Topic IV
It is equally immoral to take money from the rich and give it to the poor, provided that the rich have earned their money honestly. Why is stealing moral? And what is the difference between taxation and theft?
Milton Friedman (1976)
Ideas for an Ethic of Taxation
When Nietzsche wrote his analysis of slave morality in his masterpiece On the Genealogy of Morals, he was sure that the poor and weak were the truly evil, who created a moral system designed to weaken the wealthy and powerful. Whereas virility, power and affluence were admired in the good old times of Ancient Greece, a bad conscience had since been attached to them by philosophers and priests; chastity, restraint from worldly matters and frugality had replaced the older virtues. In the introduction to his preceding, much lesser-known collection of thoughts about morality, the Dawn (Morgenröthe), Nietzsche had expressed special contempt for Jean-Jacques Rousseau, who, according to Nietzsche, had taken the slave morality especially far. It is quite clear how Nietzsche came to this conclusion when we have a look on Rousseau’s works The Social Contract and Essay on the Inequality Among Humans. Rousseau asserts that, in fact, there were no actual differences between humans of any importance; that the difference in property and capabilities were merely artificial; and, therefore, that the establishment of total equality and the abolishment of private property was the return to a natural order of things. For Nietzsche, of course, this was the most extreme version of the slave morality, a morality designed to take down the exceptional and to make them equal to the herd.
The influence of Rousseau on European thought can hardly be overestimated. Along with other philosophers he laid the foundation for socialism. Yet of course, the modern European state is the result of socialism as well as liberalism, a political ideology which promotes the liberty of the individual to opine and to act according to his own will. John Stuart Mill, whom I shall adduce as a classical representative of liberalism, writes in his treatise On Liberty that the community or the state may only interfere “to prevent harm from others”, i.e. one’s liberty ends where someone else’s is injured.
Milton Friedman, along with John Maynard Keynes arguably the most influential economist of the 20th century, was a liberal not only concerning civil rights, but also concerning economics. In the quote put at the beginning of this essay, Friedman denies that it is moral to take away money from the rich (if they earned their money fairly) to give it to the poor and even asserts that there is no moral difference between taxation and theft. This is somewhat reminiscent of Nietzsche, though Nietzsche is not known for drawing arguments from morality.
From a Hobbesian perspective which does not make a difference between morality and legality, Friedman’s question would be easy to answer: Theft is an illegal and therefore immoral taking away of property; taxation, however, is done by the government, and the government alone, as Hobbes asserts in the Leviathan, decides what illegal and therefore immoral; so that it is impossible for the government to do anything illegal or immoral. But this perspective was offered before the arrival of either liberalism or socialism. In the modern state, limits have been set to the interfering power of government, and modern governments claim to be build not only on power itself, but also on preceding ethical principles. We shall therefore see if it be possible to come up with some foundational ideas for an ethic of taxation which considers liberalism as well as socialism; and we shall be able to take a stance on whether Friedman was right about taxation or not.
The basis of ethics must be the individual. This essay is not the place to fully develop this premise, but it may suffice to say that every human being is born as an individual, lives and feels as an individual and dies as an individual. It just means that ethics must be designed to serve the people as individuals; and only then, as a second step, people designed to serve ethics. It also means that ethics must be plausible for any individual. If the state be ethical, it must therefore allow some individual liberties such as have been established by the German Constitution (Grundgesetz) or the Universal Declaration of Human Rights. Among these is also a right to own property – which is necessary to lead a somewhat independent, individual life –; therefore, private property must be protected by the state. So far, we find ourselves in accordance with Friedman.
Before we move on to see why taxation may still be justified, I must remark that the question whether the wealth of the taxed be earned honestly or not in an ethical sense, is entirely irrelevant to the ethical problem of taxation. If by honesty is meant some moral quality, the debate about the ethical value of, say, a sugar company, would never end. It would require taking a stance on the ethical value of any business and would be, if done by the state, totalitarian. If earning “honestly” means that there is a correspondence between the effort of the earner and what he or she earns, it is generally questionable whether this is possible at all within an economy characterised by the accumulation of capital. It also is clear that the owner of anything must also have the right to decide about the fate of his property, whereby the right to bequeath is established. Therefore, I presume that Friedman meant by “honestly” only that no laws have been broken along the way. This, of course, is needless to say; because whatever has been earned illegally, has been, from a legal perspective, not earned at all, but stolen.
The disagreement I find myself in with Friedman is that he expands liberty into the sphere of economy. An ethic based on the individual leads to the principle of liberty as stated by Mill: that the community or the government may only interfere “to prevent harm from others”. So, ethics is basically about finding a compromise between clashing individual interests. Now, it is obvious that the affluence of the rich is not just their business. In fact, as soon as one interacts with an economic system, one affects all the other lives which are connected to it, and one is therefore able to harm others. To prevent harm from others, the government (or an association of governments, as fits the globalised economy) is therefore obliged to establish rules for the participants of the economy; and the more harm a participant can cause, the more restrictive may be the rules imposed upon him or her. It is often hard for us to see why this is so, since the interdependencies within our economy are so complex and impenetrable. Harm is rarely caused directly, but results from the careless acting of many participants. This, of course, is no reason not to prevent it.
The most powerful tool to regulate the market is taxation. It is a difficult matter what exactly should be taxed: capital, income or transactions of capital. But this does not concern us in this essay; we shall only consider taxation in general, the ethical value of which Friedman denies so vigorously. The general principle of taxation is that the more one has, the more one has to give away. We are now talking about the “take money from the rich” part. This principle is important to balance an economy which is characterised by the accumulation of capital. This, of course, is more of a Keynesian take Friedman would not have supported, but the evidence is in favour of it. I shall explain what it means. It is obvious and commonplace that it is much easier to expand on the market when one already owns a lot of money, valuable resources or other goods such as factories. Therefore, the affluent are always more likely to become more affluent when there is no tax. A famous case study for this kind of accumulation of capital is the Standard Oil Company of John D. Rockefeller which was back in a time when the governments had an (even) worse understanding of capitalism. Rockefeller, by acquiring more and more factories and resources, built a fortune which was so incredible that he himself, a pious Christian, thought it to be a gift from God to be used for charity. Most of all property, when no state interferes with this process of accumulation, is ultimately owned by few so that the rest of the population cannot consume and buy as much as before. As the people buy less, the production goes down as well. This results in a general decline of the economy as we can observe in Russia, where the oligarchs own almost everything, and in many other corrupt countries. It is therefore necessary that governments tax the rich to prevent an economic crisis.
As we have established that it can be ethically justified to “take away money from the rich” in accordance with individual liberty, we shall now turn to the “give it to the poor” part. We have already seen that it is important to redistribute the wealth within a capitalist system lest the system collapses. In some way or another, the middle class must be able to afford more goods. But what about the poor people? Here as well, we can argue that they can be useful to all participants of the economy when they are able to afford more goods. This would be to prevent future harm from all participants. But it may be asked if this is a good investment; we must remember that the state uses the money taken away from its citizens and is responsible to use it in the most ethical sense. Why, could a rich taxpayer say, do you give my money to the poor? Why not spend it on repairing the streets, or building a new theatre? Well, we could answer in a democracy, did you not elect the government which decides on these things? But the taxpayer would be right to point out that this had just been the vote of the majority, and not her own; and that it was a “tyranny of the majority” (to use Mill’s phrase) when her money is used by the government without any ethical reason. So it seems that we must come up with another, more powerful ethical argument to justify the government giving money (or other goods) to the poor.
To do this, I shall return to my premise that ethics must be based on human beings as individual, and that a good ethical system must be plausible for any individual. That means that it makes sense for the individual to follow the rules of ethics, and it does not demand too much. An ethical state therefore must work in such a way that it makes sense for everyone to live in accordance with it; it must work in such a way that no one can be rationally motivated to abolish it. While there will always be people who want to overthrow the state because of their political fanatism or religious fundamentalism, no one who is properly informed should be urged to act against the state if this state be ethical. This principle also applies in cases where the state can be quite sure that it is not actually threatened by anyone, as an ethical state attempts to avoid any strong or even violent conflict of interest whatsoever. Therefore, from this ethic it follows that no ethical state can allow any kind of extreme poverty; the ethical state must be a social state too.
We have now established the basis for an ethic which can explain the moral, not just the legal difference between theft and taxation; and why it is moral “to take money from the rich and give it to the poor” rather than the other way around, and why tax evasion is immoral. But it is apparent that this is not a mere justification of the current systems of taxation, but also the basis for new political changes to make our states more ethical.
It remains to point out some differences of this ethic to Nietzsche and Rousseau who have been used to introduce our topic, so that its character becomes clearer. From a Nietzschean perspective on morality, it may be asked whether the ethic presented here is a kind of slave morality. It is in the sense that everyone is conceded some liberty, and the ethical goal is to resolve the conflict of interest by compromise, not by fighting. But this has to do with the economic situation of our time. The time in which morality emerged has mostly been a time of scarcity. To give away something always meant to have not enough for oneself; and any form of advanced culture required slavery. In our day and age, the industrial revolution has provided us with an amount of wealth unimagined by previous times; and even the poor in Germany today would be unhappy to switch places with a monarch of the 18th century. Now is the time of an ethic which aims to reconcile the suppressors with the suppressed, and the rich with the poor. This, however, does not mean that wealth should become a vice and poverty a virtue; and in this sense, the proposed ethic is not a form of slave morality. Nietzsche defines slave morality as the sentiment that the more powerful (or wealthy, or strong etc.) are evil by being so. This is not the idea here. The proposed ethic of taxation is built on the mere avoidance of conflict between the individuals; this is also in the interest of the powerful and wealthy.
It neither aims to destroy the differences between the people as Rousseau proposed, as this would be an inference breaking the principle of liberty. I agree with Nietzsche that Rousseau must be seen as an extreme proponent of slave morality, a man so hateful towards the wealthy, that it made him create a new history of society (a hatred understandable considering the extreme poverty of the time). In their new book The Dawn of Everything, anthropologists David Graeber and David Wengrow explain that there is no reason to believe in a state of original equality as proposed by Hobbes, Locke and Rousseau. Instead, it is most likely that throughout early human history few societies have been truly egalitarian, yet most of them made sure that no member had to be hungry. Something like this is what I imagine must be the goal of an ethical state today: Not to make all their members equal, but to allow everyone to lead a decent life.