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Reflections: Redistribution of wealth through taxation

by Michael Greaney

It may come as a distinct shock to many people (especially politicians), but there are two essential facts about taxation that are almost completely ignored in the modern age. The first is that the purpose of taxation is to raise money to defray legitimate expenses of running the government. The second is that the State does not own you or have property in your possessions. Misunderstanding either or both of these essential facts leads to the false idea that the tax system can and should be used to redistribute wealth so as to attain a basic equality of condition for all citizens.

The proper role of government - most accurately viewed as a necessary evil - is to keep order and protect property and other basic natural rights. This is usually construed as providing a level playing field so that all citizens have an equal opportunity to participate fully in all the institutions of the common good: the common good being that network of social structures within which we as political beings realize and develop our essential human nature, acquiring and developing virtue and thereby becoming more fully human.

Equality of opportunity, however, is not the same as equality of results. Each and every human being should have equal access to the means of attaining a degree of wealth sufficient to generate an adequate and secure income to meet common domestic needs adequately. In a modern industrial economy, that means that no one can be prevented from taking any job for which he or she is qualified ... or (much more important) prevented from becoming an owner of a moderate but meaningful stake of capital, that is, income-generating assets, or "wealth."

The means of acquiring and possessing private property - meaning capital, not consumer goods (which are much easier to purchase) - is credit. Again, this means capital credit, not consumer credit, the latter being akin to heroin, and much harder to break an addiction to. A program that opens up democratic access to capital credit would be well within the scope of government - assuming that it was limited to people purchasing financially feasible projects - but not simply distributing cash taxed away from others in order to purchase those same assets.

A number of proposals have been developed to achieve the end of democratizing access to capital credit, such as Capital Homesteading for Every Citizen (from the book with the same title), but to date the only one that has been implemented is the astonishingly successful "Employee Stock Ownership Plan" or "ESOP" invented by Louis O. Kelso, and described in the book he co-authored with Mortimer J. Adler, "The Capitalist Manifesto." First published exactly half a century ago as of this writing (1958), the "Capitalist Manifesto," and its 1961 sequel, "The New Capitalists: A Proposal to Free Economic Growth from the Slavery of Savings," detailed a way for ordinary workers who lacked savings and the individual ability to get capital credit could organize, obtain loans, and purchase shares in the companies which employed them. To date, more than 10 million American workers in over 10,000 companies have benefited from this program.

As it is currently embodied in law, the ESOP unfortunately relies on certain tax subsidies - but these are not essential to its operation, and could be eliminated if the tax and banking system were reformed to reflect basic principles of justice detailed in the "Capitalist Manifesto" as well as "Capital Homesteading for Every Citizen."

Thus, except in emergency situations, there is no reason or excuse for the government to use the tax system to redistribute wealth, not when a much better system for attaining a genuine economic democracy founded solidly on principles of natural law already exists and needs only to be implemented.

As for the emergencies, yes, they have a way of occurring, and sometimes the government must take steps to redistribute wealth to meet people's basic needs until the emergency is over. Since the tax system exists and is an orderly method of carrying out this task, it can be used for this purpose - but this should never be a regular thing, and the program should be stopped as soon as the institutions of society have been restructured in a way that allows people to take care of themselves without coming under the control of the State.

Helium, Inc.
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