The Ethicist: Five Reasons to Tax the Rich (#4)

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 #1Reason #2 and Reason #3. And for proof the Ethicist is in tune with the current Zeitgeist, read about US Congresswoman Alexandria Ocasio-Cortez’s plan to — you guessed it — tax the rich and US Senator and potential Democratic presidential nominee Elizabeth Warren’s plan to introduce a 2% wealth tax.)

 

For the last few columns, I have been exploring, with the help of my friend political philosopher and ethicist Dr. François Coté-Vaillancourt, a number of arguments which make the case that it would be a good thing for all of us if taxes on the wealthy were raised. Some of the arguments we have considered – including the one that I will discuss in this column – turn conventional wisdom on its head.

Canadian tax form.

All of us, I dare say, are familiar with a very common objection to any proposal which suggests that taxes on the rich should be raised: “It would be bad for business.” This claim is often supported with the following assertion:

If the rich have to pay higher taxes, they’ll move somewhere else where taxes are lower, and they’ll take their businesses with them, leaving their current employees out of work, and benefiting workers in their new, lower-taxed homes.

The contrary argument goes like this:

Currently, those of us lucky enough to have ‘good jobs’ expect our employers to provide a benefits package which includes dental care, drug coverage, disability insurance, and so-on. What this means is that the employer is disadvantaged in two ways by our current arrangements. First, the employer must find a way to offer these benefits and must ensure that they are managed appropriately – how do they determine, for example, when an employee is sick enough to get an extended sick leave, or ensure that proper receipts for dental work are submitted? If they don’t want to do this work themselves, they must hire someone to do it, or contract it out to an insurance company.

Second, the employer must find ways to fund these benefits. In my own case, for example, while I contribute to my benefits package through deductions on my paycheck, my employer must contribute as well. These tasks can be burdensome for employers, particularly in the case of small business owners. have friends who fall into the small business owner category who complain that their employees are better off than they are, because their benefits are provided through, and managed by, the employer, while the employer must pay for, and manage, her own.

Imagine if, instead of living in a society in which, while some healthcare is covered through public funding, drugs, dental care, and eye care are not, we lived in a higher tax jurisdiction which provided not only basic healthcare, but also offered dental and pharma care, and perhaps even guaranteed a minimum basic income to all citizens. In a society like this, businesses (and business owners) would be freed from their current heavy burden, in terms of both time (the time involved in organizing and administering the benefits package they offer employees) and money (they would no longer have to offer the benefits that the state now provides).

Were such public arrangements were in place, says François:

Businesses might actually pay less than they do now, because many of the activities they currently have to take over would be done by the state… Myself, in Ontario, my job has to provide some coverage in terms of dental care, eye care, medicine – why is my employer doing this? It would be much simpler for my employer to just focus on its business and let the state have taxes and pay for all these programs. So, basically, all of what we call the benefits package could be much lower if you are in a state which provides these things. So, the business community in many ways should be happy with high taxes and to have the state take over these programs.

 

Not only would businesses benefit from higher taxes in the ways just considered, François also notes that, in some cases, they would also be able to pay their employees less than they currently do:

Minimum salary laws are impacting business, and if we had better coverage, free full healthcare, free full education, maybe even a basic income, we wouldn’t necessarily need to have minimal salaries (like a $15 minimum wage) so that could help small businesses. So, in many ways, there is a hypocrisy in the business community coming in and saying, “Hey, we’re afraid of parties like the Ontario NDP, because their concerns are not truly about how tax policies affect business. Higher taxes might be good for business.”

Eye care as a publicly funded benefit?

Higher taxes, which are used to provide more public goods, would also make it possible for businesses to hire more people. Take the case of universities, for example. Permanent positions in universities are harder and harder to find, while sessional work – which sees professors paid by the course – is becoming more and more common. One of the most significant reasons for this shift is that permanent faculty have to be provided with benefits, while sessional faculty do not. As a result of the same economic considerations on the part of employers in both the public and the private sectors, more and more people – particularly young people – find themselves trapped in an endless round of short-term contracts, which offer no security and no benefits. Not only is this bad for employees, it is bad for employers as well: they have to keep putting time and resources into training new employees, and they can expect no loyalty from their workers who will leave if they can find a job which does offer benefits.

In short, if most of the benefits that are now provided privately were paid for through public money instead, it would be beneficial for both employers, who could hire more people into permanent positions without worrying about how their benefits will be paid for, and for employees, who would be more likely to get full-time, stable work, and who would be freed from the burden of staying in jobs they hate simply to maintain their benefits.

If the argument that higher taxes are good for business is so straightforward and so persuasive, why is it that so many of us are convinced that higher taxes are bad for this sector of the economy? Indeed, why do so many businesspeople grow apoplectic at the idea they should pay higher taxes? I put this question to François:

The very rich, who own businesses, don’t want to pay high personal income taxes. They are holding the rest of us hostage, they are raising the specter of an economic collapse of the business community, when really it’s all about them privately, at the end of the year, wanting to pay less. So we should not accept their personal point of view as the position of the business community. This is truly an argument put forward by the very rich who want to serve their private interests.

In other words, the very rich – who don’t want to pay higher personal income taxes for private reasons – have managed to persuade many of us (and, in particular, many small business owners and politicians) that their personal desire to keep more money in their own pockets is actually beneficial to business more generally. However, as we have seen, we have good reason to believe the opposite is actually the case: while higher income taxes may not be to the personal benefit of the very wealthy, the public goods and services these taxes make possible are, in fact, good for business.

So, next time you hear a multimillionaire or politician saying taxes must be lowered to attract new businesses or to benefit existing ones, ask yourself: Do I have any reason to believe this claim, or is it nothing more than the expression of someone’s private interest dressed up to look as through it is a statement of a self-evident truth about a public good?

 

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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