Is progressive taxation a matter of envy?

Tax Notes editors Robert Goulder and Joseph J. Thorndike discuss envy and what it might mean for tax policy, all in five minutes.

This transcript has been edited for length and clarity.

Joseph J. Thorndike: Hi I’m Joe Thorndike, here today with my Tax Notes colleague, Bob Goulder. We want to talk about envy and what it might mean for tax policy.

We are living in the golden age of envy. Thanks mainly to social media – Instagram, Facebook, TikTok, Twitter – they have all conspired to leave us chronically unhappy, sometimes even outraged, with all the good things that happen to others.

Some believe this epidemic of envy is shaping tax policy. In a recent editorial, economist Lawrence Lindsey accused the Biden administration of supporting certain taxes as a purely punitive measure.

It sounds like a tax rooted in envy, at least to me.

Robert Goulder: Me too, Joe. But to be clear, I think Lindsey was talking about the kind of taxes that punish the rich just for the sin of being rich. I think, in particular, he was talking about capital gains rates going up about 40%.

He argued that such a rate would not increase new revenue and that any tax that is not designed to maximize revenue must therefore be aimed at maximizing pain. So, according to him, that’s what he means by a tax of envy.

Joseph J. Thorndike: That’s how Aristotle would have defined one too, I think. Aristotle thought envy is the pain I feel at the sight of someone else’s good fortune.

By extension, therefore, a tax intended to destroy that person’s good fortune is a tax motivated by envy. It soothes my pain to witness the good fortune of others by destroying that fortune.

Robert Goulder: I guess that makes sense. At least logically. Maybe intuitively.

Joseph J. Thorndike: This makes sense to me too, which is probably why critics of progressive taxation have been talking about envy for a long time. Here is Calvin Coolidge in the 1920s telling Congress to lower tax rates for the rich.

“This country believes in prosperity,” he said. “It is absurd to assume that he is jealous of those who are already prosperous. The wise and correct path to follow in tax matters is not to destroy those who have already succeeded, but to create conditions in which everyone will have a better chance of succeeding.

Robert Goulder: Calvin Coolidge? Really Joe, how quaint it is. Can you find an example of a slightly older envy speech?

Joseph J. Thorndike: Well, what about Ronald Reagan? It wasn’t exactly yesterday, but it is still in the living memory of some of us.

“Since when do we believe in America that our society is made up of two diametrically opposed classes – one rich, the other poor – both in a state of permanent conflict and neither able to move forward, except at the expense of the other ?

Since when do we accept in America this foreign and discredited theory of social and class war? Since when in America have we approved of the politics of envy and division? “

Robert Goulder: Okay. I’ll give you Calvin Coolidge and Ronald Reagan. I guess American presidents have thought about envy and taxes.

Joseph J. Thorndike: The editorial writers too. Here is the the Wall Street newspaper on the tax front of Biden.

“This is what happens when you hand over your economic policy to Bernie Sanders and Elizabeth Warren. Envy is in the political saddle and Joe Biden is in the game. “

Robert Goulder: Well, I have to ask you, Joe. Are you really good with all this envy talk? Are you saying that every progressive tax is secretly motivated by envy?

Joseph J. Thorndike: Look, I think it seems reasonable enough to say this, but I also think it is wrong.

It is reasonable to assume that some people might feel envy for the wealth of others and might support taxes to confiscate that wealth.

But here’s the problem: For an action to be truly envy-motivated, it must be devoid of other morally defensible justifications. If these justifications exist, then what you have is not envy, but what philosophers actually call resentment.

Most progressive tax reforms are defensible on the grounds of non-envy. Taxing large fortunes into oblivion may sound a lot like envy, but it is also possible that it is motivated by the defense of democratic values ​​and fear of plutocracy.

Robert Goulder: Sounds a bit like a pedantic argument, Joe. It’s almost like trying to define envy out of existence.

Joseph J. Thorndike: It’s a bit pedantic. But hey, it’s philosophy! What do you want?

This is also an important and relevant point, because when it comes to civic discourse, we would all be better off if we dispensed with cheap dismantling like the charge of envy against progressive taxation.

When the Conservatives say progressive tax is about envy, it is no better than when the Liberals say tax cuts are always about greed. In either case, the epithets oversimplify and avoid real arguments. We don’t have a real debate.

In terms of political strategy, the low blows also leave the real arguments unscathed and still capable of winning. Because envy or greed can make a good impression, but you won’t actually win a generational battle over tax reform.