Tuesday, November 16, 2010

Taxes are a Moral Issue

I oppose tax increases because they fund a wasteful, value destroying government. I oppose them because they reduce the incentives to work and invest, distorting economic incentives and reducing the size of the economic pie in future periods.

But even if they did none of these things, I would still be deeply uncomfortable with them, because I am not interested in taking somebody else's money. Not if it's given to a good cause. Not if it's given to me personally. It's not my money to give away.

Many on the left are instinctively derisive when you claim that tax rates are a moral, as well as an economic issue.

But to those doubters, let me ask you this: would you consider it morally acceptable if the government decided to implement a tax rate of 100%? That is to say, the government owns all of your output. This is just another name for communism - the government owns everything, and you own nothing. Now, more people are inclined to view that as a moral issue. But once you view communism as just another point on the tax  scale from 0 to 100, it becomes a much more complicated issue. Is it morally acceptable to implement a tax rate of 99.99%? If you earn $100K a year, the government lets you keep ten bucks in spending money. Most people would say that this is substantively no different from communism.

But then if you think that a) and b) are both morally unacceptable, then we're in a bind - somewhere between a tax rate of 0% and a tax rate of 99.99%, taxes become a moral issue. Now we're just haggling over where exactly it kicks in.

In my opinion, taxes are always a moral issue. When the government takes your money under threat of imprisonment, it is a form of stealing like any other. This remains true even if they subsequently do worthwhile things with that money. It remains true if the money is spent on genuinely important public goods that a market may not supply enough of, like police, courts, an army, and (perhaps) public roads. It remains true even if the welfare gain from the spending outweighs the welfare loss from the taxes. It remains true even if on balance we should actually do it.

Regardless of what you think of the cause on which taxes are spent, none of this changes the morality of the funding part of the equation. Things are either taken based on voluntary exchange, or they are taken by force, whether implied, threatened or actual. Everything else is just detail.

This suggests that governments should be very hesitant to take money by force from the citizens. It may be morally justified and necessary because of other reasons. But the ledger is starting with a theft. A budget neutral increase in both taxes and spending is not a morally neutral act.

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