The Ethicist: Five Reasons to Tax the Rich (#2)

The Spectator’s Ethicist, Rachel Haliburton, provides convincing — and sometimes counter-intuitive — arguments as to why making the rich pay their fair share of taxes benefits us all.(Read Reason #1)

In my last column, I began exploring some arguments that might be given in support of the claim that it is morally justifiable to raise income taxes on the well-off (for the purposes of this discussion, defined as people making $100,000 a year or more).

Since all arguments about fair rates of taxation are, at their heart, ethical ones (albeit ones that are often dressed up as “economic truths”), both those who argue that income taxes on the rich should be lowered and those who make the case that they should be raised, are making moral judgments about the appropriate role of the state in redistributing wealth and providing goods and services to their citizens.

 

Last month, my friend political and moral philosopher François Coté-Vaillancourt, argued that it is the wealthy, not the poor, who disproportionately benefit from the goods, both material and social, that society has to offer. This month, I want to explore, with his help, another argument which turns conventional wisdom on its head:  societies that impose higher tax rates on the wealthy are far more efficient than societies that don’t.

This argument runs contrary to conventional wisdom, because it is by now a commonplace truism – one widely accepted as gospel truth, at least in some circles – that the private sector is more efficient than the public at providing goods and services (since people working in the private sector have to “watch the bottom line,” while those working in the public sector can act like lazy little piggies feeding at the government trough, who will never lose their jobs no matter how badly they perform in the workplace, and can look forward to collecting cushy pensions when they retire), and that lowering taxes for the wealthy will enable them to spend their money in more efficient ways which will ultimately benefit everyone.

For example, creating more private options in healthcare, which will allow the less-taxed wealthy to take themselves out of the public system thereby freeing up beds and operating rooms which can now be accessed by those who are less fortunate; likewise, if taxes on the wealthy are lowered, they will have more money in their pockets which they can use to send their children to private schools, thereby freeing up educational resources such as classroom computers and the time and attention of teachers, which can now be used by and directed towards children from poorer families.

 

To understand what is wrong with this argument, and why a case can be made that higher taxes on the wealthy can lead to a more efficient society which is beneficial to everyone, we need to pause briefly, and consider why it is that societies exist at all. In simple terms, societies exist to allow each of us individually, and all of us collectively, to live better lives than we would be able to if we had to rely entirely on our own efforts, or even on the combined efforts of our extended families. From this perspective, rich and poor, young and old, strong and weak, are participants in a mutually beneficial social arrangement: the rich, just as much as the poor, need protections for their property and their persons, those who are strong and healthy today must recognize that they may be weak and sick tomorrow, so it follows that they must help those who are currently vulnerable so that they might themselves receive similar help in the future when they are no longer able to take care of themselves.

The great moral triumph of welfare states – for example, Canada, many countries in Europe, Australia, and so-on – was to construct social and political institutions which recognized the existence of these mutual obligations, and determined that the needs of their members should be met, not as a result of individual charity, but as a matter of social justice. All citizens, that is to say, even the poorest and most vulnerable, are, in the ethos of the welfare state, deemed to have the right to healthcare, a decent standard of living, shelter, food and education. Since the poor are unable to contribute as much, in financial terms, as the rich, to the construction and maintenance of the social and political institutions that ensure that these basic needs are met, the rich are necessarily asked to contribute more; however, it would be a mistake to think that it is only the poor who benefit from these social and political arrangements: the rich do as well. (This is a point that I will explore in more detail in future columns).

Bras d'Or Elementary School (. (Source: Cape Breton-Victoria Regional Centre for Education)

Bras d’Or Elementary School. (Source: Cape Breton-Victoria Regional Centre for Education)

Consider, for example, the provision of healthcare. Sudbury, where I live, is a relatively small city (with a population of about 140,000, dispersed over a large geographic area), located in the sparsely populated region of Northern Ontario. However, Sudbury is home to two colleges, a university with a medical school and a large hospital, all of which receive the majority of their funding from the public purse.

Given the low population density and remoteness of this area, there would be little reason for the private sector to create or sustain the hospital, the university or the colleges. And it is equally clear that not even the most enormously wealthy among us, even if they could afford to hire a full-time personal physician, would be easily able to fund that physician’s entire education and training, from paying for the elementary and high schools in which she begins her education (including the salaries of her teachers), to creating and sustaining a university and medical school in which she can study (including the salaries of her professors), to building and staffing a hospital which teaches her how to practice medicine (including the salaries of the physicians who are training her). In short, even the very wealthy benefit from the redistributive policies of the welfare state, and from the creation and maintenance of public institutions (like universities, medical schools, and hospitals) which allow all citizens to have access to good quality education and healthcare.

As François put it:

The welfare state is not only good or ethical (in that it takes seriously the moral obligation to ensure that all of its members have at least their most important needs met), it’s also very efficient. Each person paying private insurance is much more costly than a public system.

This point is starkly illustrated by the condition of healthcare in the United States (a country which remains an anomaly in the Western world in not providing all citizens with publicly funded healthcare), which is primarily run as a for-profit business, in line with the values of the private sector: while healthcare in the United States is the most expensive in the world, millions of American citizens have difficulty accessing it, and healthcare outcomes for these citizens lag far behind those in many other parts of the world. And even in the US, parts of the system can only be maintained with funding from government. In other words, Americans have the worst possible arrangement for healthcare: a system which reflects the high cost of for-profit healthcare, and which lacks the efficiency of publicly-funded systems.

 

While public systems, as they are not forced to compete in a competitive market place, may offer fewer options than private ones; in the case of many social goods, this is not a problem. Consider electricity: to quote François again:

Electricity is uniform, so you don’t want blue electricity, pink electricity, golden electricity you simply want electricity.

North Sydney Library. (Source: Cape Breton Regional Library http://cbrl.ca/)

North Sydney Library. (Source: Cape Breton Regional Library)

Moreover, in sparsely populated areas like Northern Ontario, parts of the Maritimes and elsewhere in Canada, it makes sense for governments to ensure the provision of electricity, since private corporations could not make enough money to make it worth their while to offer service in these areas. And the same is true, of course, in the case of healthcare:

If you live in a sparsely populated region – for example, in a place like Sudbury – or if you’re far away from city centers, the market is not going to provide healthcare, so healthcare will be unavailable if you don’t go around the market with a state system.

In short, far from the welfare state generating inefficiencies, it is actually highly efficient in terms of providing needed goods and services to its citizens – far more efficient in terms of this task, indeed, than any private system would be.

I asked François to speculate as to why so many people today have accepted the opposing position and believe they would be better off with lower taxes and privatized services? He responded that many of us have become complacent, and take what we now have for granted.

A lot of people in the 20th century, when the institutions and policies of the welfare state were being created, had known poverty themselves. They had been through the Great Depression, the Second World War, so there was this sense that, ‘Hey, we can do better,’ but since the late ’70s, early ’80s, in many countries, we’ve kind of forgotten what it is to live in a savage, cruel, cold society. We believe that things will go well, and so why should we pay more, if we compare things going well to things going well with high taxes – meh, why pay more? So the discourse has changed in many ways. More recent generations see the public system as something cumbersome, something inefficient, when it in fact is usually more efficient than private options such as an insurance scheme.

To which I can only add this final thought: our public institutions are fragile, and they need our support, not only financially, but also through our willingness to recognize their value and defend their existence. While there might be any number of ways in which they can be improved, depriving them of resources and believing that the private sector can do a better job of offering the services they provide will result only in a lower quality of life for everyone, rich and poor alike.

 

Rachel Haliburton

Wolfville native Rachel Haliburton teaches philosophy at the University of Sudbury. Her latest book, The Ethical Detective: Moral Philosophy and Detective Fiction, was published in February by Lexington Books.

 

 

 

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