More on the flat tax

One of the things which bugs me about the whole flat tax discussion is the attempt by (generally) left wing opponents to restyle it as a principled, deontological argument of left versus right, redistributionism versus laissez faire. But, this really is a consequentialist question - would such a tax be more efficient? - and if it is possible to settle this question, there's no reason why such a tax couldn't be adopted by the redistributionist left. In fact there are many opponents of flat taxes on the "right" because it is much easier to raise a flat tax than a progressive tax - the boiled frog syndrome - and flat taxes per se don't do anything to scale back the size of the government. What depresses me reading left wing critiques of the flat tax such as Hutton's or that of his colleague Victor Keegan, the week prior, is that they offer the flimsiest palimpsest of a consequentialist argument, reserving their passion for normative statements such as "There is something about flat rate taxes and social justice that just do not mix." This type of conservative* social democracy is doomed, wedded as it is to means, however outdated (or even tried-tested-and-failed), of nationalisation, punitive taxation instead of aims of freedom and fairness .

* in the literal meaning - the opposite of radical.

Comments

[Ciarán]

This type of conservative* social democracy is doomed, wedded as it is to means, however outdated (or even tried-tested-and-failed), of nationalisation, punitive taxation instead of aims of freedom and fairness.

Where is anyone arguing for punitive taxation? Or, why is progressive taxation necessarily punitive? That would entail a different argument.

Second, I'm sure Will Hutton et al are well able to distinquish between means and aims. They simply argue that flat taxes are not a means to achieve the aims they have in mind.

Third, there are a number of reasons why the efficiency of a taxation regime isn't the only measure of whether or not it should be adopted. The end of your post suggests that you acknowledge this too.

And finally, the deontology/consequentialism distinction isn't helpful here. It is possible to found one's moral outlook on a deontology but, when it comes to things like tax-policy, engage in consequentialist discussion. That is, one asks whether the consequences of policy x are compatible with the duties imposed by one's moral outlook. In this case, both of us roughly agree on the basic principles by which society should be formed (freedom and fairness etc), but we disagree on how best that might be achieved.

And, by the way, it would be odd to think that a person didn't begin from a normative position when it came to political thoughts.

[Frank McGahon]

Where is anyone arguing for punitive taxation?

Pullman's words were:

..to restore the principle that the wealthiest people should bear more financial responsibility than they've been required to do under the filthy-rich system: so income tax for the rich should go up.

Progressive tax isn't necessarily punitive per se, (although a simplified one might be) but at the type of high marginal rates it often creeps up to, it doesn't take long to get punitive in effect and for many soak-the-rich pundits in intent too.

Second, I'm sure Will Hutton et al are well able to distinquish between means and aims. They simply argue that flat taxes are not a means to achieve the aims they have in mind.

I suppose my point is that they are too bound up with the means and spend too much time in a rearguard action defending those means without ever looking up to see whether these traditional means generate the aims and outcomes they favour. It shouldn't take too much intellectual honesty to recognise that traditional left wing economic policies (many of which Hutton still favours although not, apparently, as many as Pullman favours) have failed in the past and are likely to fail in the future at achieving those aims.

Third, there are a number of reasons why the efficiency of a taxation regime isn't the only measure of whether or not it should be adopted. The end of your post suggests that you acknowledge this too.

Yes, but it is very important that efficiency considerations aren't so blithely disregarded. It serves no end that the massive deadweight costs which are traditionally associated with complex tax codes are incurred. This cost doesn't translate into a benefit for anyone - it's a negative sum game.

My point about the deontological versus consequentialist arguments, (however poorly made!) was not so much to trumpet the virtues of the latter (although that is my own leaning) but rather to try and point out that while those on the left object to this tax on moral or principled grounds, (albeit sometimes with a thin utlitarian veneer) they mischaracterise the support for a flat tax as if it were based on a question of principle. Few of those who support the flat tax do so because of some principle about property rights (anyone who is motivated by this is more likely to argue against tax at all!) but instead because they see it as a liberlising measure for the economy that will, counterintuitive as it might be to dear old blinkered Will Hutton, lead to better and even fairer outcomes. My impression is that Hutton, Keegan et al (especially with the "batty" comment) start off with an a priori position that "There is something about flat rate taxes and social justice that just do not mix" and miraculously find that their deliberations on the tax generate this precise conclusion.

[Ciarán]

I wish I could keep this up, but my employers might well string me up if I don't get a couple of reports finished! Still, I'll just note that you've shifted to 'punitive in effect' as a measure. What does this mean? I take it that what you are getting at is that something becomes punitive when certain consequences follow (tax avoidance, lack of enterprise etc). If I'm right, it's an odd definition of punitive, since it implies that tax evasion ought to determine the level at which taxes are set. Anyway, I wonder if you have any data to establish the point at which this happens?

Also, I didn't think your deontology/consequentialism point was all that clumsy (and that's not precisely a jibe I can throw considering the original post that kicked this particular spat off!). But I would suggest that there are very few people who are totally consequentialist. You seem attached to (negative) freedom and fairness (by which you seem to mean economic liberty combined with a basic equality before the law). Well there are your principles. I guess, if I'm not misrepresenting you, that you're not attached to them because they lead to some other thing, but simply because they are goods in themselves.

Anyway, back to feeding the bureaucratic hand that bites me!

[Frank McGahon]

Still, I'll just note that you've shifted to 'punitive in effect' as a measure. What does this mean?

It means you get punished for earning more money, by having a huge chunk of those extra earnings confiscated, which is an inevitable consequence of high marginal tax rates.

The evasion issue is different. My view is that it will always be difficult to achieve compliance if either a) the system is complicated and permits many interpretations or b) the tax rate is perceived as unfair by those who have to pay it. If you have a high marginal rate you make evading tax much cheaper - the benefits of evading are higher, more people are likely to evade, meaning safety in numbers, you have a better chance of avoiding detection. If you have a low marginal tax rate, evading is more expensive, for many it's not worth the bother and if there is a perception that fewer are evading you have a better chance of getting caught.

But I would suggest that there are very few people who are totally consequentialist.

Of course you have to start from somewhere and it is true that you have to build a consequentialism from some sort of basic principles. In terms of my own preference for negative freedoms versus positive freedoms, I'd say there's a bit of consequentialism there. The reason is that positive freedoms entail restrictions on others while negative freedoms don't and I don't see that it is at all an easy task to draw a boundary around these positive freedoms. Further, positive freedoms can be quite seductive (how can you be against a right to housing?) as asserting them strongly implies that it isn't a zero or negative sum transaction. Further, I'd quibble with "economic liberty", I am in favour of economic liberalism, but that is because I'm in favour of (classic) liberalism generally and I don't think there is a line between economic and personal freedom - personal freedom involves many "economic" transactions. If you stop someone from buying hash from a dealer or if you refuse to allow a theatre to show a play to paying customers are you restricting their personal or economic freedoms?