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This post, by a leading economist, lists the main differences on economic policy between the right and left-leaning economists. On many economic issues, Judaism does not necessarily take a clear position, since the question is more about effective policy than ethics and morality. However, what is the Jewish stance on the last issue mentioned, income distribution:

Is the market-based distribution of income fair or unfair, and if unfair, what should the government do about it?

Does Judaism believe people have a right to keep the money they earn or that there should be greater wealth re-distribution so there's more income equality? Which tax-rate fits better with Jewish tradition, a flat-rate or a progressive tax? How much financial assistance should be given to the poor and to what extent should the government be involved?

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There are many sources within Judaism that discuss the obligation to give charity, both in the individual and communal level. The principle Torah source on this issue is Devarim 15:

(ז) כִּי יִהְיֶה בְךָ אֶבְיוֹן מֵאַחַד אַחֶיךָ בְּאַחַד שְׁעָרֶיךָ בְּאַרְצְךָ אֲשֶׁר יְקֹוָק אֱלֹהֶיךָ נֹתֵן לָךְ לֹא תְאַמֵּץ אֶת לְבָבְךָ וְלֹא תִקְפֹּץ אֶת יָדְךָ מֵאָחִיךָ הָאֶבְיוֹן: (ח) כִּי פָתֹחַ תִּפְתַּח אֶת יָדְךָ לוֹ וְהַעֲבֵט תַּעֲבִיטֶנּוּ דֵּי מַחְסֹרוֹ אֲשֶׁר יֶחְסַר לוֹ:

The issue is also discussed in Mishnayos Peah (ch.8), Kesubos (67b), in Mishnah Torah Matnos Aniyim (ch. 7) and elsewhere. There are also many sources that discuss the agricultural requirements for charity, but one would need to figure out how to apply their principles nowadays. Few people are farmers nowadays, and there is also much greater wealth and standard costs than before.

Everything a person earns he owns, wealth cannot just be re-distributed by some government to create equality. Each person then as an obligation to give charity. Every year, he must give a small amount to charity to fulfill the most basic obligation. However, he is expected to give at least 10% of his income to charity, (but not more than 20%), either m'drabanan or by minhag (or even md'oraysa, according to one view). If he does not give enough charity, the courts can forcably take large amounts from him:

כי הא דרבא כפייה לרב נתן בר אמי, ואפיק מיניה ד' מאה זוזי לצדקה. (Kesubos 49b)

It seems that the individual in general can choose to some extent how he wants to give away his money, just that if he doesn't give, it will be collected forcibly. It seems that he must give a flat-rate of 10% to charity, but it may be that this might they vary based on social need. The issue is to define what is considered a need that will require the rich to give charity to the poor. The gemara discusses the different charity organizations that existed and who was eligble to receive from them. For example, one who had less than 200 zuz, could take from maaser ani (the argicultural tithe). If one was even poorer, he was eligible to take from the weekly money collection (kupah), and the truly poor would take from the daily food collection (tamchui). The issue is applying these amounts to modern times when expenses have changed so much.

R. A. Levine Discusses these issues at length in "Economics & Jewish law". He demonstrates that poverty should be defined as "bare subsistence". The Talmud learns from " דֵּי מַחְסֹרוֹ" that we are not obligated to make the poor wealthy. He argues that one should take the "budgetary approach" to defining poverty, which evaluates the basic costs of food and what percentage they take up of a poor family's expenses to define certain poverty lines. Such definitions would establish when a person is able to receive public assistance. However, someone slightly poor may still be eligible for private assistance.

In summary, there is no Jewish idea of wealth redistribution to create equality, but society must provide for the basic needs of the poor. The individual has certain leeway in choosing where to give, but if he fails, the government should collect it by force. The basic rate of giving seems to be a flat-rate, but if there's great need perhaps that may change.

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I just came across this PDF (via Hirhurim) which contains some discussions of relevant issues: fraseramerica.org/Commerce.Web/product_files/… –  Ariel K Sep 21 '11 at 3:30
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I think that no answer to this question can be complete without discussion of the laws of Shmitta and Yovel. Neither of these ideas exist at all in the economic world of modern industrialized countries.

Shmitta (the sabbatical year, once every seven years) is a year of not working the land, with the effect that one may not grow crops like wheat, legumes, or vegetables. Rabbinic extensions to the laws prohibit eating even grains or vegetables that grow by themselves.

Furthermore, everything that grows during Shmitta is effectively ownerless, and anyone may come and help themselves to fruits or other permitted crops. There can also be no extended storing of Shmitta crops: when a food is unavailable in the fields, it must be removed from one's home and declared ownerless.

At the end of the Shmitta year, all debts are cancelled. There are rabbinic workarounds to this, for fear that lenders would stop lending as the end of Shmitta approached, which would be worse for borrowers.

Yovel (the jubilee year, once every 50, at the end of 7 cycles of Shmitta; this is not observed nowadays) has the prohibitions of working the land, like Shmitta. Beyond those laws, ancestral fields and homes that had been sold are returned to the original owners, and Jewish slaves go free.

In ordinary years, Trumot and Ma`asrot (gifts and tithes) are essentially flat taxes, in that everyone separates the same percentages, even poor people. However, every 7 or 50 years there is a "reset" of sorts which, while not redistributive, evens out some of the gaps between rich and poor, and limits people's ability to acquire.

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Well, there are two sides to the story. One one side, according to Judaism, one has private property, and it is forbidden to steal from another. Whether it be rich stealing from poor or poor from rich.

On the other hand, one can be forced to give tzedaka. Normally we say that one is not forced by Beis Din to do mitzvos that have a reward (and Tzedakah has a reward mentioned explicitly). Moreover, there are times that a chiled (who is not obligated in commandments) must give tzedakah. The Ktzos Hachoshen learns that the reason one can be forced to give tzedakah is because it is a financial obligation to the poor, and a child must pay "debt".

The explanation given is that all our ownership of property comes from Hashem, so the whole idea of private ownership is dependent on the Torah.

http://www.vbm-torah.org/alei/2-9tzeda.htm

There is a story of the Previous Lubavitcher Rebbe who walked by a meeting between different groups of Jews who believed in different economic ideas. They asked him which one is right according to the torah. He answered that all systems, being man made, are a mixture of good and bad. The Torah, however, being the ultimate good, contains the the good that is in all the systems.

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Your point is still valid, but the discussion the people were having was about different schools of political thoughts, not economical thoughts (although there is a lot of overlap). The Previous Rebbe writes that the different systems mentioned were Socialism, Communism, or Monarchy. See the original (in Yiddish) here: hebrewbooks.org/pdfpager.aspx?req=31629&st=&pgnum=237 and in English bere: hebrewbooks.org/pdfpager.aspx?req=15729&pgnum=20 –  Menachem Aug 19 '11 at 0:58
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It seems you are asking two questions here. 1. What is the Jewish view of taxes? Flat or progressive 2. What is the Jewish view of wealth distribution, is 'the market fair'

  1. The Torah speaks about a modified flat tax. 'First born' goes to the temple which can be seen as government. 10% goes to the Cohanim which work in the temple, then in alternating years 10% goes to the poor, and 10% goes to the leviim (civil servants). However this is done in a cycle, and not the same from year to year. On top of this you have 'peah' or the corner of your field which must also go to the poor, but has no set percentage. All in all, in each year about 30% of your income is supposed to go to somebody else, and not more than that. However, the idea of a king puts no restriction on the taxes except for what the people can handle. (but does put a limit on the king's wealth)

  2. Judaism seems to imply that the market is 'fair'. However, poor people exist and must receive tzedekah. It is also viewed that all that you receive comes from Gd, and so you must do with it as Gd tells you.

To apply your question to today.. I think it is too complicated. How money gets used, who it gets used by, and all the financial mechanism we have today do not exist in the Torah world. There is no 'sales tax', or 'government investment' in certain programs. The government in the Torah consists of people doing what they have to do, and means to compensate those people. (because they are not able to do work of their own) There is no discussion of where the weapons for the army comes from, or anything of that nature. Today's world is so vastly different that I find it difficult for anyone to honestly directly apply the financial system of the Talmud or Torah to today. Though you can obviously be informed by it.

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This answer provides some information about how money is collected and where it goes, but it does not answer the question. Answer #2, which attempts to answer one part of the original question does not have any sources to back up the assertion (nor does the rest of the overall answer have any sources, although answer #1 at least addresses specific Mitzvoth that can be looked up). –  Seth J Aug 16 '11 at 13:46
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10% do not go to the Kohanim. The Kohanim received terumah, which can be any amount mdoraysa but mdrabanan should be about 2%. They also received terumas ma'aser (10% of the levi's 10%) and other gifts, but not a flat 10% of nay total. I don't think peah came near 10% either, but people gave tzedakah separately also. –  Ariel K Aug 16 '11 at 13:56
    
Seth, which question was not answered? There are 3 maybe more questions being asked here... –  avi Aug 16 '11 at 16:12
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