Utilitarianism with the Taxation Policy - Term Paper Example

What are the utilitarian considerations in deciding the validity of redistributive taxation? I. Introduction The equality and the justice in the society have been the issues that have most analyzed in modern philosophy. In this context, it has been found that there are many issues that should be recognized as having a significant importance on the formulation and the regulation of the social politics mainly referring to the differentiation between the wealthy and the poor members of society. One of the approaches that influenced a lot the theorists when examining and explaining the behaviour of persons in their society has been the utilitarianism. The roots of this approach can be traced in the very early democratic societies. According to the view of Mill (1901, 2) Socrates listened to the old Protagoras, and asserted (if Plato's dialogue be grounded on a real conversation) the theory of utilitarianism against the popular morality of the so-called sophist. Towards the same direction Mill (1901, 16) stated that utilitarianism could only attain its end by the general cultivation of nobleness of character, even if each individual were only benefited by the nobleness of others, and his own, so far as happiness is concerned, were a sheer deduction from the benefit. Current paper examines the relationship between the utilitarianism and the policies followed for the redistrubition of tax by the countries in the international community. In order to achieve a more integrate result, the relevant theories that have been stated on both the above issues are being presented and compared under their role to the formulation of tax distribution policies by the modern states. II. Literature review The effects of political rights to the formulation of the societal structures have been intensive and continuous throughout the existence of the humanity. The study of Clark (2001, 467) showed that the dynamics of early nineteenth century liberal thought reflected the political task of uniting owners and workers in a coalition to oppose aristocratic power. In an effort to broaden liberalism's base of support, theorists sought both to defend property rights and to oppose fixed status, hierarchy, and arbitrary authority. Property rights were acknowledged to be a social convention rather than a natural right, so the rules of justice were open to revision in light of new knowledge and changed circumstances. However, existing rights had to be given legitimacy in order to appeal to property owners. Moreover, as Clark (2001) found the challenge confronting liberal theorists was to formulate a theory of justice in which rights were sufficiently secure to satisfy owners and sufficiently flexible to appeal to laborers. The research on Bentham's work on utilitarianism by Clark (2001) led to the result that the work of Bentham crystallizes the theoretical opposition to natural rights and for this reason in order to generate consensus on questions of justice, Bentham sought a single, incontrovertible criterion of right. He rejected appeals to right reason, common sense, natural law, or moral sentiment on the grounds that they provided no "extrinsic ground" for moral judgments. On the other hand, Markovits found (2003, 3306) that the simplest forms of utilitarianism, which tie people's fortunes together by sacrificing individual fortunes whenever this maximizes total or average fortunes, also treat people equally by insisting that no person's fortune counts for more than any other person's. But the utilitarian account of equal treatment falls well short of egalitarian nonsubordination because it never compares individual fortunes against one another. Utilitarianism (on this account) is concerned exclusively with totals or averages; it takes no distributive view. As John Rawls has said, utilitarianism ignores the "distinction between persons," which is precisely the idea from which egalitarianism begins. The above views are supported more heavily in the work of Mill (1885, 23) who considered utility as the ultimate appeal on all ethical questions: but it must be utility in the largest sense, grounded on the permanent interests of a man as a progressive being. Those interests, according to the above researher, authorize the subjection of individual spontaneity to external control, only in respect to those actions of each which concern the interest of other people. If any one does an act hurtful to others, there is a primâ facie case for punishing him, by law, or, where legal penalties are not safely applicable, by general disapprobation. One of the most important theoretical approaches of Mill (1901, 16) regarding the utilitarianism is the Greatest Happiness Principle which is the ultimate end, with reference to and for the sake of which all other things are desirable (whether we are considering our own good or that of other people). This is an existence exempt as far as possible from pain, and as rich as possible in enjoyments, both in point of quantity and quality ; the test of quality, and the rule for measuring it against quantity, being the preference felt by those who, in their opportunities of experience, to which must be added their habits of self-consciousness and self-observation, are best furnished with the means of comparison. This, being, according to the utilitarian opinion, the end of human action, is necessarily also the standard of morality; which may accordingly be defined, the rules and precepts for human conduct, by the observance of which an existence such as has been described might be, to the greatest extent possible, secured to all mankind ; and not to them only, but so far as the nature of things admits, to the whole sentient creation. In the above context, Mill found (1901, 18-19) that utility includes not solely the pursuit of happiness, but the prevention or mitigation of unhappiness and if the former aim be chimerical, there will be all the greater scope and more imperative need for the latter, so long at least as mankind think fit to live, and do not take refuge in the simultaneous act of suicide recommended under certain conditions by Novalis. When, however, it is thus positively asserted to be impossible that human life should be happy, the assertion, if not something like a verbal quibble, is at least an exaggeration. If by happiness be meant a continuity of highly pleasurable excitement, it is evident enough that this is impossible. A state of exalted pleasure lasts only moments, or in some cases, and with some intermissions, hours or days, and is the occasional brilliant flash of enjoyment, not its permanent and steady flame. Of this the philosophers who have taught that happiness is the end of life were as fully aware as those who taunt them. Under these terms, Mill (1901, 18-19) considers that the happiness which they meant was not a life of rapture; but moments of such, in an existence made up of few and transitory pains, many and various pleasures, with a decided predominance of the active over the passive, and having as the foundation of the whole, not to expect more from life than it is capable of bestowing. A life thus composed, to those who have been fortunate enough to obtain it, has always appeared worthy of the name of happiness. And such an existence is even now the lot of many, during some considerable portion of their lives. The work of John Stuart Mill has been criticized by Clark (2001, 467) who stated that Mill has traditionally been portrayed as self-contradictory and failing to construct a unified social theory. However Clark found that recent scholarship has challenged this view, finding Mill's work to be creatively synthetic in bridging the antinomies inherent in liberal democratic thought. This revisionist interpretation of Mill is advanced by an understanding of his theory of justice and its role in shaping his policy positions on issues such as welfare, education, voting rights, property rights, taxation, government intervention, and the future of capitalism. Trying to analyze the work of Mills, Clark (2001, 470) stated that hose groups with sufficient political power to determine the public assessment of utility would define rights and justice. More specifically the above researcher found that by 1840, the polarization of class interests was sufficiently advanced to persuade John Stuart Mill that a new theory of justice was needed. In this context, the basic views of Mill's theory of justice are presented by Clark trying to explicate the theoretical basis of Mill's views. In this context, the theory of justice as stated by Mill presents the following characteristics: 1) Subjectivity--the rules of justice must conform, to a significant degree, with the interests of citizens since no democratic society can be called just if large numbers of its citizens perceive otherwise; 2) Objectivity--an objective criterion of justice is needed for settling conflicts between competing interests and assessing the fairness of alternative policies and institutions. 3) Adaptive Evolution--the dictates of justice must be sufficiently flexible to evolve over time in response to changes in individual interests and social institutions. Regarding the above elements of Mill's theory of justice Clark (2001) stated that the dual grounding of a liberal theory of justice in both subjective and objective realms is necessitated by the tension between individual freedom and social order. If social institutions are to elicit continued popular support, they must be perceived as legitimate in the minds of citizens. On the other hand it has been found (Clark et al., 2001, 473) that by establishing "the ultimate sanction of the greatesthappiness morality," it transforms utilitarianism from an empirical description of the pursuit of individual pleasure into a basis for social morality. The happiness "which forms the utilitarian standard of what is right in conduct is not the agent's own happiness, but that of all concerned. As between his own happiness and that of others, utilitarianism requires him to be as strictly impartial as a disinterested and benevolent spectator". Mill's third psychological law, the principle of progress, is a corollary of the second. He believes that the social feeling is "one of those which tend to become stronger . . . from the influences of advancing civilization". As the level of production and prosperity advances and legal distinctions between classes diminish, humans are brought into more intensely social and cooperative relations, their level of knowledge increases, and their moral and aesthetic sensitivities develop. Hare (1998, 148) trying to explore utilitarianism from a different approach, this of the political rights and specifically the right to freedom. In this context she stated that although it is often said that utilitarianism must be an objectionable creed because it could in certain circumstances condone or even commend slavery, given that circumstances can be envisaged in which utility would be maximized by preserving a slave-owning society and not abolishing slavery. The objectors thus seek to smear utilitarians with the taint of all the atrocious things that were done by slave-traders and slave-owners. in order to see through this rhetoric we shall have to achieve a quite deep understanding of some rather difficult issues in moral philosophy; and this, too, adds up to the importance and interest of the topic. First, we have to ask what this thing, slavery, is, about whose wrongness we are arguing. As soon as we ask this question we see at once, if we have any knowledge of history, that it is, in common use, an extremely ill-defined concept. Even if we leave out of account such admittedly extended uses as 'wageslave' in the writings of Marxists, it is clear that the word 'slave' and its near-equivalents such as 'servus' and 'doulos' have meant slightly different things in different cultures; for slavery is, primarily, a legal status, defined by the disabilities or the liabilities which are imposed by the law on those called slaves; and obviously these may vary from one jurisdiction to another. Familiar logical difficulties arise about how we are to decide, of a word in a foreign language, that it means the same as the English word 'slave'. In order to define slavery, Hare (1998, 148) first referred to the status of a slave which was defined quite early by the Greeks in terms of four freedoms which the slave lacks. These are: a legally recognized position in the community, conferring a right of access to the courts; protection from illegal seizure and detention and other personal violence; the privilege of going where he wants to go; and that of working as he pleases. We ought perhaps to notice two other conditions which approximate to slavery but are not called slavery. The first is compulsory military or naval service and, indeed, other forced labour. It is commonly alleged that utilitarianism could condone or commend slavery. But everyone agrees, it might be held, that slavery is wrong; so the utilitarians are convicted of maintaining a thesis which has consequences repugnant to universally accepted moral convictions. The above views are in accordance with the work of Rawls as presented through the study of Keller (2002, 542). In this context Rawls suggests that social institutions should be structured so as to provide the greatest benefit to the least advantaged members of society, where resource holdings provide the measure of advantage. But the above views do not give a specific answer to the question 'what if the worst-off group is made up of those who freely choose to destroy or squander their own resources?'. Under these terms, the Rawlsian theory seems to imply that institutions should be structured so as to provide for a continual flow of compensatory resources towards that group. III. Application of utilitarianism on the taxation strategy Privately held wealth and its unequal distribution, and perhaps especially the transmission of such wealth across generations, have long been thought to pose particularly pernicious influences in a liberal democratic state. Thus, some form of a wealth transfer tax--most commonly an estate or an inheritance tax--has typically been a part of real-world and theoretically supported comprehensive tax systems (McCaffery, 1994, 293). Moreover, the rich members of the world's population are more closely connected with one another, through economic cooperation, coresidence, and citizenship, than with the poor. If the right to levy redistributive taxes is delimited to groups constituted by such relationships, the result will be that rich people take responsibility for rich people and poor people take responsibility for poor people (Cappelen, 2001, 103). According to the work of Cappelen (2001, 101) a person has a tax liability toward a country because she has certain distributive obligations toward the individuals in that country--obligations she does not have toward people in other countries. The question of how the right to tax should be distributed, and the moral legitimacy of international fiscal law, is thus closely related to the question of how we define our community. To defend the view that the right to tax, at least in the absence of practical constraints, should be distributed according to a particular relationship, one has to argue that individuals who are members of the group defined by this relationship have special obligations toward one another. In order to explain more effective the above assumptions, Cappelen (2001, 101) examined the following theoretical approaches: a) the mutual benefit tradition; according to this tradition society should be understood as "a cooperative venture for mutual advantages" marked by a conflict as well as an identity of interests. Social cooperation makes possible a better life for everyone through the increase in production that results from joining forces. But cooperation also leads inevitably to conflict of interest, as everyone prefers a larger to a lesser share of the benefits produced, b) the communitarian tradition according to which an individual is partly defined by his relationships and the various rights and obligations that go along with these; indeed, these commitments themselves form a basic element of personality. Rights and obligations are therefore defined, at least partly, between members of particular societies or communities at particular times. To communitarians, the morally relevant type of connection is social and/or cultural, c) the voluntarist tradition which accepts that special obligations arise only from voluntary contractual relationships. Mere participation in a relationship is not sufficient to give rise to special responsibilities; such responsibilities must always result from some voluntary act. Applied to the question of the distribution of tax rights, this implies that tax liabilities arise only from relationships that are entered into voluntarily by the tax subject. How this concept of voluntary agreement is construed will determine what types of relationships constitute justifiable bases for taxation. According to Cappelen (2001, 102) the best-known voluntarist tradition is libertarianism which supports that all individuals have certain basic liberties or rights, such as the right to life and health, to property, and to liberty. The interaction between utilitarianism and taxation has been quite old. In fact (McCaffery, 1994, 329) this history is a bit odd, for a commonsensical view would predict that a reasonable liberal politics, say in a Rawlsian vein, would be redistributive--that, even if we did not take matters all the way to the radical redistributive point inherent in Rawls' difference principle, modern democracies would at least tend toward exacting a greater sacrifice from the wealthy. Yet modern actual tax systems are at best only weakly progressive, and at worst not progressive at all. A very useful theoretical approach towards the explanation of interaction between utilitarianism and taxation is egalitarianism which ties people's fortunes together. This theory, as presented by Markovits (2003, 2291) takes the good and bad things in people's lives--their blessings and their afflictions--and shares them out, or redistributes them, among their fellows. Where egalitarianism operates, each person's fortunes and misfortunes cease to be just her own and become, to the extent egalitarianism recommends, a part of communal fortunes and misfortunes, shared in by all those who come under egalitarianism's purview. Egalitarian political theories are not the only ones to tie people's fortunes together; feudal theories, for example, do so as well. But egalitarianism differs from these and other political theories in the manner of its tying. Egalitarianism insists that all people's lives are equally important and, accordingly, that no person's fortune may be subordinated to anyone else's. Egalitarian intuitions call for redistribution that takes from the better-off--the rich, the healthy, and the fulfilled--and gives to the worse-off-the poor, the sick, and the desolate. But these intuitions stand in need of elaboration, and an egalitarian theory answers this need by presenting an articulate account of nonsubordination among persons. On the other hand, according to McCaffery (1994, 294) the explanation of tax policy should be political and interpretive. The term 'political' means a style of analysis that eschews any reliance on formal, essentialist concepts like "income" or "consumption," or on "metaphysical" notions, such as of the natural rights to individual earnings or entitlements. A political theory of tax takes seriously the idea that legal and economic rights and institutions are human-made; that tax rules are, so to speak, up for grabs. On the other hand, the term 'interpretive' is used to present a style of social theory that looks for norms in society's actual practices and beliefs. Interpretive theories have played a major role in judge-centric, common law fields such as torts or contracts or constitutional law, and Rawls himself takes a decidedly interpretive turn in grounding his "political conception of justice" on "certain fundamental ideas seen as implicit in the public political culture of a democratic society." The approach of Rawls has been also accepted by McCaffery (1994, 329) who stated that the use of utilitarianism to the design and the application of a redistrubitive tax policy has been extensive although a bit odd, because a commonsensical view would predict that a reasonable liberal politics, say in a Rawlsian vein, would be redistributive--that, even if we did not take matters all the way to the radical redistributive point inherent in Rawls' difference principle, modern democracies would at least tend toward exacting a greater sacrifice from the wealthy. Yet modern actual tax systems are at best only weakly progressive, and at worst not progressive at all. Regarding the interaction of utilitarianism with the tax law among the countries of the international community it is stated by Cappelen (2001, 98) that several features of international fiscal law should be noted. First, characteristics of a country (for example, the fact that it is poor) or of the tax subject (for example, his ability to pay) do not constitute any legal justification of taxation. It is only the existence of particular relationships between the country and the tax subject that give a country the legal right to tax. Second, only a limited set of such relationships gives rise to the right to tax. Second, only a limited set of such relationships gives rise to the right to tax. In particular, historical relationships--for example, former residence or former citizenship--do not create tax liabilities. Third, relationships that give countries a legal right to tax do not necessarily give rise to the same tax liabilities. More specifically, a very important question would be the following: should the country in which the owner of capital is a resident or the country in which the capital is invested have the right to tax capital income? According to Cappelen (2001, 97) how such conflicts are resolved affects both the ability of countries to redistribute resources domestically and the international distribution of tax revenues. The allocation of tax rights therefore raises important questions of distributive justice, questions that require a normative theory of the right to tax. For the purposes of developing such a theory it is important to distinguish between redistributive taxation and benefit taxation. Benefit taxes have often been understood as user charges: taxes that are paid by the tax subject to cover the costs of her use of goods and services provided by the government. The main objective of redistributive taxes, on the other hand, is to redistribute resources between individuals or groups. The distinction between redistributive and benefit taxes may not be as clear. One could also argue that at least some redistributive taxes could be understood as benefit taxes in the sense that wealthy individuals pay them for the benefits (e.g., lower crime rates, a better-educated workforce) that more egalitarian societies provide. On the other hand it is noticed by Cappelen (2001, 105) that when both countries are permitted to tax, the country of residence generally provides relief against double taxation. This can be done either by granting a credit for taxes paid in the country of source, or by granting an exemption for taxes on income that has been taxed in the country of source. In the beginning and in the end (McCaffery, 1994, 330), tax is politics. It is all politics, politics through and through. No dictionary definitions, no metaphysics of natural rights or entitlements theory, no quasi-science of individual utility functions, can see us through, can dictate the choices we must make. But while it is often thought or said that all reason and logic stop at the point where we reach the conclusion that something is all politics--as if all politics meant just politics, in some trivializing sense--the trend in modern liberal theory points decisively otherwise. IV. Issues for consideration A passing remark is all that needs be given to the ignorant blunder of supposing that those who stand up for utility as the test of right and wrong, use the term in that restricted and merely colloquial sense in which utility is opposed to pleasure; An apology is due to the philosophical opponents of utilitarianism, for even the momentary appearance of confounding them with any one capable of so absurd a misconception; which is the more extraordinary, inasmuch as the contrary accusation, of referring everything to pleasure, and that too in its grossest form, is another of the common charges against utilitarianism : and, as has been pointedly remarked by an able writer, the same sort of persons, and often the very same persons, denounce the theory "as impracticably dry when the word utility precedes the word pleasure, and as too practically voluptuous when the word pleasure precedes the word utility." Those who know anything about the matter are aware that every writer, from Epicurus to Bentham, who maintained the theory of utility, meant by it, not something to be contradistinguished from pleasure, but pleasure itself, together with exemption from pain; and instead of opposing the useful to the agreeable or the ornamental, have always declared that the useful means these, among other things (Mill, 1901, 8) A possible approach towards the estimation of the level of influence of utilitarianism on the tax policy set by a country should the cost benefit analysis (CBA) which (Adler et al., 1999, 179) is desirable because there are no superior alternatives that provide determinate, or relatively determinate, prescriptions. This argument assumes that if agencies engaged in some sort of direct utilitarian regulation, they would be unlikely to evaluate projects in a consistent way. If CBA provides only a feeble approximation of utilitarianism, that is better than no guidance at all. This argument might seem odd. Why would a poor guide be better than no guide at all? If someone proposed a method that required the approval of all projects whose titles have at least twenty letters and the disapproval of all projects whose titles have fewer than twenty letters, the method would produce determinate results, but not desirable ones. Moreover, according to Binder (2001, 509) a pragmatic approach to value presumes that justifying a practice does not require a general theory of value--it requires only comparing that practice to feasible alternatives. Value, in this sense, is local. A utilitarian approach to punishment, for example, need not entail a utilitarian ethic. Thus, from a pragmatic standpoint, justifying legal institutions does not necessarily require evaluating them ethically. But pragmatism does not authorize us to perpetuate legal institutions without evaluating them at all. Nor may we evaluate legal institutions in a purely instrumental way, without assessing our ends. In this context Binder (2001, 514) refers to the views of Judge Posner who stated that the left's redistributive aims are inherently impractical and can only be maintained through a childish refusal to acknowledge economic reality. Thus, in a market economy, redistribution of wealth will always be undone by transactions that put wealth in the hands of the socially productive rather than the needy. Hence visions of social justice can only be imposed by the economically suffocating and politically repressive process of government planning. Since all important decisions must be left to market transactions, there is very little that law can or should do, other than clarifying and enforcing property and contract rights. Law should not embody any scheme of values, but should simply provide a framework within which individuals can pursue their own ends, thereby yielding an efficient allocation of resources and maximizing wealth. From this perspective, democratic decisionmakers have no real normative discretion, so there is no practical point to normative legal theory of any kind. V. Conclusion The presentation and the analysis of the above theories prove that the interaction of utilitarianism with the taxation policy of a country is real and intensive. Specifically on the issue related with the influence of utilitarianism on the redistrubition of taxation, it has been proved that the former can be serve in many cases as a theoretical 'vehicle' for the design and the application of the latter. However, the requirements for the succesful completion of such a task as well as the relevant time framework cannot be precisely identified in advance. It is rather an issue of problem-solving ability of the authorized governmental bodies as well as related with the cultural development of a specific country. In this context, the influence of utilitarianism on the redistrubition of tax (wherever such a strategy would be decided as feasible) would be more intense in countries which recognize the importance of the cultural values to their succesful governance. References Adler, M. D., Posner, E. A. (1999). Rethinking Cost-Benefit Analysis. Yale Law Journal, 109(2): 165-215 Binder, G. (2001). The Poetics of the Pragmatic: What Literary Criticisms of Law Offers Posner. Stanford Law Review, 53(6): 1509-1532 Cappelen, A. (2001). The Moral Rationale for International Fiscal Law. Ethics & International Affairs, 15(1): 97-107 Clark, B. S., Elliott, J. E. (2001). John Stuart Mill's Theory of Justice. Review of Social Economy, 59(4): 467-482 Griffin, J. (1986). Well-Being: Its Meaning, Measurement, and Moral Importance. Clarendon Press. Oxford Hare, R. M. (1998). Essays on Political Morality. Clarendon Press. Oxford Justice and Equality in 'Essays on Political Morality' What is wrong with Slavery? in 'Essays on Political Morality' Keller, S. (2002). Expensive Tastes and Distributive Justice. Social Theory and Practice, 28(4): 529 Markovits, D. (2003). How Much Redistribution Should There Be? Yale Law Journal, 112(8): 2291-2322 McCaffery, E. J. (1994). The Uneasy Case for Wealth Transfer Taxation. Yale Law Journal, 104(2): 283-365 Mill, J. S. (1901). Utilitarianism. Longmans, Green and Co. London Mill, J.S. (1885). On Liberty. John B. Alden. New York Rawls, J. (1972). A Theory of Justice. Oxford: Clarendon Press Read More