Thurman Hart

A taxing social contract

There is no way to talk about "financial justice" without addressing the issue of taxation. If you work, it hits you before you even get your paycheck. Furthermore, the conservative revolution has targeted no aspect of government more than taxation - with conservative think tanks pushing any number of "fair" tax proposals, nothing is more vital to the cause of financial justice than understanding the justification for taxation and how it is implemented. I hope to use my guest posts here at DMI to address some of the issues surrounding taxation because it is so pervasive and so misunderstood.

For example, the traditional thinking on taxation is that it is a coercive power of government used to forcibly take something of value away from citizens. Not surprisingly, when worded this way, most people take a dim view of the entire idea of taxation. Taxation borders on theft from this ideological perspective. But it is important to understand that it is nothing more than an ideological perspective - and one that aims at dismantling the ability of government to act.

This is because of a fundamental truth of taxation as a limit on governmental powers. When government needs goods or services, it can either assume the power to appropriate them without payment or it can purchase them. If it is to purchase them, then it must obtain revenues - and that means taxation. Since a democracy gives the citizenry the ability to influence the decisions of government, taxation in a democracy is not a simple coercive force, but a collaborative enterprise. We decided together who is to be taxed, on what, and how much.

It is at this point that I like to remind people that the patriots of 1776 did not rebel against taxes. They rebelled against "taxation without representation". The difference is important because it shows that they were not setting out to hamstring their new government, but to make it responsive to the demands of the citizenry. Those demands must include their demand for justice, because it makes no sense that they would fight a war to free themselves from tyranny only to allow injustice to flourish under their watchful eye.

The reason, then, that we allow government to enforce tax decisions with coercive power is because we realize that monetary decisions hold an inherent reward for misdealing. Put simply: cheating the taxman carries its own financial reward and is self-reinforcing. So our social contract of taxation must empower someone somewhere to enforce our decisions. In a very real sense, the taxman is the direct employee of the taxpayers in aggregate and the defender of democratic decisions. Democracy, after all, does not mean that someone can decide to play by their own rules just because they don't like the outcome.

Taxation is the fundamental glue that holds together our social contract. It is what gives our government the ability to move and act and carry through on every other decision. This is why it has been ground zero in the attack on government. It is fundamental, not just to "financial justice", but all forms of justice - because governments are instituted to guard the rights of men and they must be empowered to defend the rights of men, or they are simply a cruel hoax that cannot deliver what they offer.

Obviously, there is a lot to be unpacked in such a fundamental issue. I cannot hope to do it justice in a short blog post. However, I hope that it at least enough to spark a discussion about the primary function of taxation in any system of government, and the justice it is instituted to pursue.

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Posted at 7:21 AM, May 15, 2008 in Financial Justice
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