Monday, June 04, 2007

Ayn Rand and Taxation

Ayn Rand is a hero of libertarians and other advocates of limited government. Many of her fans complain about progressive taxation and favor a flat tax. A progressive tax system is one in which the tax rate is higher for larger incomes, profit, or sales cost. A flat tax system is one in which the tax rate is the same for all incomes, profit, or sales cost.

Most proponents of flat taxation argue that having the wealthy contribute a disproportionate share of their income towards the government's expenses is unfair and wrong. They may even quote Ayn Rand as part of their argument.

I don't want to argue for or against a flat tax here. But I do want to dispense with the notion that Ayn Rand opposed the wealthy contributing a disproportionate share of their wealth or income to the legitimate operations of government.

The money quote is from Ayn Rand's The Virtue of Selfishness:
It is in their own interests that the men of greater ability have to pay for the maintenance of armed forces, for the protection of their country against invasion; their expenses are not increased by the fact that a marginal part of the population is unable to contribute to these costs. Economically, that marginal group is nonexistent as far as the costs of war are concerned. The same is true of the costs of maintaining a police force: it is in their own interests that the abler men have to pay for the apprehension of criminals, regardless of whether the specific victim of a given crime is rich or poor.
Almost sounds like class warfare rhetoric, doesn't it?

A couple of subtleties and qualifications:

First, recognize that Rand believes the government's only proper role is defense, enforcement of contracts, and law enforcement. Rand's opinions on the funding of government therefore cover only those expenses.

Second, Rand did propose a flat tax of sorts but it was voluntary:
[T]he cost of . . . voluntary [my emphasis] government financing would be automatically proportionate to the scale of an individual's economic activity.
Rand pointed out that most of the poor, since they have little at stake, would likely not contribute at all. So what may have appeared to be advocacy of a flat tax in fact more closely resembles progressive taxation in its effect.

A pure disciple of Ayn Rand therefore must therefore favor not only a minimal role for government, but a progressive system of funding it.

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