Why Not Soak the Rich?
Wednesday, March 6, 2013
It would be easy to dismiss the current battle of the budget as simply partisan politics at its worst, but both sides are convinced that they are in a contest over genuine principles. In terms of the propaganda war, however, liberal Democrats have maintained a marked advantage over their conservative Republican rivals, because they have been able to define the principle that is supposedly animating Republican opposition to the White House budget proposal. Senate Majority Leader Harry Reid did this just the other day when he said that “my Republican colleagues are standing in the way of a solution. They only want cuts and more cuts. They are willing to sacrifice three quarters of a million jobs rather than ask multimillionaires to pay a penny more.”
Republicans can hem and haw about the issues dividing them from Democrats in this battle, but, in point of fact, it really does come down to the fact that they really don’t want to ask multimillionaires — or indeed, multibillionaires — to pay a penny more. But what kind of principle is this? Isn’t it proof that the Republican Party is the party of the rich, as liberals have always argued?
Well, it would be proof, I suppose, if Republicans’ only supporters were multimillionaires, in which case Congress would be composed entirely of Democrats, who would have no qualms about soaking the rich. But there are a great many Americans, who — far from being rich, let alone superrich — are among the staunchest supporters of the Republican Party. Furthermore, it is not merely the Republican leaders in Congress who oppose raising taxes on the rich; it is the Republican rank and file as well. And this fact drives liberals nuts.
Of course, middle-class Americans, even of the most conservative stripe, believe that the wealthy should pay their fair share of the tax burden, but a surprising number of them would be perfectly happy if everyone, including multibillionaires, paid the same flat tax. In a poll taken in late 2011, for example, 45 percent of Republicans favored a flat tax, while 33 percent were opposed to the idea. Needless to say, Democrats were less enthusiastic about a flat tax, but even 19 percent said they would support one.
If the sanctity of private property is a myth, it has been an indispensable myth in the development of both liberty and prosperity.
Other middle-class Americans are prepared to accept a taxation system that is more progressive, but only on the condition that it doesn’t unduly gouge the rich. Obviously there will be legitimate differences over exactly what percentage of their income the rich should pay, but in the United States today there are not many Americans who wish to impose confiscatory taxes on wealth. During the “fiscal cliff” crisis earlier this year, for example, it was only with the greatest difficulty that the highest marginal tax rate was grudgingly pushed upward to 39.6 percent of income from the previous high of 35 percent, and even then it could be argued that this was a reflection of the need of politicians to work out a viable compromise, and not a reflection of the people’s preferences on adding to the tax burden of the rich. Yet even this relatively small increase was attacked by the anti-tax stalwarts of the Tea Party movement, many of whom took the position that it was better to go over the fiscal cliff headfirst than to ask billionaires to pay even a penny more in taxes — even billionaires who were literally begging to be taxed. Considering the gravity of the fiscal crisis, and the temptation to take the easy way out of it by soaking the rich, it is little wonder that so many liberals have been deeply perplexed by middle-class America’s solicitude for the welfare of the billionaire and his billions.
Liberals have no difficulty understanding why billionaires are opposed to increasing the tax rate on billionaires. In wishing to avoid higher taxes, they are simply following the dictates of their rational self-interest. True, there are some billionaires, like Warren Buffett, who believe that billionaires should pay a higher rate; but what baffles liberals most is when men and women who are far from being billionaires refuse to act on their rational self-interest. Despite the fact that they often make no more, or even less, than the average income, these puzzling Americans perversely resist any effort to improve their own lot by demanding that the rich pay more in taxes. What can possibly account for their irrational behavior?
The short answer, widely accepted among liberals, is that the Republican Party is essentially a front. Billionaires really run everything behind the scenes. Their primary objective is to enrich themselves through control of the government and to make sure that they stay rich by keeping their own tax rates low. Of course, the rich cannot openly acknowledge what they are really after, since the average Republican voter would resent being manipulated for such low and cynical purposes. Hence, the need for some clever political marketing on the part of the wealthy. They must create a series of phony issues to distract the average Republican voter from paying attention to the real issue. According to liberals, the real issue is economic justice, while the phony issues are the various old right-wing chestnuts of the American cultural war — guns, abortion, gay marriage, immigration, religion, and so on, all of which serve as smokescreens to bamboozle the average-income voter into supporting policies and programs that benefit not themselves, but only the very wealthy.
Republicans naturally dismiss this liberal caricature of their party with contempt. Despite Democratic rhetoric to the contrary, Republicans can point to the fact that the wealthiest 20 percent of Americans currently pay 71.8 percent of federal taxes and that these wealthy Americans “are paying some of their biggest federal tax bills in decades even as the rest of the population continues to pay at historically low rates,” as the AP notes.
According to liberals, the real issue is economic justice, while the phony issues are the various old right-wing chestnuts of the American cultural war.
Yet these facts by themselves fail to explain why so many Americans who are not in the top 20 percent are opposed to increasing the tax burden of the rich. Indeed, when liberals scratch their heads at such “irrational” economic behavior, I think they are definitely on to something. They have noticed a fact that does indeed cry out for explanation. What keeps middle-class Americans from pursuing their naked self-interest when it comes to taxing the rich? Average-income Americans far outnumber the wealthy and, in a democracy, where the majority rules, there is no limit to how much wealth they could transfer from billionaires to themselves — that is, no limit beyond billionaires’ checkbooks.
Late into the nineteenth century, most men of property feared that the advent of democratic societies would inevitably lead to some kind of economic leveling. Their general view of human nature convinced them that the poor and the middling classes would demand a radical redistribution of wealth, which would invariably mean a transfer of property from those who had a lot of it — namely, themselves — to those who didn’t. If we could go back in a time machine and bring these shrewd tycoons of the past into the present day, they would be just as puzzled as today’s liberals by many Americans’ lack of enthusiasm for any proposal that aims at “sharing the wealth.” Conservatives might account for this attitude by pointing to the wide dissemination of supply-side economic theory in the post-Reagan era. This may play a role, but it is far too rationalistic an explanation of the phenomenon under consideration. The unwillingness of most Americans to use their political power to take from the rich and give to themselves did not come about because these Americans have read the right economists, much less because they have been brainwashed by cynical billionaires. What we are dealing with here, I believe, amounts to an inherited taboo — a taboo associated with the well-known phrase “the sanctity of private property.” Spelled out fully, this taboo states: the current property distribution is sacred, therefore, it is sacrilege to rearrange it, even in the name of progress or social improvement.
For leftists in general, few taboos can be more absurd. To them “the sanctity of private property” is obviously a self-serving myth devised in ancient times by the intellectual lackeys of the rich, namely priests and lawyers, in order to keep the ignorant masses slaving away in poverty. All this may very well be true, but it overlooks the fact that if the sanctity of private property is a myth, it has been an indispensable myth in the development of both liberty and prosperity, and that those who believe that our society would be better off if the average man discarded this myth could not be more mistaken. To understand why this is so, however, requires us to return to that period of European history when the redistribution of wealth had a very different meaning than it has for us today.
A History of Brute Force and Property Rights
Few things divide contemporary liberals and conservatives more than the issue of the redistribution of wealth. Yet beneath their surface disagreement lies a tacit assumption shared by both conservatives and liberals alike. When they think of redistributing wealth, they imagine taking from the rich and giving to the poor — the Robin Hood model, as we might call it. But if you were to go back in time, say, to the years following the Norman Conquest of England, the redistribution of wealth would mean something quite different.
English-speaking peoples have always tended to deal with questions of property not as philosophers, but as mere jurists and lawyers.
Shortly after the decisive year of 1066, William the Conqueror’s tax collector and army of accountants began roaming about the shires of England in order to make an accurate inventory of all the property, down to the last little piggy, belonging to William’s newly acquired subjects. The purpose of this grand inventory was not to amass useful information about daily life in eleventh-century England to enlighten historians of later centuries — though that has been an incidental product of the famous Domesday Book. No, it was undertaken so that William and his busy clerks could decide exactly how much wealth they could seize from English property holders, without reducing them to abject poverty or despair. This relative leniency was not a reflection of William’s sense of humanitarian compassion, but simply proof of his prudence. You don’t kill the goose that lays the golden egg. If you take all of a farmer’s pigs one year, you cannot reasonably expect to take any pigs off his farm the next. Hence the most obvious principles of good husbandry demanded that the tax collector take only a few of the excess pigs, though obviously excess only in the eyes of the tax collector.
The same prudent principle is the operating basis of every protection racket that has ever existed. The gang, when it comes to town, realizes that it must limit its extortions to reasonable levels. If it demands every penny of profit made by the local drugstore or pawn shop, the owners of these businesses will simply give up trying, thereby cutting off the gang’s revenues at the source. In short, moderate extortion is the key to sustainable long-term success.
When the wealth of a community is redistributed from productive citizens and put into the hands of a few parasites, we have a model of wealth redistribution that is obviously at odds with the Robin Hood model that has become our standard way of thinking about the redistribution of wealth. Yet this “protection racket” model, as we will call it, has flourished in virtually every clime and epoch, with the critical exception of those few societies that wholeheartedly embrace the myth of the sanctity of private property. To William the Conqueror and his crew, there was nothing sacred about a farmer’s excess pigs or a peasant’s excess wheat. They were there for the taking, provided, of course, that you had the power to take them. It was power that mattered, not legal title. Indeed, the only real title to property rested on either outright violence, i.e., theft or the threat of violence, i.e., extortion. Might not only made right — it made riches, too.
Once we accept this fact, then we are immediately confronted by the following question: How did certain societies ever move beyond the protection racket stage? By what means did wealth cease to be a subject of violent contention among rival gangs, whether these gangs are local branches of the mafia, the Normans of William the Conqueror, or the hordes of Attila the Hun? How was it possible that many centuries after the Norman Conquest a weak and tottering old man could exercise complete and unchallenged control over a vast fortune when he lacked all means to defend his great wealth against men who were stronger, younger, and more ruthless?
Let us begin by noticing that there is an obvious problem in basing property rights merely on theft and extortion. If property rights are to be decided by brute force alone, then there is quite literally no reason that the ownership of wealth should ever be settled once and for all. If William has possession of wealth now, due to his right of conquest, then Henry can seize it by brute force, and claim the exact same justification for his possession that William did. And what is to keep Richard from doing to Henry what Henry did to William? Nothing. The cycle will continue so long as there are new challengers to the title of conqueror.
How did certain societies ever move beyond the protection racket stage?
The end result of such a situation is familiar to us from reading about the endemic violence among the rival drug gangs of contemporary Mexico or the bloody gang wars during the Prohibition era in the United States. Where violence alone determines the possession of wealth, or indeed any other valuable resource, the violent will continue to contend for it until eventually one gang, more cunning and ruthless than its rivals, will triumph by either annihilating or absorbing its enemies. It is only when this stage is reached — if it is reached at all — that a new factor will be introduced into the equation, one with the most momentous long-term consequences.
The new factor is introduced with a flourish of brazen hypocrisy. The last successful conqueror announces to the world that while he possesses his wealth by right of conquest, his children will not need to lift a finger in violence in order to lay their hands on the immense wealth that their father has acquired for them through deceit, deception, and bloodshed. From now on, the title to wealth will rest on the law of inheritance alone. Brute force will not prevail against this new title to property — on the contrary, brute force will be outlawed and criminalized, and those who seek to seize property in this manner will no longer be hailed as conquering heroes. Instead, they will have their heads chopped off and placed on long poles in conspicuous places, as a warning to others that the age of getting rich quick through the application of superior brute force has come to a screeching halt.
The conqueror who is able to pull off this difficult trick will look in vain to find a reason — and not merely a pretext — to justify his high-handed and blatantly self-serving dismissal of all future claimants to the right of conquest — the very basis of his own claim, remember. After all, why stop with him? Why not give others a chance to seize goodies for themselves? There is nothing fair about such an arrangement, just as there is no reason to stop at this particular conqueror rather than another. Indeed, what could be more transparently self-serving than the claim that while property was up for grabs when it was in other people’s hands, it has magically become sacred now that it is firmly in ours?
No doubt this is how we see it today, but our medieval forbearers probably looked on the matter in a quite different light. Exhausted and impoverished by the incessant struggle among the violent factions, all of which are eager to set up their own exclusive protection rackets, the common man caught up in these chaotic circumstances will yearn simply for stability. Even if that stability means little more than knowing in advance precisely how much you will have to pay in protection fees, i.e., taxes, it is still far preferable to trying to carry on with life in the midst of unending rounds of violence and war, with all the unpredictability and uncertainty attendant upon such anarchic conditions. By accepting the legitimacy of the status quo, along with whatever theological and metaphysical justifications were offered for it, ordinary people were not being credulous fools — they were simply being realists. If this was the only way to achieve stability, so be it.
You don’t kill the goose that lays the golden egg. If you take all of a farmer’s pigs one year, you cannot reasonably expect to take any pigs off his farm the next.
Furthermore, the news that wealth will now be inherited through peaceful means — that is to say, through law and courts of law, and not through violent struggle — will be greeted not with howls of mocking derision, but with sighs of grateful relief. For the average man living through this critical period of transition — say, a small English landowner in the twelfth or thirteenth century — knows something that most of us have forgotten, namely, that any settled system of establishing property rights, whereby property is transferred peacefully from generation to generation without a hitch, is far preferable to a system in which property rights must continually be defended by brute force, and is hence forever unsettled. The particular distribution of property may be deemed by outsiders — such as ourselves — to be unjust and unfair; indeed, the historical origin of the property status quo may be highly questionable or even completely despicable, but as long as this particular distribution is and remains the settled law of the land, it represents a vast improvement over the previous stage of property relationships that depended solely on brute force.
A System of Property Regulated by Law
From this perspective, the sanctity of private property, far from being a reactionary platitude, becomes the rallying cry of progress. A system of property based on and regulated by law is obviously superior to one based on and regulated by brute force. In addition, it has also proven superior to a system in which philosophers and ideologues get to decide what the optimal arrangement of property should be, as philosophers have done ever since the time of Plato when they attempt to construct those ideal societies known as utopias.
This kind of wild speculation about property has never held much appeal to the English-speaking peoples, who have always tended to deal with questions of property not as philosophers, but as mere jurists and lawyers. They don’t ask if a property law is fair or unjust. They ask only whether it is on the books. If it is, then it is right. If it isn’t, then it is wrong. Of course, the law books themselves often leave plenty of room for dispute, which is why there are so many attorneys and courts of law. But the wrangle stays strictly within the circumference of the law and never wanders off into dangerous speculations about justice or fairness.
This characteristic of the English was observed by the eighteenth-century jurist Sir William Blackstone who, in his Commentaries on the Laws of England, observed that among his countrymen “there are very few that will give themselves the trouble to consider the original and foundation of this right. … We think it enough that our title is derived by the grant of the former proprietor, by descent from our ancestors, or by the last will and testament of the dying owner; not caring to reflect that (accurately and strictly speaking) there is no foundation in nature or in natural law, why a set of words upon parchment should convey the dominion of land.”
Where violence alone determines the possession of wealth, or indeed any other valuable resource, the violent will continue to contend for it.
Clearly Blackstone himself is a bit puzzled how nothing more than “a set of words upon parchment” came to hold such a grip over the imagination of his countrymen — and their American cousins, too, it must be added. Yet the brief sketch we have offered up to this point indicates that there should be nothing very surprising about this. A society whose members have been imbued from birth with superstitious awe before “a set of words upon parchment” will keep their quarrels and conflict over property restricted to courts of law. They will not resort to violence for their own gain, nor will they tolerate anyone attempting to do so. They will not try to rise up in revolutionary frenzy in order to expropriate the wealth of others. Nor will they long tolerate a government that refuses to honor their own sacred rights of property, confirmed by their own “set of words upon parchment.” All these factors taken together will redound to the general welfare, both politically and economically, of any society in which this peculiar superstition — or taboo — has taken root at the unshakable visceral level. Any society that has reached this point has traveled an immense distance from the world in which the ownership of property was decided simply by brute force.
Throughout history, soaking the rich has proven a quick fix to temporary emergencies and crises, like the one we are facing today. But it is inevitably a fix that comes with a high cost. By undermining the taboo against expropriating wealth, it makes all private property less secure, including the property of the middle class. Let liberal intellectuals poke holes in the myth of the sanctity of private property, but respect the power for good that this myth has conferred on those societies that are, for the most part, strongly under its spell. The superstitious awe and visceral reverence that ordinary people feel toward “a set of words upon parchment” has proven indispensable to securing economic prosperity and political stability over the course of centuries. The ordinary man’s reluctance to speculate philosophically about property, and its origins and rights, might make him appear dense or incurious to the sophisticated intellectual, who relishes such abstruse discussions, but this indefatigably hard-headed approach to such questions has had the altogether salubrious effect of steadying the boat and keeping it on an even keel, despite the winds of revolution that have tossed and wrecked those ships that lacked their ballast of common sense.
FURTHER READING: Harris also writes “Enlightened Conservatism,” “Can the GOP Be Saved? The Myth of the Demographic Fix,” and “What Does It Mean to Say That a Gun Law Is Tough?” Steve Conover discusses “The Unfairness of the Buffett Tax.” Michael R. Strain explains “The GOP Case for Higher Taxes on the Rich.”
Image by Dianna Ingram / Bergman Group