The Brass Tack

Let's get down to it.

On “soaking the rich”

Posted by srconstantin on July 17, 2009

Something is odd about this Economist article. It objects to Pelosi’s new House health care bill because it’s funded, not by reducing the tax break to employer-provided health insurance, but by raising taxes on the wealthy. One of the Economist’s arguments is pretty sound — the tax preference for health insurance is a market distortion, costing $250 billion a year, and it makes people over-dependent on employer-provided health insurance, making the loss of a job catastrophic because you lose your health care as well. We have higher rates of medical-related bankruptcy than do countries without this tax break. So I agree that it’s a mistake not to reduce the tax preference.

But the Economist mentions raising taxes on the wealthy (here that means those who make over $350,0000) in passing as though that’s intrinsically a bad thing. It seems to me that you at least have to justify why it’s counterproductive to “soak the rich.” Is the increase in marginal tax rates enough to really decrease productivity? Given that it wouldn’t raise the top income bracket even to Reagan-level tax rates, I think it’s not certain that it will. A universal health care system will inevitably be supported more heavily by the rich. And since according to polling, the rich don’t mind paying more I think it’s a mistake to automatically judge this as a bad thing.

Jamelle has posted on just this issue, arguing against the standard property-rights critique of progressive taxation. Jamelle spends a lot of time talking about how the rich don’t entirely earn their wealth, how Bill Gates was part of a network of privilege that helped him succeed, and I actually think that’s not the point. We don’t make tax judgments in a democracy based on whether people are “worthy” — a lottery winner and a brilliant tech wizard are taxed the same. And even someone who didn’t believe in progressive taxation would admit that some rich people are undeserving.

The point is that a liberal (in the Rawlsian tradition) thinks that certain outcomes are bad enough that redistribution is justified to prevent them. A property rights absolutist thinks that no outcome, no matter how bad, can justify wealth redistribution. Consider torture: if you seriously believe (as I do) that people have a fundamental right to not be tortured, then we must not torture, even if the victim is a scummy person, even if torturing him could save lives: it is the kind of horror we must never commit against a human being. A believer in absolute property rights feels this way about wealth redistribution. Property, to him, is morally equivalent to an extension of one’s own body; one is entitled to it, unconditionally. I don’t really think that’s true, not anymore. I think that if half the US population would die unless I gave a dollar, then it would not be wrong to take a dollar from me to save millions of people. It would be wrong to deprive me of property without due process of law — we do have property rights — but the scope of those rights can be shaped through legal means. Sufficiently bad outcomes can tip the scales. If, without progressive taxation, we have glaring class inequities and serious human suffering, then we can agree, through the democratic process, to pitch in and help. There’s an ordinary moral intuition about “pitching in” that seems to be absent in anti-tax ideology.

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5 Responses to “On “soaking the rich””

  1. Jamelle said

    We don’t make tax judgments in a democracy based on whether people are “worthy” — a lottery winner and a brilliant tech wizard are taxed the same. And even someone who didn’t believe in progressive taxation would admit that some rich people are undeserving.

    The point is that a liberal (in the Rawlsian tradition) thinks that certain outcomes are bad enough that redistribution is justified to prevent them. A property rights absolutist thinks that no outcome, no matter how bad, can justify wealth redistribution.

    I agree with you, tax judgments aren’t based on whether or not a given individual is “worthy.” What I was arguing is that even if property is an extension of the person, you still need to deal with the justice of that particular distribution, and I was trying to show – using Bill Gates as a shorthand for successful person – that most distributions are essentially arbitrary, so that if you’re going to argue that progressive taxation is unfair because individuals “deserve” their holdings, you have to do a bit more work.

    What’s more, I’m not sure if I agree with your explanation for why Rawls believes that redistribution is justifiable. The way you describe it, Rawls is – implicitly at least – something of a Nozickian. Redistribution in this case is a necessary infringement on what are otherwise inviolable property rights. But that’s not the sense I get when I read A Theory of Justice or any of his subsequent work. Rather, the sense I get is that Rawls sees our holdings are arbitrary, and that in a real sense, property rights are almost meaningless. Indeed, if the second principle of justice is any indication, if you could devise a society which didn’t contain property rights but also met the principles of justice, Rawls would be perfectly fine with it.

    • thebrasstack said

      Well, you’re right that it’s not enough to claim that individuals “deserve” their holdings — I just don’t think many people do claim that. But that’s a quibble, not a big point.

      About Rawls: no, I don’t think he sees property rights as generally inviolable. The way I understood the Theory of Justice (although maybe I’m reading my own opinions into it) is that he thinks strong property rights are useful as general rules. They make an economy more prosperous and more likely to satisfy the second principle of justice. And they ought to be rights — there ought to be legal safeguards against arbitrary confiscation of property. (Note that Rawls isn’t choosing between final distributions of resources, but on the basic institutions of society, which I think he believes ought to include property rights.) But the virtue of property rights extends only as far as their usefulness — when they begin to result in unjust outcomes, it’s all right to limit property rights. Kind of a rule-utilitarian thing, even though I know Rawls isn’t a utilitarian: it isn’t good to have the rules too loose, as part of their utility is precisely that they’re robust rules, but all the same, when the rules cease to serve their purpose they can be scrapped or modified.

  2. thebrasstack said

    Aw, thanks!

  3. […] insurance. That’s a problem. Now I’m not one of those who thinks taxing the rich is bad in itself; it’s the payroll tax that is problematic. It’s a retrenchment, instead of the promised […]

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