1. What is the moral basis for taxing some incomes at higher rates than others?
There's a subtle trick in this question. It's certainly true that equal incomes ought presumptively to be taxed at equal rates, and that we should provide some kind of moral justification for deviating from this. But it's not at all clear that we should expect unequal incomes to be taxed at equal rates.
To illustrate, let's step back a moment, and consider the head tax, almost universally recognized as deeply unjust. If everyone were required to pay exactly $1000 tax, regardless of their income, that would quite clearly be unaffordably burdensome for the poorest taxpayer, while utterly inconsequential to the richest. Both are paying an equal amount, but the burden is nowhere near equal. Most people would agree that "equal" does not mean "fair" when we're talking about the absolute amount of tax paid.
So why should we assume that equality of rate is the fairest approach? It's certainly fairer than a head tax, but is it perfectly fair, such that we need to provide a moral justification for deviating from it?
I have argued on this very blog quite often that it is not. The short answer to the question, then, is that no justification is required to treat different incomes differently according to their differences.
2. Do we imagine that incomes are entirely the result of some random process?
No, of course not. But neither are they entirely independent of random chance and unearned advantages. Pretending that all inequality of income is 100% deserved is just as ridiculous as pretending that none of it is deserved.
I tend to think, though, that bickering about what people deserve is a waste of time. I don't care if the poor deserve to be poor or the rich deserve to be rich; I want a system in which all humans enjoy the greatest freedom and quality of live possible, no matter how much we might deserve to be punished with eternal misery for our original sin. Indeed, it's kind of arrogant to try to argue for or against any economic system based on one's eminently fallible and inherently biased personal judgments about what people deserve.
3. Do we understand that people with high incomes are the most mobile people on earth and that such persons are most able to leave one tax regime for another?
I've seen this argument before. If we raise taxes on the rich, they'll just pick up and move somewhere where they can pay lower taxes.
Oh no. They'll take all those dollars somewhere else, and we'll only be left with our land and natural resources, our buildings and infrastructure, and our labour force! Whatever shall we DO!?
(This is actually a bigger problem for the rich person moving abroad than it is for us. Either they exchange their Canadian dollars for the currency of the lower-tax jurisdiction, and those dollars come back as foreigners spend them to buy Canadian stuff, or they just hang onto them and don't spend them and soon discover that money is useless by itself, while we print new money to mediate our own transactions.)
Yes, people with high incomes often have valuable skills and it might be a shame to lose them, but if those skills tend to be focused around how to squeeze the biggest share of the surplus value of trade from a transaction, it's not necessarily such a bad thing if they take those skills elsewhere.
Have some faith in the free market. If we find that we really desperately need more surgeons, we'll start offering them more money to come here and work, taxes and all. The skilled people we need to attract, the market will attract. But we don't need to attract people whose primary skill is gaming the system to concentrate wealth in their own hands.
4. Related to question 3, do we realize that governments exist in a competitive landscape, very much like businesses do?
The core of this, related to question 3, is the premise that governments are competing to attract the wealthy people to come live in their territories and pay taxes. But this is only incidentally true, and it's grave mistake to structure your whole idea of government around this objective. Governments compete for all sorts of reasons -- territory, scarce resources, access to markets, prestige -- and competing to attract investment capital is just one of many ways they may or may not compete, depending on scarcity and demand.
But all of these things are incidental to the role of a sovereign government, which is constitutionally incompatible with competition. At its core, a democratic government is simply the means by which a population organizes itself and resolves internal conflicts about what is to be done. In practice, it usually needs material resources and labour to carry out its policies, and so yes, it does compete both within and without its sovereign territory for the things it needs, but its main task is governing, and if it is to be sovereign, it must have no competition in this role.
I've written about this before, but if you really want to think of a government as a business, then you should think of citizens as shareholders, not customers. A government's responsibility is to its shareholders, not to its customers, and while it might compete with other entities for customers, it really makes very little sense to think of it competing for shareholders. And if all the shareholders decide to liquidate their shares and go invest their liberty with some other government, so be it.
5. Do we have a right to treat wealthy individuals and organizations as a resource for our benefit?
Individuals? No, of course not. Organizations? Well, yeah.
In nature, there's no such thing as a corporation. Corporations exist entirely as creatures of law; they are ways of organizing our activities to facilitate achieving certain goals. You don't have an inalienable right to form a corporation; you are given that option by a sovereign government enacting legislation allowing the creation of corporations (and other organizations, such as non-profit societies, for example) and the government can attach any conditions it wants. Want to form a corporation so you can raise capital to build a factory and manufacture widgets without exposing your personal assets to liability risks? Cool, go ahead, the government will protect this bundle of rights here, and you need to divert this proportion of your profits to government coffers.
6. Will democratic socialism damage innovation and economic growth?
The article doesn't clearly define "democratic socialism", but the answer it offers to this question seems to equate it with "steeply progressive tax rates". I'll quote it in its entirety to respond fairly.
"Steeply progressive tax rates provide a substantial disincentive to earn income above a certain level. The natural result would be to opt for more conservative returns from known methods and products. There is little reason to take risks for breakout success when the profits will be subject to a confiscatory rate."Seems superficially plausible, but there are a number of mistakes here.
First, progressive tax rates are not a disincentive to earn more money, because there is no point at which earning an extra dollar fails to put at least some money in your pocket. Rather, the incentive to earn an extra dollar diminishes, the more you earn.
Second, remember that taxes are assessed on profits, which are calculated after deducting expenses. And money invested in R&D, to develop risky but potentially lucrative new products, counts as an expense.
Third, a low tax rate doesn't necessarily encourage innovation, at least not of the sort we want to encourage. There are two principle ways to profit from investment, when you buy shares, for example: income (dividends, for example) or growth (capital gains). If the tax on income is very low, you might well prefer to opt for the "conservative returned from known methods and products" since you know you can keep most or all of those proceeds. Why bother risking putting all those profits into R&D when you know you can keep pulling out cash now, especially if capital gains taxes are relatively higher? So whether sharply progressive taxes inhibit or encourage innovation depends on a lot of other factors.
7. Why do we prize many other kinds of freedom more than economic freedom?
Where to begin? I guess my first observation is that this is just so vague as to be meaningless. What on earth is meant by "economic freedom" as distinct from "other kinds of freedom"? I would argue that most freedoms are economic freedoms, or are at least heavily impacted by economics. Someone with money has, in practice, more freedom of speech than someone without. Someone with money has more ability to cast a ballot that will be counted. Someone with money will find it much easier to stay out of jail than someone without. And recursively, someone with money will find it much easier to exercise their economic freedom to earn more money than someone without.
So I would turn this question around: why do you want to prize some people's economic freedom at the expense of everyone else's?
8. Do we really need higher taxes or do we need to rethink the way we spend our money now?
Yes to both. We always need to rethink the way we spend our money, because that's always going to be an ongoing, self-renewing problem. But we do need higher taxes, particularly on the wealth, and for reasons that really have nothing at all to do with funding government, because...
9. Are we getting taxation wrong?
...yes, we are absolutely getting taxation very very wrong. Taxation is not, contrary to all our intuitions, about funding the government. At least not the federal government. It is to some extent about funding provincial and municipal governments, but the federal government is the one that issues currency; it can in principle print all the money it wants, but it really shouldn't just do so with wild abandon because that will lead to hyperinflation. So taxation is really about preventing that, not funding the government.
In the post before this one, I talked about how the sovereign actually has practical ownership of everything. Consider that for a moment, in the big picture: Parliament can in principle pass a law imposing any rules it wants on how any given object, commodity or land can or can't be used. If parliament passes a law saying you must eat this apple and I must not, any talk about me owning this apple is essentially meaningless. Now, it's certainly true that we have a written constitution that prevents Parliament from certain sorts of enactments, but the Constitution itself is an Act of Parliament with an amending formula. In this context, it makes sense to say that the property laws in effect within Canada by which I can meaningfully claim this apple is mine and not yours are really just the system of rules that the sovereign has chosen to apply in deciding how its apples are to be used.
And so, paying people to build bridges or serve in the military or manage fisheries is just the way that the sovereign has chosen to effect its will. The sovereign wants these things done; it could pass a law requiring people to build bridges, but finds that it is more effective to use a money system instead. Money's a fine system, but it takes a certain amount of maintenance to keep it functioning smoothly, and taxation is part of that. Not to provide the money for the government to spend, but to keep it circulating.
We tend to think of money as some scarce good that we need more of, and on an individual level that's probably how we ought to think of it, or it won't work the way it's supposed to. But on the national level, the level of making policy and debating the ethics of taxation, it's dead wrong. One can criticize any tax policy as bad policy and likely to fail, but when we talk about it violating people's property rights to money they've earned, we're getting taxation very wrong.
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