Lecture #26: 3b. Distributive Justice. Equal Distribution. Contributive Justice: Distributing the Burdens of Community Life

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1 2 Equal Distribution Distribution of windfalls Lecture #26: e.g., Alaska oil revenue The Alaska Constitution makes the state s mineral resources the property of the people of the state. The Alaska Permanent Fund collects royalties from oil companies operating in Alaska and distributes them to the residents of the state. In recent years, this has come to about $1000 per person per year. Providing certain basic goods 3b. Distributive Justice security: national defense, police & fire protection Contributive Justice: Distributing the Burdens of Community Life 3 Contributive Justice & Military Service: Some Options 4 There are two basic ways of distributing the burden of communal provision: requiring citizens to do something corvée military conscription required jury duty getting (encouraging or requiring) citizens to pay for something user fees taxation lottery Literally universal service Perhaps, some physically handicapped cannot serve. Is it fair that only men are required to serve? (cf. Rostker v. Goldberg, 453 U.S. 57 (1981)) That depends on whether there is a difference between men & women that is relevant to military service. Universal male service judged necessary in Switzerland unnecessary in the US. Options for non-universal service Selective conscription The Enrollment Act of 1863 Conscripted citizens must serve, pay a $300 commutation fee, or hire a substitute. The post-wwii draft law College deferments became de facto exemptions (e.g., for Bill Clinton & Dick Cheney) Volunteer service How do we distinguish this from hiring substitutes? There are other incentives to military service (e.g., patriotism). Note that the South is overrepresented Is the current system fair? U.S. Rep. Charles Rangel has argued that the poor are more likely to enlist. Data does not bear out this claim. Beau Biden, Track Palin, & Jimmy McCain all served in Iraq. 5 6 Some Questions about Justice, Poverty, Taxes, & Wages 1. The question of inequality 2. The questions about welfare 3. The question of taxation 4. The question of just wages (or perhaps this is just a matter of commutative justice) Taxation & Contributive Justice

2 7 8 State Lotteries & Justice Raising the money necessary to pay for government programs creates a problem of contributive justice (distributing a burden of community life) Ways of raising government revenue taxes (e.g., income, property, & sales [really purchase] taxes) user fees (e.g., road & bridge tolls, gasoline taxes) state-run lotteries What basis for taxation would treat equals equally? same tax bill for everyone (a head or poll tax)? a tax bill proportioned to ability to pay? At present, most states allow raising state revenues through lotteries $15 billion raised (on $50 billion in spending) The case for: This is voluntary The case against: This is a regressive way of raising revenue: Poor people pay more than their share 9 10 The Questions What to tax? income? property? sales? At what rate? Three possible kinds of effect regressive taxes these make distribution of wealth or income less equal e.g., a head tax progressive taxes these make distribution of wealth or income more equal e.g., a graduated income tax neutral (proportionate) taxes these leave distribution of wealth or income unchanged e.g., a flat income tax Who pays how much federal tax? Taxpayers in Justice & Taxation Percent of their income paid in federal income taxes Percent of their income paid in federal taxes Top 1% 18.8% 29.5% %ile 11.8% 22.8% 21 to 80 %ile 4.2% 15.1% Bottom 20% 5.6% 4.7% CBO, 2011 Taxpayers in AGI Threshold Percent of federal income tax revenue from this source Top 1% $344K 37% Top 5% $155K 59% Top 10% $112K 70% Top 50% $32K 98% IRS, 2009 Tax Rates Over Time 11 The Laffer Curve 12 Increasing income taxation rates beyond a certain point will begin to decrease government revenues (a controversial claim of supply-side economics) either because no one would be willing to earn income that would be so heavily taxed or because they would be increasingly motivated to avoid (or possibly evade) taxes. Whether there is a exact point at which increased rates of taxation would reduce total government revenue & where it is, is a complex empirical question Left: Laffer curve illustrated, from the Wall Street Journal Right: Laffer curve challenged by attempt to fit different curve to same data

3 Justice & Taxation: Some Complications of Analysis 13 The Parable of the Supper Club Suppose that every day ten men go out to dinner. The bill for all ten comes to $100. If it were paid the way we pay our taxes, the first four men would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh would pay $7; the eighth would pay $12; the ninth would pay $18; and the tenth man (the richest) would pay $ The ends of taxation vary Raising revenue to pay for the costs of government is one police & national defense education & infrastructure an economic safety net Accomplishing other social objectives is a second, e.g., encouraging investment in depressed areas encouraging development or use of certain technologies Is redistribution of income ( spreading the wealth around to achieve greater equality) a third? Taxation affects the conduct of taxpayers (See Parable of the Supper Club) The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement until the owner tried to do them all a favor. Since you are all good customers, he said, I m going to reduce the cost of your daily meal by $20. Now dinner for 10 only cost $80. It was clear to all that the first four men should still eat for free, but how should they divide the $20 savings among those who had been paying the bill each week? Should they divide the savings equally, reducing each payer s share by $3.33? That would mean that the fifth and sixth man would end up being paid to eat their meal! They decided that it would be fairest just to apply their old percentages to the new bill. Applying that principle the fifth man would now pay nothing, the sixth paid $2, the seventh $5, the eighth $9, and the ninth $12, leaving the tenth man with a bill of $52 instead of $59. Outside the restaurant, the men began to compare their savings. I only got a dollar out of the $20, declared the sixth man pointing to the tenth, and he got $7! Yeah, that s right! exclaimed the fifth man. I only saved a dollar, too. It s unfair that he got seven times more than I. That s true! shouted the seventh man. Why should he get $7 back, when I got only $2? The wealthy get all the breaks. Wait a minute, yelled the first four men in unison. We didn t get anything at all. The system exploits the poor. The nine men got so abusive that the next night the tenth man did not show up for dinner at all. So, the nine sat down and ate without him. But when it came time to pay the bill they discovered something important. They were $51 short! Similarly, the people who pay the highest taxes get the most benefit from an across the board tax reduction. Defenders of such reductions say: Tax them too much, or attack them for being wealthy, and they may not show up at the restaurant anymore. There are lots of good restaurants in the Cayman Islands More Complications difficulties in determining the effect of the tax system sometimes, we don t have the requisite factual knowledge e.g., the effect of excise tax depends on who is using what is being taxed some taxes may offset others e.g., income tax (which can be made progressive) vs. sales tax (which is naturally regressive) sometimes the real payer is different from the nominal payer e.g., taxation on corporate income: who really pays the tax on corporate income owners in lower profits? Inequality, Poverty, & Distributive Justice workers in lower pay? customers in higher prices? Two Kinds of Inequality How Should Wealth be Distributed? Wealth inequality And meanwhile, a family in the top 1 percent has a net worth 288 times higher than the typical family, which is a record for this country. Pres. Obama, speech on inequality to the Center for American Progress, Dec Or The top 1% of Americans own 40% of the financial wealth The next 19% own 51% The bottom 80% own 9% Income inequality The top 10 percent [of American families?] no longer takes in one-third of our income it now takes half. Pres. Obama The moral controversy Some people think that such inequality is unjust, and favor taxing the rich to help the poor. Others disagree. Sandel Some possible patterns Equal shares to everyone Differential shares on the basis of different contributions Ways of answering this question What would utilitarian reasoning on this question look like? What would utilitarian reasoning emphasize? What rights might be relevant to thinking about this question? Who has relevant rights? What do they have a right to do or have or get?

4 Nozick s Critique of Pattern-based Analyses: The Instability of Patterns Robert Nozick s Wilt Chamberlain argument Equal distribution will be upset if everyone is willing to pay to watch Chamberlain play basketball Chamberlain will be rich Basketball fans will be happy but money will no longer be equally distributed Ralph Waldo Emerson Some will always be above others. Destroy the inequality today, and it will appear again tomorrow. Property has been well compared to snow, if it fall level today, it will be blown into drifts to-morrow. 19 Formalization of Nozick s Argument We have two choices: allowing individuals to use their equal shares to buy goods & services produced by others freely or we not allowing them to do so. If If we allow individuals to use their equal shares to buy goods & services produced by others freely, then the equal distribution will be upset. we do not allow individuals to use their equal shares to buy goods & services produced by others freely, then they will not be able to do what they want with the (equal) shares they possess. So, we have two choices: putting up with unequal distributions, or not allowing individuals to do what they want with the (equal) shares they they are given Libertarianism (as a moral-political theory) Nozick s Libertarian Theory of Distributive Justice ( Entitlement Theory ) Three Principles on Sandel s Analysis No Paternalism No Morals Legislation No Redistribution Appeal to history, not to patterns Wealth is justly distributed if (and only if) both the original acquisition was just e.g., the wealth initially belongs to the person who created or found it the wealth got to its present owner by a series of just transfers e.g., voluntary gift or sale The criterion of just distribution not the resultant pattern but the history of transfers Nozick s Critique of Redistributive Taxes The moral continuity from taxation (taking my earnings) to forced labor (taking my labor) to slavery (denying that I own myself) Restated 1. If the government has a right to take my earnings, then it has a right to take my labor 2. If the government has a right to take my labor, then it asserts a property right in me (I don t own myself; I am a slave) 3. But the government does not have a property right in me (I do own myself; I am not a slave) So, 4. the government has no right to take (e.g., by taxation) my earnings 23 Critique Is it true that If the government has a right to take my earnings, then it has a right to take my labor? Perhaps the government has the right to take only the minimum necessary to satisfy community obligations (& in the least intrusive way) Is it true that If the government has a right to take my labor, then I am a slave? Slavery typically includes, but the right to demand labor does not a relatively comprehensive control over a person s whole life private control over another individual (including the private person s right to punish the slave) a right to sell the slave to others Is it true that If the government has a right to take my labor, then I don t own myself & I do own myself? Sandel s reply: If I own myself I would have the right to sell my bodily organs I do not have a right to sell my organs So, I do not own myself 24

5 25 26 A More General Problem for Nozick As an historical fact This cannot be applied to our own society The causes of present inequalities are lost in the mists of history the problem of the removal of the Indians the problem of slavery problems of nineteenth-century capitalism What is the inequality problem? Another Way of Thinking about Inequality Perhaps it is not inequality per se. We ve never begrudged success in America. We aspire to it. We admire folks who start new businesses, create jobs, and invent the products that enrich our lives. And we expect them to be rewarded handsomely for it. In fact, we've often accepted more income inequality than many other nations for one big reason because we were convinced that America is a place where even if you re born with nothing, with a little hard work you can improve your own situation over time and build something better to leave your kids. Pres. Obama Perhaps it is inequalities that spread E.g., if inequalities in wealth create inequalities in political power Cf. Walzer s Spheres of Justice Distributive Justice & the Social Safety Net 27 What is available for distribution? A community s wealth does not begin as community property to be distributed by the community Wealth is produced by individuals as a result of their own initiative Nor is it entirely the product of individual effort An individual alone (i.e., without the contributions of his community technology, economic structures) could produce little. How should it be distributed? In moving from fully self-supporting families to an economy of specialists, markets, &c., society does two things It benefits everyone, by increasing the productivity of the community It puts everyone at some risk of losing their livelihood So, society has an obligation to provide an economic safety net to protect its members from the increased risks imposed by society when it moved from a subsistence economy to a market economy That burden has to be distributed to members of the community