(2) The “Ability-To-Pay” Principle
(a) The ambiguity of the concept
B. Costs of Collection, Convenience, and Certainty
Even the simplest maxims must not be taken for granted. Two centuries ago, Adam Smith laid down four canons of justice in taxation that economists have parroted ever since.60 One of them deals with the distribution of the burden of taxation, and this will be treated in detail below.
C. Distribution of the Tax Burden
Up to this point, we have been discussing taxation as it is levied on any given individual or firm. Now we must turn to another aspect: the distribution of the burden of taxes among the people in the economy. Most of the search for “justice” in taxation has involved the problem of the “just distribution” of this burden.
Various proposed canons of justice will be discussed in this section, followed by analysis of the economic effects of tax distribution.
7. Canons of “Justice” in Taxation
A. The Just Tax and the Just Price
For centuries before the science of economics was developed, men searched for criteria of the “just price.” Of all the innumerable, almost infinite possibilities among the myriads of prices daily determined, what pattern should be considered as “just”? Gradually it came to be realized that there is no quantitative criterion of justice that can be objectively determined. Suppose that the price of eggs is 50¢ per dozen, what is the “just price”?
Is the radio spectrum a unique resource that belongs to the public, or can it be privately owned like any other good or service? Most people assume that public ownership is axiomatic—a starting point rather than the historical consequence of special interests pretending to misunderstand economics. This is wholly incorrect.
Among the most popular and consequential beliefs of our age is the belief in collective security. Nothing less significant than the legitimacy of the modern state rests on this belief. And yet, the idea of a collective security is a myth that provides no justification for the modern state. Private-property owners, cooperation based on the division of labor, and market competition can and should provide defense from aggression.
The most accurate description of the twentieth century is “The War and Welfare Century.” This century was the bloodiest in all history. More than 170 million people were killed by governments with ten million being killed in World War I and fifty million killed in World War II. In regard to the fifty million killed in World War II, it is significant that nearly 70 percent were innocent civilians, mainly as a result of the bombing of cities by Great Britain and America.
Writing for Americans about the cultural background of Ludwig von Mises, an eminent former compatriot of mine, poses some difficulties: how to present you with a world radically different from yours, a world far away, which in many ways no longer exists. For example, the birthplace of this eminent economist was for nearly fifty years within the confines of the Soviet Union. Who was this great man and scholar? In what ambiance did he live before he came to the United States, where he continued to publish his crucially important works and to inspire new generations of economists?
“Lincoln was a typical example of the humanitarian with the guillotine: a familiar modern ‘reform liberal’ type whose heart bleeds for and yearns to ‘uplift’ remote mankind, while he lies to and treats abominably actual people whom he knew.” ---Murray Rothbard1
Ken Masugi is partially right
