View source for You Can't Take It With You

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[[Category:David Cay Johnston]]
[[Category:The Myth of Ownership: Taxes and Justice]]
[[Category:Liam Murphy]]
[[Category:Thomas Nagel]]
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{{DES | des = [[David Cay Johnston]]'s NY Times Book Review of ''[[The Myth of Ownership: Taxes and Justice]]''. | show=}}
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THE MYTH OF OWNERSHIP

Taxes and Justice.

By Liam Murphy and Thomas Nagel.

228 pp. New York:
Oxford University Press. $25.

When President Bush, promoting tax cuts, says people's incomes belong to them and not the government, the authors of this book say he is using fuzzy logic. Liam Murphy and Thomas Nagel, professors of law and philosophy at New York University, argue in the ''The Myth of Ownership'' that Mr. Bush's rhetoric is emblematic of a tax debate that focuses on the wrong issues because it lacks a moral foundation.

They assert that a naïve philosophy of ''everyday libertarianism'' infects American politics with a ''robust and compelling fantasy that we earn our income and the government takes some of it away from us.'' This popular myth ''results in widespread hostility to taxes, and a political advantage to those who campaign against them and attack the I.R.S.''

This fantasy grows from the acceptance by all sides in the tax debate that gross, or pretax, incomes are presumptively just and therefore the proper moral base line to begin debate. The authors say pretax incomes are morally insignificant, an idea they confess is hard to sell. They argue that ''individual citizens don't own anything except through laws that are enacted and enforced by the state,'' because without government there would be anarchy, an endless war of all-against-one that would diminish incomes and wealth, not to mention life itself. Thus it is after-tax incomes that people are entitled to own. These ideas will encounter a hostile reception from partisans in the debate of the past quarter-century, in which the prevailing political rhetoric characterizes taxes as sheer waste, an unfair drag on the most productive people and an evil.

The thoughts in this book deserve examination, especially the views of Nagel and Murphy on the self-interest each taxpayer reasonably has in the social justice purchased by hard-earned money. Unfortunately, their carefully developed arguments are mixed with a hostility to inherited wealth that will make it easy for those who are paid to promote hatred of taxes to dismiss them as soak-the-rich types with nothing new to say.

The practical problem here is that gross incomes are commonly seen as just rewards for one's commitment to work, as well as one's willingness to take investment risks. But that belief assumes that the market rewards each endeavor according to its value, an assumption that collapses under scrutiny, as the manipulations at Enron and Global Crossing remind us. Government enacts rules on employment, influences interest rates, allows widely different qualities of education in school districts and imposes countless policies that distort distribution of pretax incomes -- compared with what they might be in a libertarian world of voluntary contracts and no government. Pretax incomes are presumed just, the authors posit, for the same reason slavery was once the law of the land: pervasiveness makes legal inventions appear to be natural law.

Murphy and Nagel say using pretax incomes as the basis of debate defies logic, since ''one can neither justify nor criticize an economic regime by taking as an independent norm something that is, in fact, one of its consequences.'' To them, acceptance of pretax income as a moral base line means that ''serious public discussion of economic justice has been largely displaced by specious rhetoric about tax fairness,'' resulting in a ''radical climate'' of tax proposals favoring the rich.

Taxes, they write, need to be examined in the context of government spending so that one sees both costs and benefits. The constitutional mandate to ''promote the general welfare'' should guide tax policy, not theories about lowering marginal tax rates and favors for savers. They even argue that it may be reasonable to tax people with similar incomes differently if that achieves a social good. The measure of justice and fairness in tax, they emphasize, should be the outcomes of tax policy, especially whether each newborn gets enough of society's resources to have a fair shot at success in life. They argue that poverty is bad for rich and poor alike, and that the poor, especially when it comes to educating children, have one of the strongest moral claims on tax dollars.

They object to a myopic focus in the tax debate on how tax burdens are distributed among income classes. In this they ignore a simple truth: for the public such measures are much easier to assess than is determining government's success in promoting the general welfare.

The authors call the current policy of forgiving capital gains at death ''an outrage.'' When combined with other tax breaks for those with assets, it is, they say, ''an egregious injustice in the current tax scheme,'' because it perpetuates inequity and lavishes rewards on those who are fortunate in their ancestry but may contribute nothing useful to society. Their solution would be a fundamental reform: make recipients of large inheritances and gifts pay taxes, just as wage earners must.

Nagel and Murphy give too little attention to the role of taxes in creating wealth. Peace is a boon to hoteliers, Conrad Hilton pointed out in his will. Without vast taxpayer investments in keeping the peace, as well as in building roads and airports, his fortune would have been much smaller. Many modern billionaires owe much of their wealth to the taxpayers for investing in education, and the scientific advancements on which their products depend. Murphy and Nagel do not examine whether it would be just to look on such big economic winners as successful investments of tax dollars, and then taxing these winners to insure that society has sufficient resources to invest in each new generation.

They also ignore the morality of tax enforcement and its role in tax justice. Is it moral to prosecute and imprison an illiterate former cotton picker over less than $100,000 in taxes unpaid over the years while looking the other way when two billionaires go 30 years without filing tax returns, as the I.R.S. and Justice Department have done within the last five years? Is it is fair to audit the working poor far more intensely than everyone else? And just how does any of this promote the general welfare?

Murphy and Nagel offer ideas that would improve the national debate over how we should tax ourselves, even if their views never gain popular acceptance. What is more likely, unhappily, is that reasoned suggestions -- from many sources -- will be drowned out in the din of mindless antitax sound bites.
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