Most people agree that if you own a plot of land, you are entitled to the goods it produces, and a 1/1000th share of ownership in a corporation entitles you to 1/1000th of its revenue. Similarly, when the state taxes at a certain percentage, it claims partial ownership of the citizen in proportion to the amount taxed. In a scheme of progressive taxation, the state claims a greater share of some people’s life than others.
Taxation is more than just a material loss. Taxation is the state taking away our most precious commodity, time, with the threat of a prison sentence. If you work 40 hours a week and are taxed at 15%, the state has appropriated six hours of your week, time you could have spent with your family or pursuing your passions. While the six hours lost to the government is not forced labor, it is not far off. The only difference is that taxpayers can choose how they work. For that period, the state coerces the taxpayer into working to its ends. In the eyes of the state they are not a free person but a commodity. They become a means to an objective.
People who work or earn more sacrifice a larger share of their lives to the state and as a result face unfair bias. Person A who works 50 hours and is taxed at a rate of 25% loses 12.5 hours to the state while person B works 30 hours and is taxed at 15%, losing 4.5 hours to the state. This uneven burden is not moral or just. Most people would say that it is not okay for the government to force Person B into eight hours of extra labor to make up the difference. Even if they worked the same amount of hours, progressive taxation would discriminate against one of them because of their income. As Robert Nozick puts it, Person A may like to go to the cinema and requires extra income to do so while Person B prefers to look at the sunset. It is not characteristic of a free society for the state to coerce Person A more than Person B solely because their goals require more material means.
Discussions surrounding morality and taxation raise questions at the very root of government legitimacy. If our government derives its powers from our consent and individuals cannot offer rights or privileges to the government that they do not possess, does anyone have the right to offer up a greater chunk of their neighbor’s life than their own?
Progressive taxation violates a basic right to equality under the law. Individual rights are sacrosanct independent of how much money someone has in the bank. Once we have decided to justify infringements on natural rights under the pretense of a collective good, there is nothing left to prevent more heinous atrocities other than social norms. Norms that can deteriorate rapidly in times of distress.
A flat tax would take the same percentage of everyone’s taxable income. There are no brackets. If correctly designed, a flat tax is fair and not harmful to the poor. Under this system, income up to the poverty line is not taxed. For example, the federal poverty line for a family of four is $24,300. With a well designed flat tax, a family of four will not pay taxes on the first $24,000 they earn. A tax rate of 15-20% would lower the effective tax rate for low-income families.
This scheme acknowledges that the state has no right to take from the essential necessities of a family or individual. Aside from basic needs, each citizen gives an equal proportion of his working life to the state.
On the practical, as opposed to principled, side of the argument, a flat tax would also help erode the tax privileges of the ultra-rich and large corporations. The 400 highest-earning taxpayers in America paid less than 17% of their income in taxes. The top 1%, excluding the ultra-wealthy, would see a very modest reduction in their current average effective tax rate of 24%. A flat tax would close all loopholes and exemptions, except for the basic needs deduction, making it more difficult for legislators to create laws that give privileges to the ultra-wealthy at the expense of everyone else. The simplification of the tax code would make it more accessible and by virtue of its accessibility, more democratic and transparent.
Groups with political clout and large resources also use the tax code as a weapon. The IRS’s targeting of conservative groups in 2013 is only the latest scandal. During the George W. Bush administration, the NAACP claimed that the government used increased tax scrutiny to stifle criticisms of the President. Nixon’s Bill of Impeachment charged him with using the IRS to target political enemies. A flat tax would help fix this problem.
Additionally, a substantial amount of resources in our economy are tied up in complying with tax regulations. A 2008 report by the IRS stated that U.S. taxpayers and businesses spend about 7.6 billion hours per year dealing with filing requirements. That is the equivalent of 3.8 million individuals working 50 weeks a year at 40 hours per week. The cost of complying with personal and corporate taxes amounts to 193 billion dollars or 14% of total tax revenues.
The state has no right to claim greater ownership in certain citizens than others, but a progressive tax does just this when it unevenly claims people’s time. A flat tax with a basic needs deduction would make taxation fair without drastically shifting the burden to the lower and middle classes. Simplifying the tax code would prevent the privileged from exploiting loopholes and lobbying for privileges. It would also remove the enormous amount of opportunity and time tied up in the filing of personal and corporate taxes, freeing up a significant amount of resources in our economy and lives.
Featured image courtesy of the AP/Al Behrman.
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