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Tax, ethics and the rich

When somebody as eccentric as Liliane Bettencourt, the L’Oreal heiress, says she believes something, you might consider that a reductio ad absurdum of the position. Last week she, along with some other wealthy French people, said that the rich ought to pay more tax.

When somebody as eccentric as Liliane Bettencourt, the L’Oreal heiress, says she believes something, you might consider that a reductio ad absurdum of the position. Last week she, along with some other wealthy French people, said that the rich ought to pay more tax.

What makes it less absurd is that a couple of weeks before, Warren Buffett said that rich Americans – including him – pay too little tax. The CEO of French advertising firm Publicis thinks the same, as does the head of Ferrari, and a bunch of rich Germans have been campaigning since 2009 to donate more of their hard-earned to the state.

The UK and Swiss authorities recently signed a deal that will make people who have evaded UK tax by squirreling their money into Switzerland cough up.

Leaving aside the practicalities, what are the ethics of tax?

Usually this debate circles around the idea of “fairness”, which is used by both sides, but to mean different things. One side says that it is fair to keep the fruits of your labour, and that the state should butt out of people’s lives and keep its hands off their money.

The other side uses “fair” to mean “equal”, and thinks that society is better when money is taken from the rich and given to the poor. This argument is doomed to stalemate, because neither side will shift on its definition of fairness.

Another way of thinking about tax is to use the concept of “moral luck” invented by the philosopher Bernard Williams. Normally we think that you are morally responsible for things that are in your control. But Williams said that our moral intuitions are more complex than that.

If a drunk driver swerves and crashes into a lamp-post he is arrested for being intoxicated, and has to pay for a new lamp-post. But if he swerves and hits a child, he is guilty of manslaughter, or even murder. But the only difference between the two events is the presence of the child – bad luck for everybody concerned. It’s easy to think of examples. Concentration camp guards would have probably lived blameless lives if they had been born Australian sheep-farmers, and so on.

Lots of people are wealthy through luck, including those in (successful) family business who inherit money and the means to make more of it. Some argue that in a country like the UK where property is very valuable and social mobility is low, inheriting money and property embeds inequality. Is that right? Is it fair? Does it mean that very high inheritance tax is morally better? (Liliane Bettencourt’s heir might argue not.)

Perhaps it’s what you do with your luck that matters. Heirs who work hard and expand a family business are generally respected. Those who do nothing but spend the family fortune on champagne and fast cars, less so.

Footballers, who get fantastically rich for doing something silly, are lucky to live during the football boom, but few begrudge them their wealth. But the son of a footballer has luck of a different order.

Maybe we are wrong to look only at the amounts of money people have. Maybe what you do with it should count as well. How about taxes on luck and laziness?

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