[Revised 11-13-08 8:30 PM EST; forgot the last section]
Continuing the previous post, the arguments against (real) progressive taxation—taxing at a higher rate, the higher your income—rest on a number of misplaced confidences about the meanings of certain words, and some outright abuses of language.
1. The meaning of “more”: Math versus morals
First, there is the idea that one is “paying more” than other people if one is taxed at a higher rate than them. In absolute terms, this is true and hardly controversial; even if everyone were taxed at the same rate, whoever makes more would “pay more” than whoever makes less. But of course the complaint is about paying proportionately more. Again, it is trivially, mathematically true that progressive taxation taxes the wealthy proportionately more than lower earners; this is what “progressive taxation” means. Merely defining a concept is not the same as arguing against it. What is wrong with disproportionate taxation?—is the question.
Critics of progressive taxation could only be saying that, when you pay proportionately more than others, you are burdened more than they. Indeed, if we share moral values of equity and fairness, disproportionate burdening seems wrong. In general, loads should be shouldered as equally as possible; there is no obvious reason why the tax “load” should be different.
But “overburdening” does not describe our subject. It is arguable that paying a higher rate is less burdensome when you are left with many millions of dollars afterward. When you have more to begin with, giving “more” is simply easier. Bill Gates pays his federal rate and donates another huge chunk to charity. Is it reasonable to view him as “burdened” more than his poorer counterparts who pay a smaller percentage, but have to count every penny? The critic must give us more if he is to transform the purely mathematical “burden” into a real-life moral one.
2. Wealth is a privilege for which the state is largely to thank
There is the related criticism that being “taxed more” is a “punishment for being successful.” Again, this is a natural enough way to look at it, if you aren’t thinking hard. Warren Buffett used to say that he could never have become a billionaire in Bangladesh. And he could only be one in the U.S. due to a whole network of conditions not of his making, and for which the government is largely to thank.
As Mike Parenti writes:
“[G]overnment provides private industry with a publicly funded transportation infrastructure of airports, train depots, port facilities, canals, and harbors. And public capital is used to develop whole sectors of the economy, such as the airline industry, telecommunications, the nuclear industry, the Internet, and various medical and pharmaceutical products—which are then handed over to private corporations to market and reap the profits. Corporate America relies on government for the ample applications of force and violence needed to keep restive [foreign] populations in line. Various government agencies involved in surveillance, repression, incarceration and overall social control are well funded….Units of the national security state, the military, the CIA, FBI, DIA, and others, together devour the largest portion of the federal discretionary budget. Hundreds of state, county, and municipal police forces receive generous sums to hire additional officers and buy the latest state-of-the-art equipment, utilized less to fight crime—of which they usually do an indifferent job—and more to keep a tight lid on social unrest.”
Not that I agree with state repression, but the resultant stability certainly benefits the business class. At the least, maintaining a national guard and police force are uncontroversial ways in which the state makes business possible. Our capitalists don’t have to worry much about domestic riots, foreign occupation or expropriation of foreign holdings.
Parenti also notes the “whole basketful of handouts” given to the business class “from federal, state and local governments…[B]illions of dollars in start-up capital, research and development funding, equity capital, bailout aid, debt financing, low-interest loans, loan guarantees, export subsidies, tax credits, and other special favors.”
Even if Buffet himself never received these “handouts” (he did), and even if his own “sector” was never directly “developed” by the state, these subsidies enrich the whole economy, making his own wealth possible. (It is much easier to become a billionaire when such things as billionaires already exist; all the more when many of them exist.)
So far from a means to punish the wealthy for something they have accomplished, progressive taxation ensures that those who have benefited more from the tax-subsidized capitalist system—like that top 2.3% at the heart of the current debate—pay “more” back into it.
3. “Earning” is probably another bullshit bourgeois trojan-horse term
All criticism of progressive taxation rests upon the concept of “earning”—as in, “She has earned her money.” This is not merely a value-neutral, descriptive statement to the effect of “She makes money” or “She gets a paycheck.” “Earning” suggests a relationship of entitlement. When I earn something, I merit it; I deserve it. If this is the case, it can’t be taken away—without a damn good reason. Certainly, taking it away to give to someone who hasn’t earned it is suspect.
But “earning” implies more than this. “Merit” and “deserve” are states of being, while “to earn” suggests an activity: If I “earn” something, I do something for it. It is mine on the basis of some action—some work—performed. (Indeed, it is the work which does the earning.)
Again, all this seems reasonable at first; but at bottom it is rather silly. I’m not saying nobody ever “earns” anything, or that the concept is invalid. Only that “earning” has nothing to do with why people are legally entitled to what they make. My money may be mine, or not, but it is not mine because of any quantity of labor which I have expended, or anything else which I have done. It is mine simply because I entered into an agreement with another person (or persons) to give it to me.
I may work for my money—but if I’d inherited property or stock and merely lived off rent or interest, I’d be allowed to keep that, too. If someone steals my paycheck, I don’t have to first convince the police that the quality and hours of my work have entitled me to that wage rate before I can get my check back.
And consider this: If my work “earns,” in a legally relevant sense, x number of dollars, why can’t another guy complain that he does the same work for less than x dollars, or has to work harder for his own x? I mean, if your work earns money—creates a legal entitlement which everyone else must respect—there should be some universal scale according to which the same quantities of work yield the same quantities of pay. If I have earned it, so has he; for that is what “earns” means. If we work the same and get paid different, one of us is getting less or more than he has “earned.”
Of course, we know the underpaid guy has no legal recourse. We both had different agreements with our bosses (or fellow stockholders, or renters, or consumers, etc.—whoever we get the money from for whatever we do to get it), and that is that. “Earning” never comes into it.
The point is that, once the bogus idea of “earning” goes out the window, you are free to tax according to some other value—like equity, fulfilling needs, etc. You can still come up with a bad tax plan, but having to respect “earnings” won’t be standing in the way of a good one.
More importantly, there is the following point:
Capitalists don’t work, so they don’t “earn” anyhow
One could argue, OK, “earning” isn’t a legally relevant concept—but still, people who “earn” are still doing some kind of work, and we can still assume some rough correspondence of money earned to work done. (Hence, more money means you have worked more, and this means you are entitled to more. More taxation violates a greater entitlement.)
This is not only false, but it becomes more false the higher up the income ladder you go. The wealthier you are, the less likely you are to have done any real work to “earn” it.
That top 2.3% of earners—the group Obama wants taxed at a higher rate, supposedly—is chock full of people who make their living (or substantial parts of it) by owning rather than working. This is the home of capitalists, whose “work” is to lend others the wealth they already have—in the form of productive land, raw materials, machinery, or investment money—to make more wealth.
On the surface, it should be obvious that lending wealth is not “work” in the normal sense of the word. So if we want to say that it is work which entitles one to his wealth, it is hard to see how it could be unjust to tax any percentage of capital assets.
The whole history of capitalism—especially since the challenge of Marx—has accompanied an ongoing effort to show how what appears like doing nothing should justify the great profits that capitalists enjoy—much greater, even, than those who actually labor. Addressing these arguments is relevant to the subject of progressive taxation, but is important in its own right. Hence, the next a later post will deal with it separately.