Anyone who understand taxation to be immoral has to contend with Liam Murphy and Thomas Nagel’s argument against “everyday libertarianism”, which they describe as the common inclination “to feel that what we have earned belongs to us without qualification, in the strong sense that what happens to that money is morally speaking entirely a matter of our say-so”.
According to the authors this is a “conceptual problem”, later viewing it condescendingly as a confused delusion. They explain:
“There is no market without government and no government without taxes; and what type of market there is depends on laws and policy decisions that government must make. In the absence of a legal system supported by taxes, there couldn’t be money, banks, corporations, stock exchanges, patents, or a modern market economy—none of the institutions that make possible the existence of almost all contemporary forms of income and wealth.
It is therefore logically impossible that people should have any kind of entitlement to all their pretax income. All they can be entitled to is what they would be left with after taxes under a legitimate system, supported by legitimate taxation— and this shows that we cannot evaluate the legitimacy of taxes by reference to pretax income.
The Myth of Ownership
Murphy and Nagel
In following their reasoning one can end up at a cross-road, maybe a dead end. There is no government without taxes, and no taxes without government. There is no market without government, and no government without a market. At what point on this circle should we jump on and jump off?
They explain in the following passage:
The tax system is not like an assessment of members of a department to buy a wedding gift for a colleague. It is not an incursion on a distribution of property holdings that is already presumptively legitimate. Rather, it is among the conditions that create a set of property holdings, whose legitimacy can be assessed only by evaluating the justice of the whole system, taxes included. Against such a background people certainly have a legitimate claim on the income they realize through the usual methods of work, investment, and gift— but the tax system is an essential part of the background which creates the legitimate expectations that arise from employment contracts and other economic transactions, not something that cuts in afterward.
The circle is squared. The tax system is not an “incursion on a distribution of property holdings that is already presumptively legitimate”. It is not something that cuts in after our transactions and takes our property. Rather, the tax system creates the “legitimate expectations” that, like a feeling, “arise from our transactions”. The system is in the background, just there, perhaps everywhere, providing us all with the conditions that create a set of property holdings, like nature itself. So who cares if they take your income? In fact, your pre-tax income was never yours to begin with.
We can first contrast “everyday libertarianism” with Nagel and Murphy’s “everyday statism”, the feeling that what we have earned belongs to the state without qualification, in the strong sense that what happens to that money is morally speaking entirely a matter of the State’s say-so. In doing so it makes clear that there is a competing property claim between everyday libertarianism and everyday statism. Whose income is it?
The authors state that it is “logically impossible” that someone should have entitlement to their pre-tax income. Without a system supported by taxes there wouldn’t be markets and income in the first place. The question-begging character of Everyday Statism begins to reveal itself upon a cursory glance at history.
It isn’t true that the tax system is not an incursion on legitimate property holdings. It is, in fact and in practice, “something that cuts in after”. In America for example, the 16th amendment, which gives congress the right to levy income taxes, didn’t arrive until the 20th century. Until then “pre-tax income” was just “income”, and income in the form of remuneration distributed between consenting adults was a legitimate property holding, and a legal one. The government “cut in” to the distribution of legitimate property holdings by giving themselves the constitutional right to do so.
If there is no market without a government, why was the second law of the United States a tariff? Why would they lay duties on imported goods if there was not already a market? We know why. There was a market, a distribution of wealth, of property holdings, and the government was willing to restrict the market in order to get some of it, to pay debts, to fund wars, or otherwise to take from people their income in order to benefit the state.
The conceptual and moral problem for Everyday Statism is this: the tax system is an active and ongoing incursion on a distribution of property holdings that was already presumptively legitimate. It is not an essential part of the background. It is something that cuts in afterword, imposed upon the background, and upon all dealings which have heretofore been legitimate.