On today’s Op/Ed Page, University of Richmond professor and sometime blogger Thad Williamson has a challenging and thoughtful guest column arguing that people have no moral claim to their pre-tax earnings.

You should read it for yourself, but the gist of it is that the view of the market as a wealth-creator and government as a wealth-consumer is erroneous. Without the government’s protection of property and without government services such as roads, the market couldn’t operate as well as it does. In fact, government makes our participation in the economy possible. Therefore, while it’s reasonable to debate the appropriate level of taxation, we have no right to claim the government is “taking our money.“

There are two substantial problems with this argument.

The first, somewhat lesser, problem is empirical. While it’s certainly true that some government activities are necessary for society to function—cops and courts, first and foremost—those make up a minute fraction of most government spending. It’s not clear whether the economy would grow or shrink if government abandoned most of the other activities it engages in, and it’s pretty hard to test. (Were it not for the trillions spent on creating a culture of dependency through welfare, for instance, we might be even richer than we are now. Who’s to say for certain?) Williamson’s argument relies, to a considerable extent, on an untestable factual thesis.

The second big problem—and the more serious one—is that his argument applies to non-economic rights, too. For instance, if it were not for government, people could not enjoy the right to free speech to the extent they do. But from this fact, it does not follow that people have no right to free speech other than what the government allots them. Williamson seems to be making the case that rights do not exist ab initio and that government is instituted to protect them. Rather, he makes it seem as if government exists ab initio, and society determines collectively what privileges should be granted to individuals. Yikes!

P.S.—Thad has added some ripostes to this rebuttal in the comment section. Read those, too!

Part III:

So where do taxes fit into all this? Taxes are part and parcel of the overall system of property rights. If we take seriously the fact that taxes are necessary to undertake the public action which sustains and shapes property rights regimes, we will recognize that it’s not the case that you have a “market” that generates returns and then a government that comes along and takes those returns away from us by taxes. Actors in the market wouldn’t have gotten those returns in the first place without the general activities of government, and the specific quantity of those returns are also shaped by the specific nature of those public activities.

That’s why A) we don’t have a right to our pre-tax income and B) we shouldn’t use our pre-tax income—which itself is an artifice of the specific regime of property rights in place at a given time—as a baseline for thinking about how fair the overall tax system is. Indeed, for thinking about distributive justice, asking how fair the tax system is generally a misleading way to ask the question; what we should be asking is how fair the property-rights-and-tax-system is as a whole.

Let me give one more example to spell out the logic behind and implications of conclusion A. Suppose I do in fact find a dollar lying on the street. Suppose also we’ve had dramatic tax reform and simplification (a cause with which I have some sympathy) and that now all taxes are collected via a sales tax on all purchases. In Virginia, let’s say through the political process we’ve settled upon a sales tax of 9%.

Now in this scenario, I would have the right to keep that dollar as an unused piece of paper under my mattress, untaxed, for the next 30 years. Or I would have a right to spend it, and have 9% of its value taxed away at the point of sale. I wouldn’t have a right, however, to spend that dollar and not be taxed at all. If I (and everyone else) did have such a right, there would be no taxes, and consequently no system of property rights (or legally valid currency, for that matter), and we would be back in a state of nature nightmare ruled by force and fraud. Consequently, we don’t have a right to our pre-tax income as such.

Again (I hope) even many libertarians will follow me so far on this. But some may say, well we don’t have a right to all our pre-tax income, but government should only take the minimum necessary to keep the system intact. On this view, if (continuing the scenario laid out above), the 50 states each set their own sales tax rates, the state with the lowest tax rate would by the same fact be the “freest,” less oppressive state.

I disagree with that view. If say Mississippi had a tax rate of 6 cents compared to Virginia’s 9 cents, but Virginia provided more and better public goods than Mississippi, Virginia might be the better, more prosperous place to live. Moreover, there would be nothing inherently less free about living in Virginia than in Mississippi, even though the tax rate is higher. If that higher tax rate has been established by legitimate, democratic measures—with the approval of the people’s representatives—then no one’s rights or freedoms have been compromised; all that has taken place is a democratically sanctioned revision of the property rights system. In particular, it would be utterly invalid and illogical for a Virginia resident to claim that they have a moral right to have the $75,000 income they earned in Virginia with its 9% tax rate, instead be taxed at Mississippi’s lower tax rate of 6%. By now hopefully the reason why such a claim is invalid should be clear; the fact that an individual is able to earn $75,000 pre-tax in Virginia depends heavily on the specific bundles of public goods and market-shaping government activities present in the state, which quite likely could not be sustained if the tax rate were slashed from 9% to 6%.

One further footnote: a public good does not have to be GDP-enhancing to be a public good. Public parks and health care for veterans and housing subsidies might have only a marginal (if any) impact on GDP. But they might improve quality of life in noneconomic terms (parks), or express or repay our debt to those who’ve served the country (veteran’s benefits), or assist persons who are not able to gain access to essential goods via the market (housing assistance).  Governments can legitimately act to provide such public goods when and if they serve other purposes deemed as important by the public.

Part II: Going back to the question of taxes:

You can’t have a system of property rights without government, and government requires taxation. If you want to have a system in which individuals have a legally enforced right to property holdings, you have to be willing to pay taxes. (So far, even libertarians should agree; only possibly anarchists could object.)

But property rights don’t just pop out of thin air, waiting for government to enforce them. Government has to define, to specify them. If I find a dollar on the ground, am I allowed to keep it? If so, how is that different from if I find an unattended car with the keys in the ignition—am I similarly allowed to take possession of that car? If I jointly own a piece of property and I die, does the remainder of the property go to the other owner, or to my heirs? Do spouses have a right to one another’s income? Am I allowed to cut down branches from my neighbor’s tree that hang over my property? How much in the way of royalty fees must internet radio stations pay to copyright holders? Is the landlord or the tenant responsible for household repairs? Are investors liable for the debts the companies they own incur?

Government has to make rules governing these and many many other situations in which there are potentially conflicting or ambiguous property rights claims. This is significant because 1) the existence of functional market without functional government is impossible; governments are need to specify these laws, keep property records, prevent fraud, provide police enforcement, etc. There is simply no such thing as a free market independent of government. It’s also significant because 2) the specific rules and regulations government adopts in creating a property rights regime will necessarily impact the specific returns actors in the economy receive.  Whether I can build a chemical factory on my vacant lot a block away from Carytown affects the potential returns I can get from that property; so too do all the various laws specifying the precise extent of property rights.

Beyond these absolutely essential functions, modern governments also provide public goods, without which we’d be a much poorer society. The way these public goods are created also directly impacts the shape of the market and the returns individuals receive within them. An obvious example is the evolution of the computer industry in the 20th century, which is inseparable from the role of government spending and research. If the public hadn’t made the investments it made, we wouldn’t have so quickly reached the era of personal computers. Another example is the Internet—a direct product of public activity. Think of all the entrepreneurs now making a livelihood off the Internet; the market returns they are able to get are directly affected. Yet another example is suburban real estate development, which is enabled by the construction of public roads. Yet another would be any new large-scale industrial enterprise in the United States, which typically receives a host of public subsidies from state and local governments.
 
The big point here is that there simply isn’t a free market untouched by government action; and that the specific character of government action shapes market returns. Consider one more example: human capital, and the income one’s skills are able to command in the market. One’s particular skill set is influenced (not determined, but predictably influenced) by the quality of schools one has attended. If one went to a public school, a public university, or received a government scholarship at any point, or went to a private school financed by tax-deductible private contributions, then the skills you developed and can now earn a profit from have been shaped directly by public action. If there were such a thing as a free market, you wouldn’t have had access to this crucial public good, which would have been bad for you and your economic prospects both a) because you likely would have fewer skills yourself and b) because you’d be living in a society in which many fewer people had such skills, meaning the overall productivity and quality of life of the society would be lower.

To the various respondents (this will have to take up several posts):

1) On the question of how one can support a regime of liberal rights without necessarily believing they are “natural” rights in the strong sense (i.e. applicable in all times to all places). (I respect those who think we do have such strong natural, but don’t think the argument for rights needs to rest on that point of view being accepted.)

There are two alternative strategies for accounting for rights without appealing to timeless, natural rights. First is the argument laid about John Stuart Mill in his classic text Utilitarianism, in which he argues that rights are simply codifications of rules which long centuries of human experience have shown to be best suited to advancing human utility. The right of freedom of speech has been established, according to this logic, because experience has shown that social progress is maximized when individuals are given free rein to express their ideas and no ideas are silenced.

A second strategy would be to start from the premise that freedom consists in being able to govern ourselves, free from domination by outside forces or by overly-powerful internal forces (such as say, feudal lords). From that premise, you can derive support for all kinds of democratic rights, on grounds that things like free speech are needed if we are to remain non-dominated, self-governing people, and that these things are so fundamental to self-governance they should be secured as rights in a constitution. If you further believe that freedom requires a certain amount of personal autonomy—that we shouldn’t be forced into a particular line of work, or be forced to marry someone we don’t want to, etc.—that would provide justification for additional rights, some of which may be so fundamental they should be hard-wired into a constitution.

The common thread in both these lines of thoughts is the notion that rights are morally justified by the various goods they secure (be they security, self-governance, personal autonomy). I think this way of thinking about rights give us a better sense of why they are really important.

Margie,

Disagreeing is fine. I disagree with how a lot of tax money is spent, but I still pay.

What I find repulsive are the political leaders you refer to voting to send young men and women to die because they were afraid to risk their political careers by going against the polls.

And please, don’t say they were lied to or mislead. This gimmick is quite possibly the most wretched and disgusting act of cowardice and cynical manipulation this nation has ever seen. To disagree with a policy and advocate a change is one thing. To put a political party ahead of soldiers who volunteered to fight a war they voted for is profane.

Nevertheless, they’re comitted now. History is littered with the remains of short sighted people.

Interestingly enough, one of our contributors to the VCAP blog read the same Op-Ed in the RTD and wrote a response from a Libertarian perspective.  I think it provides some interesting discourse from a different perspective.  With Bart’s permission, I thought I would include the link because it is a little lengthy to include here without cluttering Bart’s blog.

<a >Do we have a right to our income?</a>

One of my pet peeves is Congress not out and out declaring a war it deems justified and necessary, rather than just authorizing the President to do it. No wonder he felt like he had the right to do things his way without consulting anyone. Congress reminds me of a turtle, sticking it’s head out cautiously to test the wind, then hastily withdrawing it in the face of public disapproval. Accountability is not something they are really big on.

I agree, R. Smith, but again you can’t distance the people from their government, not daring to question whether the decisions of our leaders are good or bad. It is the duty of every citizen to yell good and loud when our President is making a mistake in our names,and in our opinion.

Going against our concience and good judgement to blindly follow any leader is not a good thing. If Bush instituted the draft, yes, you should go when called on to do so, working the political system to get him out of office as soon as possible.
As long as military service is voluntary, yes, I think you are justified in not volunteering to fight a war you don’t believe is in the nation’s best interest. Without enough volunteers, he could not make or continue this mistake. Is that messed up logic? I don’t know anymore.

Marge,

As I stated in my earlier post, I believe most citizens agree that taxation is nessasary for the common good. The question I posed in the last post is this, If we accept that the gov’t has a right to our income, that is, the fruits of our sweat and toil, as long as it is used to improve the community, does it not also have the right to demand we surrender our blood in defense of the community when it (the gov’t) deems the community to be threatened?

I support the taxman, just not the taxes!

Thanks, Rick, my blood pressure is fine. It was just a reference to my blasted, unfortunate temper.It is anathema to civil conversation.

Have you considered that critisism of volunteerism is not meant in the way you think? The efforts are wonderful and religious organizations are to be highly praised for the huge part they play. The danger that I complain about is the supposition that it’s enough and sustainable. As Larry says, it’s not. It is easy to offer this as a complete solution, so let’s abolish social programs and let individuals do it all—-or not.

Your implication that if businesses were taxed less, maybe they could afford to pay better wages and better benefits is true. But would they? I don’t think so. I think the wages paid by the robber barons before the advent of unions bears that out. They busted heads in an effort not to.

As for the unions, they served a very valuable purpose for a time, and are still needed. But, like most powerful organizations they got greedy. They ended up trying to kill the geese that laid the
golden eggs, so making themselves irrelevant and harming workers instead of helping them.

I accept the moderate tag, even though my feelings on some subjects is anything but moderate.

BTW, I loved your phrase; “—the irrepressible nature of the human animal seeking to better their condition.“ What wonderful hope and faith in ourselves that conjures!

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