Is Owen Jones right that taxation is theft?
20 September 2017
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Economic Theory
Brexit
21 September 2017
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Last week, I spoke on Sky News about the cap on public sector pay rises. The Guardian columnist Owen Jones was on the segment with me. When I asked him how he thought the government’s deficit should be reduced, he replied that high earners should be asked to pay more tax. I objected to his use of the word “asked”, pointing out that we pay tax on threat of imprisonment.
Jones set about correcting my assertion that “tax is theft”. But I had not said that “tax is theft”. I had said that tax is paid on threat of imprisonment. It was Jones who equated this with tax being theft. And, since tax really is paid on threat of imprisonment, it was Jones himself who implicitly claimed that tax is theft.
It is odd that he does not explicitly draw the conclusion that his own ideas entail. But Owen Jones and his intellectual foibles are not as important as the issue itself. Is Jones right that, because it is paid on threat of imprisonment, it is theft?
Some think the answer is obvious. Tax isn’t theft because whereas theft is illegal, tax is legal. Tax collectors act within the law. This is unlikely to placate the “tax is theft” crew. Legalised theft is still theft, they will say. What makes tax theft is that it is paid under duress. Similarly, the “tax isn’t theft” brigade are unlikely to be moved. They know tax is paid under duress but think that it is nevertheless quite unlike ordinary theft in the respects that make ordinary theft wrong.
Which suggests what I think is the right approach to answering the question. We should consider what is wrong with theft and ask whether tax shares these features.
The most obvious harm done by theft is the loss to its victim. If someone steals your TV then you are worse off by one TV. But this loss is perfectly offset by the gain to the thief, who is better off by one TV. Transferring the TV from you to the thief has no net effect on the welfare of society.
The same goes for taxation, which transfers money from the taxpayer to the government and, ultimately, to whomever the government spends it on. In this respect, tax and theft are the same, but equally harmless.
Nevertheless, theft does harm society. First there is the unproductive use of the thief’s time and effort. Suppose it takes the thief an hour to travel to your house, case the joint, break in and abscond with your TV. Had he applied this time to doing something productive, such as making a shirt, society would be better off by one shirt (less the value of the leisure he lost).
Tax-collecting is similarly unproductive. The 58,000 people who work for HMRC create nothing. Their efforts are directed solely to transferring wealth that already exists from the population to the government.
Preventing a transfer is just as unproductive as bringing one about. If there were no theft, there would be fewer window grills, deadlocks, burglar alarms and security men. All the resources that go into theft prevention could be used to add to the sum of what we have.
Taxation has the same ill-effect. About half of all work done by accountants is devoted to minimising tax bills or complying with the demands of tax collectors. Without taxation, all those clever people could devote their efforts to something productive.
The final cost of theft that I will mention is less obvious. Theft increases the cost of doing business and, hence, reduces the amount of business that gets done. A shopkeeper must make up for her losses from shoplifting by charging higher prices. Some customers who would have bought things at their “pre-theft” price no longer do. In areas of very high theft, businesses are sometimes unable to operate profitably at any price that customers are willing to pay, and law-abiding locals must travel to shop in safer neighbourhoods.
Taxation has the same ill-effect. Suppose Jack is willing to pay anything less than £10-an-hour to have his garden weeded and Jill is willing to weed for anything more than £9-an-hour. Then they should be able to come to a mutually agreeable arrangement. But now suppose that incomes are taxed at 20%. Then Jack’s maximum is reduced to £8, which is less than Jill’s minimum. They can no longer come to a mutually agreeable agreement.
Without the tax, the weeding would have happened and benefitted both Jack and Jill. The tax stops it from happening, and stops Jack and Jill from getting the benefits they otherwise would have. By driving a wedge between what sellers are willing to accept and what buyers are willing to pay, tax eliminates much valuable economic activity. The bigger the tax, the bigger the wedge and the greater the “deadweight cost”, as economists call it.
In short, taxation harms society in precisely the same ways that theft does.
But taxation may have virtues that theft lacks. Most obviously, taxation is gathered by governments which then spend it on various things. If those things could not be supplied without being tax-funded and are more valuable than the costs taxation imposes on society, then taxation may be warranted. National defence looks like a good example. The BBC3 television programme, Eating with My Ex, funded by a tax on TVs, does not.
Where should the line be drawn? What should the government use taxation to force people to pay for? This is a question that those of us who believe in limited government give considerable thought to.
The leftists I encounter show no interest in the question, always calling for an expansion of taxation and government spending no matter how high the starting point. They speak as if taxation is a mere transfer of money with no net cost to society. They are wrong. And a better appreciation of the ways in which taxation resembles theft would help them to understand why.
Jones set about correcting my assertion that “tax is theft”. But I had not said that “tax is theft”. I had said that tax is paid on threat of imprisonment. It was Jones who equated this with tax being theft. And, since tax really is paid on threat of imprisonment, it was Jones himself who implicitly claimed that tax is theft.
It is odd that he does not explicitly draw the conclusion that his own ideas entail. But Owen Jones and his intellectual foibles are not as important as the issue itself. Is Jones right that, because it is paid on threat of imprisonment, it is theft?
Some think the answer is obvious. Tax isn’t theft because whereas theft is illegal, tax is legal. Tax collectors act within the law. This is unlikely to placate the “tax is theft” crew. Legalised theft is still theft, they will say. What makes tax theft is that it is paid under duress. Similarly, the “tax isn’t theft” brigade are unlikely to be moved. They know tax is paid under duress but think that it is nevertheless quite unlike ordinary theft in the respects that make ordinary theft wrong.
Which suggests what I think is the right approach to answering the question. We should consider what is wrong with theft and ask whether tax shares these features.
The most obvious harm done by theft is the loss to its victim. If someone steals your TV then you are worse off by one TV. But this loss is perfectly offset by the gain to the thief, who is better off by one TV. Transferring the TV from you to the thief has no net effect on the welfare of society.
The same goes for taxation, which transfers money from the taxpayer to the government and, ultimately, to whomever the government spends it on. In this respect, tax and theft are the same, but equally harmless.
Nevertheless, theft does harm society. First there is the unproductive use of the thief’s time and effort. Suppose it takes the thief an hour to travel to your house, case the joint, break in and abscond with your TV. Had he applied this time to doing something productive, such as making a shirt, society would be better off by one shirt (less the value of the leisure he lost).
Tax-collecting is similarly unproductive. The 58,000 people who work for HMRC create nothing. Their efforts are directed solely to transferring wealth that already exists from the population to the government.
Preventing a transfer is just as unproductive as bringing one about. If there were no theft, there would be fewer window grills, deadlocks, burglar alarms and security men. All the resources that go into theft prevention could be used to add to the sum of what we have.
Taxation has the same ill-effect. About half of all work done by accountants is devoted to minimising tax bills or complying with the demands of tax collectors. Without taxation, all those clever people could devote their efforts to something productive.
The final cost of theft that I will mention is less obvious. Theft increases the cost of doing business and, hence, reduces the amount of business that gets done. A shopkeeper must make up for her losses from shoplifting by charging higher prices. Some customers who would have bought things at their “pre-theft” price no longer do. In areas of very high theft, businesses are sometimes unable to operate profitably at any price that customers are willing to pay, and law-abiding locals must travel to shop in safer neighbourhoods.
Taxation has the same ill-effect. Suppose Jack is willing to pay anything less than £10-an-hour to have his garden weeded and Jill is willing to weed for anything more than £9-an-hour. Then they should be able to come to a mutually agreeable arrangement. But now suppose that incomes are taxed at 20%. Then Jack’s maximum is reduced to £8, which is less than Jill’s minimum. They can no longer come to a mutually agreeable agreement.
Without the tax, the weeding would have happened and benefitted both Jack and Jill. The tax stops it from happening, and stops Jack and Jill from getting the benefits they otherwise would have. By driving a wedge between what sellers are willing to accept and what buyers are willing to pay, tax eliminates much valuable economic activity. The bigger the tax, the bigger the wedge and the greater the “deadweight cost”, as economists call it.
In short, taxation harms society in precisely the same ways that theft does.
But taxation may have virtues that theft lacks. Most obviously, taxation is gathered by governments which then spend it on various things. If those things could not be supplied without being tax-funded and are more valuable than the costs taxation imposes on society, then taxation may be warranted. National defence looks like a good example. The BBC3 television programme, Eating with My Ex, funded by a tax on TVs, does not.
Where should the line be drawn? What should the government use taxation to force people to pay for? This is a question that those of us who believe in limited government give considerable thought to.
The leftists I encounter show no interest in the question, always calling for an expansion of taxation and government spending no matter how high the starting point. They speak as if taxation is a mere transfer of money with no net cost to society. They are wrong. And a better appreciation of the ways in which taxation resembles theft would help them to understand why.
23 thoughts on “Is Owen Jones right that taxation is theft?”
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I love this. Can’t wait to use it on a lefty.
“But I had not said that tax is theft” Stealing is taking something with out consent and another word that can be used for stealing is theft and taking something on threat of imprisonment is stealing and so yes you did say it’s theft and you would be right.
Absolutely!
It could be argued that tax is slavery. A tax rate of 100% of is slavery. What does it matter if the slave owner invests what money could have been to paid to the slave into health care for the slave? It’s still slavery. Maybe the slave owner invests in education for the slave children in order to produce more efficient slaves but it is still slavery. Maybe the slave owner invests in better housing for the slaves but it is still slavery. If the slave owner gives a small percentage of the value that the slave produces back to the slave and that slave is free to spend that money on whatever the slave wishes, does it suddenly now become something other than slavery. If so at what percentage? Is 1% enough to make the slave not a slave or is it 30%? Is it then slavery or just a degree of slavery?
Just a thought experiment.
Owen Jones has made a short-cut from fallacy to truth. If tax is taken from you by force of law, it is taken from you by force.
This is one of the biggest loads of drivel I’ve ever read. My sister had her house broken into and her and her late husband’s wedding rings stolen and this plonker is equating that to an economic transaction. Let’s see if this he remains as sanguine if someone breaks into his house, infringes his private space and takes something of value to him. The IEA used to be a place for serious intellectual discussion now it’s occupied by rabid right-wingers who won’t be happy until we live in some kind of Darwinian state where you pay for everything yourself and if you can’t afford food, you starve and die. Mark Little “finger” wood was in the Times the other days saying how wonderful Jersey was because you can be on loads of money and not pay any taxes. Whyte does graciously say that some money should be raised from taxation to pay for national defence, presumably to pay for poor people to risk their lives so he and his pals can carry on making money for themselves without fear of being attacked by other (generally poorer) countries or terrorists. If the IEA was to say that we should be more like Switzerland and pay only a third of our income in tax, I could get behind their argument but I suspect even that wouldn’t be enough for these guys. And if Philip Booth thinks any of this is Christian, he’s needs to have another read of his Bible, preferably not the version seemingly translated by Milton Friedman.
This can only be answered by firstly defining taxation. Not all sources of revenue come from “taxation”.
A tax is a coercive charge, deducted as a % of income, capital or transactions, for benefits the payer may or may not receive.
By this definition, Income Tax, NICs, VAT and Corp Tax are “taxes” and are legalised theft. As a rule of thumb, taxes are immoral, therefore distort incentives leading to deadweight losses. (any economic system that suffers deadweight losses is, by definition, unfair/dysfunctional).
On the other hand, things like Pigouvian taxes on pollution/congestion aren’t taxes. Neither are royalties from natural resources, like the petroleum tax or 3/4G auctions. Neither are student fees. They are best thought of as compensation payments and user fees. As such, just like the payment for any good or service they align incentives, thus aiding efficiency.
In the UK, the majority state revenues currently come from “taxes”. This neither solves the issue of excessive inequalities and adds to economic dysfunction. All of which then requires a large and overweening state apparatus in order to mitigate the ill effects.
Yet all revenues could come exclusively from user fees if we so wished, leading to a simple, flat, fair and optimally efficient way of funding shared services/UBI. It would also mean the state having to become an active participant and competitor in the market against other alternative goods and services.
Its all very well libertarians saying taxation is theft, but then saying it is a necessary evil because ,hypocritically, they find the alternative even less palatable.
Taxes may be theft, but their predictability and lack of collateral damage render them less objectionable to most people than traditional theft. I wouldn’t bother too much if 10 pence was taken from my bank account each day for one year as some sort of tax, but I’d be pretty annoyed if my wallet, containing £36.50, my work ID, my bank cards, phone numbers etc, was stolen.
Mr Whyte’s justification for differentiating between taxation and theft is this: “But taxation may have virtues that theft lacks. Most obviously, taxation is gathered by governments which then spend it on various things. If those things could not be supplied without being tax-funded and are more valuable than the costs taxation imposes on society, then taxation may be warranted. National defence looks like a good example. The BBC3 television programme, Eating with My Ex, funded by a tax on TVs, does not.”
This is a case of the end justifying the means. If an ordinary thief were to spend his ill-gotten gains on works of charity, that still wouldn’t justify his theft. Theft is the appropriation of another’s property without his permission with the intention of permanently depriving him of it and the motives of the thief are irrelevant. As St Augustine noted, “it was a witty and a truthful rejoinder that was given by a captured pirate to Alexander the Great. The king asked the fellow, “What is your idea, in infesting the sea?” And the pirate answered, with uninhibited insolence, “The same as yours, in infesting the earth! But because I do it with a tiny craft, I’m called a pirate: because you have a mighty navy, you’re called an emperor”. The individual miscreant who steals your television is called a thief; the highly-organised and irresistible thieves whose place of business is Westminster portray themselves as public benefactors.
Taxation is a form of a protection racket: “if you give us what *we* say you owe us, we won’t hurt you”.
The difference between a government and a protection racket is mainly in terms of size & recognition of validity: governments tend to control bigger size territory, are more universally recognised as “validly controlling that territory”, and usually are the lesser of the two evils. Usually but not always: some of the governments (Venezuela, North Korea, etc.) are arguably worse than some of the more civilised mafia organisations.
And when a private protection racket organisation “moves in” into the “government’s turf”, what happens is basically the same as to what happens when 2 different gangs want to control the same patch: turf wars erupt where each side tries to persuade the other side to give up control by taking the opposing side’s players out of action: by killing, kidnapping (a.k.a. arresting) or intimidating into submission. Then we see an armed conflict: mafia soldiers vs. police/SWAT + courts + prisons.
Taxation, insofar as it takes property by threat of imprisonment from the person to whom it belongs,is prima facie theft.Insofar as the great majority of people would consent to their taxes being spent on defence, law and order, health and education, it can be justified.But the knowledge that it is prima facie theft was what motivated C19th politicians, above all Mr Gladstone, to see themselves as trustees for the taxpayer, to spend their money wisely, and to abhor waste.
With the coming of mass democracy and the Big State,politicians abandoned these responsible attitudes. Left-wing politicians,e.g. Crosland,saw taking money from ‘the rich’ even if it did not do the poor much good, as a good thing, insofar as it promoted ‘equality’.Taxation levied with this motive is nothing but theft. George Osborne’s increasing stamp duty on expensive properties was done with this left-wing motive, and was pure theft. It has also had predictably adverse effects on the property market.
All foreign aid spent other than on the relief of poverty – the unbelievable way in which £millions are wasted in an effort to meet the 0.7% requirement – also amounts to theft.
Owen Jones – a vastly- overrated nasty little prole, whose talk about ‘asking’ the wealthier to pay higher taxes is merely a euphemism for the state-enforced coercive theft that his proposal amounts to.
And Jamie, you really should know better than to say that insofar as theft redistributes property, its effect is economically neutral.The fact that the law has been broken, that the victims feels stressed and insecure, is a very definite cost – both to the individuals,and to society. The loss to the individual , especially where an object of sentimental value is involved, will far outweigh the gain to the thief.
Just consider how cheaply stolen goods are sold!
It is only possible for their to be theft if there is property. If there were no notion of the concept of ‘property’ then the concept of ‘theft’ would be meaningless.
Thus, in order to understand what theft is it is necessary to understand what property is.
To own something, to have property, is to have other people recognise you as the ‘owner’ of that something. Consensus in matters of ownership is essential. If it were no such consensus then Everybody could lay claim to everything and there would be no way of resolving whose claim was correct. When we talk about consensus, we are talking about some sort of system of organised governance.
In our modern western societies, it is our governments which are the ultimate authorities over issues of ownership. The government therefore defines property.
When the government determines that you must pay a certain percentage of your income over to it as tax, what it is really doing is saying that that money is the government’s property rather than yours. Since the government determines all questions regarding property, it is entitled to do this.
To describe taxation as ‘theft’ is to assert that there is some notion of property that transcends that which is defined by the government. Those who persist in claiming this have to explain how this system of property works.
One of the most common explanations of such a system is that of ‘homesteading’: The idea that land is appropriated originally when someone ‘mixes their labour’ with it. The problem with this idea is that it still requires societies to recognise such property claims. A property right enforced by an actual government has a real value which one supported by homesteading does not.
There may be other such explanations of how property can transcend government but I have yet to hear a satisfactory one.
Excellent piece, but I think we’re missing something here. Irrespective of the point of duress, tax is a reciprocal value arrangement in which monies are collected to fund collectively provided services, which those paying the tax hope to receive in as efficient way as possible. Theft, on the other hand, is not reciprocal, it is a straight value transfer between the thief and the victim. The criminality is exactly that, no quid pro quo in the transaction.
In a free market the services are not left the mercy of monopolies which exaggerate cost from demand.
Where “tax” is the food of government/s and is driven by coersion, “need” is the driving force of the peoples free market and being driven by freedom of choice.
The cursed fig tree that draws food and water but will not yield.
If I as an individual have no right to coerce others to relinquish 30% of their property, then how can I confer rights, that I do not have, to others?
Taxation is clearly theft!
and
Government is illegitimate.
A load of intellectual bollocks herethat I think half the authors understand what hey’ve said . Tax is theft unless accepted by the victim. This he generally does for healthcare and other services. There is no excuse for double taxation, Vat and the like arebeyond the pale, whatever that means. Time to visit WIKI
What about the aspect of the people making the laws are also collecting the taxes. Poacher and game keeper in one. In which case should we allow murderers to make the laws on murder ?
The only fair form of taxation is the one which an individual agrees to for a service provided. The only way to do this is hypothecated tax which no government would agree to.
Therefore if you are forced to pay for something you do not want by threat of imprisonment then its theft.
There are TOO many taxes in the UK,leaving a lot of people with not enough money. We must keep the Labour party out of Government as long as we can.
The legal definition of theft in UK law clearly states that the appropriation of property, in order to fit this definition must have been carried out “dishonestly”. And as we all know, a UK Government could not possibly engage in any such unlawful activity.
That’s exactly theft , no matter how you call it , transferring money , etc…
Theft is taking someone’s property unlawfully , he doesn’t agree.
If the gov want to help people they should work and give it in charity.
It’s like some bandit comes to you and says , either i kill you or give me 500$ . if you choose to give him money , it’s not like it’s your consent , you were threatened , same goes for govt.
Tax is theft achieved through the ultimate threat of violence, and taxation itself is actually a form of slavery. Consider that a totally free person keeps all the efforts of their labor, whilst the slave loses 100% of their labor. Most people therefore exist on a sliding scale of slavery. Government is a racket that exists to deprive you of a much of your wealth as possible, so that the Government can use it to buy the votes of others at your expense.
There are even evil marxists such as those at https://taxjustice.net that would argue all your income is the property of the Government, and that you have no legal or indeed moral right to any of it. So they expect you to work for free to benefit others, not yourself. Again, this is describing pure tyrannical slavery. They also use the false premise that taxation is legal so cant be theft, whereas it is only ‘legal’ because some crooked Government official has decreed it to be so, without any consent from the individual.
I think the biggest lie ever told is that “everyone pays tax”. They don’t. If you are paid from Government money, then by definition, you do not pay into the tax pot. All your money, pensions, wealth, car, house, cost of living etc comes OUT of the tax pot – nett. And its not just Tax per se – any publicly funded organisation like the BBC also take from the pot and do not ADD to to the pot
Imagine the Tax pot as a jug of water that is filled by the tax payer. If 50x people that earn 50k pay 40% of their earnings into that pot then the pot will have £1,000,000 in it. That will pay the salaries of 20 Government employees who earn the same 50k
Take off their “tax” at 40% and that would leave 400,00 still in the pot. Enough for another 8 government employees. So 50 people taxed at 40% pays for 28 people who take all that money out of the pot.
Without the 50 taxpayers, there would be nothing in the pot as by definition, the government employees would therefor have no income to be “taxed” on – so there would be no pot
But nobody seems to be aware of this or acknowledge it.
The way they do it is not by coercing the individual – but by coercing the companies that pay the individuals so that the money is taken at source because they KNOW they could never get it off the individual or we would all end up in jail for tax evasion – jail that is paid for by tax, arrested by police that are paid from tax, sentenced by judges that are paid from tax – its a cartel. A gangster organisation over which we have no say – even though we pay them
Why should anything be secret from us if we pay them either?
Obviously that can never be admitted as its like turkeys voting for christmas for anyone to admit this – but it is an inescapable mathematical/arithmetical fact that Government employees do NOT pay into the tax pot. They take all their earning FROM the tax pot. It not equal and its not fair and its theft perpetrated on a HUGE scale the world over. We pay them to forcefully keep us subjects. Fact