Taxation and Redistribution: A Moral Critique of Welfarism

The Taxman cometh,

The Taxman taketh.

Blindly we trust:

Equal is just.

Prologue

Proponents of welfare economics argue redistributive institutions are central to ensuring equality in a stratified society. After all, how could anyone with a moral conscience tolerate the unjustness of inequality? The answer to that question, as this essay hopes to show, is far more nuanced than whether or not society should desire equality, and whether redistributive instruments like taxation are appropriate. More importantly, this essay will argue that welfarism and its redistributive policies aimed purely at reducing inequality are morally misguided. To show this, we will first establish that an equal society does not necessarily equate a just society, an important distinction that seems to be lost on the welfarist camp. Furthermore, we will also see that even if equality itself is just in and of itself, the disregard of other considerations such as efficiency and aggregate welfare is a mistake, as argued by John Rawls. The be-all and end-all importance to which welfarists attribute to equality, while perhaps well-meaning, is misguided and likely to result in a Pyrrhic victory that ultimately reduces welfare for society as a whole. 

Equality and Justice: A Misunderstanding

The Welfarist argument is essential as follows: if society is able to do away with inequality through taxation and redistribution through either social programs that provide equal opportunity or directly writing cheques to the poor, it should. The core premise of the welfarist position is that equality is just–this however, is deeply misguided. Consider the following example inspired by the welfarist’s utopia:

Jeff is a very hard worker that lives in Equaltown. Through sheer hard work, Jeff has managed to earn twice the average Equaltown resident does, and has never committed any injustice against his fellow residents. Jack does not come from a background that unjustly advantages him over his fellow residents; his family never owned slaves, stole, lied, or cheated. Equaltown residents, however, are not happy with Jeff’s wealth, and decide to tax it in such a way that everyone has the same wealth. 

The story above is an example of what Robert Nozick calls a current time-slice principle of justice, where the equal redistribution of assets, wealth, and opportunities in the current time is the only consideration that matters regardless of how the initial distribution came about (1974). Like in Equaltown, welfarists seek to tax and equally redistribute opportunities and wealth for the sake of equality in the current time. Whether or not those being taxed came about their initial distribution of assets justly does not matter to the welfarist, what matters is how equal society becomes after taxation and redistribution. Why does this matter? Well, imagine if Barbara makes much less than Jeff today as a result of her unjust and stupid choices in the past. Since Equaltown only values the equal distribution of opportunities and wealth today, Barbara stands to benefit from the taxation and redistribution of Jeff’s justly acquired wealth despite the circumstances that led to Barbara’s initially diminished wealth. Has Equaltown become more equal as a result of its redistributive policies? Definitely. But has Equaltown become a more just society as a result of its equalness? Likely quite the opposite. In fact, the natural conclusion to the story is that Jeff's justly earned assets were unjustly taxed so that Barbara and the other residents get to live in an equal society. 

That is not to say equality cannot be just, but equality for the sake of equality achieved through the forceful taxation and reapportionment of justly earned assets can hardly be just. Of course, even if some equality were to the benefit of society, well-off individuals like Jeff could be convinced to voluntarily sign away some of their wealth for the wellbeing of their fellow residents. But that is not to say, as Nozick argues, that the forceful taxation of the rich is moral just even if the rich would have voluntarily signed away said wealth in the first place. Just because you would have given the homeless man spare change does not morally acquit him from having threatened you with a machete for your wallet. The voluntary and involuntary redistribution of justly acquired assets is what morally distinguishes philanthropy from the unjust violation of property rights.

A Matter of Efficiency

Once we have settled the question of whether equality necessarily equates justice, we can move on to the tension between efficiency and equality outlined in Rawls’ Theory of Justice (1971) that welfarists often point towards to justify their redistributive propositions. Even if equality itself is just in and of itself, that is not to say the be-all and end-all interpretation and implementation is just. Since the welfarist only concerns himself with the equality of society and seeks to implement it through taxation and redistribution, it is not unreasonable to imagine all the different ways and far lengths he would go to sacrifice efficiency in search of equality. To equally portion the pie among members of the society, the welfarist is willing to potentially discard chunks of perfectly good pie to achieve his conception of a fair society. To illustrate, consider the following example: 

Jeff is very rich and employs many of his fellow citizens through his entrepreneurship. Many of his fellow citizens, while hardworking, lack the entrepreneurial spirit and drive Jeff possesses. In fact, many of them would venture into failed businesses if given access to capital. Unhappy at Jeff’s wealth, the citizens decide to legislate a law to seize and redistribute Jeff’s assets among themselves in such a way that everyone is equal. Soon, the economy falters because most citizens enter into failed ventures. Many people starve to death. 

While the above example may seem radical, it is not unprecedented. Disgruntled at the intelligentsia and bourgeoisie, Mao Zedong and his fellow proletariat comrades, inspired by the wonders of Communism, enacted the Great Leap Forward and sent the urban youth packing to the rice fields in an effort to industrialize and equalize China into an equal utopia. 45 million souls perished of hunger. If equality comes at the cost of diminishing a society’s wealth and wellbeing, is it really moral and just? To answer that question, welfarists should ask those 45 million souls that starved to death in China. Perhaps, what welfarists truly seek is not a just society, but the imposition of their moral framework and conceptions of a fair life on others–even if it means poverty and starvation.

A Rebuttal

Of course, welfarists can, and do, argue that societal inequality is a result of the morally arbitrary distribution of innate and societal advantages. Consider the following example: 

John and James both live in Equaltown. John is born smart, physically attractive, charismatic, and happens to come from a fabulously wealthy family that invests greatly in his success. John ends up going to Harvard and lives a life of material and eudaimonistic success. James, however, is born unattractive, stupid, unlikeable, and was brought up by divorced parents who did not much prepare him for success. James ends up a janitor and leads an objectively unhappy life.

At first glance, as Rawls would argue, John’s innate and social advantages over James is morally arbitrary. After all, how is it fair for John and James to be born into this world with starkly different realities with access to vastly different opportunities? Surely, it must be immoral, or at least morally arbitrary, to allow John access to more opportunities than James if neither John nor James did anything to deserve what they were born with. This moral arbitrariness is what many welfarists point towards to justify redistributive policies that “equalize” opportunities and wealth. As such, equal opportunity for everyone regardless of innate and social circumstances achieved through taxation and redistribution is not only necessary to even out advantages and disadvantages across society, but to address the moral arbitrariness often regarded by welfarists as unjust. 

A Counterargument

Welfarists are right about one thing: the initial distribution of innate and social advantages among the population is morally arbitrary–that is not up for argument. John himself did not do anything to deserve his good looks, charisma, intelligence, and advantaged upbringing any more than James deserves his less-desirable traits and broken family. The scales of justice now rest on whether innate and social advantages were justly or unjustly “acquired.” Did John’s ancestors enslave and cheat other Equaltown residents to arrive at the advantaged position John enjoys today? As much as welfarists may want to argue such considerations are irrelevant to whether John and James themselves deserve the circumstances they were born into, they seem to conveniently ignore that people, rich or poor, naturally strive to secure the future and wellbeing of their children and the children that come after them. 

Ask people why and for whom they work so hard for, and I would wager most would point to their family and loved ones as a considerable motivating factor for their blood, sweat, and tears. This is the point welfarists seem to miss: people are not just motivated by their own wellbeing, but also by the wellbeing of their loved ones. In fact, one could argue the wellbeing of one’s beloved is as much of a “good” as a Porsche 911, food, and shelter are; John’s ancestors toiled blood and sweat to “purchase” John’s increased chances of a good life from the market. To go even further, John’s ancestors worked to purchase and own the “property rights” for John’s increased likelihood of a good life just like you and I hope to one day purchase property rights to our own houses. You may now be asking yourself, what about John’s good looks, charisma, intelligence, and all the other natural advantages he possesses? To answer that question, imagine this:

Jack is John’s father. Jack has always known he wanted to start a family. Moreover, he wants smart, charismatic, good-looking, and educated children capable of achieving greatness and carrying on his legacy. He decides to work hard and achieve greatness himself in hopes of winning the affection and attraction of a beautiful, smart, and charismatic wife with whom he can hopefully produce children that are genetically likely to be beautiful, smart and charismatic. He works very hard in school, makes a lot of money, and ends up in Harvard Business School where he meets and charms the beautiful, smart, and charismatic Jenny who ends up his future wife and mother of his children, one of whom is John, who is also intelligent, handsome, and charismatic, in addition to being a Harvard legacy.

Just like John’s ancestors worked hard to acquire the property rights to the resources and assets necessary for nurturing his potential, John’s father Jack, in a sense, also worked very hard to “acquire” the chances of meeting, impressing, and wooing Jenny. It does not seem all too controversial to say that Jack, through his hard work and drive, justly purchases a “property right” to likely meet, impress, and woo the wonderful Jenny with whom he will father the smart, handsome, and charismatic John. Now, it becomes clear that John’s natural edge over his peers is much less morally arbitrary and undeserved than welfarists would believe; John’s increased likelihood of favorable natural advantages were justly “purchased” by both Jack and Jenny on behalf of him well before he was born. This completely flips the script against welfarists. If John’s parents and grandparents, motivated by John’s wellbeing and chances of attending Harvard, worked hard to achieve wealth and social status through just and honest means, then the onus is now upon welfarists to prove John’s advantages were not deserved. Moreover, if Jack’s natural advantages were justly acquired through the investment of time and effort put in by both John and Jenny to secure smart, intelligent, and charismatic mates in hopes of conceiving smart, intelligent, and charismatic children, then the distribution and attribution of natural advantages should be much less morally arbitrary than welfarists suggest. Their moral framework must be able to explain how and why it is just to tax and redistribute away the “property right” to John’s likely good life his ancestors justly acquired for him. Rich or poor, parents and grandparents hope for and work to give their descendants the best fighting chance they can. If such advantages were acquired and conferred through just means, the welfarist proposition for taxing away inequality for the sake of equality is arguably just as morally arbitrary as the distribution of natural and social contingencies. 

A Conclusion 

What this analysis has hopefully and definitively established is that the welfarist conception of justice is misguided; an equal society is not necessarily a just society. As Nozick argues, the disregard of how the current distribution of wealth and opportunities came about when pursuing equality for the sake of equality is hardly any more just than inequality. Moreover, when the be-all and end-all importance attributed to equality by welfarists risks sacrificing the wellbeing and, ironically, the welfare of society, equality is but a facade for the forceful imposition of welfarists’ moral frameworks on society. And while it can be conceded that the distribution of natural and social advantages among individuals is random and morally arbitrary, the removal of justly acquired advantages from individuals “purchased” by their families through forceful taxation and redistribution is hardly any less morally arbitrary. Until welfarists are able to address these concerns, their redistributive instruments should be met with skepticism and moral scrutiny.