October 30 Bruno Verbeek (Leiden) ‘You Did Not Build that Road: Reciprocity, Benefits, Opportunities and Taxing the Extremely Rich’Posted: September 26, 2013
16:30 – 18:00
Dante Building Room 7 (DZ7)
Recently, many states in the Western world, confronted with a fall in revenues and rising debts on the one hand and growing economic inequality on the other, have taken a critical look at the tax rates for the extremely rich. In various places, policies have been proposed to the effect that the 1% of the highest income earners should pay (much) more in taxes than they currently do.
A typical argumentative strategy that is used to argue for increases in the marginal tax burden for the extremely rich is to argue that the extreme rich amassed their wealth by taking advantage of economic opportunities that they did not create themselves. Other members of society created those opportunities and reciprocity therefore demands that the extremely rich ‘pay’ for these opportunities they enjoyed.
In this paper I argue, first, that arguments like these fail: they do not justify a marginally higher tax burden on the extremely rich. Secondly, I argue that this type of argument appeals to a principle according to which taxation is the price a citizen pays for the enjoyment of the benefits the state provides. Third, I will show that such a principle not only undercuts the argument, but also that it mandates a flat tax rate if not a lump-sum tax.
In the final part of the paper, I briefly discuss an argument for taxing the extremely rich that does not appeal to a benefit principle. This argument proceeds from the idea that justice demands that taxation is levied according to the ability to pay. Social-democrats and left liberals who are concerned about the extremely high incomes on the top end of the income distribution are better advised to adopt such a strategy.