Suppose I were to buy a loaf of bread. If I trace the history of that bread, Leonard Read “I, Pencil”-style, I’ll find that in producing the bread, a wide range of governmental services were used. These services come from local, state-wide, and federal governments, both domestic and foreign. It would be bizarre, then, to assume that in buying the loaf of bread, I acquire some special debt to the US Federal Government.
Another major error is to assume that people must repay their debts through taxes. I don’t know what Thomas Edison paid in taxes. But I can safely assume that he did more to repay his “debt to society” through his inventions than by paying taxes. A similar point will apply more weakly to many of the rest of us.
If higher tax rates on larger incomes are needed, fine, let’s raise them. Show why that’s necessary, show why it’s the best way to accomplish what we’re trying to accomplish. I agree, actually, that we should increase taxes on people with higher incomes. Looking at the train wreck our budget is headed toward, I don’t think there’s any other way to solve it without making absolutely devastating cuts to entitlements and defense. But higher taxes must be a part of a larger plan that does put entitlement and defense spending on a sustainable path (which means some cuts!), rather than as an individual piece which does nothing to solve the underlying problem.
There are a lot of wealthy, successful Americans who agree with me — because they want to give something back. They know they didn’t — look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something — there are a whole bunch of hardworking people out there.
In other words, you’re not as special as you think, and all those other people are much, much more responsible for your success than you think. That’s a lovely argument for higher tax rates, because the argument provides no means of deciding what is and isn’t a just tax rate. Is 10% fair? Obama can’t tell you. 30%? Beats him. 90%? Hell if he knows. All he can say is you didn’t do it yourself, so don’t complain when they raise the tax rate.
Of course no one is literally responsible for every single ounce of their success. No great novelist invented the paper they wrote on, the pen they wrote with, the language they wrote in, or even the stories themselves. Their work is built on top of past work. But that places no duty on them to pay those past giants for their contribution to their success, because they didn’t invent the pen (or manufacture it, for that matter!) so this great novelist could write their novel, nor did they do so with an explicit contract with this novelist. They did so for their own reasons. Demanding compensation after the fact is what’s immoral.
In the same way, yes, of course businesses benefit from government services. Roads tend to be quite useful, education too, the rule of law is a magnificent thing, and that says nothing about the physical security government provides. All incredibly helpful for businesses and successful individuals! But government provided those services for the tax revenue they already required, not for after-the-fact higher rates, and the reason they provided it was for the good of society. There’s no moral claim whatever that can be made by the government for people’s income based on services provided by the government.
If we grant this argument—that we pay taxes because our success means we have a moral duty to pay taxes, whatever the rate may be—we are all dependent on the government’s services, and thus all our income is rightly the government’s. It is only through the government’s benevolent, altruistic nature we are allowed to keep what portion we do, so be happy with it—because you only earned some unnamed portion of it anyway. We—and by we, I mean we—object to that because intuitively we know that isn’t the case. Whether someone’s success is built on other people’s work or not, they deserve their success. No one else can arbitrarily claim moral right to it.
That doesn’t mean, of course, that we shouldn’t pay taxes. It doesn’t even mean that we shouldn’t increase tax rates! It means that justifying tax increases based on a moral necessity is ridiculous. If higher tax rates are necessary and the wealthy are the ones most able to bear the brunt of it, just say so. There’s nothing wrong with that statement.