Justifying Progressive Taxation

About time Atlas shrugged? The creator of this 19th Century political cartoon had no difficulty in identifying who carries who in capitalist society. Ayn Rand notwithstanding, it is the countless millions of proletarian Atlases who prevent Capitalism's world from sinking. Progressive taxation is the price the capitalists' pay for keeping their feet dry.

IT’S ALREADY BEGUN – the wealthiest New Zealanders and their hired guns are already laying down a curtain of covering fire for what looks like being the most inequitable Budget since 1991. The report of the hand-picked Tax Working Group has already (and very predictably) recommended a reduction in the top marginal tax rate from 38 to 30 percent – to be paid for by an increase in the rate of GST from 12.5 to 15 percent. And to head-off the inevitable protests from the Left, the editors, journalists and columnists of the Right are already casting (here and here) the objections of the nation’s "progressives" as manifestations of "the politics of envy" and plain, old-fashioned class hostility.

And they’re winning.

Most left-wingers simply assume that "progressive taxation" – the more income you receive, the more tax you must pay – requires little or nothing in the way of economic or philosophical justification. It is simply presented as "a good thing" – like Motherhood and Apple Pie. If its defenders feel at all obliged to justify the fact that 44 percent of income tax receipts are extracted from just 10 percent of the tax-paying population, they do so by pointing out that this same group of taxpayers controls more than half the nation’s wealth. If their incomes weren’t redistributed by means of progressive taxation, the say, our society would rapidly become even more unequal than it is at present.

But, once again, the Left is assuming that everybody, like themselves, looks upon inequality as "a bad thing" – something which, if it can’t be entirely eliminated, must be ameliorated to the maximum extent possible.

But is this true? Do the wealthiest layers of our society, and those who aspire to join their ranks, really believe all human-beings are equal? Or that our society should be organised to give every one in it "a fair go"?

In my opinion, the answer to that question is: "No – they don’t." Reading the columns and blogs of the Right’s leading apologists, I get the distinct impression that the doctrines of Social Darwinism command a considerable following in this country. Just consider the reaction elicited by Social Welfare Minister, Paula Bennett, whenever she exposes the worst excesses of the beneficiary class. Think about the widespread support for Anne Tolley’s campaign to impose a test-based "standards" regime on our educational system – a policy which the upper and middle classes instinctively recognise as likely to rebound to their social and economic advantage.

No. I don’t think all New Zealanders view inequality as "a bad thing". Not at all. Not by a long shot.

The Left needs to ask itself how the notion of "the more you earn, the more you pay" ever got established. How were the upper and middle classes of modern capitalist societies ever persuaded to go along with fiscal policies so manifestly designed to limit both their wealth and their power?

The answers might surprise them.

For a start there was the enormous moral and social force of the Judeo-Christian and Islamic religious traditions. The Jewish prophets reserved their most devastating condemnations for those who refused to share their wealth with the poor; who "ground the faces of the widows and orphans". Jesus famously declared that it was "easier for a camel to pass through the eye of the needle, than for a rich man to enter the Kingdom of Heaven". Philanthropy was similarly mandated by the Prophet Mohammed – all Muslims are required to contribute to the maintenance of the poor.

In an irreligious age, and in a nation as secularised as New Zealand, it is easy to forget that, in the past, conformity with these moral precepts was a condition for the salvation of one’s immortal soul. Jewish, Christian and Islamic culture expected people to turn over a significant portion of their wealth to their less fortunate brethren. After all, to see oneself as a child of God more or less mandates a belief in equality and fraternity: if God is our father, then we are all brothers and sisters.

These fundamentally religious precepts flowed naturally into the secular faiths of democracy and socialism.

The French Revolution struck down the notion that inherited privilege had any legitimate role to play in the modern age. The new capitalist wealth, however, was earned. In stark contrast to the wealth of the aristocracy, argued the bourgeois revolutionaries, the capitalist’s profits were the product of individual wit and energy and, therefore, manifestations of democracy.

Classical Marxism dispelled this notion with a vengeance, imbuing wealth with the same moral taint as the teachings of Jesus, Mohammed and the Old Testament prophets. According to Das Kapital, the capitalists appropriated the "surplus value" of their worker’s labour in the form of profit – exploiting the new industrial proletariat no less ruthlessly than their predecessors, the feudal landlords, had exploited their serfs.

The progressive income tax was simply "social democracy’s" means of clawing back the proletariat’s pilfered sweat and talent. Not for nothing was the second of Marx & Engels’ ten demands in The Communist Manifesto: "A heavy progressive or graduated income tax".

The Right, at least, recognises the revolutionary political, social and economic objectives behind the institution of progressive taxation, even as it rejects and denies the religious and/or ethical justifications for its imposition.

In the months ahead, New Zealand’s left-wingers will have to learn once again what their parents and grandparents came to grasp only after long struggle and bitter experience: that equality and social justice are never simply given; they must be fought for – and won.