Misunderstanding the Social Contract

The Times-Dispatch this morning printed another letter on tax fairness this morning, this time from the far right. The letter writer, Horace McCowan of Richmond, does not get into the specifics of how much the rich actually pay in taxes. Instead, he attacks the conventional metric of whether a tax structure is progressive.

The conventional definition of a progressive tax structure is one in which individuals get taxed at steeper rates as their incomes increase. McCowan posits that the proper standard for judging a system’s progressivity should be the total amount of money paid by each taxpayer. On this definition, if Dale Earnhardt Jr. earns $5 million in a year and pays $25,000 in taxes, whereas the fellow who pumps his gas earns $25,000 a year and pays $2,500 in taxes, it’s still proper to call the system “progressive.”

Why? Because Earnhardt is paying ten times as much money into the coffers as the gas attendant.

The implication of McCowan’s letter is that the rich are being taxed at a vastly unfair rate even now, because our tax system requires them to pay more money into the system than the poor. Moreover, McCowan writes, if you look at who benefits from government services, it’s the poor, not the rich.  If we extend McCowan’s logic a bit further, we reach the surprising conclusion that the United States already is a socialist society, with its vast system of redistributive taxation.

Needless to say, this an extreme right-wing view, but there is a surface logic to the argument which merits a reply. Where does McCowan go wrong? In failing to consider who actually benefits most from the institution of government.

What does government actually do? Fundamentally, it protects and preserves property, and punishes those who don’t respect property (or life and limb). Why is it that day after day, the super-rich can enjoy their quiet days at the country club, undisturbed by anything other than the group ahead of them that is playing too slow or the latest slice into the woods?

It’s because they can be quite confident that the have-nots are not going to attempt to sieze their land or homes while they’re out on the golf course–and that if such attempt does take place, the legal system will respond and attempt to restore their property.

The police power of government provides for the basic social stabiilty that allows the rich (and all of us) to enjoy our property and material goods in a climate of reasonable security, in the knowledge that if our claims are violated, society will try to punish the offenders and restore our loss to the degree possible. Who benefits the most from this stability and security? Those who have more.

That point was made most poetically by Jean-Jacques Rousseau in his Discourse on the Origins of Inequality, but it also fully consistent with the account of government offered by John Locke, the favorite contract theorist of the American framers.

As society has gotten more complex, government has evolved beyond the exercise of police power to include other functions aimed at promoting the common good, from the provision of basic social insurance to management of macroeconomic policy. While some (though by no means all) of those policies benefit the poor in the most immediate sense, the overall impact is to maintain the basic social cohesion and stabiilty of the society. Who benefits the most from the fact that most people obey the law, that the United States is not racked by frequent violent strikes, that riots in the streets are rare, and that we don’t (a la contemporary Iraq) have marauding gangs everywhere taking whatever they want by force?

The rich. (Indeed, to the extent the United States is plagued by crime, it is the poor who are most vulnerable.)

It’s these considerations which underlie the conventional view that the rich are indeed obliged to pay more in taxes (both in absolute terms and as a percentage) than the poor and middle classes. Simply put, they benefit from the institution of government and the preservation of the social order more than the rest of us.

On another note, McCowan also writes that the 5th and 14th Amendments of the Constitution do not “authorize” progressive taxation or redistribution. Presumably he is referring to the due process clauses in each amendment. Again, this is a fundamental misunderstanding. The purpose of those amendments is not to prevent government from passing legitimate laws which regulate property, but to protect individuals against arbitrary incursions on private property undertaken by the government with no concern for the common good.

McCowan may believe those amendments provide grounds for rejecting the constitutionality of progressive taxation, but he’s going to have to overturn a long history of judicial interpretation on that one. Good luck. There’s also the small matter of the 16th Amendment to the Constitution, which specifically authorizes the federal government to “lay and collect taxes on income.”

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Published in: on December 19, 2006 at 3:06 pm  Leave a Comment  

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