Director and co-founder of the Adam Smith Institute
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Tax eats into income – the rewards of work. It makes it less worthwhile for people to earn, save and accumulate the capital goods that will raise productivity and generate wealth for the whole community.
Taxes on these things have the economically and morally debilitating effect of promoting idleness and indebtedness – which may explain some of our present predicament.
There is a strong argument that people who create things should enjoy the fruits of their creativity. It is, after all, their labour and ingenuity that produces those fruits. People have a right to use their natural talents freely and without others impeding them, as taxation surely does. Tax stifles people’s creativity, which harms us all.
Inheritance taxes also discourage saving and capital accumulation. It is also at odds with our basic ethical programming – since the drive to provide for one’s friends and family, and in particular one’s children, is a strong human instinct. The tax hits families at the very worst time of their lives – after bereavement. It encourages people to rearrange their affairs to avoid it; with the unfortunate result that their assets are likely to produce less than they might, making them and their families worse off. Hardly a just tax.
Precisely because of these perverse effects on creativity and productivity, high-tax countries grow more slowly than low-tax countries. They export less and create fewer jobs. That is bad news for the millions of individuals whose prosperity is directly diminished. But not only that, they also harm anyone who depends on government and charitable support, because a less wealthy public has less to spend on such causes.
Is taxation theft? Some people say so, but the term is loaded and therefore perhaps best avoided. Unlike theft, taxation is usually imposed only by the decision of a majority, after public debate, and for public rather than private purposes.
Nevertheless, if two strong people took money from a third by force and spent it on themselves, we would certainly call it theft. If 51 per cent take money by force from the other 49 per cent and spend it as they think fit, is there really such a big difference?
But such name-calling is hardly necessary. As we have seen in this series, high taxes are plainly not moral, or generous, or the hallmark of a humane society. On the contrary, they are coercive, they undermine personal morality and responsibility, they diminish prosperity and crowd out charity, they are divisive and inefficient, they reward power and discourage creativity and they turn both people and governments into cheats. The moral case against them, in other words, is quite strong enough.
Eamonn Butler is director of the Adam Smith Institute and has a PhD in Moral Philosophy from the University of St Andrews in Scotland.