5 Moral Reasons for Low Tax

While the economic case for lower taxes is well known, the moral case is rarely made. Here are five moral aguments from Eamonn Butler, Director of the Adam Smith Institute from the 2020 Tax Commission.

1. Spending crowds out private contributions

People who pay high taxes are less likely to make financial contributions for the general benefit. In the first place, tax leaves them with less money to devote to charitable giving. Schools, hospitals, libraries, galleries, orchestras, care homes and other welfare charities have all benefited from the bequests of people who understand their importance to society and humanity; but high rates of lifetime or inheritance taxes inevitably leave people with less to give.

When people have the impression that the state will provide through its spending programmes, they see less reason to contribute their own support to good causes. When people see public libraries closing, their first thought is to demand that public expenditure priorities should be changed – rather than to dip into their own pockets. Why support medical research, for example, when the government already directs countless grants and subsidies to this very function?

2. Spending undermines personal responsibility

By relieving people of control over their own resources, public spending relieves them of personal responsibility. They may wish, for example, to take care of elderly relatives, or to provide educative activities for their children, or to give themselves training that might enhance their employment prospects. By eating into their income, savings and capital, taxation reduces their ability to do these things.

Indeed, spending may leave people convinced that they have no outstanding social obligations at all. When our taxes are collected, we are told that they will pay for vital public services such as education, welfare and policing. And since most people greatly underestimate the cost of public services, they may well look at their tax bill and conclude that these services must be in ample supply. That in turn may make them believe that their social obligations have been completely discharged – that they have paid handsomely for others to do the job.

3. Spending fuels the government gravy train

The higher that spending grows, the more people there are who have an interest in keeping it that way. In Scotland, for example, over 50 per cent of GDP, the country’s income, derives from public spending. In the North East of England, it is more than 60 per cent. In Wales, more than 60 per cent of GDP comes from the state.

It is no wonder that the (generally more hostile to public spending) Conservatives are hardly represented in these areas. But, whatever the fortunes of particular parties, the figures do suggest that people who live in places that are highly dependent on government spending, or who themselves depend on it, are more likely to vote for more of it, rather than to make some dispassionate judgement about what is beneficial for the nation as a whole.

4. Spending promotes the self-interest of authorities

It is not as if the money raised through taxation is spent in accordance with the views and wishes of those it comes from – or even as if it is spent honestly and objectively in the public interest.

We get very little say in where our tax money goes. Elections are infrequent, perhaps no more than every four or five years. The politicians who decide where our money is to be spent cannot have any clear idea of what the public’s priorities really are, and of the depth of feeling that different people have about those priorities.

But then our legislators and officials have priorities of their own. People do not suddenly become angels when they are elected into office or start working for a government agency. They have their own interests, ambitions and objectives that inevitably colour the decisions they make. Officials may well try to ensure that public money is spent effectively and dispassionately; but they may equally have an eye on protecting their own budgets.

Parliamentarians may well claim, and believe, that they are in politics to make things better for everyone; yet they may also incline to take greater care in steering public resources to their own voters and supporters. The real world of government is very distant from the textbook ideal in which representatives and officials weigh up the issues dispassionately, decide them impartially and apply them objectively in the public interest.

5. Spending is inefficient

There is an argument that people can spend their own money better than others can, and that taxpayers too can spend their money more effectively than can politicians and officials. Given that taxes are collected by coercion, this should worry us, since it implies that, to some extent, people are being coerced for no good purpose.

To illustrate the argument, consider four kinds of spending.

First is when I spend my own money on buying things for my own use. In this case, I will of course be very concerned to get a good price, but also to get good quality. Second is when I spend my money on buying something for someone else – a present for my aunt, say. Here, I am very concerned about the price, but not so concerned that I get good quality. Third is when I spend someone else’s money on myself – as with an expense-account lunch. Here I am keen to get good quality, but hardly concerned about the price at all. Fourth is when I spend someone else’s money on someone else. And this is the public sector.


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