January 14, 2010
Tax Justice Focus
I was kindly invited by my former employers the Tax Justice Network to guest-edit a special edition of their Tax Justice Focus newsletter.
The edition is out today, and focuses on the topic of “Tax Justice and Philosophy”. It contains contributions by:
Dr Martin O’Neill, lecturer in political theory at York University
Dr Martin McIvor, PhD in politicla theory from London School of Economics, editor of Labour journal Renewal
Dr John MP, Member of Parliament for Southport and holder of a doctorate in Philosophy from the Liverpool University
Dr Daniel Mitchell of the Cato Institute, and Hiwa Alaghebandian is a researcher at the College of William and Mary, Williamsburg, VA. (spouting some absolute madness, it has to be said).
Dr Thomas Rixen of the Social Science Research Centre, Berlin
Sheila Killian, lecturer in finance and accounting at the University of Limerick
Richard Murphy, Tax Research UK
John Christensen, Tax Justice Network International Secretariat.
You can download it here (PDF).
Here’s my editorial, to give you a taster:
–
Welcome to a special edition on the theme of tax justice and political philosophy. This may seem a strange combination. After all, the Tax Justice Network is a research and advocacy group, dedicated to raising awareness and promoting reform of such practicalities as international accounting standards and tax information exchange. Philosophy, by contrast, turns the mind to quiet and abstract contemplation; to tweed jackets, dusty tomes and ivory towers.
Yet there is an connection here that escapes the hasty observer. John Maynard Keynes remarked that practical men “are usually the slaves of some defunct economist.” Less remembered is the sentence preceding it: the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else.”
In a world ruled by ideas, the apparently disconnected enquiries of philosophers eventually shape world-views, orientate debates, influence elections and direct policies. Those doubting this statement should cast an eye to history. For whilst applied Marxism was certainly a humanitarian disaster, who could deny the profound impact of Karl Marx the philosopher-economist?
But there is more value to philosophy than its long-run impact on practical politics. For it is through philosophy that we explore our beliefs and discover where our values lie. This, after all, is particularly important for the Tax Justice Network and everyone who demands tax fairness – two terms loaded with centuries of philosophical baggage.
Fittingly, this edition introduces a spectrum of philosophical approaches. John Pugh MP offers insights from a faith perspective, drawing upon the centuries-old tradition of philosophical Christianity. One need not share Pugh’s spiritual commitments to find significance in his reflections.
In similar vein, Martin McIvor offers us a perspective from the Marxian tradition. The financial crisis has generated an upsurge of interest –frequently superficial – in Marx’s thinking. McIvor shows that notwithstanding the legacy of history (and the lazy outpourings of journalists) Marx’s legacy takes the form of a powerful analytic tool for the critical assessment of capitalism. And as with all good philosophy, one need not be an acolyte in order to gain profound insights from such analysis.
No edition focusing on political philosophy would be complete without reflection from the great intellectual tradition of liberalism. Martin O’Neill accordingly draws on the work of Thomas Nagel and Liam Murphy to show how modern liberal egalitarian insights can make a compelling case for tax justice.
Yet no important philosophical issue ever commands even a broad universal consensus. Thus it is fitting to feature a contribution from Daniel Mitchell and Hiwa Alaghebandian of the Cato Institute, arguing against the consensus of our other contributors. We at TJN firmly believe that their arguments are unsound and inadequate, and have previously set-out some reasons here. Yet we nonetheless thank them for their enduring willingness to engage and contribute. In a world of increased polarisation where reasoned dialogue seems ever rarer, it is a pleasure to have opponents such as they.
Thanks must also be given to Sheila Killian for her review of a new publication of an essay by George Warde Norman on how taxation might promote human happiness. Norman penned the essay in 1821, not long after the introduction of income tax to the UK. But whilst much of his analysis may seem anachronistic and counter to TJN’s aims, it nonetheless yields important insights. In our second review Thomas Rixen considers the merits of a new book exploring the possible role of a World Tax Organisation and how such a thing might be organised. Especial thanks also to Richard Murphy, who at short notice provided an excellent summary of the first decade of what is likely to be an ongoing struggle for tax justice.
Before vacating the floor to our contributors, however, I would like to make a few further remarks about the issue of tax justice and philosophy.
The connections between philosophical reflection, economics and real-world outcomes have already been noted. But in these dizzying times it is worth casting our gazes back to ages past. While it may now appear that market-capitalist societies are a necessary fact of life, this was not always so. If we return to the thinkers of the 18th Century in particular – who struggled to understand, and in many cases legitimise, the emergence of capitalism in its modern form – we see this most clearly.
While philosophers such as Jean Jacques Rousseau decried and denounced the nascent “commercialism”, it is more interesting to examine the thinkers who championed the emerging capitalism. Two in particular stand out.
Although David Hume is now remembered as a philosopher, he was also one of the first modern economists. Indeed, he had an enormous intellectual impact upon his great friend Adam Smith, the “founder” of modern economics. And Smith, of course, was in his day known as a philosopher. Only after his death did his name became synonymous with economics.
Both men were champions of commerce, trade and industry (though neither were free-market zealots, as Smith has so often been mis-characterised). Yet within the worldview of capitalist enthusiasm, both Hume and Smith paid particular attention to the importance of justice in taxation.
In his essay Of Commerce, Hume warns of the danger that the wealthy may exploit the worse-off: “it is easy for the rich, in an arbitrary government, to conspire against them [the poor], and throw the whole burthen of the taxes on their shoulders.” Hume urged strongly against such a state of affairs:
“A too great disproportion among the citizens weakens any state. Every person, if possible, ought to enjoy the fruits of his labour, in a full possession of all the necessaries, and many of the conveniencies of life. No one can doubt, but such an equality is most suitable to human nature, and diminishes much less from the happiness of the rich than it adds to that of the poor. It also augments the power of the state, and makes any extraordinary taxes or impositions be paid with more chearfulness.”
In the year of Hume’s death Adam Smith published his seminal Wealth of Nations, the second volume of which discussed principles of taxation. Although much of Smith’s discussion is now anachronistic, one passage is of particular interest, and worth quoting at length:
“A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion.”
Like Hume, Smith was preoccupied by the social impacts of taxation, and is attuned to the issues of justice that arise. Both were champions of trade and commerce, and acutely conscious of tax and its multifaceted importance. They were economists, as well as philosophers.
Whilst it would be disingenuous to claim, across a chasm of 300 years, that either figure provides direct support for any modern viewpoint, there are nonetheless important lessons to be drawn. For it is as true of the early debates of modern capitalism as it is today that taxation and justice are intimately related. In short, economists must still be philosophers.
freethinkingeconomist said,
January 14, 2010 at 3:58 pm
Paul
Am reading it:
Corporations earn their ‘social
license to operate’ insofar as they contribute
to the general good of the societies in which
they exist, facilitating rather than frustrating
the achievement of social justice. They can
only do this when they contribute towards
the achievement of social justice by providing
revenue to the state that can be used to
pursue valuable social policies
Do you agree? If I set up an icecream parlour in a hot place, is my only contribution to society the tax I end up paying? This strikes me as the very epitome of the poverty of understanding in the Left about how value is really made. That last sentence is a total stinker, and a real giveaway.
Paul Sagar said,
January 14, 2010 at 4:37 pm
No, it’s not the only value. But who ever said it was?
However, I agree with Martin that it’s to confusedly reason in a circle to claim that corporations don’t have to pay tax because of ex ante property rights. Or as youre looking at it, the one obligation they do have in exchange for the privilege of incorporation society grants them is to pay tax.
Your ice cream stall example is taking a very, very narrow reading: nothing precludes Martin O’Neill from saying that lots of other values flow from allowing businesses to exist, alongside indiviual rights of association and employment.
And he isn’t really thinking about ice cream parlors: he’s thinking about barclays and tesco and limited liability partnerships especially. These things, of course, bring us all value. But we as a society grant them a privilege of operating, and the condition of that is that they pay the tax society sets via democratic process.
Indeed, I’m surprised by your reaction, and your extremely narrow reading. This is more what I’d expect from Tim Worstall than you.
Paul Sagar said,
January 14, 2010 at 4:40 pm
Ok to be fair Martin should not have used the word ‘only’. That’s far too strong. You do indeed have a point, sorry.
But I think the spirit of Martin’s piece survives if we tone down the ‘only’ to a ‘one way in which’.
Paul Sagar said,
January 14, 2010 at 4:42 pm
Sorry, my first reply is way too defensive. Martin has over stated things (albeit with innocent intention) and you are right to point that out.
freethinkingeconomist said,
January 14, 2010 at 4:47 pm
Don’t worry! But I have to dash home – a further answer perhaps tonight, as I am alone in the house and allowed to be sad blogger once more.
Dan said,
January 14, 2010 at 5:35 pm
Aside from the shocking sentence picked up on by freethinkingeconomist, the first article looks to me to be argued pretty badly. The whole “argument from convention” is, I think, guilty of precisely the circular reasoning which it attributes to proponents of private property. As far as I can see, the argument only works by assuming that private property is merely a legal convention and that there simply are no independent moral considerations regarding entitlement.
Consider an analogous argument. Most people think that laws against personal violence are justified because such violence is morally objectionable. But aha! Here is a cunning counter-argument to this common sense view: “Actually-existing rights against personal violence – murder, say, and rape – are the result of a general system of legal and political rules. One commits an error of reasoning if one appeals to rights against personal violence in order to justify this regime of legal and political rules. So we cannot judge the current system of rules by their success in prohibiting violence, because to do so would be to justify a regime by taking as an independent norm something that is, in fact, one of its consequences.”
Now, I think the natural response would be to say: that argument doesn’t work because it assumes there is no independent norm against murder and rape – that is, it begs the question against the person who says that there is. But this is precisely the position of O Neill with respect to the proponent of property rights.
The focus on conventions begs the real question, namely, whether property rights are justified independently of the system of legal and political rules of which they are a part – and O Neill never touches this issue. Now by all means, he might have some strong arguments to the effect that people are entitled to absolutely none of the product of their labour whatsoever, but he certainly doesn’t present them. But this is a very counter-intuitive view to hold – not just by the standards of my intuitions (hell, even Marx believed (or at least presupposed) some form of entitlement theory) so I don’t see how he can beg this crucial question and pompously conclude that he has settled the philosophical issues.
Grace said,
January 14, 2010 at 7:36 pm
“actually-existing property rights are
constructed by the legal rules of property,
including the rules of taxation”
(sorry if this is a really really basic point)
no. there is some meaning in one drug dealer saying to another “you stole my stash” – so people recognise the existence of property rights even when these property rights have not been granted (or even recognised) by the state.
Paul Sagar said,
January 14, 2010 at 8:37 pm
Grace: 1) is that a property RIGHT or is it a claim of possession? The two are different. What if the other drug dealer says ‘not now mutherfucker, it be mine’. You and the libertarians may want to say that the original drug dealer still had a right, and it’s been infringed. I want to know what content the notion of ‘rights’ can have ex ante to any social arrangements or conventions. I’m tempted to think that talk of natural rights is indeed nonesense on stilts, for the same reason that natural morality or natural law is.
2. Does the situation change if our drug dealers receive a set of legal privileges to conduct their profit-seeking activities, without which they wouldn’t be able to seek profit in the way they do? (I.e. Drug dealers aren’t corporations, and if they have rights, the structure of those rights are different to the rights of corporations)
Dan: will try and reply to your points when I get a spare hour or so. Which might not be for a while.
freethinkingeconomist said,
January 14, 2010 at 8:45 pm
Dan, brilliant answer, saved me a lot of effort.
For libertarians, I have no doubt that they would see the current set of laws or institutions as quite naturally built up from free and uncoerced agreements and transactions between free people. A corporation of 10 people might form as a purely voluntary arrangement, and then so on up to 100,000 people. At each stage of the way it might seem odious for some state-appointed person to say things like “you exist and make money only because we have granted you these rights”.
Now, I am not a libertarian, nor someone who sees only a need for a nightwatchman state. Such ‘uncoerced’ relationships can easily lead to losses of liberty, infringements of other rights- obviously. But the other thing that bothered me about the essay in question was how it appeared to assume that the state granting of rights was primary, and the corporate’s subsequent production of some sort of privately enjoyed surplus secondary. I see the two proceeding in tandem – the corporation needs the state’s abilities in enforcing property rights, the state needs the corporation’s genuine innovativeness and use of capital to generate the surplus to pay its bureaucrats.
2 years of working in Westminster is getting to me – all thse people producing reams of paper and gallons of hot air at each other – all largely funded by a surplus produced elsewhere by the people they so casually discuss and dispose of. when I was in the private sector, my views were the opposite.
freethinkingeconomist said,
January 14, 2010 at 8:50 pm
Oh, and I would not have come up with as good an answer as Dan. My first sentence there looked unintentionally like I could have . . .
Grace said,
January 14, 2010 at 9:05 pm
2. drug dealers still benefit in some ways from the existence of the state. eg they sell their drugs on state-built and owned premises at least sometimes (eg housing projects). ok that’s probably a bit of a tenuous one but they also gain a bit from the state having educated the runners etc who work for them (tenuous again i admit), they benefit from the country not being in complete anarchy because that would make selling drugs harder, etc. there are also large gains from state-enforced drug prohibition. so even if they don’t benefit as much as corporations, they benefit a bit.
1. ok the drug dealer example only shows that people claim they have rights that aren’t recognised by the state. it doesn’t show they actually have these rights. i suppose you might not agree, and i don’t know how i would persuade you, but it does seem to me that if wallace takes home his money and puts it under his bed, and someone else comes and takes it, that his money has been stolen (which shows he had a right to it), regardless of whether he’s got this money from drug dealing or from working at the corner shop. or if there’s an abandoned house and homeless people go to live there, and do so for 20 years, at the same time making it much nicer (DIY etc), and some lawyers come along and prove it was “owned” all along by some old millionaire who lives in a different country and has no use for the house whatsoever, because of some obscure part of the legal code (imagine there are no laws for squatters’ rights), then surely even though the state doesn’t recognise the claims of the squatters, they do actually have some right over the house (from use and need)
“what content the notion of ‘rights’ can have ex ante to any social arrangements or conventions” – the state is not the only creator of social arrangements and conventions. you’ve seen from the corner what tight a grip the “corner” rules and logic has on those parts of baltimore, who’s to say that the relevant “conventions” that grant property rights in those areas are not the rules of the game (which would grant rights to drug dealers) but the laws of the government? when the law is irrelevant in so many ways?
Paul Sagar said,
January 15, 2010 at 6:02 pm
Ok, the Internet connection on my flat is buggered and has been all day. I’m using my iPhone to leave this comment. But I’m not going to use it to reply at length to the above. That will have to wait til some point this weekend. During which I am very busy indeed…
Alex said,
January 20, 2010 at 12:01 am
Hmm. What is the nonsense about the State “granting” rights. It does no such thing. As far as I’m aware, the State adjudicates between competing rights, claims, freedoms, liberties (whatever you want to call them), and protects certain among them, when they come into conflict. In the case of property rights, it is the social and legal conventions that mean the State will side with the one with the right piece of paper (at least in this democracy), instead of anyone else’s claims of ownership.
Paul Sagar said,
January 20, 2010 at 8:57 am
Alex,
so the artificial persons of corporations have rights in a state of nature, preceding the existence of a state, do they?
Of course not. Indeed, that is the most palpable of nonsense. How can the state’s role simply be to arbitrate between property rights, when it is only the existence of a state providing a legal and coercive framework for the recognition and adjudication of rights – especially property rights – that gives the notion of a ‘right’ a) any meaning or b) any content.
As Martin points out in his original piece, you are labouring under the well-entrenched misconception that eg property rights exist ex ante to the state, and think an appeal to property rights can be used against the state. But that’s to reason in a circle. There may be other (legitimate) objections to state activity – that it causes harm or restricts liberty – but that it infinges your property rights ain’t one of them.
Remember, not everything that is ethically important is a right – but the deep entrenchment of the concept of rights is apt to make us think so.
freethinkingeconomist said,
January 20, 2010 at 10:25 am
I don’t like tax avoidance either. But Paul’s argument sounds too similar to that which might be used by a Medieval tyrant – ‘I grant these rights to trade, I can plunder you how I like’ – to be convincing for me. The holy word ‘Democratic’ has replaced ‘Divine Right’ but the form seems similar.
As is the recurrent theme of having a monopoly on violence.
Sure, companies need states. They also need electricity, water, educated staff, transport links etc. These dependencies don’t allow utility firms or teachers to demand whatever they like from its surplus. The local state may be a monopoly – able de facto to abuse this – but that is surely why being able to shift abroad to escape ‘reasonable’ democratic extortion is still important.
Just as it was for Medieval traders …
Paul Sagar said,
January 20, 2010 at 11:17 am
Giles, you are making the mistake of assuming all ethically important things must be ex ante rights. But that’s just not the case.
You are of course correct that we don’t want a situation in which states wilfully oppress anyone and everyone a-la-medieval tyrant. Indeed, we have developed the concept of rights precisely to militate against that sort of thing. But what’s really doing the work here is a desire to prevent opression or suffering or harm, and whereby talk of rights acts as a powerful normative check.
Indeed, we might want to make that normative check a legal one, by enshrining in law that e.g. The government can’t do XYZ to corporate entities unless in situation ABC. Indeed, this looks like a very sensible and desirable thing to do, for capitalist-specific reasons as well as having all the benefits attendant to the general rule of law being in place.
But notice: the state is still what grants and enforces these rights; without the state such rights would be without content or meaning.
THEREFORE corporate entities cannot appeal to ex ante property rights to justify activity that contravenes the law (or the spirit of the law) giving property rights content and meaning. That’s just a straightforward logical fallacy. HOWEVER it doesn’t follow that the government can do whatever it likes to corporations once a system of laws has been legally enshrined, granting property rights. The repeal of such rights requires due legal process via the courts, to ensure the rule of law broadly prevails. And this is a good thing, because maintaining the rule of law grnerally is more important than shutting down individual corporations behaving badly. But nonetheless, such corporate entities do not possess ex ante property rights independent of the state.
freethinkingeconomist said,
January 20, 2010 at 11:41 am
I still feel slightly uncomfortable with the priorities. A couple of honest questions:
1. Since a state is the usual guarantor of rights, doesn’t your reasoning apply to individual property rights too? Which I personally find awkward.
2. Are ALL combinations of people necessarily regarded as ‘right-less’ absent the State? Partnerships?
I can still imagine a strong rebuttal from a more libertarian conception of the state, one where it (not the corporates) only has any rights insofar as it provides ‘services’ that combined individuals find convenient to provide collectively. Then the idea of it graciously ‘granting’ anything may jarr.
But like you last week I find using mobile tiresome … Sorry
Paul Sagar said,
January 20, 2010 at 3:11 pm
Giles, I’m in classes and research seminars til 7.30 , but I will try and reply later
freethinkingeconomist said,
January 20, 2010 at 5:24 pm
I am just playing devil’s advocate, waiting for verdicts, so please don’t bother – I am normally on your side, and tend to only react when a position is stated too strongly. So let’s not – I don’t mean to timewaste . . .
Alex said,
January 20, 2010 at 8:27 pm
“so the artificial persons of corporations have rights in a state of nature, preceding the existence of a state, do they?
Of course not. Indeed, that is the most palpable of nonsense. How can the state’s role simply be to arbitrate between property rights, when it is only the existence of a state providing a legal and coercive framework for the recognition and adjudication of rights – especially property rights – that gives the notion of a ‘right’ a) any meaning or b) any content.
As Martin points out in his original piece, you are labouring under the well-entrenched misconception that eg property rights exist ex ante to the state, and think an appeal to property rights can be used against the state. But that’s to reason in a circle. There may be other (legitimate) objections to state activity – that it causes harm or restricts liberty – but that it infinges your property rights ain’t one of them.
Remember, not everything that is ethically important is a right – but the deep entrenchment of the concept of rights is apt to make us think so.”
I am not doing any appealing “against the state”. I am not a libertarian. I am a liberal, social democrat tradition. I’m merely pointing out that the State does not GRANT rights/claims/freedoms/liberties etc, it adjudicates between them, and protects certain among them. At least that’s the way I see it.
On the property point:
In the state of nature, I could claim that your property is mine. If I am more powerful than you than I would get your property by overpowering you. With a State, the State adjudicates between our competing claims, and says it is you who owns the property since you have the piece of paper that says so, and protects you from any attempt I might have at taking your property. That that piece of paper means the State decides in your favour is for social/cultural/legal reasons; in a dictatorship or certain democracies, the State may not decide in your favour even though you may have the right piece of paper. That is how it works in this country. No police officer thinks about the philosophy of property rights when they do what they do. Property rights are protected in this country for sociological reasons (in law yes, but the law is a social construct).
Now I think perhaps part of above was us talking at cross purposes. The State defends property rights for sociological reasons. But a company cannot, philosophically, say “I can do X because of property rights” as you say (I never disagreed with you on this point).
Anyway, as I didn’t make clear, I believe that in general, talk of rights is useful rhetorical device. For instance the First Amendment to the US Constitution reads in part:
“Congress shall make no law … abridging the freedom of speech”
But of course, Congress CAN make laws abridging the freedom of speech, such as:
defamation laws, advertising laws, laws related to incitement to imminent lawless action, child pornography, perjury, conspiracy to X type laws, laws related to employee relations, copyright laws and so on.
And I don’t think many people will find things wrong with those exceptions to free speech. They come about when it is deemed other rights/claims/freedoms/liberties are more important. No-one has the right to free speech, they have the right to free speech except A, B, C, D, E….
(As a liberal I don’t see much wrong with those exceptions either. I think laws like copyright might have to be very different in 50 years due to the internet, but that’s another matter.)
So as I say, speaking of rights is a rhetorical way of framing it e.g. I believe Islam4UK should not have been banned because of their rights of freedom of speech and association. That’s rhetoric, but to someone who doesn’t speak the lingo, it doesn’t provide an actual reason to abide by their rights. Saying murder should be illegal because “the right to murder isn’t as important as the right to life” isn’t an actual reason to have murder illegal. That’s a conclusion. You have to go into much more detail than that to justify it.
Where am I going with this? Well, since speaking of rights is more of a rhetorical tool, talking about the State “granting” rights is dangerous rhetoric to my eyes/ears. In the state of nature, we have the freedom to do anything. Unfortunately, that means that while Alice has the freedom to live her life, Bob has the freedom to kill her. Now maybe in this hypothetical Bob won’t be able to kill Alice because of lack of means or some such. Or maybe he does kill her, but then people in Alice’s community decide to inflict their justice upon Bob (things like this are what Giles is talking about. Rights can most definitely exist before the State, since the State is just a social construct. I do think that all such anarchist communities will devolve into Statedom eventually though as oligarchies take hold.). Either way, there is a conflict between Alice and Bob there. And the State is what we have “come up with” to decide between their claims to liberty. And as society, we have (in our case democratically, in other countries case more constitutionally) decided that Alice’s liberty is the one who should be protected.
Now you may say that in that situation, the State has actually adjudicated between different freedoms (freedom of life vs to murder), and not between rights, and rights are what come after, when the State has made a decision (or at least that people who talk the language of rights would see as the right decision). So in that situation, maybe you say, “Bob has had his freedom to murder denied him (as have other people of course), in order to protect Alice’s freedom to live, and so Alice now has a ‘right to life’ granted to her by the State”.
But because there are exceptions to these rights, they are a rhetorical device. So if we’re going to talk the language of rights, which I am happy to do, then we must be careful of the language we use. And as I said, I find talking of the State “granting” rights to be scary. It makes me think that really, we have no liberty, unless the State says so (and it is false anyway, since as Giles and I have pointed out, rights can exist before the State does). So if we’re going to use the language of rights, we need to engage with it properly and not let it get out of hand by using rhetoric that can be used against us. We need to talk of the State adjudicating and protecting rights (and not just freedoms) (Giles has a nice way of putting it: the State as the guarantor of rights), not granting them, and detailing why it should come to the decision we advocate. We need to explain why the State should (Always!) favour the right to free speech over the right not to be offended.
Perhaps I’m not explaining myself very well, but I know what I want to say, but it’s hard to explain in words. But when I hear talk of the State granting rights, it gives me the shivers. It does remind me somewhat of people who complain that victims get less rights than criminals in the Daily Mail or whatever, or calls for a “British Bill of rights and responsibilities” (and I know you aren’t anything like those people on the right of course – if you were I wouldn’t be spamming your comments thread with giant philosophical posts!).