Some radical libertarians hold that all taxation is immoral, on the grounds that it amounts to the state stealing the money of private citizens. This is an extreme position, but the sense that tax involves the government taking ‘our money’ is ubiquitous, and hugely influential in real-world politics. The former British prime minister David Cameron, for example, repeatedly made a ‘moral case’ for low taxes, based on the need to give back to you, the citizen, more of ‘your money’. And even those who believe in relatively high taxes tend to start from the assumption that one has some kind of moral claim to one’s gross income, a claim that is overridden only by the greater good of equality or the need to fund public services. Outside of academia, almost everyone assumes that the money I get in my pay-packet before the deduction of taxes is, in some morally significant sense, ‘mine’.
This assumption, although almost universal, is demonstrably confused. There is no serious political theory according to which my pre-tax income is ‘mine’ in any morally significant sense. Moreover, this matters: this confused assumption is a major stumbling block to economic reform, causes low and middle earners to vote against their economic interests, and renders it practically impossible to correct the economic injustices that pervade the modern world.
In addressing the question of whether taxation is theft, it is important to distinguish two senses of ‘theft’: legal and moral. In 18th-century North America, it was possible to ‘own’ a slave, in the legal sense of ownership. If someone deprived me of my slave in order to give that slave liberty, then this constituted ‘theft’ in the legal sense. But of course the laws underpinning slavery were morally abhorrent, and hence few these days would class liberating a slave as ‘theft’ in any moral sense. Conversely, we can have cases of moral theft that are not legal theft. The laws of Nazi Germany enabled the authorities to seize the property of Jews who had been deported; although strictly speaking legal, such actions constituted ‘theft’ in a moral sense.
And so, when we ask ourselves whether taxation is theft, we have to specify whether we are thinking of the moral or legal sense (or both). If we wanted to say that tax is legal theft, then we would have to argue that people have a legal claim to their pre-tax income, and hence that the government commits legal theft when it takes the pre-tax income of its citizens. This idea can be quickly dismissed. Clearly if Ms Jones is legally obliged to pay a certain amount of tax on her gross income, then she is not legally entitled to keep all her pre-tax income. It follows logically that the state does not commit legal theft when it enforces the payment of this tax.
The more interesting question is whether taxation is moral theft, and this depends on whether citizens have some kind of moral claim on their gross income. It is to this question I now turn.
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.
A person has a moral claim on all her gross income only if property rights are natural, not human constructions
The French anarchist Pierre-Joseph Proudhon declared in 1840 that all property is theft. But even among those who accept the legitimacy of property, there are very different views as to what exactly the right to property amounts to. 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. We need, therefore, to defend a theory of natural property rights. Our next task is to explore philosophical theories of property rights.
We can group philosophical theories of property rights into three categories: Right-wing libertarian; Left-wing libertarian; and social constructivist. Let’s take each in turn.
All libertarians hold that an individual has full natural rights of ownership over herself, and the fruits of her labour. However, libertarians of the Right and the Left disagree over the ownership rights that individuals can have over the natural world, ie over land and natural resources.
Right-wing libertarians believe that the material world – all land and everything that stands on it – was once owned by nobody. The first individuals who discover, or claim, or ‘mix their labour’ (a phrase introduced in this context by the 18th-century philosopher John Locke) with things in the natural world come to possess an inalienable natural property right over those things. If I’m the first to find some land and I farm it, I come to have natural property rights over that land, such that it is morally wrong for someone to take the land or its produce away from me without my consent.
We can now start to see how someone might try to make sense of the view that taxation is moral theft. If we think of the market as a free and consensual exchange among individuals of things over which they have natural property rights, then any state interference with the market will constitute infringement of individuals’ natural rights. Taxation will take from citizens what is theirs by right.
Less familiar in popular discourse is the view known as ‘Left-wing libertarianism’, defended, among others, by Peter Vallentyne, Hillel Steiner and Michael Otsuka. Left-wing libertarians agree with Right-wing libertarians that each individual has full rights of ownership over herself and the fruits of her labour. However, they hold that the natural world belongs to everyone: it is not possible for one individual to acquire exclusive rights over land or natural resources in a way that excludes the equal moral claims of other citizens.
The claims of future generations must also be taken into account, leading naturally to an inheritance tax
There are various forms of this view. In a more extreme version, the natural world is jointly owned by everyone, such that no one is permitted to own anything without the express consent of every other living individual (compare: if we jointly own a house, you can’t just let out half of it without my consent). In a more modest form, no one is allowed to acquire property unless they leave enough for each person to have an equally valuable share of natural resources. The uniting principle of Left-wing libertarians is that each of us has an equal moral claim over the resources of the world.
Left libertarianism will certainly rule out some forms of taxation as immoral. If I have acquired land or natural resources in a way that is consistent with the equal moral claim of others, and by my own labour increase the value of those resources, it is wrong for the state to tax that wealth away from me. But Left-libertarian theories leave considerable latitude for the state to alter the distribution of wealth, perhaps through taxation, if some take more than their fair share of natural resources. Crucially, the claims of future generations must also be taken into account, leading naturally to an inheritance tax (or at least restrictions on the right to bequeath) to ensure that each future individual has a fair share of natural resources.
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).
Almost all politicians and voters start from the assumption that each citizen has some kind of moral claim on her gross income. In fact, we have seen that making sense of this requires some hefty and highly contentious philosophical theses. It requires accepting the general libertarian commitment to property being natural and not dependent on human laws or conventions. And it also requires denying the Left-wing libertarian claim that each of us has an equal moral claim on the resources of the natural world.
The second requirement – the denial of equal rights over the natural world – is particularly implausible, and something I’ve never seen any justification of from Right-wing libertarians. On the Right-wing libertarian view, it is perfectly morally acceptable for one person to claim a vastly unequal proportion of land and resources for himself, resulting in his propertyless neighbours being forced to work for him to avoid starvation. By what right can the natural world be appropriated in this way? It is one thing to say that one has exclusive natural rights over oneself, but how can we justify exclusive natural rights over the natural world? And if it can’t justify this, Right-wing libertarianism falls at the first hurdle.
Moreover, as I will now try to show, even if Right-wing libertarianism is true, even if there are natural property rights, even if such rights allow private individuals to carve off for themselves a vastly unequal share of natural resources, even then we cannot make sense of the idea that actual people living today have a moral claim on their pre-tax income.
Professor Schmidt’s salary comes from the state: she has no right to complain that she keeps only some of this stolen money
The reason is that the world that Right-wing libertarianism theorises about is a very different one to the world we live in today. (It is no accident that Nozick’s 1974 book is called Anarchy, State and Utopia.) According to Right-wing libertarianism, the market distribution of wealth is morally significant because it is the distribution that respects the voluntary choices people have made with the property to which they have a natural right. But this is the case only if the market is perfectly free, ie if the state has no influence on the distribution of wealth. Yet there are very few countries in the world in which this is the case. In almost every country, there is a certain amount of taxation, at least to pay for roads and infrastructure, if not for education and healthcare. But even the smallest such state intervention entails that the market distribution of wealth no longer reflects the free choices of citizens, and hence by the lights of Right-wing libertarianism the citizens of these countries have no moral claim on their pre-tax income.
The point can be made clearer with some examples. Consider a Professor Schmidt, a Right-wing libertarian academic working in a German university, who is very annoyed about the state taking 42 per cent of ‘her’ income. Where did her salary come from? Well, German universities are publicly funded, and so Schmidt’s salary comes from general taxation, from the money the German state forcibly extracted from its citizens. But according to Right-wing libertarianism, this is an immoral state action that infringes the natural rights of its citizens; in effect, it steals from people to pay Professor Schmidt. It follows that Professor Schmidt has no right to her salary, and hence no right to complain that the state lets her have only 58 per cent of this stolen money.
Perhaps some radical libertarians will gleefully agree with me that professors who leech off the state have no right to resent taxation. But the point applies quite generally, although in a more subtle way. Now consider a Ms Jones, a libertarian British businesswoman who resents paying tax on dividends from her lucrative company. Although she is not directly paid by the state, the profits generated by Jones’s business are dependent on many things that are funded by the state: perhaps she receives state subsidies, but even if not, certainly the success of her company will depend on infrastructure, roads, rule of law, and an educated and healthy workforce. It doesn’t matter whether in principle these things could have been provided privately; in reality, they are provided by the state and funded through taxation. According to Right-wing libertarianism, these things were paid for by theft, and hence Jones has no right to the profits thus generated.
In theory, Right-wing libertarianism does entail that people have a moral claim on their pre-tax income, and hence that taxation is theft, but only in hypothetical societies where there is zero or minimal state interference in the economy. In states in which the government intervenes in the economy through taxation – ie, in almost every developed state – market transactions are tainted and so are morally void. The Right-wing libertarian is perfectly entitled to campaign for the day when her minimal-government Utopia is brought about, but until that day she cannot consistently argue that she has a right to her pre-tax income, and hence cannot consistently complain that the government is taking what is hers by right.
It’s hard to shake the feeling that the gross income figure on your payslip represents your money, and that the difference from your take-home pay represents how much the state has taken from you. In fact, there is no coherent way of justifying this conviction. Even if the most radical forms of Right-wing libertarianism are true, it remains the case that you have no special moral claim on your gross income.
Still, the vast majority happily vote for low taxes, rejoicing that they get to keep their morsel while in reality all they’ve done is protect the spoils of a tiny minority at the top. The result is our failure to create what we really need: a tax system that – as part of the wider economy – creates a just society.