Tax Debate, Continued

Bart Hinkle of the RTD has on his blog a couple of potentially important criticisms of my op-ed on taxes today, and I posted a lengthy response over at his site, which I’ll reproduce here:

Thanks for the comments. Three responses. 

1. On the first point, you are right that not necessarily all government spending contributes to economic growth; but a lot of it does.  The
U.S. has a very low tax rate compared to other industrialized countries that have comparable prosperity to us (and often, better outcomes on social measures such as poverty and health care coverage). Anyway, the point of the argument here is not necessarily that we should raise (or lower) the total tax rate, but that we should recognize that our private incomes depend heavily on the provision of an effective set of public goods. This is true not only for government workers or businesses who get government contracts or restaurants which serve government workers or companies that benefit from publicly-generated technologies; it’s true more generally as well. So while we do have a right to critically assess what government does, the notion that our pre-tax income is “ours” and that government encroaches upon our freedom more and more with each additional dollar of tax it imposes is deeply flawed. The income we are able to get is thoroughly dependent upon our being part of a social system of which government is a central part, and not simply a function of our individual effort. The fact that the average American’s income is several order of magnitudes larger than that of residents of many developing countries is not a testament to our superior personal effort, but the fact that we are part of a social system that a) has and has had an effective public sector for many years that has provided essential public goods such as infrastructure, education, and public safety and b) that we’ve established and enforced (via government) a system of property rights which (while not perfect) has tended to encourage economic growth.
 

2. I do think (and if I had more space for a longer piece, would have tried to develop this argument more) that government places a critical role in not jus enforcing but also establishing and specifying property rights. An individual who claims “this is mine” is making an utterly meaningless claim unless the larger community accepts that claim is legitimate and is willing to enforce that claim against the encroachment of others. Then it becomes a right. 

Property rights in land, for instance, are essentially a monopoly on previously common or unowned resources that is granted to individuals by government. When we grant such monopolies to individuals, others lose a bit of their freedom–they no longer can cross or use the piece of land as they were able to before it fell under private ownership. For that restriction of freedom to be legitimate, it needs to be ratified by the larger community (acting typically through government). In establishing property rights, we essentially agree to establish a system of private monopolies, because it is believed that in this way we can best advance the common good. But as early theorists of property rights like Locke recognized, the extent of those rights is constrained by the requirement that they promote the common good. (For Locke on the legitimacy of taxation within a system of representation, see Second Treatise of Government, paragraph 140.)

 

But it’s not the case that government (in modern economies) simply enforces a pre-existing natural right to property. Rather government devises and specifies the nature of property, and also takes actions which directly affect the value of property. I have in mind here complex rules governing the transfer of titles and so forth; but also wholly artificial forms of property—such as patents which expire, and limited liability corporations—which simply could not exist without the actions of government. And these artificial forms of property constitute a major proportion of the American economy. An economy in which individual shareholders in corporations could be held personally responsible for the debts that corporation incurs would be very different from the one we presently have.

 

Government action also affects the value of property in very specific ways.  A house which is accessible by a public road and is connected to other forms of public infrastructure is vastly more valuable than an equally sized house that can’t be reached by a road. The important point here is that the specific value of our property holdings (including the income we receive) is inextricably intertwined with public activities.

 

For longer and no doubt more eloquent expression of this general set of ideas, I’d encourage readers to check out this series of blog postings by Elizabeth Anderson of the

University of
Michigan (here’s the link to part III of a three-part series, you can access the earlier parts from this link).

 

3. I don’t think that viewing property rights in this way (as fundamentally products of government) necessarily means we have to view all rights claims this way. Some rights claims are so ingrained in our political culture that they do indeed strike us as self-evident, and that in itself is not a bad thing.

 

But ask yourself this: what if you or are I had asserted an absolute right to express our views on politics and government in say 2nd century Rome, and went on to a launch a bitter, sarcastic attack on the rulers. What would have happened? Well, we’d probably have rotted away in dungeon somewhere. Nor would we have gotten a lot of sympathy from our fellow citizens, because the notion of a nearly absolute right to political speech was part of the Roman political culture at that time. If you had said, “but it’s self-evident,” you would have been laughed at.

 

So whether or not say political rights are in fact upheld in practice depends not only the actions of government in respecting those rights, but also whether there is a political culture which accepts and supports the moral legitimacy of such claims. Liberal (in the broad sense) political cultures do uphold such claims, and I’m glad of it. But this is a historical (and perhaps still fragile) achievement which (again) is inextricably intertwined with the emergence of liberal state constitutions (i.e. government action).

 

If one wants to believe that people by nature always and everywhere have and have always had the set of rights we today enjoy, that is fine, but it is a quasi-theological claim with little practical political significance. The enjoyment of such rights in practice, with which I am more concerned, depends upon the specific constitutions we establish and the evolution of political cultures supportive of such rights claims.

 

Published in: on April 30, 2007 at 4:00 pm  Comments (1)  

Tax Debate

The RTD this morning ran an op-ed of mine this morning criticizing the idea of “Tax Freedom Day”; it ran opposite an anti-taxation piece. Check it out!

Published in: on April 30, 2007 at 2:03 pm  Leave a Comment