Sam Harris has apparently ignited some controversy by writing a post agreeing with Warren Buffet’s position that the extremely wealthy should be paying more in taxes. Harris says that he has received quite a bit of feedback, much of it negative. The general thrust of much of the negative criticism concerns the very legitimacy of taxation itself, with many people claiming that taxation is a form of theft. This is something you sometimes hear from the more libertarian-minded, but I rarely see anyone asked to defend this claim, which is, after all, fairly startling, strongly counterintuitive to many people, and deeply important if true. Thinking about this issue has prompted me to write a fairly lengthy examination of it and the parallel claim that a person is entitled to keep everything that he or she earns.
Harris, I think, errs when he says,
I agree that everyone should be entitled to the fruits of his or her labors and that taxation, in the State of Nature, is a form of theft.
This is almost definitely wrong because, taken literally, it is nonsensical. In a state of nature there is no government, hence there is no institution whereby a government can take a portion of a person’s income. So in a state of nature taxation cannot be theft because there is no such thing as taxation. This is a fairly minor point, but it does make me wonder exactly what Harris meant to concede here. Some have taken him to be conceding that taxation is a form of theft, full stop. But, as I hope to show below, that is a very strong claim that requires considerable argument. So this, coupled with his attempt to qualify his concession by referring the state of nature, makes me think that Harris really did not mean to concede that taxation is a form of theft (period).
Regardless of what Harris meant to say, I think the topic is worth considering. First we need to ask why anyone would believe that taxation is theft to begin with. Well, fairly obviously taxation is the forced confiscation of part of a person’s income. But this alone doesn’t justify the claim that it constitutes theft since theft is the unjust (or illegal) taking of property belonging to another individual. So the claim that taxation equals theft boils down to the claim that it is the unjust confiscation of another person’s money. So why should we think that the government taking a portion of one’s income is unjust? One common justification is that it is wrong to take money that a person has earned. I want to consider this justification, but once again, we need to begin with a question: What does it mean to say that a person has earned his income? What does earning consist in? Let’s consider some examples:
Suppose I am the beneficiary of a large inheritance, say half a million dollars. Did I earn that money? Arguably, no. I just happen to be lucky enough to be related to the person who possessed it.
Suppose I buy a $5 lottery ticket and win $2 million. Did I earn that money? At least to me, the notion of earning does not apply to money that is acquired through random chance. If I and another person each take the same or sufficiently analogous steps in an effort to acquire some amount of money, only one of us can get the money, and the winner of the money is chosen completely randomly, it is at least highly questionable to claim that the winner earned the money.
Let’s think about the issue of taxation in these two cases. Would it be wrong for the government to confiscate a percentage of the money in either of them? If you say yes, then your justification must be something other than that it is wrong to take money that a person has earned. What is this justification?
Let’s flesh out the details of these examples a bit more. Suppose that each of the individuals in the two scenarios lives in a democracy with a functioning government that engages in many sorts of activities, all of which require money. One of the things that the government does is provide security for investments in the form of regulations of financial institutions, insurance on bank deposits, etc. The government also provides an ample defense force protecting its citizens and the country as a whole from financially devastating invasions (including those from powers who may seek to confiscate and redistribute the assets of wealthy citizens). Thus, to some non-negligible but unquantifiable extent, the value of the assets of the two individuals in the above scenarios depends upon the costly activities of the government. It is entirely accurate to say that the activities of the government are responsible for some portion of the assets’ value. Why would we not think that these two individuals indeed owe the government some of the value of their assets? Regardless of how you answer that question, you must at least concede that the government taking a portion of the income of either of these two individuals is an importantly different kind of thing than a person breaking into your home and taking your laptop. So if we are going to assimilate these two activities (robbery and taxation) under the concept of theft, we are going to need a very strong argument.
Something that might seem to follow from the claim that a person has earned his or her income is that she deserves what she has been paid. Undoubtedly the notions of earning and deserving are distinct, but I want to expand the discussion here and think in terms of what people deserve. I think that the appeal of the notion that a person is entitled to keep all of the money that she earns stems, at least in part from the parallel notion that a person deserves the money they are paid. But I think it is highly questionable that every person deserves all of the money that they are paid.
Some more examples:
Suppose I am a songwriter who writes a catchy tune that, even though it is not a particularly good song, becomes wildly popular because it is used in the soundtrack of a successful and popular film. I sell millions of copies of the song, taking in nearly a million dollars in one year. Have I earned this money?
Compare this example to that of a physician who spends years of her life and tens of thousands of dollars to earn her MD and medical license, and obtains a position in private practice where she earns $200,000/year. She has worked tremendously hard and is well-rewarded, but she makes only a fraction of what the songwriter has managed to acquire. Given the discrepancy in the amount of effort, talent, skill, etc. between the physician and the songwriter, I think that we may legitimately balk at the claim that the songwriter deserves what he has been paid. It is unclear what notion of dessert you would have to be using in order to believe that the songwriter deserves more money than the doctor.
The songwriter owes his wealth, to a large extent, to two factors, neither of which he has any control over nor responsibility for. First, the cost of producing copies of his work is negligible and thus there are few disincentives to scaling his product. He can cheaply produce as many copies as he can sell (or, more accurately, he can contract with a company that can cheaply produce and distribute the copies and share the profits with him). This feature of the songwriter’s reality is a result of a number of inventions, including sound recording devices and sound reproduction devices that the songwriter played no part in creating. Before the twentieth century, it would not have been possible for a musician to produce and distribute multiple copies of recordings of his music.
The second factor that contributes to the wealth of the songwriter that he has no responsibility for is the size of the population to which he is selling his product. A large population entails a larger potential for huge sales. Again, this has nothing to do with the inherent worth of the music that is produced. Brittany Spears could accumulate vastly larger sums of money than JS Bach because she was born at a time that allowed for her to produce and sell recordings of her product to a very large population. Is it reasonable to think that Spears is more deserving of the fortune that she acquired than Bach? Arguably, Bach was more talented, more responsible, and worked harder to produce better music. If anything, it would seem that he would be more deserving than Brittany Spears of the millions of dollars Spears “earned.”
Another example: Suppose I am the owner of a paper company that distributes paper to organizations all over America. I own a large fleet of delivery vehicles that operate on publically built and maintained roads and bridges. Without that infrastructure, my company would be unable to deliver our product in a timely manner. Would it not be reasonable to conclude that some non-negligible but unquantifiable portion of the value of my company is a direct result of the activities of my government? When you add the fact, discussed above, that the government also maintains a defense force that protects public infrastructure from the devastation of war and also provides for the kind of persistent peace that is conducive to a strong economy, it becomes even more problematic to assume that the money that my business takes in is money that I (or my business) have earned of my own accord and that thus it would be wrong for the government to take any of it.
Consider now the extremely high salaries of some CEOs and other executives. Does a person who makes $3 million a year really deserve so much more than a physician who earns only a couple hundred thousand? Does a CEO really earn his multi-million dollar salary? I don’t think that any CEO works harder, is more talented, or bears so much more responsibility than a physician that the CEO’s efforts are worth 10 times as much. And here we are comparing such an extreme salary to one that is already very large. Does the effort of a CEO (any CEO) entitle him to make 100 times more than the average teacher? I’m not suggesting that there is anything morally questionable about paying a CEO such a salary; that is a separate issue. The question I am asking is really about whether it makes sense to say of a person who gets paid so much money that she earned it or that she deserves it? To say that she deserves it is to suggest, at least to my mind, that her work is so valuable that it is worth 10 times what a well-paid physician makes or 100 times what some teachers make. And I just don’t see how to make that case.
Again, I want to be very clear here that I am not trying to suggest that CEOs shouldn’t be paid millions of dollars per year. That is not the point. Companies should be free to pay their CEOs whatever amount they think they can afford and is necessary to retain the CEO’s services. The question is whether the CEO earns that money, or, comparably, whether they deserve it. I have tried to bring up certain problems with suggesting that a person earns whatever they are paid (in the sense of deserving it or that they’re work is worth it) or whatever they acquire by legal means. But I certainly don’t have some well-worked out theory about how much work is worth a given amount of compensation. I just have the sense that at some monetary amounts, we are no longer talking about money that is earned (in the appropriate sense). Thus, saying that a person is entitled to retain everything that he has earned doesn’t really get you anywhere. Arguably, some people are rewarded with an income much of the value of which is not really earned in the requisite sense. Now maybe we can still make the case that it is wrong for the government to take any portion of any person’s income, whether that income is deserved (or earned) or not. But this, if it can be defended, must be defended in some way other than talking about people’s right to what they have earned.
So, I think it is very questionable to describe taxation as a form of theft. More appropriate seems Oliver Wendell Holme’s statement that “taxes are the price we pay for civilization.” All of this is to suggest that the person who wants to claim that taxation is a form of theft has a very big task on his hands to defend this claim. It is not obvious and nobody should concede it.
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August 30, 2011 at 6:49 pm
Josh Strodtbeck
Example 1: If you are the beneficiary of the large inheritance, your benefactor earned the money. It is his right to decide what to do with it; in this case bequeath it to you. Normally, we regard the forcible taking of a gift “theft.” If I were to sneak into your house and take a third of your children’s Christmas presents because they hadn’t earned them, I’d be a thief. Not because they hadn’t earned the presents, but because YOU had, and you have the right to give the fruits of your labor to others.
Example 2: Assuming it’s a private lottery, the person running the lottery is providing the good or service–in exchange for a small fee, he gives you the chance to win a million dollars. Even though the probability is small, it is real and in fact must be real for genuine exchange to take place.
Example 3: You are incorrect in saying “it’s not a particularly good song.” Clearly, millions of people enjoyed it. That’s pretty good work! Since those millions of people value the entertainment you provided enough to give you a twenty-five cents or so each, yes, you earned it. Yes, the song writer does have the good fortune to live at a time when he can reach many more people with his work–and your physician has the good fortune to live in a time when the germ theory of disease has won out over miasmas and humours. But it’s a huge leap to go from there to say that the government should confiscate their earnings–after all, the government is no more responsible for the 21st century being a pretty nice time to do business compared to the 17th.
Example 4: A CEO of a large firm is responsible for directing the firm to provide goods to hundreds, thousands, or even millions of people. He has hundreds or even thousands of people working under him. There are many shareholders depending on him to make sure the company returns a profit. Perhaps the thing the company does is no more interesting than making socks. But the scale of the operation is why he commands large compensation. If you want to earn CEO money, do something with CEO value.
There are two problems you haven’t addressed: First, You have no way to compare values without market prices, and you have no way to explain prices without the subjective theory of value. The problem is that you’re trying to use the same words philosophically and economically. Economically speaking, everyone earns every dollar that they are paid by someone else. Philosophically speaking, you might argue until you’re blue in the face that the physician is more meritorious person than the CEO…but so what? I could just as well argue that, philosophically speaking, the satisfaction of curing a single sick patient is of more value than all the money the CEO makes.
The second problem is that you haven’t established that just because I don’t deserve X, that a man in a uniform has the right to lock me in a cage if I don’t give him whatever fraction of X he demands. In every example you listed, if I were to threaten the person with some kind of harm lest he give me 30% of the cash, you would call me a thief and a brigand. Why does an organization calling itself “the government” have that right? Because it has guns? The Mafia has those. Or is it because of the uniforms? Or is it simply because there is no rival organization powerful enough to challenge its monopoly of force?
August 30, 2011 at 8:15 pm
jbthibodeau
Josh,
I was trying to make two separate, though related, points in this post. First, that there is something problematic about the assumption that a person earns or deserves everything that they are paid. Examples 1, 2, and 3 are supposed to provide some support for the idea that, at least in some instances, a person acquires (legally acquires) money that he has not earned (at least in some sense of ‘earn’). The second point is that because at least some of the activities of the government add value to my income and my assets, there is some plausibility to the notion that I have an obligation to compensate the government for at least part of the cost of those activities.
The analogy that you make to example one (the Christmas present analogy) is fine. It is true that my kids probably have not earned their presents. And that obviously does not give anyone the right to break into my home and take a portion of those presents. But the point I was trying to make with the example was only about what has been earned; I do not earn the money that my rich uncle leaves me in his will; my uncle may have earned it (but that has yet to be established) but I certainly have not.
It would be a gross misreading of my argument to suggest that I am defending a general principle to the effect that it is permissible to take a person’s property so long as the person has not earned that property. That I have possessions that I have not earned does not, by itself, mean that anyone is justified in taking those possessions from me. It is indeed a large leap to go from the fact that I have not earned something to the claim that therefore anyone can take it from me. I never tried to make that leap. And that is not what we are talking about with taxation. This is where the second point comes in: The activities of the government adds value to my assets. Given that, it seems highly problematic to me to say that when the government tells me that I must contribute some of my income to cover the costs of those activities, that this constitutes theft.
August 30, 2011 at 8:45 pm
jbthibodeau
You say,
“You have no way to compare values without market prices, and you have no way to explain prices without the subjective theory of value. The problem is that you’re trying to use the same words philosophically and economically. Economically speaking, everyone earns every dollar that they are paid by someone else. Philosophically speaking, you might argue until you’re blue in the face that the physician is more meritorious person than the CEO…but so what? I could just as well argue that, philosophically speaking, the satisfaction of curing a single sick patient is of more value than all the money the CEO makes.”
You are right that there are multiple sense of ‘earn’ involved in the discussion of the morality of taxation; thank you for making this explicit. My point is that in the argument against taxation that involves the claim that a person is entitled to keep everything the she earns, the notion of ‘earns’ at work is ultimately a moral notion (or, as you put it, the philosophical one). I could be wrong about this, but I think that many people have the intuition that everyone deserves (morally speaking) the money that they take in as income. I think this is wrong.
You are correct, that in another sense of earn, all income is earned. But this sense will not do the heavy lifting required to justify the position that taxation is theft because the government has no right to take what I have earned. In a capitalist system a person earns (in this economic sense) every dollar that they are paid in exchange for their work. But that a CEO’s salary is earned in this sense does not imply that he deserves that salary (in the moral sense). That I can get a company to pay me $5 million per year does not imply that I deserve it.
Now the claim that a person is entitled to keep everything that he or she earns is obviously a moral claim. And I think that what makes the claim intuitive is that we tend to interpret ‘earn’ here in the moral sense. If I think that a person deserves his compensation, then I am more inclined to think that he deserves to keep all of it. But if I think only that he has acquired it in a capitalist system, then, since I know that in capitalism you can charge whatever price the market can bear, then I am going to be less inclined to think that he deserves to keep all of it.
So, why does it matter that the physician is more meritorious than the CEO? Because if we agree with that, then we have undermined the notion that the CEO deserves his extreme income. And it is this notion (which again, is a moral one) that plays a role in the claim that the CEO should not have any of his hard earned income confiscated by the government.
If we can agree that it is wrong to think of all income as having been earned (in the morally relevant sense) then, when we add the observation that some of the value of that income is dependent on the activities of the government, it becomes highly questionable to claim that when the government takes some of that income that this is theft.
August 30, 2011 at 6:51 pm
Josh Strodtbeck
That should read, “You have no way to explain prices without the subjective theory of value and marginal utility theory.”
August 30, 2011 at 7:14 pm
Heidi Beezley
You say:
“So in a state of nature taxation cannot be theft because there is no such thing as taxation.”
I think this is an interesting point. Many believe that things like taxes are part of the social contract. That is, when individuals form a society, they do so in order to increase their security, establish norms, increase their productivity, and probably many more reasons. Taxation is necessary in order to provide for the needs of that society such as security, the enforcement of rules, etc.
Claiming something like “Taxes are theft” seems to imply that there should not be taxes. But it is likely impossible to have a society that does not receive funding. Are people making this claim advocating anarchy?
On another point, I agree with the post that no one produces and creates in a vacuum. The Randian Hero can’t build houses or otherwise use their talents without a society where the investment of their talent is protected. If Howard Roark built houses in a country with massive poverty and factional violence, then his homes would be burned, people would likely not pay him nearly as much to build, etc. It is because he produces in a stable society that he is able to earn money on his work. For that, he should pay his taxes!