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12092

Justice and Taxation

Daniel Halliday*
University of Melbourne

Abstract
This article provides a survey of various topics in which questions about taxation feature alongside
questions about justice. It seeks to argue mainly that taxation is a rather fragmentary domain of inquiry
about which it is hard to envisage the development of views about what justice requires with respect
to tax policy in general. Guided by this idea, the article attempts to highlight some aspects of taxation
whose connection with justice has been under-explored by philosophers, as well as to acquaint the
reader with a sense of the more thoroughly researched areas.

1. Introduction
Taxation is routinely used for purposes as diverse as reshaping the distribution of income and
wealth, getting people to reduce their consumption of unhealthy products, and paying for
things that free markets won’t supply – like a royal family. Each of these ways of using tax
is morally controversial, sometimes just as to how much tax is extracted, but often as to
whether the state has any business taxing people for these things in the first place.
Given these facts, one would expect moral and political philosophers to have an important
contribution to make to the study of taxation. One of the most striking features of the
philosophical literature on taxation, however, is how fragmentary it is. Taxation has not, at
any rate, generated a philosophical debate centred around two or three general theories of
how to make tax policy fit the requirements of justice. In this way, taxation contrasts quite
sharply with other morally significant topics to do with state coercion, such as punishment.
One can easily find book-length pieces of work defending the view that punishment has
some very specific moral function. But philosophical work on tax is not like this at all.
Instead, one tends to find philosophical debate clustered around relatively specific topics.
Justice in taxation is therefore most easily approached in a rather piecemeal way, rather
than through the lens of a grand abstract theory able to provide guidance for every moral
problem a tax policy-maker could possibly encounter. This makes it rather difficult to put
together a survey article on justice and taxation. Nevertheless, this piece will try to give a
brief (albeit incomplete) picture of how philosophers have contributed to the study of taxa-
tion, give a sense of where substantial progress has been made (or attempted) and to identify
some areas in which philosophical inquiry still has unspent potential to make a contribution.
Accordingly, I have divided this article into three sections, each dealing with some broad
function of taxation. First, Section 2 looks at taxation’s role in solving certain sorts of
collective action problems. Section 3 focuses on the general problem of securing a just
distribution of the tax burden, given concerns about inequalities in talents and other features
relevant to persons’ participation in the labour market. This section will also comment briefly
on work done in global justice. Section 4 looks at the case for using taxation as a device for
suppressing harmful behaviour.
I have selected this taxonomy because it corresponds to relatively well-defined themes that
have generated rather separate bodies of literature. This is not to say, of course, that this way

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of dividing the territory marks any ‘natural’ division between different domains of philosoph-
ical inquiry about tax. Also, for reasons of space, this article will not offer any comment on
the work done by historical figures, which is unfortunate given the enduring influence that
such writings have on contemporary work. Nor will it really give a full impression of the
work done on taxation in other disciplines, citing only the work here that is philosophically
most ambitious.

2. Taxation as a Solution to Collective Action Problems

Generally speaking, collective action problems occur when rational (prudent) action by
individuals leads to outcomes that are sub-optimal with respect to these persons’ interests
considered collectively. Taxation can sometimes solve or mitigate these problems. Most
familiar here is the case of public goods. Broadly speaking, goods are ‘public’ when they have
properties that prevent their being supplied through voluntary market exchanges. Standard
examples include goods like national defence, traffic lights and coastal flood barriers. The
market’s failure to provide public goods is standardly blamed on these goods being ‘non-
excludable’ and ‘non-rival’. Respectively, these terms mean that consumption of the good
cannot be made conditional on payment or any other act and that an individual’s consump-
tion doesn’t reduce that of others. Once a flood barrier has been built, it benefits every
member of the population living behind it, regardless of whether they are paying and
regardless of any change in their number. These facts mean that no private provider can make
a profit out of selling the ‘use’ of a flood barrier. It is standard to analyse this sort of market
failure as a collective action problem (Hardin 1982: 13–20; Schmidtz 1991: Ch1).
The state has a special ability to coerce people into paying for things, which private agents do
not (or ought not to) have. The use of taxation to supply at least some core set of public goods is
probably the least morally controversial use of tax that there is (Murphy and Nagel 2002: 46).
Nevertheless, hard questions remain. First, it is likely that the set of goods meeting the definition
of a public good might turn out to be rather large,1 and full provision could require massive tax
revenues (Murphy and Nagel 2002, 47). Second, many goods, such as education, only count
vaguely as public goods, perhaps because they are really clusters of goods, only some of which
(like basic literacy and numeracy) are public goods. Intuitively, some public goods seem more
worthy candidates for coercively sourced funding than others: It is one thing to say that the state
can impose taxes for national security but possibly quite another thing to say the same for things
like free to air broadcasting. Libertarians might contend that a line can be drawn at whichever
public goods are necessary to ensure the functioning of market exchanges and the protection of
private property rights. But there are many public goods, such as vaccination programmes, that
have little to do with protecting property rights but which the state intuitively has an obligation
to supply (if only because vaccinations are an extremely cost-effective way of increasing
collective well-being). What is needed, then, is some sort of moralised account of which public
goods warrant coercive supply and which don’t.2 This challenge might be located within the
very general problem of setting out a model of a legitimate political process for addressing
market failure, which requires much more than simply identifying that market failure has
occurred (Brennan 2008).
Even if some appropriately restricted set of public goods could be identified, there remains
a problem of specifying what level of funds can justly be extracted. Libertarians sometimes
worry that the state has no ability to identify how much these public goods are valued and
that any amount taxed will probably fail to track people’s actual valuations, insofar as such
valuations even exist (Rothbard 1998: 163–164). One view is to treat this problem as an
inequality of consumption that might balance out once all public goods are taken into

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account (Murphy and Nagel 2002: 81). Another view is that private companies might, after all,
be able to solve the problem through systems of assurance contracts (Schmidtz 1991: Ch 4).
The general observation to make here is that the concept of a public good does not supply its
own general justification for the state’s use of taxation to ensure its supply. The truism that
supplying public goods can advance collective self-interest only goes a modest way towards
working out what the state is permitted to do when taxing people to pay for such goods and
needs to be supplemented with a good deal of further theorising. This is not to say, however,
that it is impossible to come up with coherent principles for deciding what should be spent
on public goods, such as fixing expenditure in accordance with meeting basic needs
(Miller 1999: 193–202; White 2003: Ch5).
It is reasonable to think that the state might have a very general licence to combat undesirable
collective action problems in a much wider range of cases than those concerning public goods
(Brennan 2007: 136; Goodin 1989a). There is an increasing amount of sociological and
economic theories outlining how modern markets often lead to sub-optimal outcomes in ways
that have the structure of a collective action problem. Core examples include the increasing
need for individuals to out-purchase their peers in a variety of competitive domains, such as
the purchase of better clothing for job interviews and housing in better school districts. With
regard to consumption in general, the lifestyle of the wealthy person as portrayed in the media
has somewhat superseded that of the next-door neighbour as a reference point against which
people fix their consumption goals (Schor 1998). This gives rise to ‘expenditure cascades’ where
the consumption habits of people at certain income levels are shaped by an attempt to mimic
the lifestyles of those at levels above (Frank 1999, 2011: 59–61). A bolder view has it that
capitalist economies need to satisfy every new generation’s desire for goods that were scarce
luxuries for previous generations (Hirsch 1976). Eventually, capitalist economies run out of
new forms of absolute consumption to supply and need to switch to supplying positional
consumption instead (Frank 2011: 68–74). This gives rise to a growth in markets that supply
largely positional goods (or means of increasing one’s chances to obtain such goods).
Markets in positional consumption can trigger ‘arms races’, where people make ever larger
purchases for the sake of maintaining some level of positional advantage. These arms races
can be analysed as a certain kind of collective action problem3: While it is in individuals’
respective self-interest to engage in these purchases (any individual would lose out by
reducing their purchasing unilaterally), it would be better for everyone if something could be
done to collectively reduce positional consumption (Hirsch 1976: 4–6, 173). Crudely speaking,
society needs competitive screening processes like job interviews and some amount of
educational testing but clearly doesn’t need the waste involved with excessive expenditure by
competing individuals (Ireland 1994). In addition to the sheer amount of resources that
positional competition can absorb, it tends to exacerbate existing inequalities insofar as the least
advantaged are less able to fund participation in arms races. Many positional competitions come
in the form of ‘winner take all’ markets in which the victorious tend to be those with the
greatest talents and assets, thereby undermining equality of opportunity and increasing
inequality in material position (Frank and Cook 1995; McMahon and Abreu 1998).
Those who have written about positional arms races in the social sciences have been quite
ready to make normative proposals, and taxation features prominently within these pro-
posals. Insofar as positional competition involves markets, one view is to increase consump-
tion taxes (Frank and Cook 1995: 213–217; Frank 2008, 2011: 76–81). Taxing luxury items
might eventually lower visible wealth of the best off members of society, which might choke
off expenditure cascades (Schor 1998: 164–165). Apart from taxing individual consumers,
much might be said regarding the tax status of sellers in arms race markets. Some private pro-
viders of positional goods (such as education) have charitable status. Treating such entities as

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corporations might limit the numbers that are financially viable, thus removing some
opportunities for positional consumption. Philosophical discussion of the conditions under
which an organisation should gain charitable status is still somewhat limited but has begun
to examine the question of whether charities should be required to benefit the badly off
(Harding 2013). Another view is that competitive consumption might be curbed simply
by introducing a more progressive income tax (Ireland 2001).
Of course, taxation is not the only way of resolving collective action problems like positional
arms races. It should be noted that these problems are unlike the case of public goods in that the
problem relates to the way in which collective action problems suck up resources, rather than
prevent the collection of revenue necessary to supply some good or service in the first place.
This means that while taxation may be the only solution to the problem of public goods, arms
races could also be curbed through non-tax solutions. (For example, simple prohibition of the
relevant market exchanges, or else through non-coercive policies such as incentives). More
generally, what this calls for is more work from philosophers on what sort of conditions
legitimise the state’s intervention with collective action problems and how different solutions
compare from the point of view of justice. There is a particular scope for further exploring
the moral significance of background concepts like a positional good (Brighouse and Swift
2006) and of the moral cost of allowing positional competition to displace various forms of
non-positional consumption. For example, a growth in competition for educational prestige
might reduce the extent to which education can help children to flourish rather than simply
out-compete each other (Brighouse 2006: Ch3).4

3. Justice and the Distribution of Tax Burdens

Much work on tax aims to address the question of its proper role as a means of addressing
material inequalities or other distributive trends. Discussion here focuses on two central
problems. The first of these is the task of identifying an appropriate tax base, that is, the set
of activities or exchanges that are taxed. The second concerns how to identify the morally
appropriate rate of tax, given some specification of a tax base. In other words, just taxation
is generally approached through what are regarded as separate questions of what to tax and
how much to tax it.
Tax theorists traditionally utilise another distinction by dividing questions about tax justice
into categories of ‘vertical equity’, meaning fairness across different levels of income or wealth,
and ‘horizontal equity’, meaning fairness across differently positioned members of the same
income group (Slemrod and Bakija 1996: Ch3). Whether to make income tax progressive or
flat is a question of vertical equity. When to give tax credits or exemptions to (say) persons with
disabilities, married couples or self-employed workers are all questions about horizontal equity,
insofar as each of these categories of person could be earning the same amount of money as each
other. Another important distinction concerns the difference between the ‘benefit principle’
and the ‘ability to pay principle’.
Philosophers have recently begun to question the adequacy of this framework. The basic
point is that some presumption is made of the existence of a stable baseline against which to
measure the burden imposed by income tax (Murphy and Nagel 2002: ch2). Roughly
speaking, the point of this objection is to problematise the idea that we can clearly measure a
person’s tax burden. This threatens the prospects for maintaining a strong distinction between
vertical and horizontal equity. Murphy and Nagel contend that what is needed is a sort of
holism, where justice in tax policy accommodates the idea that pre-tax income is merely a
convention rather than a morally independent baseline. Exactly how much is established by this
observation might be up for debate (Brennan 2005), but at any rate, this only complicates rather

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than removes the need to answer questions about tax base. Some decisions still have to be made
about whether to tax an individual’s endowments (defined as the income she has the ability to
earn), actual income or some non-income base, such as consumption (the portion of her actual
income that she spends rather than saves).
The intuitive injustice of an endowment tax stems at least partly from the thought that
persons with talents shouldn’t be forced into performing work that they’d rather not do.
An endowment tax seems to unjustly penalise people who are able to secure high-paying
employment but would rather pursue less lucrative occupations (Dworkin 2000: 90).
This is a somewhat delicate matter, and there has emerged a debate about whether talented
individuals do, after all, have some strong moral reason to enact their talents when their
labour benefits others. The strength of this reason needs to be assessed in light of how it might
be weighed against things like freedom of occupational choice (Cohen 2008: 205–214; Fabre
2010; Otsuka 2008). Any egalitarian case for making taxation even minimally sensitive to
endowments must also deal in some way with general concerns about allowing the pursuit of
justice to intrude into people’s personal affairs or make offensive or stigmatising judgments about
their circumstances (Anderson 1999; White 1999: 618–619; Wolff 1998). But if there is any sort
of pressure on the talented of this sort, then it might go some way towards justifying an endow-
ment tax that effectively forces the talented people to earn high incomes in order to pay it.
Importantly, the case against an endowment tax might be misleadingly coloured by shaky
assumptions about it being a more burdensome tax than an income tax (Olson 2010: 249–252).
One task for the philosopher is to think of a third way between taxing actual earnings and pos-
sible earnings (i.e. endowments). One possibility is that tax regimes should be evaluated not sim-
ply according to the range of choices that they restrict but rather as to whether they restrict choices
that we think there are good moral reasons to protect. Instead of taxing earnings or endowments,
we might make individuals liable according to the fraction of their earnings that is attributable to
the scarcity of the earner’s talents (Olson 2010: 260–270). This would mean, for example, that the
income of professional athletes might be taxed proportionally more than that of, say, lawyers or
accountants. This is roughly in line with the idea that athletes earn large amounts because their
talents are rare, whereas lawyers and accountants earn large salaries due to some combination of
a somewhat rare ability with the burdensome nature of their work and the fact that a larger
number of talented personnel might be needed than in (say) professional sport.
Discussions of tax rate tend to be couched in the context of income tax. This is partly
because it is difficult to conceive of how to construct a variable-rate consumption tax
(but see below). In any case, discussions of tax rate routinely distinguish the idea of a head
tax (where every person pays the same absolute amount regardless of their income or
other circumstances), the flat (or proportional) tax (where everyone pays the same fraction
of their income) or a progressive tax (where the fraction of tax paid increases with
absolute income).
Moral defences of the head tax are hard to find. However, the fact that some recent
governments have been so bold as to attempt its implementation – and been met with substan-
tial levels of public backlash – provides an interesting case study for work on political obligation
(Bellamy 1994). Proponents of proportionate or ‘flat’ taxation sometimes invoke simplicity and
complain that progressive taxation discriminates against those who choose to work harder
(Hayek 1960: 275). Another sort of argument emerges out of a sort of state-of-nature theory. This
extends a common formulation of the argument for using tax to supply public goods: The rele-
vant claim is that we’re all better off in society than in a state of nature, and so society can be
viewed as agreeing to cooperate for mutual advantage (Gauthier 1986: 113; Rawls 1999: 4).
On top of this claim, it might then be suggested that those who possess the greatest level
of talent are, in some sense, making the larger investment or contribution, when it comes

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to the agreement to form a state (Epstein 1993; Epstein 2012: 98). Roughly, then, a flat tax
represents a just distribution of the tax burden on grounds that the tax burden tracks the
differences between respective persons’ talents.
Problematically, these arguments overlook the plausible claim that talents are socially
constructed, in the sense that they emerge as a consequence of markets, rather than prior
to them. It has been said that this counts heavily against any argument for the flat tax that
employs state-of-nature theorising of the above sort (Fried 2002, 2003). Indeed, it’s arguable
that that once the socially constructed nature of talents is properly appreciated, it counts in
favour of some sort of progressive tax. If people owe their talents to the socio-economic
reality in which they find themselves, then allowing them to profit excessively is, as
John Rawls said, merely ‘to favour the more fortunate twice over’ (1999: 88). Generalising,
the idea here is that progressive taxation realises a form of reciprocity between citizens. In
Rawlsian terms, those who profit from greater assets and talents recognise that their success
depends in part on the willingness of the least advantaged to cooperate in whatever
arrangement accounts for the power of any talents to command an income and not simply
on the sheer recognition that others are less well off (Rawls 1999: 88–89, 2001: 76–77;
Freeman 2003: 50). Reciprocity is, of course, only one among a number of principles that
might be invoked in support of progressive taxation. Another egalitarian position treats a
progressive tax rate as representative of what choices that people would make in an ex ante
situation of resource equality, where the average person would choose to purchase insurance
against ending up with relatively poor talents (Dworkin 2000: Ch2). Whatever its
foundations, any defence of progressive taxation benefits from a well worked out view about
the mechanisms involved. Hence, there is a large literature comparing the respective merits
of basic income and other grants with more conditional sources of redistributive support such
as a welfare state (White 1999).
The chief alternative tax bases to income are consumption and inheritance. A longstanding
problem with consumption taxes is their tendency to be regressive: Roughly, the amount
extracted (per unit of consumption) will be the same irrespective of how rich or poor the
consumer is. This means that the poorer a consumer is, the greater a proportion of their
income they must pay. Hence, consumption taxes hit the poor harder than they hit the rich.
Some economists claim that, under ideal conditions, this regressive tendency is limited
(Slemrod and Bakija 1996: 194–212). Others have suggested that the problem can be over-
come by using an exemption to cover a substantial amount of initial yearly consumption
(Frank and Cook 1995: 214; McCaffery 2002: Ch5). Alternatively, individuals could be
required to report their income and evidence of how much they’d saved. From this, it
could be deduced how much they spent on consumption, and they could be taxed progres-
sively on this basis (Frank 2011: 76–81). These proposals may gain some support from
empirical concerns about the difficulty of making an income tax genuinely progressive,
given certain complexities to do with how the very wealthy receive their income. Exces-
sive consumption is, some argue, a lot harder to hide than excessive non-payroll income
(McCaffery 2002: 27–44).
Then, there is the issue of inheritance. Here, the tendency for bequests to perpetuate
economic inequality tends to motivate an egalitarian concern for retaining substantial estate
taxes (Dworkin 2000: 348–349; Haslett 1986; Erreygers and Vandevelde 1997; Murphy and
Nagel 2002: Ch.7). It is worth noting that disagreements between distinct egalitarian
principles might mean disagreements about the details of an inheritance tax. Egalitarians
might perceive differences between large and small bequests, bequests made by grandparents
rather than parents, and so on (Alstott 2007). Not everyone, of course, is an egalitarian.
A standard libertarian move is to treat bequest as simply another way in which someone

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might choose to dispose of their property (Friedman 1962: 164). More generally, the case for
taxing bequests wrongly overlooks the perspective of the bequeather (Nozick 1974: 168). It
is sometimes added that inheritance tax represents a particularly cruel intrusion, given its
temporal proximity to the death of a family member (Lomasky 1987: 270). In response, one
view holds that taxing bequest is actually less coercive than taxing income or consumption,
roughly because the tax is extracted at the end of one’s life (Halliday 2013). As to cruelty, there
is actually much uncertainty about what motivates people to make bequests (Fried 1999).
Increases in life expectancy (particularly of the affluent) suggest that bequests do less to helping
one’s progeny than a gift donation earlier in life (Ackerman and Alstott 1999: 36). There
remains the possibility that bequests help secure insurance against being abandoned by one’s
offspring during old age (Steiner 1992), in ways that might make inheritance morally unlike
standard cases of gift giving. A more complicated argument makes use of the idea that bequests
differ again from other transfers in property in that the parties cannot both be alive at the time of
transfer. If transferring a property right has anything to do with accepting obligations not to treat
the object of transfer in certain ways, then the idea of bequest may be incoherent (Steiner 1994;
Steiner and Valletyne 2009: 68–73). All in all, the morality of inheritance tax remains rather
delicate. Suffice it to say that the existence of a special right to bequeath needs more defence
than an analogy with altruistic gift giving, particularly if any weight is given to the role a
system of bequest has in maintaining economic inequality across generations.
All of the above questions are located firmly within a traditional limit of political
philosophy’s area of inquiry, namely, the internal arrangements of a single society. On this
view (broadly speaking), just taxation presupposes a domestic relationship between the
state and its own citizens. This assumption may be an innocent convenience when
approaching any of the topics discussed so far in this section. But as a descriptive claim
about when taxation occurs, the presumption is demonstrably false. Almost all developed
countries have some non-citizens living on their territory, many of whom participate in
the labour market. Migrants who work legally often incur the same tax burden as citizens,
but enjoy fewer legal and political rights and may lack access to certain public services
that their taxes fund. Even migrants who work illegally can still end up paying income
tax, since they often have little choice but to obtain false identities in order to find work.
Big issues lurk here, and the problem of migrant taxpayers falls within a larger question
about the morality of immigration. The question of a just tax burden for migrants has
been discussed usefully if somewhat intermittently, perhaps due to the greater relative
urgency of other ways in which migrants are (mis)treated (Carens 2005, 2010;
Lopez-Guerra 2005; Seglow 2009).
Some continue to support the domestic presumption on a normative reading, even given
the current extent of economic globalisation and its impact on distribution (Nagel 2005).
Challenging this view is an important part of foundational work in global justice (Cohen
and Sabel 2006; Julius 2006). Among those who think this foundational scepticism can be
overcome, taxation has featured prominently in positive attempts to work out what the
requirements of global justice are and how they are to be responded to. The global arena
is unlike a state in being not subject to a single authority with broad coercive power.
This makes for a rather different background from which to develop proposals about
taxation. Views on global tax justice must therefore be expected to look rather different from
domestic proposals (Dietsch and Rixen, 2012). Influential here is the view that global in-
equality and poverty could be most easily corrected by changing the existing rules and con-
ventions covering global trade and economic cooperation (Pogge 2007). Alongside matters
like intellectual property, inter-state loans, immigration rules and so on, much of the existing
global economic order is constituted by policy relating to tax.

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As to the proposals that one finds in the recent literature, these are a mixture of rather
ambitious, large-scale solutions to the problem of global poverty and narrower proposals that
might rely on fewer commitments (normative or otherwise). The most prominent instance
of the former type of proposal is perhaps Thomas Pogge’s global resource dividend, or
GRD (2008, esp. Ch.8). According to Pogge, the basic needs of the global poor could be
met under the implementation of a tax on the selling and extraction of natural resources.
The case for a GRD draws on the idea that global resource use largely excludes the global
poor. GRD revenues could be allocated to the governments of developing nations so as
to correct this. Critics have suggested that the GRD relies on contestable interpretations
of the empirical data, undue optimism about feasibility and an unhelpfully homogenous
conception of the ‘global poor’ that allows important local factors to be overlooked (Cohen
2010). Others have sought to develop proposals that draw their normative force not from the
idea that the global resource trade begins with (for example) outright theft at the extraction
stage, rather than mere exclusion (Wenar 2008). Like Pogge’s, such proposals involve some
tax-like extraction of revenues destined for the global poor. Various interesting comparisons
can be made between such views (Casal 2011).
Other proposals seek to rely less on controversial claims about changing the global economic
order. One method is to approach global taxation questions with a view to addressing the sort of
collective action problems that arise given the lack of a global coercive authority. International
competition between different states gives rise to tax havens and other policies enabling low
corporate tax liability (Brock 2009, Ch.5). International agreement on certain tax reforms could
remove this sort of competition and enable larger revenues to be secured through corporate
taxation. The taxation of corporations overlaps with other proposals, such as a push for more
financial transaction or ‘Tobin’ taxes (Wollner, 2013).
The global justice literature is large and getting larger, and the above remarks are only a
cursory sketch of some proposals it has generated about tax policy. Even on a sceptical view
about global justice, it is hard to escape the view that there are some non-justice obligations
that states have to the rest of the global population. The fact that tax proposals made in the
global justice literature tend to reject this scepticism may not matter very much as regards
their interest. That is to say, to establish that any taxation responsive to international realities
turns out to help a state fulfil duties that are ‘merely humanitarian’ does not, on its own,
establish that such proposals fail to make theoretical or practical progress.
There is perhaps one other connection to draw between global and domestic theorising.
Authors in global justice have, arguably, also drawn attention to some themes that have been
somewhat neglected in domestic discussions about tax and justice. Pogge’s work, for example,
emphasises the advantages of securing redistribution through coercive taxation rather than the
‘arrogant generosity’ of charity or voluntary aid (2008: 213). Similar sentiments feature strongly
in egalitarian writings during the early 20th century5 but are harder to find in the liberal-
egalitarian work that has become more prominent since the century’s latter half.6 But there
remains something in the idea that redistribution through coercive taxation has an important
expressive function, and work on domestic distributive justice might make more of this.

4. Taxation and Harmful Behaviour

A third function of tax is as a device to influence individual behaviour, principally to dissuade
people from buying something that’s harmful. This function can be distinguished from the
others discussed, partly because an attempt to curb certain purchases often comes at the
expense of raising revenue.7 Such policies nevertheless connect quite substantially with
concerns about justice.

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Consumption taxes can be used to protect the consumer ‘from themselves’ or to

protect their consumption from harming others via negative externalities. Taxing these
sorts of consumption either forces the consumer to internalise the costs of their activity
or to generate revenues that can be used to compensate those affected by the external-
ity. The idea of cost-internalisation is sometimes discussed in contexts of justice and
health. Here, it might be suggested that those who burden the healthcare industry
due to bad choices ought to pay a greater share of the costs (this might be done
through attaching consumption taxes to any purchases associated with these poor
choices). Although this view seems to enjoy support from some general egalitarian prin-
ciples, philosophers working on justice in health tend to reject it (Wikler 1987; Segall
2010: Ch3). A more moderate sort of internalisation might be conceived in terms of
‘hypothecating’ consumption taxes on the relevant exchanges. If revenue from
consumption tax on (e.g.) cigarettes were pumped wholly into funding the health
service, then there would be a sense in which smokers were internalising a larger share
of the burden of supporting that service. Proponents of hypothecation have argued that
it has certain democratic credentials through its capacity to empower taxpayers
(Le Grand 2003: Ch11).
The idea of taxing people to extract compensation for negative externalities has proponents
in environmental justice, partly because the externalities often harm individuals who are
antecedently worse off than those who engage in environmental pollution or simply harm
people who are yet to be born (Caney 2010). Work in global justice (see above) also takes an
interest in these matters, given the tendency for environmental harms to spread around the
world (e.g. rising sea levels) regardless of whether they are caused by inter-state cooperation
or by a wholly isolated state. Other imaginative proposals include taxes on emails and currency
transactions (Brock 2009: Ch.5). It is arguable that environmentally damaging consumption
(such as frequent flying) tends to be exhibited by people who are financially well-off
(Casal 2012). If this assessment is right, then taxes on at least some undesirable transactions
may be somewhat less vulnerable to regressivity worries associated with the use of consumption
as a general tax base (see above) or its use on commodities consumed by the poor (see below).
The case for taxing people to prevent them from harming themselves is perhaps most
familiar from cases of tax on alcohol and tobacco and to some extent foods with high fat
or sugar content. In general, such policies rely on the idea that public policy can be
guided by a commitment to some sort of paternalism. Whatever the general case against
paternalism, it is rather easy to justify when making it harder for individuals to engage in
forms of consumption that are addictive, and typically regretted later in life, such as
tobacco (Goodin 1989b:23). The case of addictive substances warrants some consider-
ation of consumption taxes that impose the bulk of payment prior to the actual
consumption, rather than at each point of consumption. This has led to proposals in
support of a shift from sales taxes to licences, at least for tobacco consumption
(Chapman 2012; Halliday ).
One general worry about taxing people to protect themselves emerges, given the fact
that many forms of consumption that harm the self are common among economically
disadvantaged consumers (Goodin 1989b: 107–112; Voigt 2010). This returns us to
the sort of regressivity worries that might be avoided by proposals about taxing other-
harming consumption among the affluent. That said, it is nevertheless poor people
who often stand to be most ill-placed to cope with the harms of ill health. Therefore,
the regressivity worry might be best viewed as one horn of a dilemma between
discriminating against the disadvantaged and having a means to combat something that
particularly affects them.

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5. Summary
Philosophical work on taxation is spread across a range of topics. Some of these have been very
extensively worked, as evidenced by the large literatures on public goods and on the general
egalitarian concern with the relation between earnings, talents and redistribution. On the other
hand, there exists other topics where the development of normative proposals has been so far
left to social scientists or barely developed at all. Examples of such topics include the role of
consumption taxes in pursuing better health outcomes and the case for using taxation to address
collective action problems that, while having some connection with markets, may differ in
important ways from the classical problem of public goods. The fact that social scientists
frequently bring considerations like inequality and harm into their work on tax reflects the fact
that the domain of taxation, although fragmentary, is a thoroughly moralised territory.
Philosophers are well-placed to make contributions to new and emerging areas of inquiry
and not (just) to topics that have the benefit of a well-defined philosophical literature.

Short Biography

Daniel Halliday is a lecturer in philosophy at the University of Melbourne. His research is

focused on topics in distributive justice, including their relation to problems of public policy.
His recent work has appeared or is forthcoming in journals including Law & Philosophy, The
Journal of Medical Ethics, Philosophical Studies and Utilitas. He holds a BA and MA in philosophy
from Sheffield University and a PhD in philosophy from Stanford University.

Notes
* Correspondence: School of Historical and Philosophical Studies, University of Melbourne, Parkville, VIC 3003,
Australia. Email: [email protected].

1
Strictly speaking, few goods are pure public goods. The interesting concept of a public good is really that of any good
that approaches the non-rival/non-excludable idealisation close enough to rule out reliable market supply. Plenty of
goods come close enough to the idealisation for this to be the case.
2
A related problem concerns what to say about goods that markets might fail to supply but which the state might have
reason to supply on grounds other than collective self-interest. Such goods include ‘merit goods’, which are unlike pub-
lic goods in that the market fails to supply them because, rather than in spite of, individual preferences (ver Eecke 1998).
The case for merit goods might be made by citing the authority of electoral preferences, which may differ from prefer-
ences revealed by markets (Brennan and Lomasky 1983). Alternatively, one could include the case for merit goods as part
of the work to be done by whatever moralized account explains how much ought to be spent on funding public goods
(Miller 1999: Ch.9; White 2003: Ch.5).
3
According to Frank and Cook, a positional arms race can be interpreted as a form of iterated prisoners’ dilemma
(1995: 126–127).
4
While much attention has been given to understanding positionality in domains like education, this tends to treat
positional goods as raising a problem about fairness and has not tracked the work done on arms races.
5
(Attlee 1920: esp. Chs. 1&2).
6
I do not mean to deny that contemporary egalitarians have wholly ceased to emphasise ideas of this sort. For example,
G. A. Cohen has maintained that state-imposed redistribution plays an important role in maintaining an ethos in which
the materially better off can view their redistributive burden as something they ought to accept happily or at least
without complaint (Cohen 2000: 175). These claims fit into a larger general attack on the liberal-egalitarian idea that
justice takes institutions (or other structural phenomena) as its subject matter, rather than individual conduct
(Cohen 2008). The debate surrounding Cohen’s views is too complex to summarise here. It is possible, however, to
stress the presence of individual responsibility for justice while continuing to assign an important place to structure in
its subject matter (Young 2011: Chs. 2,6). To this extent, it may be possible to theorise about the expressive power
of tax policy in ways compatible with various conflicting views about what justice ultimately regulates.

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7
As a matter of fact, it is possible that some consumption taxes ostensibly aimed at curbing undesirable consumption end up
being relied upon by governments as a source of revenue. This is sometimes said, for example, of taxes on tobacco in
countries whose governments have a limited commitment to promoting public health (Proctor 2011: 540-41).

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