Further Words in Defense of Fair Taxation: A Reply to Mike

“Mike,” who declined to give his last name, responded to my recent blog post, “Of Toilet Bowls and Fiscal Cliffs: A Simple Solution,” in which I proposed as a political solution to the “fiscal cliff” that the U. S. tax all incomes, from whatever source derived, at the same percentage rate.

That way, I suggested, Warren Buffett and Mitt Romney would no longer pay lower tax rates (even though vastly more in taxes) than their secretaries (assuming that canard is true), and working people with relatively high earned incomes would not pay a disproportionate share of the income tax burden while nearly half the population pays no income tax at all.

This political compromise, I opined, should satisfy both conservatives and self-styled progressives, while doing less damage to our democracy and our economy than the current punitive system, which pits voter against voter while imposing a tremendous dead weight economic loss on society in general.

In his response, Mike criticizes my proposal, confuses me with Ayn Rand, and then accuses me of being a communist (the antithesis of Ayn Rand, one should think, but no matter). Because the purpose of this blog is to encourage thoughtful discussion – not merely to vent one’s spleen – I thank Mike for his comments, but let me explain why I believe that they are mostly mistaken.

First, for the sake of convenience, here is Mike’s comment: 

Ayn Rand, the infamous champion of meritocracy, strongly opposed the socialist principle of “from each according to his ability, to each according to his need.”

As you, David Applegate, are an eminent lawyer, you will understand the principle of equity, or fairness as we lay people call it.

Someone who barely makes enough money to survive cannot be expected to pay taxes as well. That’s only fair, and it brings us to the second element in taxation, the revolutionary principle. In a nation of starving peasants, the rich know that sooner or later they will be lined up against a wall, *unless* they buy their way to safety.

If you watch movies and TV dramas you will know how strong is our sense of injustice. That’s a trigger most adeptly pulled by movie-makers, and now by social activists as well. And that is what libertarians and free-marketeers are up against. You will have to compose your own “narrative of injustice” if you want to compete.

My own point of view comes from Herrnstein & Murray’s “The Bell Curve.” In an increasingly complex and technological world, the best outcomes will mostly go to the intelligent. Where does that leave those of lesser intelligence? Low IQ is not their fault and certainly not their choice. By and large, intelligent people are able to look after themselves. Do you leave the others to sink or swim, or do you help them to become productive members of society?

Just as there is no “natural law,” there is no absolute answer to the question of taxation. Graduated tax scales and minimum taxable incomes are pragmatic solutions to this knotty problem. A flat tax rate sounds more like a soviet kind of solution, which would be accompanied by caps on income and wealth with any surplus to be forfeited to the state.

If I understand Mike correctly, he makes essentially two points: (1) a “fair” (i.e., “equitable”) taxation system would not “punish” people who, through no fault of their own, are genetically incapable of being more than marginally productive citizens in an increasingly technology-based economy; and (2) the “rich” – i.e., those who have succeeded financially in life or are destined to do so because of their presumed genetic superiority – have a self-interest in “buying off” the genetically inferior poor so that the latter do not kill off the former. Put less kindly, if I understand Mike correctly, poor people are both stupid and violent so “the rich” had better beware. The price of safety, he urges, is a graduated (i.e., “progressive”) rate income tax so that the congenitally poor do not go all ballistic on the rest of us.

At the outset, I do not share Mike’s dismal view of the natural condition of humankind, which he claims to take from Herrnstein and Murray’s controversial book “The Bell Curve.” Nor, I believe, did the Founders of this country, who declared their independence from feudal overlords beginning with the timeless words “that all men are created equal, that they are endowed by their Creator with certain unalienable rights, [and] that among these are Life, Liberty, and the pursuit of Happiness.” (That our spiritual [and in some cases literal] ancestors took what today we regard as a rather crabbed view of what “all men” meant is beside the point, for the 13^th, 14^th, 15^th, and 19^th amendments extended our understanding of these words and these rights to include all men and women, regardless of condition of prior servitude or humbleness of origin.)

This does not mean that we all have equal skills, motivation, or willingness or ability to work hard, of course, but it does and should mean that we all have the same inherent human dignity; that we have the same natural rights to live our lives the way we wish so long as we do not harm others in the process; and, subject to the obligations of citizenship imposed equally on all of us, that each of us is entitled to the fruits of his or her own labor and not to be deprived of property without due process of law. Yet a punitive and confiscatory tax regime such as our current “progressive” income tax system violates all of these principles; it invites unscrupulous politicians to incite covetous people to take the fruits of other people’s labor and to confiscate their property under ultimate threat of government force.

Second, Mike fails to define “fairness” or “equity” other than by example, which is apparently that “fairness” dictates that some people should pay taxes and others should not. Not only do no guiding principles inform this conclusion, but the result that it advocates also undermines the very system – the only system on earth to this date – that truly recognizes (or once did) the inherent dignity and equality of all human beings, regardless of their humbleness of origin.

Unlike the many kingdoms of Europe, the empires of the Middle and Far East, and the anarchy and despotism that have prevailed just about everywhere else through most of history, the United States is not a class-based society. Yes, politicians talk (incessantly) about “the middle class,” which suggests by negative inference both an upper and a lower class, but these are not “classes” in the sense of, say, the Indian caste system or the British class system that prevailed in the Victorian era and that still has remnants today.

In contrast, the United States of America is an inherently mobile society in which a member of the “working class” of yesterday, or his or her children or grandchildren, is easily a member of “the upper class” of tomorrow. Immigrants come to this country every day, both legally and illegally, in search of a better future for themselves and their families, and many of them find it through hard work and initiative. Why do we want to discourage those qualities and punish those accomplishments by depriving people of the fruits of their labor and of their property, just because others may have less?

My own grandparents were farmers and railroaders with elementary school educations; my parents had no more than high school diplomas. Growing up, my six siblings and I shared bedrooms, beds, bathtubs, and bathwater; we lived in rental and public housing and went to public schools. Today several of us are working professionals and most of us have multiple degrees. One brother paid for his college education by volunteering for the army during the Viet Nam War; another was less fortunate: hit by a car while in high school, he has spent the last forty-plus years in a wheelchair, brain-damaged and with the use of only one arm.

To suggest that whole “classes” of people are too inherently inferior to others to take advantage of the same opportunities made increasingly available to all of us refuses to recognize people as individuals instead of sociologically-defined groups. It also reflects what Washington Post op-ed columnist and former presidential speechwriter Michael Gerson perceptively called “the soft bigotry of low expectations.” The public policy that has, for fifty years or more, both reflected and coddled that bigotry has manifestly failed to improve the lot of “the poor” because it treats “the poor” as immutably irredeemable members of a class rather than as individuals with the same dignity, rights, hopes, and dreams as the rest of us. This “soft bigotry” does not help them, and it does not help the nation; it diminishes self-esteem and dumbs down our democracy.

Yes, it is true that a small percentage of any population will always be incapable of taking care of itself – the severely mentally and physically ill or disabled, such as my brother in the wheelchair, or hard-core drug addicts and other unfortunates – and a decent society will always take care of them. Yet surely I could and more likely would do a better job of taking care of my brother with my own money, were I allowed to keep more of it, than the government can or does by first taking the money out of my (and others’) paychecks and then funneling a portion of it to my brother after taking a large bite out of it first.

More broadly, to classify large swaths of the population – the almost 50% of all income earners who pay no income taxes at all – as inherently incapable of accomplishing anything meaningful in life without the help of the rest of us is an insult, both to them and to us. As Benjamin Franklin once observed, we best serve the poor not by making them comfortable in their poverty but by giving them incentives to escape it. As he noted during his many travels, “the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer.” Yet that is exactly the path that American tax and spend policies promote in the social welfare arena. To embellish an old maxim, give people fish and they will escape hunger for the day – and they will show up expecting more free fish tomorrow. Teach them to fish, however, and they will be well-fed for life.

At bottom, Mike seems to me more concerned with preserving a sort of feudal fiefdom system in which the overlords must allow the peasantry to poach a certain amount from their masters as the price of avoiding an armed revolt with torches and pitchforks. That is a sad view of the American future and a low view of human nature. I prefer to accept the wisdom of our Founders that such a system is and was among the worst of all possible systems, and to continue to argue for a system that recognizes neither lords and masters nor servants and slaves but instead treats us all as citizens with equal rights and responsibilities.

The cause of human liberty, I suggest, is better served by treating people as citizens rather than subjects, by showing them respect rather than condescension, and by offering them opportunities and incentives rather than guarantees and handouts.

In short, as I observed before, I do not believe that a democratic republic cannot long survive unless substantially everyone has some skin in the game. More simply put, just as there should be no taxation without representation, there should be no representation without taxation.

A “same rate” tax on all incomes, from whatever source derived, would go a long way to promote fairness, economic and spiritual growth, personal responsibility, and equal rights and opportunities for all of us. Ultimately, I predict, such a system would help lift more people out of poverty than all the taxpayer-funded social welfare programs in history combined.

Contrary to Mike’s ultimate assertions, my suggestion of a “same rate” income tax system does not presume – and I do not suggest – caps on income or forfeiture of “surplus” wealth to the state. It is others, not I, who claim that “sooner or later, you’ve made enough money,” and it is the current U. S. inheritance tax system, not I, that requires forfeiture of wealth to the government upon your death. Those may indeed be Soviet-style proposals, but they are not mine and I do not know why Mike thinks otherwise.