Solidarity does not require taxation
12 June 2017
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Economic Theory
12 June 2017
Trade, Development, and Immigration
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Today is the Adam Smith Institute’s tax freedom day, the symbolic day you stop working just to pay taxes and get to keep the money you earn. It is a publicity stunt aimed at getting people to notice how much tax they pay. On average, Brits will pay 42% of their incomes in taxes in 2017, so tax freedom day falls on the day when we are 42% of the way through the year.
The philosopher Julian Baggini last year claimed that this celebration reveals an unreasonable hostility to taxation. Taxes pay for the health service, state schools, the police, pensions and much besides. Instead of celebrating tax freedom day, we should celebrate social solidarity day.
These two days mark the same objective phenomenon – namely, that tax is 42% of GDP. But, according to Baggini, calling it social solidarity day has the virtue of avoiding the “tax-as-theft worldview”. We should instead see tax as social solidarity.
Baggini’s view is not unusual. Leftists frequently recommend the “social solidarity” of an expansive welfare state and the taxes required to fund it. On the political left, the idea of tax as an expression of solidarity almost goes without saying.
Which is peculiar, because it is the opposite of the truth. Tax is required only where social solidarity is absent.
To see why, consider street lighting. If everyone on your street installs a light outside their house, you will reap the benefits, even if you do not install a light outside your own house. The benefits of street lighting are non-excludable, as economists put it. Once the light is supplied, no one in its vicinity can be excluded from its benefits.
So you may be tempted to free-ride on your neighbours and avoid the expense of installing your own external light. Since the same logic applies to everyone on the street, there is a risk that few will install lights and the street will be darker than everyone on the street would want it, even if they were bearing their share of the cost.
This problem can be overcome by (at least) two things. One is social solidarity. Where people have strong feelings of solidarity, they will not free-ride on their neighbours. Understanding that everyone in the street benefits if the street is well lit, solid members of the street community will voluntarily pay for a light outside their house.
But what if no such solidarity exists? What if people on the street are perfectly happy to free-ride on their neighbours? Then some authority, such as the local government, might tax the street’s residents and use the money to supply street lights. Assuming the street lighting is worth its cost, the residents are better off.
Taxation is thus a remedy for a lack of social solidarity.
The point is not specific to street lighting. For another example, if people felt solidarity with unemployed strangers, tax-funded unemployment benefits would be unnecessary. Ample private charity would flow to the unemployed. The fact that the taxes that fund unemployment benefits are paid on threat of imprisonment shows that they are not an expression of social solidarity.
The virtue that causes an action when it is voluntary is not conjured into being when the action is compelled. Slavery is not charity work.
Slavery may sometimes be justified. A military draft may be justified when a country is threatened with invasion. But it would cloud proper thinking about the draft to pretend that it expresses conscripts’ devotion to the cause. If a draft is required, that can only be because too few are willing to volunteer.
Tax may be justified for some purposes. Indeed, I suggested one: namely, the provision of valuable goods that are non-excludable. But it does the sensible discussion of taxation no good to pretend that taxes are like donations, willingly paid out of solidarity with the cause they fund. They are the exact opposite.
The philosopher Julian Baggini last year claimed that this celebration reveals an unreasonable hostility to taxation. Taxes pay for the health service, state schools, the police, pensions and much besides. Instead of celebrating tax freedom day, we should celebrate social solidarity day.
These two days mark the same objective phenomenon – namely, that tax is 42% of GDP. But, according to Baggini, calling it social solidarity day has the virtue of avoiding the “tax-as-theft worldview”. We should instead see tax as social solidarity.
Baggini’s view is not unusual. Leftists frequently recommend the “social solidarity” of an expansive welfare state and the taxes required to fund it. On the political left, the idea of tax as an expression of solidarity almost goes without saying.
Which is peculiar, because it is the opposite of the truth. Tax is required only where social solidarity is absent.
To see why, consider street lighting. If everyone on your street installs a light outside their house, you will reap the benefits, even if you do not install a light outside your own house. The benefits of street lighting are non-excludable, as economists put it. Once the light is supplied, no one in its vicinity can be excluded from its benefits.
So you may be tempted to free-ride on your neighbours and avoid the expense of installing your own external light. Since the same logic applies to everyone on the street, there is a risk that few will install lights and the street will be darker than everyone on the street would want it, even if they were bearing their share of the cost.
This problem can be overcome by (at least) two things. One is social solidarity. Where people have strong feelings of solidarity, they will not free-ride on their neighbours. Understanding that everyone in the street benefits if the street is well lit, solid members of the street community will voluntarily pay for a light outside their house.
But what if no such solidarity exists? What if people on the street are perfectly happy to free-ride on their neighbours? Then some authority, such as the local government, might tax the street’s residents and use the money to supply street lights. Assuming the street lighting is worth its cost, the residents are better off.
Taxation is thus a remedy for a lack of social solidarity.
The point is not specific to street lighting. For another example, if people felt solidarity with unemployed strangers, tax-funded unemployment benefits would be unnecessary. Ample private charity would flow to the unemployed. The fact that the taxes that fund unemployment benefits are paid on threat of imprisonment shows that they are not an expression of social solidarity.
The virtue that causes an action when it is voluntary is not conjured into being when the action is compelled. Slavery is not charity work.
Slavery may sometimes be justified. A military draft may be justified when a country is threatened with invasion. But it would cloud proper thinking about the draft to pretend that it expresses conscripts’ devotion to the cause. If a draft is required, that can only be because too few are willing to volunteer.
Tax may be justified for some purposes. Indeed, I suggested one: namely, the provision of valuable goods that are non-excludable. But it does the sensible discussion of taxation no good to pretend that taxes are like donations, willingly paid out of solidarity with the cause they fund. They are the exact opposite.
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Or as Pope Benedict XVI put it: “Solidarity is first and foremost a sense of responsibility on the part of everyone with regard to everyone, and it cannot therefore be merely delegated to the State.”