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September 13, 2005

So what is the moral case for low taxation?

Posted by Harry Phibbs

Harry Phibbs asks, what is the moral case for low taxation? And which politician has made this case most strongly?

In the heady days of ideological clashes in the 1980s libertarians used to produce stickers and badges with the slogan "Taxation is Theft". It was partly prompted, I suppose, as a riposte to the slogan "Property is Theft".

Any child has a clear enough grasp of what theft means. Somebody takes something that belongs to you. Ameliorating circumstances do not stop this being theft. It might be that, in the spirit of Robin Hood, they don't steal from you for selfish reasons. But it would still be theft. It might be that they are stealing for selfish but rather pressing reasons - such as someone who is starving who steals a loaf of bread. But again that would still be theft. It could be that the theft has been authorised by some wider community. Perhaps everybody in a village has had a vote and agreed to steal the property of somebody else. Again it would still be theft.

On this basis there is a pretty clear argument for saying that taxation is a form of legalised robbery. If a majority of people agree with it, or if a law is passed approving it, or if (supposedly) the money stolen is passed on to some worthy cause that might perhaps mitigate the offence. But does it actually stop it being theft? Would those who argue that it can't really be theft if it is done by the government apply the same logic to totalitarian governments? When Saddam Hussein sent off his henchmen to go round murdering opponents it was effectively the government going round murdering people.

But if taxation is theft isn't that a moral argument for no taxation rather than low taxation? It is. But I also think that if the consequence of our having no taxation meant that we abandoned our mechanism for defence of the realm and the maintenance of the rule of law then the policy would not be sustainable. So it is consistent to argue that taxation is theft but it is also necessary. However given that theft is immoral there is a strong moral case for keeping theft, in this case taxation, to a minimum.

Recently Tory politicians have started talking about the need to make that moral case but naturally they are constrained in actually doing so. One problem is that people will think if they really believe it why do they not have a policy to deliver it? The promises of tax cuts from the Tories at recent elections have been decidedly modest. Another has been that when they do make the moral case it is usually ignored by the media who are more interested in the substance of policy announcements or attacks on the government.

The high minded Oliver Letwin had made some effort in the field. This is how Oliver Letwin put it in a speech to the Centre for Policy Studies when he was shadow Chancellor in 2004:

To take people's money under threat of imprisonment is a serious business. And it gives the government a solemn obligation to ensure that the money is well spent. The government has an awesome moral responsibility as the trustee of the taxpayer. When we see that the government is not giving value for money - when we see that there are more civil servants than people in Sheffield, or more bureaucrats in the DWP than soldiers in the British Army, or that the government is spending 1,000 on an office chair - and when we say, "it's a disgrace", we ought to mean it. It is a disgrace. If the government isn't giving taxpayers value for money, that isn't just some passing feature of the scene. It is a moral outrage.
Letwin compared the duty of government to the taxpayer to that of company directors to their shareholders to ensure their money was well spent, or the trustees of a charity that the donations are well spent:
Of the three cases, it is the government that has the most solemn duty because - unlike the shareholders who invest voluntarily or the donors who give voluntarily, the taxpayers (unless they choose to leave the country for some less-taxed state) are compelled to pay their taxes under threat of imprisonment.
For Letwin that was the heart of the case although he added other moral arguments:
One could argue that high taxes are morally disadvantageous because they drive out voluntary giving, which is morally superior to paying under compulsion. One could argue that high taxes (like excise duties at present) create a moral hazard by driving many otherwise law-abiding people to break the law.
In some ways the economic case and moral case can not be neatly compartmentalised. One moral argument for taxation is that the government has a moral duty to provide full employment - that enforced idleness is immoral.

But what if the economic argument is accurate that higher taxation might allow increasing public sector employment but would destroy rather more jobs in the private sector. Letwin again:

How can we in good conscience explain to the small businessman that we are going forcibly to remove some of the results of his labour and thus make it more difficult for him to employ another employee, if the only purpose of this coercion is to employ someone in the public sector to do something counter-productive?
Letwin's speech is good stuff. But it is really: "The moral case against wasteful public spending".

When he was Tory leader William Hague had a stab at it in a speech to the Institute of Economic Affairs:

We believe it is morally a good thing that people should be able to keep more of what they earn, instead of being forced to hand it over to the state. We trust people to make better choices than Governments do about how they spend their money. We think that the nanny state and the "Whitehall knows best" attitude is not just patronising, it diminishes our free society.

For economic freedom goes hand in hand with political and personal freedom, as the old communist dictatorships quickly learnt to their cost. Give people more choice about how they spend the money they earn, and you are giving them more freedom and power over their own lives. Curtail that choice with high rates of taxation and greater state interference, and you are reducing their freedom.

Perhaps Hague was right to broaden it out as: "The moral case for freedom". Once that has been accepted it is reasonably clear that high tax reduces freedom and so is immoral.

Hague also pointed out how the state crowds out individual compassion:

High taxes weaken communities, because they undermine the diverse plethora of voluntary societies and charities that make up our civil society and buttress our freedom against an over-weaning state. They do this by driving out generous instincts.

The more people are forced to give to the state in compulsory taxes, the less they are inclined to give to voluntary good causes. In America, the state takes about 30% of the national income from its citizens, and its citizens give on average the equivalent of 17 per month to charities and voluntary organisations. In Britain the state takes almost 40% of the national income in tax, and our citizens give on average 7 per month - although this is still more than the average in higher-tax France. Lower tax is not the only cause of the difference in the propensity to give - but it seems almost certain to be amongst the major causes.

Hague felt that charitable giving was beneficial to the giver as well as
those on the receiving end because it encourages "moral habits":
A nation made mean by tax becomes, in due course, mean by inclination. The victims of this are the more vulnerable in our society, who are not strong enough to stand on their own two feet, who need the support of the community, who are helped by charities and carers and voluntary groups.
From a Christian perspective we have been given free will. For us to have a chance to make the choice we need to be given a choice. As Margaret Thatcher put it in 1977:
Choice in a free society implies responsibility on the part of the individual. There is no hard and fast line between economic and other forms of personal responsibility to self, family, firm, community, nation, God. Morality lies in choosing between feasible alternatives. A moral being is one who exercises his own judgment in choice, on matters great and small, bearing in mind their moral dimension, i.e. right and wrong. Insofar as his right and duty to choose is taken away by the state, the party or the union, his moral faculties, i.e. his capacity for choice, atrophy, and he becomes a moral cripple in the same way as we should lose the faculty of walking, reading, seeing, if we were prevented from using them over the years.
Some years earlier she put it more bluntly:
The point is that even the Good Samaritan had to have the money to help, otherwise he too would have had to pass on the other side.

Harry Phibbs is a journalist.


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Theft is the act of taking anything over which you do not have legitimate property rights. But everyone has a different opinion on the matter of who has legitimate ownership over a particular piece of property. This is why governments exist; to arbitrate and enforce on the matter of "who owns what". If a government states that 20% of a person's wealth belongs no longer belongs to him, and now belongs to another party, then legally this is now the truth.

So if the government comes up to someone and says "we're about to steal your horse", then that is theft. But if they say "this horse is not your property, it is government property", then by virtue of this statement the horse now IS government property. Obviously the government would define things in the latter way, so it would not be theft.

Essentially, the government is the body that defines which actions are theft, and which are not. So it doesn't really make sense to talk about the government as "commiitting theft", as they would define theft in a way such that they weren't committing it.

In more democratic countries there is separation of powers, eg a judge couild rule that the police had wrongfully siezed someone's property. But this just means that one branch had defined "theft" in a particular way, and this definition had been "trumped" by a higher branch.

Note that this is not a moral judgement saying that I condone all government actions; quite the opposite in the case of most governments in the world today. But my point is that my views on what is moral and what is not can only have influence through the workings of a government. If I (subjectively) believe that the government is committing theft, then I may try and change the government.

I cannot claim to have divine knowledge of "who legitimately owns what", any more than anyone else can. Neither can the government, but if the government is representative then it's definition of "who owns what" carries more moral authority than any one individuals', because it reflects an amalgamation of views.

So it is nonsensical to say "taxation is theft"as if you are stating some sort of objective fact. You are claiming that an institution is violating your property rights, but you are talking about the very institution that you rely on to define and enforce those rights in the first place.

Posted by: Offalo at April 12, 2006 03:34 PM
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