It's not YOUR money, it's OUR money

The following is excerpted from an article that appeared in Real Economics, by Ian Welsh, April 15, 2015

"It seems like every time I discuss taxation, some libertarian will waltz in and say: “It’s my money and I don’t see why the government should be able to take it.” 

So let’s run through why, no, it isn’t your money. We’ll start with two numbers. The income per capita for the US in 2005 was $43,740. The income per capita for Bangladesh was $470. 

Now I want you to ask yourself the following question: Are Bangladeshis genetically inferior to Americans? Since not too many of my readers think white sheets look great at a lynching, I’ll assume everyone answered no. 

Right then, being American is worth $43,270 more than being Bangladeshi and it’s not due to Americans being superior human beings. If it isn’t because Americans are superior, then what is it? 

The answer is that if it isn’t individual, it must be social. On the individual but still social level, Americans are in fact smarter than Bangladeshis because as children they are far less likely to suffer from malnutrition. However not suffering from malnutrition when you’re a baby, toddler or young child has nothing to do with you and everything to do with the society you live in and your family–two things over which you have zero influence... 

Bangladeshis won’t, on average, get as good an education. They won’t get as much education either, since every child is needed to help earn a living as soon as possible...

When a Bangladeshi grows up, the jobs available aren’t as good. If he or she starts a business, it will earn much less money than the equivalent American business. If he or she speculates in land and is very successful, the speculation will generate much less wealth than in America. 

One could go on and on. I trust the point is obvious—the vast majority of money that an American earns is due to being born an American. Certainly the qualities that make America a good place to live and a good place to make money are things that were created by Americans, but mostly they were created by Americans long dead or they are created by all Americans working together and are not located in the individual."

So, it should be clear, that wealth, even under capitalism, is created socially and is not simply a product of one individual's effort. There are many other ways to understand this. One that I particularly like is to look at any business and how it relies on infrastructure (from roads to the internet to the education of its workers, etc) that are the social products of the past. Who does that past belong to? ALL of us.

But in our society wealth accrues, in the first instance, to individuals. Taxes, under capitalism, are the way in which some of the socially produced wealth is recaptured for use by the society in general. Further, progressive taxation recognizes that those, who have benefitted the most from the wealth created by society, should "contribute" the most.

Of course, all of this reasoning would be irrelevant under socialism, where the wealth produced would accrue to the society as a whole and benefit all. But in the meanwhile, we have to settle for using taxation to redistribute the wealth that is the product of our society, both past and present.