The basic definition of a capital gain is profit or the increase in value of an asset over time. What to do with the gain has been a point of contention between conservatives and liberals for years. Contemporary liberal thinking is that profit should be taxed and redistributed so others could share in the benefits of that gain while conservative thinkers believe such gain should be reinvested so the growth of the assets in question can continue.
Such thinking on the part of liberals is somewhat surprising inasmuch as liberal fiscal policy as defined by Webster includes the premises of …individual freedom from restraint based on free competition, the self regulating market…etc. This issue was brought to light recently as democrats scrambled for ways to fund their proposed ‘health care reform’ legislation and we started hearing about the larger issues of capital productivity and the redistribution of wealth. And the Bible is certainly not silent on these issues.
Jesus taught the parable of the talents. Granted, this parable is about being productive with spiritual responsibilities and opportunities, however, His teachings wouldn’t be illustrated with fiscal practices if those practices were not recognized as valid.
The parable begins with the owner of many assets planning an extended trip. Before he leaves he divides his portfolio among three servants and entrusts them to manage his assets while he is away. He recognizes that the three have different levels of ability and he divides his holdings accordingly.
“For the kingdom of heaven is like a man traveling to a far country, who called his own servants and delivered his goods to them. And to one he gave five talents, to another two and to another one, to each according to his own ability; and immediately he went on a journey.” Matthew 25:14-15
The servant entrusted with the most capital began immediately to buy and sell and soon doubled the value of the assets within his control. The next servant was entrusted with less capital; however, he also doubled its value during the same time period. The third servant was less confident and feared the assets entrusted to him would lose value so he took the money out of circulation. This action, while attempting to guard against a loss in asset value, absolutely placed a cap on any opportunity for growth. And then the three servants waited for the owner to return from his trip so they could explain their strategies and successes.
“Then he who had received the five talents went and traded with them, and made another five talents. And likewise he who had received two gained two more also. But he who had received one went and dug in the ground, and hid his lord’s money. After a long time the lord of those servants came and settled accounts with them.” Matthew 25:16-19
And so it was, the first two servants that doubled the value of the capital entrusted to them were praised by the owner. He told them both that because of their successes with the limited capital entrusted to them they were deemed worthy to be trusted with greater responsibility.
“So he who had received five talents came and brought five other talents, saying, ‘Lord, you delivered to me five talents; look, I have gained five more talents besides them.’ His lord said to him, ‘Well done, good and faithful servant; you were faithful over a few things, I will make you ruler over many things….’ He also who had received two talents came and said, ‘Lord, you delivered to me two talents; look I have gained two more talents besides them.’ His lord said to him, ‘Well done, good and faithful servant…’” Matthew 25:20-23
Then the servant who was entrusted with the least capital confronted the owner. Recall that he was afraid to enter the market place and take any risks. He actually appeared proud that he hadn’t lost any of the asset value entrusted to him. It is also evident from the text that this servant didn’t have a clear understanding of the sovereignty of the owner nor the concept of capitalism.
“Then he who had received the one talent came and said, ‘Lord, I knew you to be a hard man, reaping where you have not sown, and gathering where you have not scattered seed. And I was afraid, and went and hid your talent in the ground. Look, there you have what is yours.’” Matthew 25:24-25
The owner’s response was not what the servant expected. The owner stated that even if the servant’s perception of him was true, it was inexcusable to take the capital entrusted to him out of circulation. The servant’s slothfulness was even termed ‘wicked.’ The servant was told that if he didn’t have the ability to assess risks he should have least deposited the money in the bank and let it draw interest. Implied is that the banker would place the deposited money back into circulation so it could grow.
“But his lord answered and said to him, ‘You wicked and lazy servant…you ought to have deposited my money with the bankers, and at my coming I would have received back my own with interest.’” Matthew 25:26-27
Subsequently those who grew the capital entrusted to them were rewarded and not penalized for their successes. He who was not successful, or did not grow the assets entrusted to him, was forced to turn his capital over to them who would and could grow it. This redistribution can also be accomplished via the free market.
“So take the talent from him, and give it to him who has ten talents. ‘For to everyone who has, more will be given…but from he who does not have, even what he has will be taken away.’” Matthew 25:28-30
Based on this Biblical illustration one can assess the validity of taxing the wealthy to fund entitlement programs including health care reform.