On Friday I wrote post that praised the philosopher Jamie Whyte for his clear thinking and rigorous logic. I cited, as an example, his recent interview on Radio Four, during which he made the case that progressive taxation was a unfair. Since then I've had a number of emails asking me to explain more.
What follows isn't just about tax, it's about our tendency to accept commonplace values without asking the question: why do we think that? I'm sure that to many of you it will also be a good example of why philosophers can be irritating. For the few who get to the end, it might just show how difficult it is to justify much of what we take for granted.
Now back to taxation - don't fall asleep yet please.
Over recent months, politicians and the media have been full of claims that this or that policy is regressive or progressive. The general iimplication is that progressive is good, and regressive is bad. In the context of tax, Progressive Taxation is the idea that the more you earn, the higher percentage of your income you should pay. And it's the 'higher percentage' bit that is offensive to Whyte.
Whyte isn't arguing that the better off shouldn't pay more tax. What he questions is the accepted wisdom that says they should be obliged to pay an even higher percentage of tax. To put this into context, in the UK the standard rate of income tax is 20%; it increases to 40% for incomes over £37,500; it rises again at £100,000 (because at this point people begin to lose their personal allowance) and again at £150,000, by which point the tax rate is 50%.
Whyte says this approach is a punishment for success. He argues that a fundamental aspect of fairness is that we treat people the same, but in this case we are arbitrarily saying 'because you are successful you not only have to pay more - you have to pay disproportionately more.' He says there is no moral justification for this approach - and in no way can it be described as fair.
On radio last week, his interviewer challenged this, saying the system treated all rich people the same, and therefore it did not treat people differently. Whyte replied with incisive logic that this was equivalent to levying a tax on bald people or black minorities and saying it was fair because we treated all bald or black people the same. No, it isn't enough to treat all 'better of' people the same, we have show why it is reasonable that they should pay disproportionately more than others.
His interviewer challenged again: but aren't richer people lucky to be earning more than others? Isn't the roll of life's dice such that they have their income by good fortune?
Whyte argued that this was not so; the vast majority of higher incomes result from a mixture of skill and application. Success was not a lottery and this is why we encourage education, and reward hard work. And most of us intuitively agree with this - for example, not many headmasters, doctors or company managers would concede that they are where they are, as a result of luck. No, the argument of 'good fortune' is not strong enough justification.
So why then, do not more people and politicians question progressive taxation?
Whyte went on to argue that the system is actually bad for the economy, because it creates a disincentive to work harder. In making this point, however, he acknowledged it was a practical argument rather than anything to do with fairness.
And perhaps that hints at an answer to the earlier question. Politically, progressive taxation makes sense - the alternative, of putting taxes up by a smaller amount for everyone, is hardly a vote winner. And frankly, where else are we going to get the money from? Progressive ideas also make for good soundbites, such as David Cameron's aphorism that, 'those with the broadest shoulders should carry the biggest burden'.
But none of these are arguments for fairness. Neither are statements you might just be thinking now, such as they can afford it or it would be a nice problem to have. We might feel like that when we hear of bankers' bonuses or footballers' wages, but they are not a coherent argument for fairness. They also ignore the reality that higher tax rates kick in at a fairly low level; for example, most heads of department in a secondary school will hit the 40% threshold.
So if, like me, you still feel there is something not quite right with Whyte's argument, then what is it he is missing? Why exactly do I think it is right that the better off not only pay more tax, but pay disproportionately more? In a moment I'll give you my answer. But before I do, I'd acknowledge that my arguments are not very strong; they rely to large extent on unprovable assertions and probably to an even greater extent on a desperation not to share the same views as reactionary Tories.
Perversely, this is why I like Whyte so much; he makes me think; he makes me question my views and come up with real hard reasons in support of them.
So why is Whyte wrong?
Actually, I don't think he is. I think his arguments are logically consistent and if you hold to them rigorously they are beyond my skill to dismantle. But I do think he gives too little weight to the idea of society and the economy as whole.
While it is true that most people who are 'better off' achieve this through skill and application; they also need a flourishing wider society to make this possible. Skill and application will not get you very far if you are alone on a desert island! There is also a historic inheritance upon which all successful people build - today's engineers owe a debt to the past, as do our doctors, teachers, writers... everyone. In other words our success, however great or modest, is almost never entirely our own work.
I'd argue that those who benefit the most from the existence of the wider society and the achievements of the past, should fairly contribute a greater amount to its upkeep. I'm sure that Whyte would argue, that they would already be paying more - and he'd be right - but then we get into the realm of value judgements. I think it is not unreasonable that better off people pay a higher percentage as well as higher total amount.
How much more, and whether the thresholds of forty and fifty percent are reasonable, is another issue - in fact, I'd agree with Whyte that our tax system is very poorly designed and that the use of sharp thresholds creates real disincentives. We also, quite bluntly, tax too much - but that really is a different matter.
Enough from me. What do you think? Is Whyte an insightful maverick or plain wrong? Should we all pay the same rate or should the rich pay even more? Either way, let me know your reasons.
I love a philosophical discussion and you have got me thinking even at this late hour. The Full Moon is keeping me awake.ReplyDelete
What do I think? I think society depends on everyone working together which you touched on. So we are all dependent on each other to survive or even be paid. However the most important people like refuse collectors, nurses, fire service, ambulance service, etc etc are not paid as much as those that we could LIVE without - of which there are many who are paid way way too much. I see it as a cake which is not shared out very fairly. And when people get a pay rise as a percentage I don't hear those high earners complaining then when they get a disproportionate amount of increase in their wage packets.
Thank you Cait; perhaps the moon and philosophy go together.ReplyDelete
I tend to agree with the sentiment of your reply, but if I'm rigorous I don't think that unfair wages can justify unfair tax. I am sure that Whyte would argue that if some people are paid too much then that is an argument for addressing their wages and not imposing punative tax rates on everyone who earns over a certain amount. Unless of course we belived that ALL higher earners so not deserve their wage rates.
Mark, you're probably too young to remember the days when we had REALLY punitive tax rates for the very wealthy - up to 97% at the very top end. I do remember this and therefore have a problem thinking of 50% of what you earn above £150,000 as too unfair. I do agree that the 40% rate kicks in too soon, but as a non-philosopher I abide by the maxim that of those to whom more is given, more should be expected.ReplyDelete
I think we need to be clear about what it means to have a fair society. There are some who define a fair society as offering a level playing field, with equal opportunity for all in education and elsewhere, where everyone can apply his or her talents to the full (or not) and enjoy the rewards that result. Others consider a fair society to one where where the benefits that arise from living in it are available freely to all, regardless of level of income or wealth. (This observation I first read in the Economist) Perhaps Jamie Whyte is simply more towards one end of this spectrum than we are used to.ReplyDelete
On the subject of luck, I accept that wealth can arise from application and talent, but I have observed that these alone are not always enough, as has been noted by others before me: the race is not to the swift...but time and chance happen to them all.
The question arises as to whether the wealth that comes from great success is disproportionate. If it is, then it can also be argued that disproportionate taxation is also appropriate. But wealth disproportionate to what? One's contribution? It seems to me that that is impossible, almost by definition; if people didn't want your contribution, at least in a free market economy, they wouldn't buy it.
*sings* "One for you, nineteen for me, I'm the tax man...."
@Mark in MayenneReplyDelete
LOL - that's my generation!
mark....WishI had not been on nights last night!ReplyDelete
couldn't keep up!!!!
And people try to put us d-d-d-downReplyDelete
Actually I am against our tax system. I think it is all wrong. It should be replaced with a flat tax rate of some percent for total income with no deductions for anything.ReplyDelete
If you make a million dollars your tax would be 10% of the million.
If you made a thousand dollars you tax would be 10% of the thousand...
Plain wrong, I suspect. His mistake seems to confuse income and wealth with some vague idea called "success" : a belief that income and wealth is somehow a reward for hard work and innovation. Does anyone seriously believe this.ReplyDelete
There's been a lot in the news recently about the lack of social mobility in Britain, and I think this is linked to the feelings that have been expressed - actually many people simply do not have the opportunity to turn their hard work into 'success' and become wealthy. Some get lucky but most don't. Also, I think some kind of progressive tax is important because at the bottom end of the income ladder, earnings are so low (and I agree that wages at this end should be higher - thank goodness for the minimum wage or things would be even worse than they are) that people really struggle to get by with the basics. To put people on £12000 a year in the same tax group as people on £120000 a year seems barmy. Sadly I am unable to argue as convincingly as Mr Whyte!ReplyDelete
I just read Jamie Whyte's book Bad Thoughts. Delightful, thanks for the tip.ReplyDelete
Undoubtedly his argument is the fairest. Why should I pay more tax, proportionately, than the next person? Yet I'm with you: I feel the richest should have a higher rate.ReplyDelete
Partly this is because the poorest should (must?) be excluded from tax. There is a basic level of income that is essential just to eat and put a roof over one's head. What that level is can be debated ad infinitum.
But if we are really going to revolutionise our tax system then we should reduce the paperwork that accompanies it. I had a friend who said the tax return in New Zealand was a single sheet of A4 (can't tell you if that is true or not). I have long thought that any party that proposes simplifying everything to that level would get my vote!
One argument for progressive taxation is that individuals pursuing money through working excessively hard damage the well being of others in society. This may be a challenging idea for some people but there is interesting empirical evidence that this is the case, see Layard:ReplyDelete