Tax Fairness versus Tax Morality

Published March 1, 2004

Politicians talk about “tax fairness,” but never about tax morality. That’s because their notion of a fair tax is really an immoral tax, for it is based on theft (some people taking money from other people for themselves). Let’s look at examples of moral and immoral taxes and four principles to use in determining which is which.

The first example is gas taxes. The portion of gas taxes that funds roads is a moral tax, because the users of roads pay for the cost of the roads and do not shift the cost to non-users.

On the other hand, the portion of gas taxes that funds mass transit is an immoral tax. It is wrong for mass transit riders to take the money of non-riders instead of paying the full cost of their ride in fares.

If you think this is a minor matter, think again. Someone who takes the typical light-rail system to work everyday over a 25-year career will receive $100,000 in “subsidies,” which is a euphemism for “stolen money.”

Direct taxes and fees, such as a city water bill based on water usage, are the most moral way of paying for government services, because the users pay directly for the services and cannot stick their neighbor with the bill.

This leads to our first principle of taxation:

Principle One: The most moral way of funding government services is through direct taxes and fees.

Of course, it is not practical to charge citizens directly in taxes or fees for many government services. In such cases, general taxes are necessary, and the following principle applies:

Principle Two: General taxes are moral if they are taken from all citizens in equal proportions and used to the extent practical for the equal benefit of all citizens.

An example of the above principle is taxes for national defense. Some would argue taxes are immoral if used to fund what they see as an unjust war. They would have a point. But in such a case, it is the war that is immoral, not the taxation. This leads to a third principle:

Principle Three: The morality of taxes should be judged separately from the morality of the use of the taxes.

Applying this principle in the national defense example, the use of the taxes, war, may be immoral, but the taxes are moral, since they do not take money from some citizens for the benefit of other citizens.

Contrast this with Medicare taxes for prescription drugs. In this case, the taxes are immoral, because they are a form of inter-generational theft. They take money from younger generations for the benefit of the retired generation. However, the use of the taxes, buying medicine, is not immoral, for there is nothing wrong with seniors buying medicine.

Similarly, it is moral for citizens to help those in need. Not only that, but a case can be made that it is immoral for someone not to feed the hungry and care for the sick. But this is a separate issue from the issue of taxation. Not only is the government lousy at distinguishing the truly needy from the phony needy, but it is wrong for the government to force some citizens to support other citizens through the tax code. Which brings us to our fourth principle.

Principle Four: Compassion and charity are personal and religious matters, not matters for the tax collector.

When Principles Are Violated

Violating the four principles has resulted in over half of government revenue being taken from some citizens for the benefit of other citizens. Politics has become a gigantic game in which the objective is to have the government take someone else’s money before the other person has the government take your money. Stated differently, over half of government activity is funded by theft. Thus, the power and reach of government and politicians would be cut at least in half if the four principles were followed.

Violating the principles also has resulted in uneconomic decisions, wasted capital, and rising costs. When someone else is picking up the tab, cost is no object to the recipient. It is not a coincidence that the two most socialized areas of the economy, health care and K-12 education, are the most inefficient.

Admittedly, there are gray areas with the principles, as there are with any philosophy of government. In such cases, the best course of action is to discuss why the principles apply or don’t apply, and then to vote on the issue. This is quite different from what happens today, when there is no discussion of guiding principles and voting is based solely on self-interest.

What about Medicare? Is this a gray area? The answer is no. Medicare is immoral, because much of the cost is shifted from users to non-users. It also is immoral because it turns doctors into indentured servants of the state, but that is another subject for another day.

For Medicare to be a moral program in terms of taxation, the payroll taxes paid by individuals over a lifetime would fund the benefits received by them in retirement. Medicare would be a true insurance program and operate similar to life insurance, in the sense that payroll taxes, or premiums, would buy a defined benefit. And, as is the case with life insurance, grandparents would not send their Medicare premiums to their grandchildren or strangers.

What if premiums paid did not end up covering 100 percent of future medical expenses? The difference would be paid out-of-pocket, or in the case of the poor, covered by private charity.

Such a program would be both fair and moral, which is why politicians who believe in state plunder won’t embrace it.

Craig J. Cantoni is an author, columnist, and founder of Honest Americans Against Legal Theft (HAALT). His email address is [email protected].