|The Myth of Ownership': Challenging the Rhetoric of Tax Cutting
By DAVID CAY JOHNSTON
THE MYTH OF OWNERSHIP: Taxes and Justice. By Liam Murphy and Thomas
Nagel. 228 pp. New York: Oxford University Press. $25.
When President Bush, promoting tax cuts, says people's incomes
belong to them and not the government, the authors of this book say
he is using fuzzy logic. Liam Murphy and Thomas Nagel, professors
of law and philosophy at New York University, argue in the ''The
Myth of Ownership'' that Mr. Bush's rhetoric is emblematic of a tax
debate that focuses on the wrong issues because it lacks a moral
They assert that a naive philosophy of ''everyday libertarianism''
infects American politics with a ''robust and compelling fantasy
that we earn our income and the government takes some of it away
from us.'' This popular myth ''results in widespread hostility to
taxes, and a political advantage to those who campaign against them
and attack the I.R.S.''
This fantasy grows from the acceptance by all sides in the tax
debate that gross, or pretax, incomes are presumptively just and
therefore the proper moral base line to begin debate. The authors
say pretax incomes are morally insignificant, an idea they confess
is hard to sell. They argue that ''individual citizens don't own
anything except through laws that are enacted and enforced by the
state,'' because without government there would be anarchy, an
endless war of all-against-one that would diminish incomes and
wealth, not to mention life itself. Thus it is after-tax incomes
that people are entitled to own. These ideas will encounter a
hostile reception from partisans in the debate of the past
quarter-century, in which the prevailing political rhetoric
characterizes taxes as sheer waste, an unfair drag on the most
productive people and an evil.
The thoughts in this book deserve examination, especially the views
of Nagel and Murphy on the self-interest each taxpayer reasonably
has in the social justice purchased by hard-earned money.
Unfortunately, their carefully developed arguments are mixed with
a hostility to inherited wealth that will make it easy for those
who are paid to promote hatred of taxes to dismiss them as
soak-the-rich types with nothing new to say.
The practical problem here is that gross incomes are commonly seen
as just rewards for one's commitment to work, as well as one's
willingness to take investment risks. But that belief assumes that
the market rewards each endeavor according to its value, an
assumption that collapses under scrutiny, as the manipulations at
Enron and Global Crossing remind us. Government enacts rules on
employment, influences interest rates, allows widely different
qualities of education in school districts and imposes countless
policies that distort distribution of pretax incomes -- compared
with what they might be in a libertarian world of voluntary
contracts and no government. Pretax incomes are presumed just, the
authors posit, for the same reason slavery was once the law of the
land: pervasiveness makes legal inventions appear to be natural
Murphy and Nagel say using pretax incomes as the basis of debate
defies logic, since ''one can neither justify nor criticize an
economic regime by taking as an independent norm something that is,
in fact, one of its consequences.'' To them, acceptance of pretax
income as a moral base line means that ''serious public discussion
of economic justice has been largely displaced by specious rhetoric
about tax fairness,'' resulting in a ''radical climate'' of tax
proposals favoring the rich.
Taxes, they write, need to be examined in the context of government
spending so that one sees both costs and benefits. The
constitutional mandate to ''promote the general welfare'' should
guide tax policy, not theories about lowering marginal tax rates
and favors for savers. They even argue that it may be reasonable to
tax people with similar incomes differently if that achieves a
social good. The measure of justice and fairness in tax, they
emphasize, should be the outcomes of tax policy, especially whether
each newborn gets enough of society's resources to have a fair shot
at success in life. They argue that poverty is bad for rich and
poor alike, and that the poor, especially when it comes to
educating children, have one of the strongest moral claims on tax
They object to a myopic focus in the tax debate on how tax burdens
are distributed among income classes. In this they ignore a simple
truth: for the public such measures are much easier to assess than
is determining government's success in promoting the general
The authors call the current policy of forgiving capital gains at
death ''an outrage.'' When combined with other tax breaks for those
with assets, it is, they say, ''an egregious injustice in the
current tax scheme,'' because it perpetuates inequity and lavishes
rewards on those who are fortunate in their ancestry but may
contribute nothing useful to society. Their solution would be a
fundamental reform: make recipients of large inheritances and gifts
pay taxes, just as wage earners must.
Nagel and Murphy give too little attention to the role of taxes in
creating wealth. Peace is a boon to hoteliers, Conrad Hilton
pointed out in his will. Without vast taxpayer investments in
keeping the peace, as well as in building roads and airports, his
fortune would have been much smaller. Many modern billionaires owe
much of their wealth to the taxpayers for investing in education,
and the scientific advancements on which their products depend.
Murphy and Nagel do not examine whether it would be just to look on
such big economic winners as successful investments of tax dollars,
and then taxing these winners to insure that society has sufficient
resources to invest in each new generation.
They also ignore the morality of tax enforcement and its role in
tax justice. Is it moral to prosecute and imprison an illiterate
former cotton picker over less than $100,000 in taxes unpaid over
the years while looking the other way when two billionaires go 30
years without filing tax returns, as the I.R.S. and Justice
Department have done within the last five years? Is it is fair to
audit the working poor far more intensely than everyone else? And
just how does any of this promote the general welfare?
Murphy and Nagel offer ideas that would improve the national debate
over how we should tax ourselves, even if their views never gain
popular acceptance. What is more likely, unhappily, is that
reasoned suggestions -- from many sources -- will be drowned out in
the din of mindless antitax sound bites.
David Cay Johnston, a reporter for The Times, won a Pulitzer Prize
last year for his reports on inequities in the American tax system.