Taxes and Tyranny

One of the very first bits of political writing I ever read on the World Wide Web was this 1996 column from a British libertarian named Jan Clifford Lester. Professor Lester argues that only taxpayers should be allowed to vote. After discussing the slogan “Taxation Without Representation is Tyranny,” he goes on:

This then prompted me to consider the converse proposition: Representation Without Taxation Is Tyranny. It would, of course, be a fallacy to think that this is entailed by the first proposition. But surely it is just as reasonable. It was accepted by most people as a fair limit on the franchise in the mid-nineteenth century. Why should people who are not taxpayers be allowed to vote money away from those who are? If we must have state services, it should at least be for those who pay for them to vote for which services they want and how much they wish to pay. To allow those providing, or living off, the services to vote is like allowing a shopkeeper to vote on what you must buy from him, or a beggar to vote on what you must give him. Naturally, I hear you say, but doesn’t everyone pay tax, at least on goods and services? And so is it not trivially true, insofar as morals can be ‘true’? No, they do not and it is not. Not by a very long chalk.

Professor Lester then differentiates state employees, who are paid out of taxes, from others who are not:

To take a clear case, when a direct state employee, such as a civil servant, receives his salary cheque there will be an apparent deduction for the amount of tax that he pays. As a matter of fact this is a mere book-keeping exercise designed to keep up the pretence that he is a taxpayer along with everyone else. Abandoning this pretence of taxpaying and simply paying him less in the first place would save taxpayers’ money in administration and make the political reality clearer to all.

If a “direct state employee” is merely “a clear case,” what other cases are there?:

So who does not pay taxes and so ought not to have an electoral vote? Judges, state-school teachers, all in local government, state policemen, all in the armed forces, all in prison, all in the NHS, all in the civil service, all employees of the BBC, all the unemployed, all in academia (except, perhaps, in the University of Buckingham), some farmers, some solicitors, maybe some barristers, any employed in businesses that receive tax-subsidies in excess of their tax-payments, and MPs with insufficient taxed market-incomes to cover their salaries. I cannot list them all, but you see the size of the problem. You can also see that there is no class conflict in any quasi-Marxian sense here.

Who, then, does pay taxes? Well — anyone who is left. If you are in any doubt as to which category that you are in then the simple test is to ask yourself whether, in your current position, you would have more purchasing power or less purchasing power if taxation were completely abolished.

That is rather a sweeping list- denying the franchise to “any employed in businesses that receive tax-subsidies in excess of their tax-payments,” for example, would mean that a great many people would have to wait for the results of quite a thoroughgoing audit of their employers before they would know whether they would have a place at the ballot box. And if we take Professor Lester’s “simple test” at face value, no one would be qualified to vote. If “taxation were completely abolished,” taking with it all enforcement of laws, one might expect new obstacles to be put in the path of wealth creation.

Professor Lester reaches his conclusion:

There are some who are on the periphery of net tax-receiving and whom it will not be possible to distinguish with certainty. These people receive most of their income from purchases by state institutions or state employees. The latter is especially hard to be sure of. For instance, those working for The Guardian and New Statesman &Society might just fit this category. But if it is too hard to prove then they might have to be given the benefit of the doubt. Though if the state sector shrinks, due to a new Taxpayer Democracy, then enterprises will decline to the extent that they necessarily depend on indirect state patronage. In the case of the latter two publications I would expect such journals as The Times and The Spectator to expand to replace them.

In view of the percentage of economic activity in modern societies that “purchases by state institutions and state employees” represent, one rather doubts that even The Spectator would pass this test.

And why stop there? If the employees of The New Statesman are disfranchised because most of their subscribers are net tax recipients, why should employees of the bar across the street from the offices of The New Statesman retain the right to vote? And if those workers are classified as net tax recipients because most of their income is derived from purchases made by net tax recipients, shouldn’t any purchases they make, and any purchase the bar makes, also be classified as a transfer of tax monies? Follow those knock-ons far enough, and again we come to a scenario in which voting is abolished altogether.

Moreover, while there are various schools of thought which propose that in a well-ordered society the laws defining those relationships among people which we call “property” could be written in a way that would reflect some moral reality given in nature, the radicalism of Professor Lester’s proposal would suggest that he does not believe that the UK has attained a particularly high level of justice. So, how can he consider any corporation chartered and regulated by the British state, even if the voting shares of that corporation’s stock are held by private individuals, to be less than suspect?

And what of tax recipients in other countries?  To return to his examples of The New Statesman and The Guardian, while it may in 1996 have been the case that both of these publications derived most of their revenue from net recipients of UK taxes, two thirds of  The Guardian’s revenue now comes from readers outside the UK, half of them in the United States. Few of these readers are in the pay of the British state, but it is possible that most of them are net tax recipients in their own countries. If so, would employees of The Guardian still be disqualified from voting in Britain because they are indirect recipients of US tax dollars?

Nor is that the only implication. Professor Lester is surely right that our conception of taxpaying is too narrow if it is simply limited to figures that appear on ledgers. I would not defend the idea that the line on a state employee’s pay stub indicating that some number of pounds or dollars has been deducted from his or her gross pay represents actual taxpaying. On the other hand, his conception of tax-receiving is just as narrow as this. So in the USA, profitable corporations pay their shareholders far less in dividends, and their executives far more in compensation, than do their counterparts in other advanced countries. This is largely the result of the US corporate income tax, under which companies pay taxes on money they distribute as dividends but not on money they pay to executives. Therefore, a rational analysis of taxes in the USA should classify as tax payments all compensation executives receive in excess of what their counterparts receive in countries with different tax regimes. That analysis would reveal that many of the individuals who are in the habit of regarding themselves as the USA’s greatest taxpayers are in fact net recipients of tax dollars. Professor Lester would have to deny them the franchise as well.

In fact, Professor Lester’s proposal might have some rather amusing consequences if applied to the USA. Not only executive compensation, but interest payments are also deductible from the corporate income tax. That encourages US firms to take on far more debt than do their counterparts in other countries. Those debt levels in turn give rise to the private equity sector, the “corporate raiders” who sometimes make such a big splash in the business pages. If we classify them as net tax recipients and on that account deprive them of the vote, we would suddenly have a bunch of disfranchised billionaires and centi-millionaires running about. I confess that I would find it difficult to refrain from laughing out loud if corporate raider-turned-politico Willard “Mitt” Romney were to lose the right to vote.

What brought this old column to my mind was an essay that popped up in my Twitter feed this morning, a 2017 piece by philosopher Philip Goff. Professor Goff begins with the observation that right-wing libertarians who denounce all taxation as theft are only the most extreme advocates of a widespread notion, the notion that what is listed on pay stubs and other accounting instruments as a payee’s pre-tax income is property to which that payee is morally entitled.  Again, this is the fallacy that Professor Lester identified, equating taxpaying with ledger items rather than with the actual allocation of resources.

Professor Goff writes:

Your gross, or pre-tax income, is the money the market delivers to you. In what sense might it be thought that you have a moral claim on this money? One answer might be that you deserve it: you have worked hard and have done a good job, and consequently you deserve all your gross income as recompense for your labour. According to this line of reasoning, when the government taxes, it takes the money that you deserve for the work you do.

This is not a plausible view. For it implies that the market distributes to people exactly what they deserve for the work that they do. But nobody thinks a hedge-fund manager deserves many times more wealth than a scientist working on a cure for cancer, and few would think that current pay ratios in companies reflect what philosophers call desert claims. Probably you work very hard in your job, and you make an important contribution. But then so do most people, and the market distribution of wealth patently does not reward in proportion to how hard-working people are, or how much of a contribution they make to society. If we were just focusing on desert, then there is a good case for taxation to correct the amoral distribution of the market.

If we have a moral claim on our gross income, it is not because we deserve it, but because we are entitled to it. What’s the difference? What you deserve is what you ought to have as a result of hard work or social contribution; what you are entitled to is the result of your property rights. Libertarians believe that each individual has natural property rights, which it would be immoral for the government to infringe. According to Right-wing libertarians such as Robert Nozick and Murray Rothbard, taxation is morally wrong not because the taxman takes what people deserve, but because he takes what people have a right to.

Therefore, if taxation is theft, it’s because it essentially involves the violation of people’s natural rights to property. But do we really have natural rights to property? And even if we do, does taxation really infringe them? To begin to address these questions, we need to think more carefully about the nature of property.

Professor Goff distinguishes between three schools of thought. Right libertarians hold that all things that have value to humans gained that value because someone discovered those things and by his or her labor created that value. For them, it is a truth inherent in the structure of the world that each individual has inalienable right to possess the fruits of his or her labor. Property law represents an attempt to tease out the moral facts that make up this truth. Property law must therefore recognize ownership as a relationship between a particular person and a particular object, and it must prohibit all other persons from interfering with this relationship.

Left libertarians agree that property law is just if and only if it teases out moral facts about the relationship between people and things. However, they do not accept that these facts are as Right libertarians say they are. Rather, they believe that it is unjust for any one person to lay exclusive claim to nature. At its most extreme, Left libertarianism proscribes ownership of anything other than one’s own body. At its most modest, it lays down rules enjoining requirements for sharing what one does own, and insisting on joint responsibility among members of a community for the use of the resources under their control.

Opposed to both varieties of libertarians are the social constructivists. Professor Goff summarizes their views thus:

Libertarians believe that property rights are natural, reflecting basic moral facts about the world. Others hold that property rights are merely legal, social constructions, which are created by us and can be shaped to suit our purposes. We can call the latter view ‘social constructivism’ about property. (Please note, our focus here is specifically on social constructivism about property; we are not considering a more general position according to which morality as a whole is a social construction.)

To bring out the difference, ask yourself: ‘Which comes first: facts about property or facts about property law?’ For the social constructivist, the right to property is not some natural, sacred thing that exists independently of human conventions and legal practices. Rather, we create property rights, by setting up legal institutions to ensure that people have certain legal rights over the material world. For the libertarian, in contrast, facts about property exist independently of human laws and conventions, and indeed human laws and conventions ought to be moulded to respect the natural right to property.

This distinction is crucial for our question. Suppose we accept the social-constructivist view that property rights are merely legal. Now we ask the question: ‘Do I have a moral claim on the entirety of my pre-tax income?’ We cannot argue that I am entitled to my pre-tax income on the basis of my natural property rights, as there are no such things as ‘natural’ property rights (according to the social-constructivist position we are now considering). So, if I have a moral claim on my entire pre-tax income, this must be because it is exactly the amount of money I deserve for my hard work and social contribution, presumably because in general the market delivers to each person exactly what they deserve. But we have already concluded that this is not a plausible claim. Without the belief in natural property rights, existing independent of human laws and conventions, there is no way to make sense of the idea that the deliverances of the market are inherently just, and hence no way to make sense of the idea that each person’s gross income (which is just the income the market delivers to them) is hers by right.

Here’s where we’re up to: to make sense of the idea that taxation is (moral) theft, we have to make sense of the idea that each person has a moral claim on the entirety of her gross income, and this can be made sense of only if property rights are natural rather than mere human constructions.

Further:

As already discussed, social constructivists do not deny the existence of property rights, rather they take them to be social or legal constructions, which humans are free to shape to reflect what they deem valuable. Jesus declared that ‘The Sabbath was made for man, and not man for the Sabbath.’ Analogously, for the social constructivist, property rights are made to serve human interests and not vice versa.

It is plausible that human flourishing requires certain legally protected rights to property, and hence most social constructivists will advocate a system of property rights. At the same time, there are other things of value – perhaps equality, perhaps reward for hard work and/or social contribution (which as we have seen is not well-protected by the market) – and in order to promote these other values, most social constructivists propose making property rights conditional on the payment of taxes. In the absence of pre-existing natural property rights, there is no moral reason to respect the market distribution of wealth (there will of course be pragmatic, economic reason, but that is another matter).

Professor Goff argues that Right libertarianism fails at two points. First, it cannot answer the basic claims of Left libertarianism, and so fails at the outset. Second, even if we choose to overlook this failing, it can defend the idea that gross income is a measure of special moral importance if and only if it can demonstrate that the market is operating in its best possible state, in no way distorted by political intervention. As this claim would leave Right libertarians without much of anything else to say, they would seem unlikely to adopt it.

I would like to add one point to Professor Goff’s description of social constructivism. Many years ago, I studied the legal codes of ancient Rome. I can’t say that much stuck with me from that study, but one thing I remember very clearly is that every time the ancients said they had “rights” they specified against whom they had those rights.  That is to say, rights were definitions of what was and what was not allowed in particular relationships among people. The concept of rights is simply not relevant to relationships between people and inanimate objects.

A property right describes, not what may happen between a person and a thing s/he owns, but among various people who might encounter that thing. That’s why I can’t kick your door down, but a police officer with the proper warrant can. Your ownership of your door gives you rights against me that it doesn’t give you against the agents of law enforcement. Likewise with the various actions allowed a tenant and a landlord with regard to the same location. Or for that matter, with regard to the right of free speech a citizen may have against the state, as opposed to the rights that same citizens might have against the owners of a social media platform with terms and conditions specifying that they can “terminate your account at any time, for any reason or no reason.” You may be able to challenge their particular exercise of that right in court, but if so it isn’t because you have the same right against them that you have against the state. Rather, it is because there are rights built into the law of contract that sometimes override particular provisions parties may write into a particular agreement.

It seems to me that the social constructivist view of property law is obviously right, and that the both varieties of libertarian are simply being childish. If you disagree, well, there is a comment section.

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