Matthew T Grant

Elizabeth Warren has been enjoying a kind of viral popularity on Facebook due to some statements she made, apparently as part of her stump speech, which can be summed up with these words, “There is nobody in this country who got rich on his own.”

Warren lays out the basic rational for taxation by pointing out that wealth is a social good. In order to make money, there has to be a monetary system in place; there have to be laws governing commerce and courts able to enforce such laws; there needs to be infrastructure allowing for the free distribution of goods and the free movement of the populace; there has to be an army providing for the common defense. Etc.

Long story short, if you are going to make money by pursuing free enterprise, you need to pay the government for services rendered.

Seen from this perspective, taxes are just a rational exchange between entrepreneurs and the civil authorities: I’ll pay you to keep the system running smoothly, and you’ll allow me to do my entrepreneurial thing.

The problem arises, of course, when you get into the nitty-gritty of how much exactly the one should pay the other.

Does a percentage of income really make sense? Shouldn’t the percentage actually vary based on the actual usage of said services? If you are not using the highways, for example, to conduct business, should you have to pay for them?

Also, if we are going to make the argument that taxes are just payment for services rendered, shouldn’t the cost of those services be laid out? Also, shouldn’t you be able to decide which services you prefer? What if, for example, you think that local security could be better maintained by hiring your own private forces? What if you prefer to set up your own private school system for the education of employees or future employees? Etc.

The fact that things don’t work this way (a sort of à la carte approach to taxation and government services) highlights the fact that taxation is not just a question of “paying the piper.” It is not a rational exchange between rational parties because the state is not just another business. The state has powers that no business or individual has and the state doesn’t really want competition, for example, when it comes to enforcing laws or defending borders. And, in fact, most business folk don’t want that either.

What business folk and everyone else generally want, and are will to pay for, is stability. And if the tax code is a little fuzzy, it’s because putting a price on stability, or even enumerating all the acts of state that go into properly maintaining it, is a pretty fuzzy undertaking.

Now, when the state has a monopoly on violence, as the militants used to say, that can actually promote stability, so long as the state itself is not run by or beholden to a specific person, clan or clique. That is, if the state is perceived to be more or less neutral, if it is not using its powers of taxation to fill the coffers of specific people and their cronies, then everything is hunky dory.

If, however, there is the sense that the state is biased, then people begin to question its legitimacy. Such questioning may lead to insurrection and even civil war.

But shouldn’t perhaps, the state be biased, in some regard? Naturally, if the state is biased against the majority (think: South Africa under Apartheid), we consider this wrong. Likewise, if the state is biased against a specific minority (Nazi Germany, the South under Jim Crow), we also take issue.

But if the state were biased against those who might, thanks to their wealth, exercise undue influence over its workings and, perhaps, actually further bias the system in their favor—and I’m not talking about “in favor of business” but, rather, “in favor of specific businesses and their owners”—that would make sense, right?

Now what would happen if someone said, “The wealthy should pay a greater proportion of their income and net worth in taxes because that’s the only way to prevent our democracy from lapsing into some oligarchic or outright plutocratic state,” that would also make sense, right?

Note (added September 26, 2011): The “bias of the state” is the true object of class warfare. The class that sets and controls that bias, is the class that wins.