Tuesday, August 10, 2010

Justice and taxation

No system of taxation currently in use distributes the financial burden in a completely fair way. I think this is something that just about everyone will agree on, though where exactly the unfairness is located is a controversial question. I do not mean that the unfairness is intentional or even foreseen by the legislators, but more like this: there will either be a pair of individuals A and B such that it would be fairer if A were taxed more and B less (it's also possible, but less likely, that (a) everybody is taxed more than justice allows or that (b) everybody is taxed less than justice requires; I'll neglect (b), and leave the extension of the arguments to (a) as an exercise).

This is not something we can complain about much. No legal system can cover all cases adequately. But here is an interesting consequence: An across-the-board increase in taxes is very likely to exacerbate some instances of injustice. For if fairness requires that A be taxed more and B less, then when we raise A's and B's taxes, we will likely be overtaxing B by a greater amount than before, and hence the injustice to B will very likely be the greater. (This can be controversial. One might think that what matters are the ratios, not the absolute amounts. I am inclined to disagree.) This means that we have a prima facie consideration of justice against across-the-board tax increases.

Moreover, I think the above considerations generate a prima facie consideration of justice against government spending. For if overall spending were even slightly lowered, a slight across-the-board decrease in taxes would be made possible, and that would slightly decrease the severity of the unfairness to B.

Of course, the reasons above are only prima facie and defeasible. Double Effect can permit the increase of spending and across-the-board increase in taxations when the injustices are not intended and a sufficiently serious good—perhaps itself a good of justice—is being pursued. So while the above considerations sound like they would generate fiscally conservative conclusions, in practice the effect of the considerations could be quite small or nonexistent. Or it could be large. I don't know. But it is still interesting to me that the defeasible reasons against spending and across-the-board tax increases are reasons of justice—I didn't think of them that way before I noticed the above arguments. And I suppose it would be healthy for legislators to think of them as reasons of justice, if they are indeed such.

A weakness, however, in the above arguments is that it is not clear whether it makes sense to talk of unintentional injustice. If I am convicted of a crime I did not commit, but on excellent evidence and with solid legal procedures, have I really suffered an injustice? If the answer is negative, then we may not be able to say, strictly speaking, that B has suffered an injustice by being taxed too much. Maybe, though, the thing to say is this. My conviction of a crime I did not commit is not an injustice; but justice requires that such convictions be minimized. Likewise, the allocation of too high a tax burden to B is not an injustice; but justice requires that such misallocations be minimized.

The incorrect conviction analogy also suggests that we have a prima facie reason of justice not to increases criminal sentences across the board. For each across the board increase of sentences is likely to result in some innocent serving an even greater sentence than otherwise. (However, there is a difference with the taxation case. For while justice does not intrinsically call for taxation (though taxation may be a necessary means to ends that justice requires the pursuit of), justice does intrinsically call for the punishment of the guilty.)


Nick Fortescue said...

You assume in your first paragraph that it cannot be true that everyone is taxed too little, and then derive in your second that across the board tax increases cannot be just. An across the board tax increase is saying that everyone is taxed too little.

Or maybe more strictly speaking, an across the board tax increase says that there are more people who are taxed too little than are taxed too much. So you example in the second paragraph of A and B is too simple - the across the board tax increase says there are more A's than B's, possibly many more.

Alexander R Pruss said...

There is no injustice to x in x's being taxed too little. Of course, if x is taxed too little, this may result in an injustice, in that there may be insufficient revenues to pay for things that justice requires or there will be a temptation to overtax someone else. In the scenario where everybody is undertaxed, there is no injustice intrinsic in the undertaxing, but an injustice may result from the insufficiency of revenue.

Now take an extreme scenario where B is overtaxed, and everybody else is undertaxed. An across-the-board tax increase will directly increase the injustice to B, and will not directly decrease anybody's injustice. So there is a reason of justice not to put that tax increase in place. At the same time, the across-the-board tax increase may indirectly decrease other injustices, by increasing revenues and making it possible to feed the hungry, have better paid and hence (hopefully) less corruptible public officials, etc. So there may be on balance reasons of justice for the increase, just as in the cases I consider in the post. But it is still true that there is a reason of justice not to do that increase.

By the way, here is a principle that would somewhat strength the weak conclusion of my post:

(*) One may only go against a reason of justice for the sake of other reasons of justice.

But I am inclined not to accept (*).

Nick Fortescue said...

Hmm, I still think your conclusion comes from the asymmetry of your assumption, which I wouldn't agree with.

By "x is taxed too little" I assume we mean "someone else, whether another taxpayer or future generations through debt incurred is paying for something that x should have payed for." Therefore, while there is no injustice to x, there is with certainty an injustice to one or more other (unspecified) individuals.

Let's quantify your example. Suppose a fictional state has needs of $30, and has a population of 10. Suppose our definition of "fair tax" is that each person should pay $3, and there should be no deficit spending, as this would be injustice to future generations.

In fact B pays $10, 9 others pay $1, and $11 is deficit spending. So B is taxed too much (by $7), and the others are taxed too little (by $7).

An across the board tax increase of $1 means B pays $11, the others pay $2, and there is now a deficit of $1. So B is now taxed too much by $8, the others are taxed too little by $1, but now there is less injustice in the deficit (under our assumptions of fair).

I would say this across the board tax increase has reduced injustice, completely ignoring spending.

Alexander R Pruss said...

I hadn't thought of the possibility of a deficit being in itself an injustice. But maybe one should say that the undertaxing is unjust. Maybe what one should say is that the combination of undertaxing and spending more than one has is unjust, and the undertaxing only contributes to the injustice.

But I don't know how plausible that would be in a case where justice requires one to spend as much as one does.

So a better thing to do would be to admit that maybe there can be cases where the undertaxing is directly unjust and some are overtaxed. In those cases, although there is a reason of justice not to raise the taxes across the board--because of those who are overtaxed--this reason could be overridden by reasons of justice to other people (such as future generations who would have to pay the debts or lenders whose loans would not be repaid). But it remains true that there is a reason of justice not to raise the taxes across the board.