F. Hayek, Progressive taxation discriminates against a minority

The real reason why all the assurances that progression would remain moderate have proved false and why its development has gone far beyond the most pessimistic prognostications of its opponents17 is that all arguments in support of progression can be used to justify any degree of progression. Its advocates may realize that beyond a certain point the adverse effects on the efficiency of the economic system may become so serious as to make it inexpedient to push it any further.

But the argument based on the presumed justice of progression provides for no limitation, as has often been admitted by its supporters, before all incomes above a certain figure are confiscated and those below left untaxed. Unlike proportionality, progression provides no principle which tells us what the relative burden of different persons ought to be. It is no more than a rejection of proportionality in favor of a discrimination against the wealthy without any criterion for limiting the extent of this discrimination.

Because “there is no ideal rate of progression that can be demonstrated by formula,” it is only the newness of the principle that has prevented its being carried at once to punitive rates. But there is no reason why “a little more than before” should not always be represented as just and reasonable.

It is no slur on democracy, no ignoble distrust of its wisdom, to maintain that, once it embarks upon such a policy, it is bound to go much further than originally intended. This is not to say that “free and representative government is a failure” or that it must lead to “a complete distrust in democratic government,” but that democracy has yet to learn that, in order to be just, it must be guided in its action by general principles.

What is true of individual action is equally true of collective action, except that a majority is perhaps even less likely to consider explicitly the long- term significance of its decision and therefore is even more in need of guidance by principles. Where, as in the case of progression, the so- called principle adopted is no more than an open invitation to discrimination and, what is worse, an invitation to the majority to discriminate against a minority, the pretended principle of justice must become the pretext for pure arbitrariness…

In no sense can a progressive scale of taxation be regarded as a general rule applicable equally to all—in no sense can it be said that a tax of 20 per cent on one person’s income and a tax of 75 per cent on the larger income of another person are equal. Progression provides no criterion whatever of what is and what is not to be regarded as just. It indicates no halting point for its application, and the “good judgment” of the people on which its defenders are usually driven to rely as the only safeguard is nothing more than the current state of opinion shaped by past policy.

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