We have forgotten the meaning of property rights

The outrage accompanying the release of the so-called ‘Paradise Papers’, detailing efforts to avoid tax by wealthy individuals and global corporations, is a sad testament to the extent of dilution the concept of property rights continues to suffer in our modern democracies. In the current political debate, the question of the moral justification of taxation has been forgotten.

‘Justice being taken away, what are kingdoms but great robberies? For what are robberies themselves, but little kingdoms?’. With these words Augustine of Hippo, a fourth century philosopher, was maybe the first to articulate a challenge to the moral legitimacy of taxation. And the discussion of the ethics of any action must start with an articulation of the underlying principles. As libertarians, we take as our starting-point the principle of non-aggression. The individuals has a moral, inalienable right to his own body and hence the fruits of his own labor. Whatever property he may accumulate in such way is his property. Taxation is clearly a violation of property rights, hence we equate taxation with theft.

Some on the extreme left take the opposite position. They argue that the market allocation of income is random and not morally justified, and therefore the individual has no moral right to income. It is the job of the state, via taxation, to correct the markets failure to yield a just distribution of income. Of course, whatever is such ‘just’ distribution is clearly subjective.

A mainstream argument is that the moral of taxation springs from the ethical legitimacy of democracy. Proponents of that argument also advocate the highly dubious position sometimes referred to as ‘You Didn’t Build That’ (a phrase from a Barack Obama speech during the 2012 election campaign). The argument goes that any business owner relies on a societal infrastructure of roads, education, security etc., and preposterously assumes that that can only be provided by government: the argument is thus logically flawed. The moral weakness of the argument is that any transgression can be deemed moral as long as it garners a democratic majority. Libertarians would argue that democracy is illegitimate precisely because of its inherent failure to guarantee protection of personal freedom and property rights.

In mainstream thought, taxation derives its legitimacy from the so-called social contract. By merely living in a society, tacit consent to certain measures and restrictions to basic rights is assumed. However, as libertarians, we question the idea that the individual can be morally beholden to a contract which he has never signed or agreed to be party to. The right to your post-tax income is a legal, not a moral, right.

The ‘Paradise Papers’ illustrate how even the legal right to post-tax income is now subject to moral judgement. These days few care to distinguish between legal tax avoidance and illegal tax evasion. The act of trying to minimize one’s tax liabilities is considered morally wrong (we argue that is not the case here), whether in compliance with the law or not. Libertarians would argue that it is taking other people’s property which is morally wrong, legal or not, but in the mainstream, the right of the state to expropriate our property now clearly ranks ahead of the individual’s right to defend it.

A decade ago, Tony Blair’s government took a utilitarian approach to taxation: the emphasis was on revenues, not tax rates. Though the system seemed to callously regard the taxpayer as a subject to be bled for as much cash as possible, there was no demonization of wealth. Peter Mandelson was famously quoted as being ‘intensely relaxed about people getting filthy rich’. A tax system set up to tax only domestic, not global income, attracted high net worth individuals to British shores. The Great Recession changed the mood: the tax system has been altered, loopholes closed. The current Labour leader, Jeremy Corbyn, talks of billions ’being leached from our vital public services by a super-rich elite’. These days, taxation is being viewed through the subjective prism of ‘fairness’. Moral outrage is ubiquitous, and the public notion of ‘fairness’ is increasingly egalitarian.

The defence of property rights is not a dubious crusade to protect the Few from their perceived responsibility to provide for the Many. Besides the moral arguments, private property rights are fundamental institutions of a market economy. Where there are no property rights, there can be no market and hence no functioning economy. Upholding the sanctity of property rights is to defend the capitalist order to which we owe the explosion in wealth the Western world has enjoyed since the industrial revolution.

The moral concept of property rights has been steadily diluted by government overreach, to the point where tax is often not viewed as a payment by the taxpayer to the state, but rather that a residual is paid to the taxpayer by the state. It is paradoxical that in the age of rapid human rights inflation, now spanning things like education, holidays and access to public services, the most fundamental right of all is being slowly eroded.

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