Recently, a YouGov poll asked the British public whether they’d still back higher taxes on the super-rich even if that resulted in many of them leaving the country and the Treasury being worse off. Unfortunately, 42% of them said ‘yes’ against 36% who said ‘no’. This presents a problem for free marketeers because the standard argument for tax cuts contends the state should cut taxes to raise revenue via growing the economy; making everyone better off. The 42%, though, are happy to be worse off provided greater equality is achieved. Free marketeers clearly need alternative arguments against the higher taxes the 42% want. Enter F. A. Hayek and Murray Rothbard.
The main argument that people in favor of taxation make is one based on social justice. F. A. Hayek famously declared that social justice is a mirage. Why?
In Law, Legislation & Liberty, Hayek answers this question in two steps to establish his conclusion. First, he maintains that no outcome is unjust unless an agent is blameworthy for it. A baby born blind is not unjust, a tree falling on your car is not unjust, nor is an earthquake destroying your home. These are unfortunate alterations to the distribution of well-being, but no unjust state of affairs arises from them because no one is to blame.
Second, Hayek argues that in a market economy no one is to blame for the distribution of wealth since we cannot know how our production and spending will affect it. It’s not a centrally planned system in which planners decide the distribution of resources. Therefore: the distribution of wealth in a market economy cannot be called unjust (or just), because no one is to blame for it—a defining feature of the very concept of justice. Social justice cannot demand higher taxes based on the logic of social justice because it is not a meaningful idea to start with.
Although he rejected high taxes and government intervention in large, Hayek was not a hardcore libertarian such as Robert Nozick, Albert J. Nock, or Auberon Herbert, so he did not reject the welfare state per se. Indeed, Hayek’s Constitution of Liberty can be read as him supporting a universal basic income. Yet the rejection of social justice is important in undermining the egalitarianism that would level down the economy for that ideal. This is especially so because the 42% are explicitly rejecting the apparent good of everyone, which is usually the sounding board for public policy debates.
Murray Rothbard invokes a far easier-to-understand argument in For a New Liberty: taxation is theft. The first premise is simply the definition of theft as taking a person’s property without their consent. The second premise: taxation takes a person’s property without their consent. The conclusion: taxation is theft. Many people will dispute the second premise—that we don’t consent to taxation. Surely, under democracy, we consent via voting, or, indeed, via residence alone. No. The mere fact a majority wills something cannot be a warrant for said thing: if ten of us go out to dinner, we can’t permissibly vote to load the whole bill on just one person.
‘Well, if you don’t like it leave!’ The problem with this reply is it assumes the state has rightful authority over all the land from which it can set fiscal conditions. Why should it, though? It is not as if all private owners have given over their rights, and the very idea the state naturally has such universal rights strikes as communist.
The first premise will be turned to next. Political philosophers such as Thomas Nagel and Liam Murphy maintain there are no natural rights to private property; rather, private property is simply whatever the state makes it to be via the legal system. Hence, Nagel and Murphy allege, taxation cannot be theft because private property rights mold around the taxation; they never stand against it in full force. Against this, Rothbard held it is far more intuitive to believe in natural rights to private property: if you meet a native in a faraway land without a legal system and take the little bits of gold he has mined and forged, then it seems you have committed theft. Analogously, then, when the state takes the money you have earned, then they have committed theft too.
Although Rothbard rejected all theft, political philosophy need not go that far. Michael Huemer adopts the moderate position that should you be starving and a freshly baked pie be placed on the windowsill, then you can steal the pie to avert your death. Property rights give way in extremities. Contrary to Rothbard’s anarcho-capitalism that arises out of rejecting all taxation, perhaps this form of theft could finance the welfare state and be justified taxation. What obviously isn’t warranted is theft to ensure greater equality, and especially, theft to ensure greater equality which makes everyone worse off. This is the moral equivalent of burning your neighbour’s second car simply because you don’t have one. Some would call this ensuring equality; most would simply call it outright envy. Enforcing equality via higher taxes clearly violates our property rights.
F. A. Hayek and Murray Rothbard both present forceful arguments against high taxes, or taxation per se: one from a social justice perspective and one by consent argument. Irrespective of whether or not you think they are persuasive, however, the burden of proof surely rests on the 42% of people who would rather everyone be worse off, provided greater equality is achieved. Not, first and foremost, upon those of us who want everyone to be better off.
