorest 40% of the population and a single person earning £40,000 per year would be in the richest top 20%.68
The system, as a whole, creates unfair average tax rates for single-earner and low-income families. For instance, the amount of income tax and National Insurance paid by a household earning £30,000 annually varies from around £1,600 to around £5,700 depending on how the earnings are split between its members. The family in which one parent undertakes caring responsibilities or other unpaid work will pay the higher amount. The family in which both go out to work and earnings are split evenly between the two adults will pay the lower amount. This difference is huge as a proportion of disposable income after housing costs for a family on such a low income.
In other words, the income tax system places single-earner families in the most unfavourable tax position compared with dual-earner families who are in an otherwise identical position in terms of their income. This situation is exacerbated when National Insurance contributions and other factors, such as the withdrawal of child benefit for earnings above £60,000, are taken into account.
The most obvious solution to this problem is to treat the family or household as the unit of taxation. Tax-free allowances and tax bands would be given to a household and based on household composition. If there are two adults, they would receive two bands of tax-free income, as currently happens, but these should be aggregated and used by the household as a whole. A household in which one spouse earned £25,000 and the other had no paid work would have a tax-free income of £25,000, just like a household in which both spouses worked. This would end the discrimination against families in which incomes were uneven because one or other parent took on the majority of caring responsibilities (or for other reasons).
This approach is well within the mainstream of international tax systems. It does not involve some harking back to days gone by in which we had stereotypical views of the role of men and women in family life. In France for instance, family taxation is based on a ‘quota’, or the number of adults and children within a household. The term in French is ‘quotient familial’ and the entire composition of the household is used to determine the number of dependants and the subsequent amount of tax payable.69 Similarly, the German tax system makes provisions for families by a principle of ‘income splitting’ by which the family income is combined and then divided between husband and wife for tax purposes so that they can make maximum use of tax-free allowances. The German system also makes special provisions for dependants in the form of tax-free child allowances which, it could be argued, is better than the provision of cash benefits for children.
By contrast, the UK has little to no tax deduction provisions for the number of dependants or the employment status of either or both parents. Measures such as the much-acclaimed “Marriage Allowance” are of minimal financial impact.70
When the UK’s tax system is superimposed on the welfare system, the result creates very serious problems indeed. Welfare benefits are taken away as family income increases. So, we have a welfare system based on family income and a tax system based on individual income. This means that if you have a non-earning individual with the responsibilities of caring for a child (in practice, this is normally a mother) with a partner who is earning (possibly the father or somebody who would become a stepfather), forming a family together will see them lose welfare benefits. At the same time, they will pay penal rates of tax because of the situation described above. If the mother were able to transfer their tax-free allowance to the father, the loss of welfare benefits would be compensated by a reduction in the tax paid by the father, which would represent the increased responsibilities that come with family formation.
Jonathan Williams, Family Policy officer for Christian Action, Research, and Education (CARE), argues that: “By forcing a married couple to be treated as two individuals, the UK tax system fails as good public policy… our tax system is philosophically incoherent. Stable families and stable marriages are the bedrock of a strong and flourishing society.”71 The UK has a rate of lone parenthood that is over one-third higher than the EU average, and perhaps this is not a surprise given the interaction of our tax and welfare system.72
Pope St John XXIII said that the family “must be regarded as the natural, primary cell of human society. The interests of the family, therefore, must be taken very specially into consideration in social and economic affairs.”73
The family plays a key role in the physical, emotional, and spiritual growth of its members. Recognising the family as a unit of taxation will not only benefit the family itself but wider society. Government needs to recognise the importance of the family within the wider socioeconomic dynamics of life in the UK as happens in many other countries. Above all, it should not discriminate, as it does very strongly, against families in which one parent takes on the majority of caring responsibilities. In moving to a tax system that took into account family composition, it would also reduce significantly the penalty on family formation for those on low incomes.
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Chapter Six: Catholic social teaching, Welfare and Taxation >
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66. Cardinal W. J. Levada, The Family in the Catechism of the Catholic Church (2006).
67. For simplicity it will be assumed that the tax free allowance is £12,500 in this chapter.
68. Christian Action, Research and Education, The Taxation of UK Families (2022).
69. Income Tax France: Calculating your French Income Tax in France (accessed 8/8/23).
70. Gov.uk, Marriage Allowance (accessed 8/8/23).
71. Institute for Family Studies, Taxing Families in the UK (18/6/2019) (accessed 30/8/2023).
72. Organisation for Economic Cooperation and Development, Family Database (accessed 6/9/2023).
73. Pope John XXIII, Pacem in Terris (1963) 16.
What a just and loving approach to taxation might look like.
In this chapter we are concerned with the principles and applications of taxation within Scripture and not the development of a systematic theology.
The Catechism of the Catholic Church tells us that individuals and companies have a responsibility for the common good, and thus it is morally obligatory to pay taxes that are due.
The Church, from her origins, was a movement of the poor and the powerless. The fact that her founder, Jesus Christ, was born in poor circumstances necessarily made concern for the poor one of its founding commitments.
