What an interesting post and discussion in the comment section on progressive taxation.  I hope Jeff Haymond doesn’t mind.  Let me just add a little on the philosophical and ethical side, since the theological/Biblical has been pretty well covered and the economic problems have also been addressed.  One word raised several times in the “Comment” section was “fair.”  Another implied issue was equality/inequality in terms of the desired outcome of progressive taxation and its rationale.  I want to address these briefly—to make up for my long-winded earlier post.

But first, just a little history.  It is more than just a little bit intriguing that the idea of progressive taxation was first advocated as a desired policy by Marx and Engels in the Communist Manifesto (1848).  Now one may respond that I have committed the genetic fallacy that says you can’t reject a particular idea just because of its origin.  True.  And I am not.  My historical argument here is that Marx and Engels wanted progressive taxation because it helped achieve the goals of “Scientific Socialism” (most of them consistent with earlier versions of socialism) to attain a much more egalitarian society, even if possible, a society of nearly precise equality in terms of income or disposable property (not real property which would be abolished for most socialists).  So the question is actually raised here:  Why would it be fair to implement such a tax scheme?  They would answer: Because it achieves more equality.  But why is equality the primary value without considering actual well-being?  Marx and Engels would argue that was because the proletariat had been as a “mass” treated unfairly by the bourgeois, who had effectively co-opted their labor power by paying wages that did not reflect the actual labor value they contributed.  I do not wish to enter into a discussion of what is wrong with the labor theory of value—very much—but to stick to the issue of fairness and equality.

So progressives/modern liberals and socialists generally favor progressive taxes and the more progressive the better.  They say it is fair, and they generally say that it is not fair for some people to have so much income/wealth.  My first question:  How do we define fair in an ethical sense?  Moreover, who gets to define what is fair or unfair?  In addition, as my colleague Jeff Haymond has asked (I think it was him), how do we measure fairness—he put it in  terms of interpersonal measures of utility.  On this latter, he is obviously correct.  One cannot compare the utility of any two people objectively, much less get some numerical measure for it.  Two individuals may value something completely differently, and even then, we can’t say one values it at say “5” while another at “10.”  It’s just impossible to do.  And that carries over into discussion of fairness when we think about what people gain or lose through taxes.  But that’s economics and I said I would leave that for Jeff Haymond.

So back to ethics.  Why is it considered fair to take from some (more from those who have more) just to achieve more equality?  And why is it fair to give what is collected—directly or indirectly—to those who may make less or have less, just because they make or have less?  To whom does fairness apply and to who does it apparently not apply?  Fairness might be defined as giving each one his due.  But then what is due and under what circumstances?  My point is that many are all too glib about progressive taxation, but they haven’t bothered to consider in any depth the whole issue of fairness.

Fairness is a  notoriously ambiguous term and concept.  It always has been.  In the end most people just choose the definition they prefer rather than attempting to think through whether it has any real meaning at all.  My contention is that ethically there is NO inherent justification for progressive taxation, particularly if the goal is to redistribute resources in order to bring about greater equality.  In part this is because equality/inequality itself is notoriously ambiguous.  There are all sorts of inequalities, and they are actually measurable.  But when it comes to taxation issues, inequality is not really relevant, not by itself at any rate.  The relevant value is well-being, as assessed subjectively by those in a given situation.  We use proxy measures to try to get at well-being—like income, goods and services.  It is one thing if I make $1 billion and you make $2 in a year—assuming a two-person society.  It is quite another if I make $1 billion and you make $100,000 and have all sorts of goods you could never have afforded years ago.  You are well-off and you would say so.  Why should anyone care that I make $1 billion?  Moreover, the numbers themselves are not necessarily important.  Again, it is being well- or better-off that counts.

Progressive taxation then is intended to make life fairer, but since we cannot define what that means, is it still an appropriate policy?  And if we think we can measure what is fair or unfair by the level in inequality—without consideration of actual well-being—then such taxation policy is tilting at windmills and possibly treating those who have more unfairly themselves.

It is time we began to start thinking about these issues instead of merely emoting.