Do you ever get the impression that people see taxation as an end in itself, rather than a means to an end? We are struggling with empty state coffers: well just raise taxes. But for what? Why tax people at all? What is the money being spent on, besides front-line services? And why should producers be paying for those things?
Chris Dillow writes at the Stumbling and Mumbling blog about “The Fairness of 50p” tax rate. [To be honest I take issue even with the title of this post: “fairness” is not an absolute, and what is fair to one is not fair to all.]
In a nutshell: he is saying that the rich (which he says can mean various things, but which he does not define here) should pay more taxes to the state because it is the state that has made them rich to begin with (I should have warned Ayn Rand fans to brace themselves for that one).
In any case, he presents his argument in 3 main points, and I choose the space of a post, rather than just a comment on his site, to give my own opinion on each. His first point reads:
“1. A high tax is a dividend, paid to the state in return for its investment in the things that made you rich.”
“Even if the state did not educate you”, he says, “chances are it educated your customers”. Although he does not explain why that education is central to these customers purchasing my product, service or labour. And I apologise for sounding sarky, but if I can prove that most my customers were not educated in state schools, may I pay less taxes?
The state also provides peace, in which the economy can flourish. I wonder: without the state are we all crazed animals who feed on each others’ wealth and fear? Did not trade come first, the state second? The state is not detached from peace, of course: it helps maintain peace, more or less effectively. However: we have the same amount of state all over the country, but not the same amount of peace (or safety).
And thirdly within this point: the state helps sustain capitalism. In fact more often then not: when the state gets involved in business corruption and market distortion ensue (automotive bailout, anyone?)
His second point seems to imply that business is corrupt by definition:
“2. The state’s force is a form of countervailing power. Some (many?) of the rich owe their fortune to the fact that they are powerful.”
In other words man is powerful first and rich second, and at that point holds undue influence to extract money from the state. I dare say wealth tends to precede power. Even in politics: wealth helps get you elected. In fact generally the more one grows in wealth, the less he extracts from the state. He will move from state to private health care, send his children to private schools, not depend on public housing, and much more.
In point 3 we look at markets, and so of course we find a negative:
“3. Inequality is a form of market failing.”
This appears premised on the idea that people become rich because of luck or talent, which I presume he associates closely with luck (you are either born with it or not). So this argument can only stand if we deny that wealth can and usually does come from work. Providing a good service, creating a great product, making fruitful decisions: these things generally come from training, work and dedication; not luck.
In any case I find this point moot, as equality is not, nor should be, the goal. Everybody has different desires, different pleasures and different priorities. The goal, to paraphrase Ocean, is that you get out as much as you put in, and you choose how much you put in.
I strongly believe in equality of opportunity as the only desirable equality, and this is achieved by less intervention, not more.
In summary: according to Dillow the state gives us all that is good (governments make you rich!) and the markets all that is bad (inequality is, we presume, bad). The more you have, the more you should contribute towards MPs second houses.