This post by Michael O'Hare is an example of the sort of rhetoric that seems appealing--nay, irrefutable!--when you are crafting it over drinks with like-minded friends, and that falls entirely flat when you deploy it against people who don't share your priors.

Among the standard bleats of those who want [to be heard asking for] less taxes on everyone, and want to actually have less taxes on on the bleater personally, is a sort of pugnacious Babbitty claim that "I earned my money by my own efforts and when the government takes it from me it's theft." Another is that individuals will spend a given dollar better than the government.

Both of these extremely tiresome memes were thrown around in response to a couple of earlier posts with a confidence that surprised me coming from readers of this blog. So I guess I need to take them on, at least for the record. If you recognize these as ignorant cant, you might as well scroll up or down to the next post which will assuredly enlighten you more than this one. Short version of the first lesson: what's yours is what's left after you pay for what you use up, which means after taxes. Shorter version: don't like government? Try Somalia (and let us know how that works out for you).

This meme seems to be catching on on the left, to judge from my comments and emails, and it's really weak.  The equally meaningful right-wing equivalent would be to say "You want higher progressive tax rates?  Why don't you move to North Korea?  Let me know how real progressive taxation works for you."  And sigh, I'm sure there is some one out there on the Interwebs making that argument right now.



Someone really committed to the notion that "society" owns everything and lets you keep whatever piece "society" thinks you deserve might simply say that they want a new economic order, not the massively coercive political regime.  This is, of course, nonsense on stilts; the only way you achieve that kind of state ownership is by shooting dissenters.

And the reason that you need that sort of coercion is that most people do not regard themselves simply as happy cells in the body corporate.  They believe in property, voluntary transactions, and the right to keep what you earn.  They temper this, to varying degrees, with the recognition that such transactions happen inside a framework of security which is provided by the government, and that this framework needs to be paid for.  I assume that O'Hare counts himself in this group.

He goes on to write a lengthy analogy about a manufacturer who operates within a framework of suppliers, customers, etc, things for which she must pay some share of her revenues. 

Meet Anita the small manufacturer, with gross revenues of $10,000,000, and let's accept that this properly measures the value of her product in everyone's eyes, and compared to everything else. I have never heard such a person claim that this is all her money and she deserves to keep it all; instead she happily lets her employees, landlord, banker, and suppliers confiscate most of it, leaving her only (say) a lousy 10%, or $1,000,000. She may grouse about the prices they charge and wish she could pay less, but she doesn't call it theft of what is rightfully hers.

Why does she let them get away with this? Because she's making deals, agreed in advance, and more important, because these $9m worth of goods and services are completely indispensable to the $10m gross value her business creates. We don't expect the trapeze catcher to call the flyer a thief when he takes half the gate: they're partners, joint contributors to the enterprise. Just like Anita and her team. How they divide the gross varies, but everyone gets a share or the whole thing collapses in ruins. The iron law here is, "you pay for what you use up": "I [not we] earned it" applies at most to net profits, not all the money you take in.

But I didn't mention some other partners in the enterprise, who contribute essential factors of production. Among these are the folks who built the road on which parts come in and goods go out, who patrol it so Anita's shipments are safe, who run the courts that make her contracts worth signing and save her the great expense of a private army of Pinkertons and thugs, and on and on right up to the bureau of weights and measures that make it possible for parts to fit together because everyone knows what an inch is. What these have in common is the property of market failure, which despite libertarian determination to pretend such a thing cannot exist, is a completely non-ideological, non-negotiable, technical property of certain goods, including many very good goods. They all have a real economic cost: making them uses up resources (asphalt, labor, copier toner) that are then not available for something else.

The only way to have most of them is to stand up a government and give it taxing power, and this scheme lets Anita pay for a large class of her inputs. What really would be theft would be for her to figure out a way to consume them and somehow make others pay, and we know how much entrepreneurs despise theft. What would be fatal to the entire business is for the ideologues who demand that government be drowned in Norquist's bathtub to succeed.

But of course, O'Hare has deliberately chosen the least controversial jobs that government does, which muddies his argument.  Some of the things at least arguably could be provided with fees (roads).  Others are inarguably public goods, which is why virtually no one is arguing against them.

But these are not the expensive bits of government over which we are now quarreling.  We are now quarreling precisely because the major business of government, especially the federal government, is transfers.  Those transfers often do not benefit the people from whom the money is taken, except in the most nebulous possible sense.  And the fees assessed bear no relationship to what you use; they are assessed on what you produce, which does not scale linearly with your use of public services--indeed, for many of the most expensive public services (Medicaid and public education, for example), the more money you make, the less benefit you get.

Given that the sums involved keep getting larger, there is genuine fear that this represents, not theft, but something dangerous:  the legal transfer of resources from the people who earned it, to those who didn't.  To this, O'Hare seems to be replying that everything above the level of Somali subsistence is a product of "society", which may then rightfully decide to keep as much as it wants.  One could as fruitfully say that anything above the level of North Korean per-capita tax revenue is the product of "the market", and that the government has no right to claim it.

O'Hare's subtle conflation of "society" and "the government" makes this sort of absurd reductio possible.  Because of course, while it is true that living in America makes one vastly better able to create wealth than living almost anywhere else, much of that wealthy creation comes not from anything the government provides, but from the infrastructure of people, skills, and norms that surround one.  It is a common fiction that government can somehow represent the will of "society", but this is high-test bunkum; government is its own institution, a part of society, not the instrument of its divine will.  Anyone who has studied any political science at all knows that to the limited extent that you can even say that "the will of the people" exists, it is at best only partially and somewhat haphazardly represented by their elected government.

That's why ultimately, I think this whole framework of "society" and individuals allocating mutual gains between them ultimately falls apart.  To nurse it even as far as he does, O'Hare (and the many others who are fond of this sort of analogy) has to sort of leave out the coercive nature of what government does.

Unfortunately, I don't have a Grand New Theory with which to replace it; I think of "society" as a chaotic system, within which government, like corporations, are necessary evils that will only ever imperfectly perform the idealized roles to which we would like to assign them.  As such, I can't generate any neat sound-bytes like "Taxation is theft!" or "Why don't you just move to Somalia, huh?"