What does it mean to be free? Usually, when we talk about freedom, we mostly mean political freedom, but that is far from the only kind. Ultimately, freedom means having the option to do the things you want to do, and there are many potential constraints. These constraints generally fall into a handful of categories:
- Physical Limits: The thing you want to do may be impossible, either because no one can do it (I cannot levitate myself telekinetically) or because you personally cannot do it (no matter what I do, I will almost certainly never run a four-minute mile).
- Time Availability: Related to physical constraints, temporal constraints are ones which result from the fact that there are only so many minutes in a day and so many days in a lifetime, and you can only be in one place at a time. I could either have pursued becoming a bassist or a writer, not both, even though either is technically physically possible.
- Social Restrictions: This is what people mostly mean when they talk about constraints on freedom, the things you can’t do because other people won’t let you. The most obvious social restrictions are laws, but norms and societal pressures can also be a major constraint on freedom. I can’t wear a kilt to work
- Resources: These are the things you can’t do because you don’t have access to the required resources. I can’t rent out every bar and hotel in Liechtenstein for a party, but somebody much, much wealthier than me probably could.
That last restriction, resources, is the one I want to talk about. See, the thing about any constraint on freedom is that, as you have more of the limiting factor, it becomes less of a constraint. What I mean is, if someone has lots of free time but not a lot of resources, giving them more free time is going to increase their freedom less than giving them more resources. Likewise, if someone is a billionaire with a terminal disease, an extra year of life is going to increase their freedom more than a few million extra dollars.
As your resources increase, you eventually reach a point where resources just stop being a limit on your freedom. When you have a yacht, a jet, an island of your own, and money to spend, there isn’t much that you can’t do, resource-wise. Gaining more resources doesn’t get you any more freedom–and conversely, losing resources (so long as you don’t lose to much) doesn’t cause you to lose any freedom.
What increased resources does get you, once you’re past the point of diminishing returns, is power. When you have a lot of wealth, you can alter the choices of others. You can do this overtly and directly (if you buy voting stock in a company and downsize it, you increase the resource-based restrictions on the freedom of its employees) or subtly (you can alter what goods that company creates and in what quantity, changing the options available to others). You can influence elections with campaign donations, or just enjoy watching people have to work to please you, since you control their salaries.
Or, for that matter, you can donate to charity, help out others, and use that power for good. Either way, the resources you’re expending aren’t changing the options available to you, they’re changing the options available to others. For purposes of this essay, those are the definitions we’ll use: Freedom is the ability to do what you want, power is the ability to change whether others can do what they want.
Which, by a perhaps roundabout road, brings us to taxes, and specifically to income taxes. There are three main competing approaches to income tax. We’re pretty familiar with them, so I’ll just discuss each briefly to highlight the main points I want to talk about:
- No Income Tax: Usually, proponents of this approach aren’t total anarcho-libertarians; they accept that some form of government is needed, and that it must fund itself through some form of taxation, so they argue for a sales tax of some sort. The argument for this approach is that people are taxed according to what they spend on consumer goods, which is somehow fair while taxing people based on the size of their paychecks or investment returns or what they spend on the stock market is somehow not fair, because wiggly finger motions and look over there while I run away!
- “Flat” tax: Everyone pays the same percentage of their income. This system is supposed to be fair because, well, everyone pays the same percentage of their income.
- Progressive taxes: The percentage you pay depends on your income. The simplest form is a flat tax with a floor: If you make less than X dollars, you pay no taxes. If you make X+Y dollars, you pay a fixed percentage of Y. More complex systems have more brackets, but the general principle is that you pay nothing on the first X dollars, a small percentage of the next Y dollars, a slightly larger percentage of the next Z dollars, and so on. This is supposed to be fair because wealthier people get more out of society, so should be expected to pay more in.
So, which is fairer, a flat tax or a progressive tax? As a general rule, libertarians and conservatives argue the former, liberals the latter; I think it’s pretty clear which is correct, however, if we consider it in terms of the definitions of freedom and power we established above.
It is, after all, obviously and inherently unfair for one person to have the ability to control whether and in what forms another person has freedom. The only way in which power can be fair is either if it does not exist, which is impossible (in any system, if no one has the power to stop bullies, then bullies have all the power), or if it is shared as broadly as possible. In other words, it is unfair if one person gets to decide for everyone what freedoms we can and cannot have, but if we all get together and collectively decide that, say, murder is not allowed, that is fair because everyone gets a say.
Consider, then, a flat tax as you climb the economic ladder. For the very poor, a flat tax is a major reduction in freedom, since they already are badly constrained by resource availability and the tax makes it worse. Eventually, however, we reach levels where the tax is barely a reduction in freedom at all–if my income is $200 million a year, my level of freedom is basically the same as someone making $20 million a year, and therefore I can pay a 90% tax and not experience any loss of real freedom.
What I do lose, in that scenario, is power. However, in most places where this article is readable that money ends up in the hands of a democratically elected government. Even given a government as corrupt and distorted as the current U.S. federal government, even given filtering through representatives and the constraints of the two-party system and gerrymandering and voter suppression (if you live somewhere other than the U.S., substitute the imperfections of your country’s government instead), the average person on the street still has far more say in what the government does with its money than they do in what I do with my money. Thus, the government getting to decide how to use that power is fairer than me getting to decide.
Remember that money is, ultimately, imaginary. It is what money represents that matters: resources, which is to say, freedom and power. A flat tax takes freedom from the poor, but not the rich, and does nothing to address the power imbalance between rich and poor; it exacerbates the unfairness that already exists. A well-designed progressive tax, however, takes little to no freedom from anyone, reduces power imbalances, and helps correct the unfairness endemic to capitalism.
The progressive income tax is the fairest approach to taxation we’ve come up with. Anybody trying to tell you otherwise is more interested in protecting the power of the few than anything to do with fairness or freedom.