Suppose–purely hypothetically–a prominent politician uses the following argument to explain why we should pay more taxes:
If you are rich, you relied upon background infrastructure, social norms, institutions, the rule of law, and so on, in making your money. In the state of nature, life would be nasty, poor, brutish, and short. But you life is pleasant, rich, civil, and long, thanks to these background institutions, many of which are provided by government. So, pay us more taxes.
These kinds of arguments try to establish that you owe a debt to society, and then try to establish that paying more taxes is the right way to repay this debt.
The problem is that they assume–without argument–that the society to which you owe a debt just happens to be the nation-state. There is no reason to assume that. In fact, it’s more plausible that my debts, if I have any, are both more local and more global than the nation-state.
Consider that I was educated in public schools in Tewksbury, MA, and Hudson, NH. I now drive on roads provided by certain counties in Virginia and by Washington, DC. Etc. If I owe a debt for my education, why think this indebts me to America (or the federal government) rather than Hudson, NH?
I benefit from the positive externalities created by an extended system of trade. Why think this indebts me to America (or the federal government) rather than almost the entire world?
Suppose I were to buy a loaf of bread. If I trace the history of that bread, Leonard Read “I, Pencil”-style, I’ll find that in producing the bread, a wide range of governmental services were used. These services come from local, state-wide, and federal governments, both domestic and foreign. It would be bizarre, then, to assume that in buying the loaf of bread, I acquire some special debt to the US Federal Government.
Another major error is to assume that people must repay their debts through taxes. I don’t know what Thomas Edison paid in taxes. But I can safely assume that he did more to repay his “debt to society” through his inventions than by paying taxes. A similar point will apply more weakly to many of the rest of us.
A final problem with the hypothetical politician’s argument is that it does not establish how much people should pay. The argument above (and the real-life argument to which I allude) do not tell us at all what marginal tax rates should be. Perhaps I owe the government 95% of my income. Perhaps I owe it 5%. The argument does not say. One might try to argue that I owe the government everything, since life would be lousy in the absence of government. But we could just as easily say that the government owes us everything, since it couldn’t function without us.
ADDENDUM: I forgot to list another mistake the argument makes. Consider that my kids probably owe me a debt for raising them. To repay that debt, when they are adults, they should probably at least visit or call once in a while. However, while they owe me this debt, I will not be entitled to force them to pay it. So, another problem with the debts to society argument for increased taxation is that it doesn’t establish that society may force us to pay our debts.