[In response to Cameron’s speech yesterday, I have re-posted an argument I put on my blog 12 months ago. Obviously he didn’t see it the first time].
Many political arguments start from the assumption that taxation is the government taking ‘our money’ off us. When austerity hit the arts in 2011, Dr Steve Davies of the pseudo-think-tank the Institute of Economic Affairs argued on Channel Four news that the 20% cuts to the arts didn’t go far enough: art funding should be entirely abolished on the grounds that it’s unfair to take people’s money off them by force to pay for something they may not want. Again and again the economic right stoke resentment at the state allegedly taking what’s ours by force, and use this resentment to build support for a programme of small government.
But even those who believe in relatively big government tend to share this understanding of taxation as the appropriation by government of ‘our money’. Most on the economic left start from the assumption that it is all things being equal a bad thing that the state takes our money from us, but hold that this prima facie bad is justified by the public goods which taxation makes possible. Well-meaning public intellectual Alain de Botton encourages us to think of taxation as charity: we give up what’s ours for the greater good of our society.
So both sides tend to agree that one has some kind of right or entitlement to one’s pre-tax income. The economic right believe that the right to pre-tax income is inalienable, or at least that it is trumped only by the absolute necessity of providing the basic requirements of society, such as roads and rule of law. In contrast, the economic left tend to value the good of making society more equal, or of providing a basic standard of living for all, above the good of letting people keep their own money.
This feeling that your pre-tax income is ‘your money’ is difficult to shake. It’s hard not to see the pre-tax figure on your payslip as representing what’s really owing to you for the work you’ve done, and hence to feel that the state is taking away from you something that is yours by right. However, a little careful reflection shows this almost universal assumption to be utterly confused. There is no sense in which you have a right to your pre-tax income.
To see this, we have to ask what kind of right it might be supposed one has to one’s pre-tax income. Presumably, it is either a legal right or a moral right. Once we separate out these alternatives, we can see that the former option is incoherent, whilst the latter is utterly implausible.
You clearly don’t have a legal right to your pre-tax income, as you are legally obliged to pay tax on it. This is a simple analytic truth that follows from the definition of taxation. People who don’t take pay their taxes go (or at least legally ought to go) to gaol.
So if there is a general right to one’s pre-tax income, then it must be a moral right. But it is implausible to suppose that each person has a moral right to his or her pre-tax income, for that would imply that the distribution of pre-tax incomes the market happens to throw up is perfectly just, and this is clearly not the case. There is no justice in the fact that the pre-tax income of a City banker is many hundreds of times the pre-tax income of scientist working on a cure for cancer. This is just an accident of the way our market economy is structured. To hold that each person has a moral right to their pre-tax income would be to hold that the market economy just happens to deliver to each person exactly what they deserve, and this is clearly not the case.
Perhaps there are specific cases in which a person happens to deserve their pre-tax income; these would be rare and happy co-incidences in which the market happens to deliver exactly what is deserved. But the mere fact that your pre-tax income is £X does not entail that in any morally significant sense you are entitled to £X. The money the market happens to throw at you is not necessarily the money you deserve. No doubt you have worked hard for that money; no doubt you have made a contribution to the public good; you have special talents that others lack, etc. But others also work hard/are talented/make a contribution, and the market has not taken these morally significant factors into consideration in working out what to give to whom. For better or worse it’s almost certainly not fair that you have what you have relative to what others have got.
It’s the responsibility of law makers, then, not to respect pre-tax incomes, but todisrespect pre-tax incomes. Insofar as the market fails to yield a just distribution of incomes, the state should work to correct that distribution. Of course, to some degree the scope for such correction will be limited by economic realities. The pragmatic argument between right and left as to the relationship between tax levels and incentives to work or invest is a perfectly sensible one. But it is crucial to distinguish the pragmatic argument of the economic right, ‘We must lower taxes in order to encourage investment’, from the moral argument of the economic right ‘We must lower taxes in order to give people more of their money’. The former argument is based on an empirical claim which stands or falls with the data. The latter argument is based on the wholly confused notion that there is something morally significant about the distribution of incomes the market happens to have thrown up.
Your pre-tax income isn’t the money you deserve; it is the money the amoral market has gifted you. A government may have cause to respect the whims of the market as a matter of practical necessity. But the state has no moral reason to respect the whims of the market. The only legitimate bar to redistribution is economic reality. Any politician who thinks it a good thing, in and of itself, to give people more of ‘their money’ is confused.
(A similar argument is made at length in ‘The Myth of Ownership’ by Murphy and Nagel, published by Oxford University Press).
Conscience and Consciousness 
Not all of my pre-tax income is money the amoral market has gifted me; some of it is money I and my employer have freely and mutually agreed (s)he will pay me. But most of your other points seem to me to be basically right.
Sure, market transactions involve a lot of voluntary agreements. But such consensual giving and taking are just only if the distribution which pre-existed the transaction was just. The entire functioning of the market economy is dependent on a complex system involving taxation, and so we can’t isolate particular voluntary transactions and say ‘Well that was consented to and so fair’. We have to try to work out whether the system as a whole is just.
But working that out is a job that takes time and may never be finished; life is short and we have to act now, and the best that we already have, judging from centuries of experience, is a social market economy (such as Germany’s and some Nordic countries’) in which wages are fixed, in ideal cases, by negotiations between workers and employers, and these voluntary transactions are as just as we can presently and in the foresseable future hope for.
Daniel Hannan quoted some old proto-libertarians on this matter. I forget who but I’ll paraphrase.
I own my mind, I own my body, and I am free to trade with the products of my own labour.
If the fruits of my own labour were never mine for me to claim that my income is too low for my standard of living because of the tax deductions from it, then is my labour even mine? Is my body mine, and by extent my mind?
All of us on the right accept that some taxes are necessary, but the fact that we have no say in whether we don’t want to be taxed higher is surely very authoritative, even Marx knew that you couldn’t have a state of high-taxation without some authoritarian and punitive threat of prison.
I think its the moral principle as opposed to a legal one given that all crime is caused by law decided by those whom it suits. Whether the economy benefits from high taxes or low taxes is a separate issue but surely this is anti-libertarian.
Money is just a material which shows physical representation of the service you have provided, allowing you to further develop your skills or spend it on luxury items. Surely my labour is mine, the product I have produced is also mine, so the profits which I exchange my product for is also mine?
If a nice woman with a clipboard knocks on my door, takes my wallet and drives away very quickly shouting ‘Don’t worry its going to help the homeless’, that may be all well and good but was I asked? Did I have a choice? I never agreed to this, so most people would say my wallet had been robbed.
Most of our taxes are swindled on foreign aid, EU contributions, foreign wars, pointless projects (HS2) and banks etc. There is enough tax to go around for the things that are necessary, things which we all would gladly pay tax for. I also think this issue boils down to how well economics (whichever system) aligns well with human nature, and if you tax people even higher, human nature will dictate to us all that we feel as though we are being robbed and so far as we believe that to be the case we will protect ourselves from it and ultimately avoid it. If you were to have 100% taxation for example, no one would work obviously, unless you made them to…. who would want this society of gulags? When has socialism/communism objected to this?
I’m no anarcho-capitalist but I’m sure if everyone was offered a legal way to pay less tax, then they would. Finally, until the public see evidence of this ‘greater society’ that we allegedly pay tax for, then I think they are not wrong to worry about how much the state is taking of them and not see much in return.
You should come to my tax and social justice class!
I think property rights are purely legal. The idea that there are real, natural property rights out there in the world independent of human institutions is superstitious. Hence the libertarian starting point is metaphysically implausible. I have certain rights not to be interfered with, but don’t think we make sense of these by saying that I ‘own’ my body.
But even if we do think that one owns one’s body and one’s labour, what about the world’s resources which are used in the making of profit? How do your move from owning oneself to owning part of the material world? ‘Left libertarians’ think that one owns oneself and the fruits of what one does with what one legitimately owns, but that the world’s resources ought to be equally distributed, and hence those with more ought to compensate those with less.
Send me the empirical claims you tweeted me about tax so I can refute them too (-;
I’m not saying that rights, property or human exist out there but it doesn’t mean we shouldn’t suppose they are.
Its purely assertion that the worlds resources and materials should be equally distributed, because why should they? When someone will destroy it and some will enhance it make use of it, and change the world. Free market competition is the only thing which unlocks the creativity of humans to make products with their own labour.
But still talking about tax. You’re defending the right of the state to tax people’s products resulting from their own labour because the resources which they used in producing it where not theirs to begin with. Well they weren’t the governments’ to begin with either, like you hinted, the world is not a person nor does its material intrinsically belong to anyone, but if they do belong to anyone they should solely belong to people who utilise them and make things from them all on their own. Just because someone is in charge/in power, why does that give them the right to take a share in what someone produced on their own? That wouldn’t be leftist libertarianism, that’s purely authoritarian. I find it really difficult to understand how one can be on the left and be libertarian. I think its possible to be authoritarian and on the right though.
On equal distribution, that’s just an assumption that equality and equal distribution works and provides the best standard of living for people. Show me where in the world that this works. Greed works, and to paraphrase Milton F., why is economic greed somehow less nobler than political greed?
if political greed does not exist in a country where there is also no economic greed, then give me an example of this perfect society, because I don’t know any.
Any previous society which ran on state ownership, no self-ownership/property rights and wealth redistribution led to countries that were less free and less wealthy.