George Bernard Shaw famously observed that those who rob Peter to pay Paul can always count on the support of Paul. And today, as Americans rush to file their federal income taxes, we’re reminded of how deeply modern politicians share Shaw’s cynicism, try as they might to ennoble it with smug moralizing about “shared sacrifices” and those who can “afford to pay a little bit more”.
But there’s nothing morally sound about robbing Peter to pay Paul.
As that great Virginian Thomas Jefferson wrote in America’s Declaration of Independence, governments exist to secure men’s rights.
And government wields the power to tax in order to pay for the costs of exercising of this function. But progressive taxation, and redistributionary spending, actually violate our rights. For the state to take from some of its citizens, not because they have broken any natural law but simply because they have acquired more than others, is to pervert its own function and to misuse for injustice the power that it has been granted to maintain justice.
And when it perverts its proper role in this way, civil government does moral harm. As I explained in Slaying Leviathan, in the natural order, virtue and vice each carries its own consequences. On the one hand, virtue yields largely positive results. Hard work, patience, and carefulness, for example, tend to generate prosperity. Vice, on the other hand, brings negative consequences. Sloth, impatience, and recklessness, for example, tend toward suffering. By taxing the fruits of the virtuous behavior that creates wealth, redistributionary fiscal policy discourages that behavior.
Our progressive tax system also takes too much money—not just from the so-called rich but also from the middle class—diminishing their economic, and thus their moral, freedom. It unintentionally steers behavior away from virtue; the classic example is of course the marriage tax, which encourages not only cohabitation but also divorce, and so fosters all their attendant social pathologies.
And many so-called tax breaks added into the code intentionally steer behavior; the mortgage deduction, for example, seeks to encourage something—home ownership—that we consider to be a mark of a healthy society, but at the cost of encouraging debt, and we’ve certainly seen over the last couple of years how dangerous that can be. But moreover, with these kinds of incentives, the federal government is actually inserting itself into the family’s or the individual’s decision-making process, usurping the moral authority to decide what’s best for their own situation, seizing a moral power it shouldn’t have.
Today, Americans across the country are gathering at Tea Parties to protest government’s confiscatory tax-and-spend policies and the economic harm that they cause. They are right to do so, but it is important to remember that the real harm is not merely financial but moral as well.