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Taxing the Rich and Understanding Social Justice
Publication date: 2003-06-25

Can Taxing the Rich Make Us All Better Off?

The British socialists are creeping out from under the floorboards again. Some of them are calling for changing the income tax to “tax the rich”, others for a tax on increases of value of private houses, and still others for “more to be done to tackle the widening gap between rich and poor”.

The “gap between rich and poor” has always aroused much emotions and has been the main motivation behind the ideology of socialism, and there have been some serious attempts to establish a society where all the people would be equally rich (or equally poor) and the Gap would disappear.

None of these experiments have succeeded. But, although many people today understand that economic “equality” is unachievable, many add that it would have been good, if it were possible, but “unfortunately” it is not. Many people still believe that it is unjust that some people are poor, while others are rich, and a condition under which all people would be equally rich (or poor) they call “Social Justice”.

So we shall consider the difference between “Justice” and “Social Justice” and the issue of government taxation, from prime principles.

Justice means equality before the law. It is also based on the assumption that all people are free and responsible for the results of their own actions. But those who cannot provide for themselves, children, old, and sick are the responsibility of their families, or of the state (if they have no family to support them). Because people live in groups, some activities need to be performed for the benefit of the group as a whole. These activities are financed from people's contributions — taxes.

Freedom implies the ability to use one's time, energy and abilities in any way one chooses. It also means freedom to own property and to enter into binding agreements with other people (contracts).

If people use their time, energy and ability in such way as to create things of value for themselves or others, they create wealth. And, if they create more wealth than they consume, they retain it as their property. People are also free to give their property to others, and pass it on to their relatives after death. Because the result of this wealth creating, acquiring, and passing on process is different between people, some people finish with more wealth than others. Those who have more wealth are called “rich”, those with less, “poor”.

If the wealth creating activity of people is so low that it is not sufficient to provide for their basic needs, such as food and shelter, then they are poor in the absolute sense of this word. And, if this condition is due to inability to provide for themselves due to age or state of health, then such people become the responsibility of their families, or, if they have no families, of the state.

But, if a person has sufficient wealth to provide for his needs, but his wealth is less than that of another person, then the word “poor” is used in a relative sense. Such “relatively poor” person is not a responsibility of any other person. If he wants to increase his wealth, he should make his own effort to do so.

But many people have a quality such, that when they see another person having something which they have not, they begin to hate that person, and wish that he would not have what they themselves have not. This feeling of hatred towards people who have more than oneself is called “envy”.

And when people have strong feelings for a prolonged period of time, they begin to rationalize these feelings (building a theory about them). So, they say: “Is it just that I live in a small house, but my neighbour lives in a house twice as big as mine? And he even has a swimming pool! And he earns 10 time than I do! Just think of that ‘gap’!. Should not the government put an end to this injustice?”

It is this type of attitude that is known as “Social Justice” — “nobody should have more than I have”.

This feeling is vividly illustrated by a parable of Russian origin:

When the communists came to power in Russia, poor peasants used to come to Lenin to ask for favours.
One such peasant came to Lenin and said, “Father Lenin, I have suffered a great injustice. Please help me”.
“Please, tell me about your injustice”, said Lenin, “I am here to serve people like you”.
“I had a cow”, said the peasant, “and my neighbour had a cow. But my cow has died”.
“So, do you want me to give you another cow?”, asked Lenin.
“No, Father Lenin”, said the peasant, “I am not asking you for another cow”.
“Then what do you want?”, asked Lenin, puzzled at the peasant's reply.
“But, could you, please, Father Lenin, make it so that my neighbour's cow would die as well”, said the peasant.

While this is just a parable, if we look at the sayings of today's British socialists from Tony Blair's New Labour, we shall see that their concern is not “absolute poverty”, but “relative poverty” — the “gap between rich and poor”. What they are objecting to is not that some people are too poor, but that some people are richer than others, and they want to make all people equally poor. This is the meaning of “Social Justice” which underlies their ideology of socialism.

They did try to implement their “ideals” in the last quarter of the 20th century. They did increase the income tax to 92% at the highest point. But this did not make everybody equal, although people became poorer than they would have been otherwise. As a result, the Labour party lost the elections and became unelectable, until the conservatives had disgusted the British public by their arrogance and dishonesty so much that they were replaced by Tony Blair.

But, to get elected Tony Blair had to re‐brand the Labour Party as New Labour, to abandon its main goal of “social ownership”, and to swear that his party will not be a party of high taxation. And although he did have minor (compared to Old Labour) tax rises, he did keep his promise not to go back to the “tax the rich” politics of old.

So, why, to Tony Blair's embarrassment, did his socialist colleagues are coming out into the open with their “tax the rich” banners?

While Tony Blair understood that “tax the rich” socialism was an obstacle to the Labour Party being a party of government, the majority of his colleagues were still the same tax‐the‐rich socialists they had always been. This is what brought them to the Labour Party, this is what kept them there, and this was the only tune they were capable of singing.

They did keep their mouths shut, because Tony Blair had succeeded in persuading them that this is the only way to be elected.

But now that the Labour Party has been in government long enough and the conservatives still continue to amaze the world by their ineptitude, and Tony Blair's own prestige has been weakened by his war spin, Tony's colleagues, silent for the past decade, plucked up their courage and opened their mouths, and the old tune “Tax the rich! Tax the rich!” filled the air again.

But can the labour socialists drag Britain back to the tax‐the‐rich socialism of Neil Kinnock?

Because in a free society the powers of government are strictly limited to the purpose of the administration of their area of governance, raising taxes for any purpose except legitimate government activities is abuse of government powers. And raising taxes for the purpose of “making the pips of the rich squeak” or “of reducing the gap between rich and poor” is ultra vires (outside of the government powers), and therefore illegal.

But, although we do live in a free society, many people in that society do not see themselves as free people. They see themselves as some kind of slaves of the government. Rather than relying on their own efforts, they expect various benefits from their government masters — they have sold their birth right of being responsible for their own lives for a bowl of socialist pottage of various benefits and government services. They say, “the higher the government will tax the people, the more benefits and services we shall get from the government. And, if they tax not us, but the rich, then it will also be Social Justice. Why should those rich be richer than us?”.

This is what they were saying in the days of Neil Kinnock, and this is what they are saying today.

But, as the Social Justice experiments of Lenin in Russia and of Neil Kinnock in Britain have proved, Social Justice does not work. It does not make all the people equally rich. And it does not even make all the people equally poor. It just leads to social parasitism and corruption.

Those who make more effort are robbed of the fruit of their activities. The lazy, the profligate and the incompetent are rewarded for their failings. Those in government and their cronies rip off the rest. And everybody becomes poorer, than they would have been had they made an honest effort of their own to create wealth, instead of relying on redistributionist politics. Thus, the country, as whole, becomes poorer, and the real poor, who cannot provide for themselves due to their disability, are worse off, because there is not enough crumbs left for them, once everybody else had their “slice of the National Cake”.

"Social Justice" is no justice at all.

So, how can we all become better off?

By eliminating politics from government, by reducing the government activities to the strictly necessary minimum, and by all healthy able‐bodied people relying on their own efforts. This will not make everybody either equally rich or equally poor, but it will make everybody richer than they would be if they relied on politicians. And as everybody will be richer, then they will be able to provide for those who truly cannot provide for themselves.

But what will the politicals do?

They will have to learn to provide for themselves honestly, rather than by pandering to envy and other deficiencies of human nature.

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