This week I wrote about the dignity of paying taxes (among other ways of contributing to social flourishing). But as we know, not all taxes are created equal. Indeed, as Antony Davies and James Harrigan write this week at US News, “Politicians are in the business of buying votes with tax breaks and sweetheart deals for their preferred constituencies, and they have to offset these deals by taxing disfavored constituencies at increased rates. The longer this game is played, the more convoluted the tax code becomes.”

As I argued previously at Capital Commentary, this amounts to a kind of back door social engineering (as well as playing favorites, picking winners, and so on). The fundamental purpose of taxation is not to buy votes and give preference to lobbies and special constituencies. Instead, as I write, “The point of taxation is to raise funds to enable the government to fulfill its moral, political, and social responsibilities.” Such a view is ultimately at odds with a Utilitarian theory, which considers taxation to be a tool rather used “to maximize overall well-being in society.” Matthew Weinzierl argues for greater attention to a theory of Equal Sacrifice, which on Weinzierl’s account “assumes individuals have the first claim to their output, and that they voluntarily agree to form societies that collect taxes in order to purchase public goods.”

Davies and Harrigan give a good example of the kind of shenanigans that politicians play with language about taxation, which are actually part and parcel of a Utilitarian approach:

Another popular gimmick is to confuse deliberately who pays a tax with who delivers the tax to the IRS. Imagine that you are in line at a movie theater. You hand your child $20 and tell him to buy two tickets. It would be ridiculous to claim that the child paid for them, but this is exactly what politicians claim when they talk about taxing corporations. Corporations only deliver tax money to the IRS. Taxes are paid by people. When politicians raise taxes on corporations, corporations respond by doing one of three things: they raise the prices of their products, they generate fewer dividends and capital gains for their stockholders, or they pay their workers and suppliers less. In the first case, the customers really paid the tax. In the second, the stockholders paid the tax. In the third, the workers and suppliers paid.

This reminds me of the larger problem in the way that taxation is often framed, particularly on the Utilitarian view. This concerns the logic that anything that isn’t taxed is supposed to be counted as government largesse. Put government in the place of God in the following paragraph from C.S. Lewis’ Mere Christianity and you have a pretty good sense of the dynamic:

Every faculty you have, your power of thinking or of moving your limbs from moment to moment, is given you by God. If you devoted every moment of your whole life exclusively to His service you could not give Him anything that was not in a sense His own already. So that when we talk of a man doing anything for God or giving anything to God, I will tell you what it is really like. It is like a small child going to its father and saying, “Daddy, give me sixpence to buy you a birthday present.” Of course, the father does, and he is pleased with the child’s present. It is all very nice and proper, but only an idiot would think that the father is sixpence to the good on the transaction.

But as Harrigan and Davies show quite well, in the case of government tax gimmickry, it isn’t very nice and proper at all.

  • fundamentalist

    Nice article! In addition, the rule of law tells us that government should treat all citizens equally, which means the same tax rate for everyone. How can the middle class honestly justify passing laws to tax the wealthy at rates the middle class aren’t willing to pay?

    Then there is the issue of the role of government. If government has no limits, then it can tax as much as it likes. But if government has a specific purpose, then taxation above the level needed for that purpose is theft.