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Basic Income and the Justice of Taxation

Nikolas H.M. Roos
Law Faculty - Maastricht University

Revised paper of the 7th International Congress on Basic Income, Amsterdam, 10-12 September 1998.



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A basic income system (BIS), Philippe van Parijs once wrote, is "a disarmingly simple proposition". In this paper I would like to link it with another disarmingly simple proposition, a tax system that has value added tax (VAT) as it its main source. Joining two such simple propositions suggests boundless naivety. However, if social security can be reduced to such simplicity, why not taxation also? After all, a basic income is a negative form of taxation and one cannot simply overlook the question of its relation to positive taxation.

Starting with a methodological section, the first question to be considered is why lawyers and legal philosophers as such have shown little interest in BIS so far. This is regrettable since the proponents of BIS have hardly tried to consider BIS within a systematic treatment of the principles of taxation.

The next question of the methodological section is if BIS is exceptional as a negative form of taxation. Our discussion will show that all forms of positive taxation have an equivalent in negative forms.

The suggestion that BIS would be exceptional as an example of negative taxation, is created because it would seem to violate the fundamental principle of equal fiscal charges. It enables people to enjoy free time without any obligation to produce taxable income if they are capable of doing so. This objection against BIS cannot simply be bypassed even if it were true, as some proponents of BIS have suggested, that it provides the most efficient solution of the present problems of unemployment.

The second section is about the justification of BIS as an individual right. Although the subject is more than sufficient for an independent paper, it is too essential to be left out when dealing with the justice of taxation. Both BIS and the justice of taxation are directly linked to the political philosophy one takes as one's starting point. Van Parijs' theory is at present the most elaborated philosophy of BIS. It represents what I propose to call the "fairness-approach" to BIS. One of the virtues of Van Parijs' theory is that it deals with forms of taxation in so far, at least, as the financing of BIS is concerned.

The criticism that Van Parijs' theory has already met, has demonstrated that it is much too artificial, complex and debatable as a foundation of BIS. However, its main defect, it has been argued, would seem to be that it contains no convincing grounds to reject the principle of self-provision (the PSP) for everybody able to do so. I will argue why Van Parijs' theory can be protected against this criticism. However, that protection is of a doubtful nature in so far as one will have to give up the ahistorical-modernist frame of reference of the fairness-approach.

Govaert Den Hartogh, who does not reject PSP, has suggested a convention-theoretical approach to BIS. He nevertheless assumes that fairness is the solution for dealing with the problem that natural sources have no "natural" owners. I will argue that this is a serious mistake, because the theory of conventions is about processes in time and must have both logical and empirical support. Having reverted to fairness, Den Hartogh uses two idealist assumptions to circumvent PSP, both of which are unconvincing.

In a third approach, a republican-democratic one, PSP is also not rejected. It argues for BIS as a citizen's compensation for fulfilling republican duties. It will be argued that this approach cannot justify overriding PSP in cases where people fail to fulfil those duties or were they can do so and respect PSP nevertheless.

My own approach is also of a political-theoretical nature, but it relies on convention-theory. It is based on a theory of "law as second-order morality" (LSOM). In that theory law is seen as a device for people who prefer to live in peace with all those who are willing, for whatever reason, to accept a position of moral relativism. Following this approach, BIS can be explained as a pay-off for rights of political domination, however democratic these political rights may be. The recognition of exclusive property rights in natural resources will be shown to be just an aspect of these political rights.

The third section of this paper contains an analysis of the incoherence of the prevailing systems of direct taxation. The outcome of that analysis will be that consumption-tax, and more in particular, VAT is the right and only justifiable form of (pure) taxation.

The fourth section is about the coherence between BIS and a VAT-system (hence: VATS) within LSOM.

The fifth and final section is concerned with the administrative advantages and problems of VATS.

I. Basic income and basic questions

1. Legal scholarship and BIS

Law is divided in an ever increasing number of branches. Specialisation in the study of law has grown accordingly. Moreover, the philosophy of law has failed to compensate for this process of differentiation by developing integrating theories. This failure of legal philosophy is not a recent phenomenon. As I have argued in a recent article, the philosophy of the criminal law, for instance, has been struggling with its separation from political philosophy for more than two hundred years. The philosophy of tax law, would be another case in point. Professional philosophers of law tend to remain at a level of generality and abstraction from which they do not have to deal with the seemingly technical and pragmatic concerns of fiscal-legal scholars, who tend to concentrate on positive law and not on law as it might or should be.

The discussion concerning BIS illustrates this. It is striking, for instance, that the discussion has been almost totally ignored by legal philosophers, but also by legal specialists as such. They suppose it to be a matter for politicians and economists. This is also remarkable because the discussion about the differences between a system of negative income tax and BIS has shown how closely connected technical and more principled matters are. In contrast to BIS, a negative income tax system implies that people are supposed to pay income tax, that the state has a direct right to be informed about personal income, and that an effort to provide for oneself, even if only by borrowing money, has to precede the payment of a negative income tax. The latter implies, again, that one has to involve others in one's deplorable financial situation and that one will depend on private or state altruism, control and more or less subtle moral censorship. But these are only examples of the more superficial legal philosophical aspects of BIS. In this paper, it will be demonstrated that some of the most fundamental questions about law are involved with BIS: the justification of property rights in natural resources, the justification of political power, the foundations of social security and the justice of fiscal charges and expenditures.

The distance of legal philosophers and fiscal specialists from discussions concerning BIS, is mirrored by the distance that proponents of BIS have kept from the normative principles of taxation. They are usually weary of the control over the life of the unemployed and the costs of such interference that goes along with the existing systems of public social security. However, they do not seem to mind much that fiscal authorities can also scrutinize and manipulate the life of citizens who do provide for themselves. In other words, so far proponents of BIS did not consider the justification of BIS in the light of the more general questions concerning the principles of taxation. Just as proponents of a negative income tax system tend to think of the difference between their proposal and BIS as no more than a fiscal-technical matter, proponents of BIS are inclined to think that the deontological structure of the main part of the fiscal iceberg is irrelevant for the justification of BIS. At best, as in the case of Van Parijs, for instance, they focus on the taxes that would seem to be justified from the background theory they use for BIS. However, how these forms of taxation fit in with general principles of taxation, is a question that does not seem to worry them.

2. Forms of taxation

Positive taxes can be direct or indirect. Direct taxes are paid by the owner of the financial source that is subject to taxa- tion. Income tax and property tax are examples of direct taxes. Indirect taxes are paid by the buyer of goods or services that are being taxed. VAT and ECO-tax are examples of indirect taxes. Indirect taxes are direct in an economic sense, because they are mark-ups on prices. Conversely, direct taxes have indirect economic effects. They become hidden in prices as there is no direct relation with the size of the indirect tax component in a good or service and its price. If I produce a good with high labour costs but the market does not live up to my expectations, the price of the good may even be lower than the income tax-component in the wages of the people that worked for me.

Positive taxes can be distinguished from retributions. Retributions can be of three kinds. They can be payments for public goods or services an individual profits from specifically, e.g. the price of a ticket for a public museum. They can also be a price supposedly compensating the costs of specifically public services, like the costs of a passport. A third possibility is that they represent the price for a privilege, e.g. the right to sell goods on a public market. This latter form of retribution is a part of the means of regulating economic competition for goods owned by the state.

Finally, positive taxes can be divided into pure and impure taxes. Pure taxes have the acquisition of fiscal revenue for their primary purpose, independently from what other positive or negative effects they may have on other policy goals. By contrast, impure taxes have a non-fiscal primary purpose. They are means of social-economic regulation. VAT is an example of a pure tax. ECO-tax, which aims at a more efficient use and protection of the natural environment, is an example of an impure form of taxation. In reality, the distinction between pure and impure taxes is rather an ideological matter. For instance, an impure tax like excise-duties on tobacco-products is very inefficient as a means to prevent smoking, its pretended main justification, but a very efficient means of extortion of smokers for fiscal purposes. On the other hand, income tax does not only have the purpose of raising fiscal revenue, it is also an instrument for redistributive and macro-economic goals.

I will totally leave aside impure taxes and retributions. A lot might be said about a lack of justification of instances of impure taxes and retributions in the form in which they exist at present. However, in other instances they can be perfectly justified.

3. Positive and negative taxation

Negative taxation is a concept that refers to an obligatory payment of the state to a citizen that is not based on private law. It is not a currently used concept except in connection with BIS. This might suggest that negative taxation is an exceptional phenomenon. To see whether this is true, one must investigate if the various forms of positive taxation have counterparts in negative taxation.

The distinction between direct and indirect forms of taxation would also seem to make sense when applied to negative taxation. A basic income is an example of a direct form of (negative) taxation. A subsidy on "green" products is an example of an indirect form. The two examples also illustrate the meaningfulness of a distinction between pure and impure negative taxation.

Does the distinction between pure and impure taxes also make sense when applied to indirect taxes alone? Yes, an example is a government that provides poor people with food stamps instead of with money in order to try and prevent that social security money is spent on products that they believe to be bad or less useful for the poor.

How about the distinction between taxes and retributions? Negative retributions are payments for specific goods or services that a citizen is under an obligation to deliver to the state, or payments for the voluntary production of goods and services the market is supposed not to supply spontaneously in sufficient quantities. An example of the first sort of retributions is payment for dispossessed property (compensating a particular sacrifice of an individual's rights on behalf of the state) or - as an example of a service - the payment to military conscripts (compensating some of the costs of an individual in delivering a specific service). A highly perverse example of the second sort of retributions are agricultural price subsidies.

The exercise of determining negative parallels of the distinctions in forms of positive taxation, has shown that negative income tax (in the non-technical sense in which it includes the basic income), is not a lonely example of negative taxation. The impression that it stands out, is created by the suggestion that the state does not profit from pure forms of negative taxation. However, that suggestion is false. BIS has advantages for the state, because it will prevent negative consequences of poverty just as much or even better than the existing systems of social security.

It is useful, I think, to note in passing that the assumption that a citizen who pays positive pure taxes will also profit from doing so, is unfounded. It is only true in the very abstract sense that all non-anarchists assume that everybody in society is, under certain legal conditions at least, better off with than without a state. However, it is certainly not true that someone who has a large income and pays a lot of income taxes, can also be supposed to have profited more from taxes than someone who is less fortunate. That he would do so is suggested when abstraction is taken from the specific nature of public expenditures and the profit that is being gained from them, by calling them "the advantages of living in society". One's income may be related to public investments rather marginally only. One can think of a self-made artist, for instance. However, when this self-made artist spends his money, he is going to buy products the production of which has been financed to a considerable extent, directly or indirectly, by tax money. In fact, this is an important argument in support of the thesis that consumption tax is more just than income tax (see below).

Even if it can be admitted that negative taxation is nothing exceptional, it might still be maintained that the problem of a negative income tax in the form of a BIS, is that it will also be received by people who are not poor or who do not respect PSP. However, many defenders of BIS argue that this is a price that has to be paid for dealing in a more efficient way with poverty and its consequences than the present social security system.

4. Efficiency and justice

In my opinion, the efficiency-argument for BIS is too weak as a matter of principle, even if it were valid. To think that the argument is sufficient, is to accept the dominating techno-pragmatic assumption that doing redistributive justice is just a matter of real (Pareto) or potential (Kaldor-Hicks) compensation for the losses caused by redistribution. However, there is nothing wrong with regarding justice or morality as more important than efficiency.

What is the basis of the claim that BIS is incompatible with PSP? The idea of moral autonomy and responsibility of the individual presupposes that one should live according to one's convictions concerning what is morally right and wrong. It may be that somebody has no moral objection to living off gifts from others. In fact, some people, like Buddhist monks, for instance, find this a morally praiseworthy way of life. However, this would be a dangerous form of life from a moral point of view, if it would imply a dependency on such gifts for one's survival. Givers may have second thoughts and stop giving or set immoral conditions. And even without such demands, risking to get into a situation in which survival is not secured, implies exposing oneself to strong impulses to act immorally.

Since BIS is not funded from gifts, but from taxes the payment of which is a legal obligation, it would seem to be wrong to force tax payers to support people who would be able to provide for themselves if they were willing to work. The possibility that BIS would be more efficient than a social security system that includes an obligation to work if one can, does not imply that the PSP-objection against BIS becomes pointless.

Suppose you own a bicycle you are really attached to. One day, when you go pick up your bicycle, a broken lock sadly testifies to its own inadequacy. However, you find a note attached to it, stating: "Sorry, I took your bicycle. I needed it badly. But do not worry, I will put more than enough money on your account to compensate all your losses". You check your account and you find that the thief has been really generous. If he had asked you, for that amount of money you would have consented in his taking your bike. Do you have no reason to remain upset nevertheless? Of course you do! The thief interfered in your life and took your bicycle without asking you. Even if you would have consented in his taking your bicycle had he asked you, he could not know if you would have consented or not without actually asking. In other words, the reason you are upset is not necessarily your material loss, which may, in fact, have been more than compensated. The reason is that the generous thief interfered in your life without the respect that is owed to you as an independent, autonomous person.

Although the bicycle example shows that morality cannot be reduced to utility, it may not seem to rebut the compensation argument in the case of taxation. After all, taxation is a form of forced payment to begin with. Nobody is asked if he consents to pay tax or not. However, the objection is not against taxation as such, nor against its amount, but against how it is spent. The objection is against tax money being given to people who do not really need it, even if that would imply a lower tax bill in the end. The objection is directed against a society in which loafing is condoned. In fact, it is difficult to deny that no efficiency-argument can take away the fact that BIS may undermine the respect for PSP. However, would that not be a paternalistic argument? In the bicycle-example, it was the autonomy of the owner that was jeopardized. In the case of the tax payer, however, it would be the moral conscience of those who would assume, on receiving BIS, that it is all right to live off the efforts of others. Although one might investigate if there is something wrong with such a form of paternalism, it is not necessary to do as the objection is not necessarily of a paternalistic kind.

BIS is given to everybody and it changes everybody's moral conditions by removing the basic cause for the moral need to provide for oneself: the fear of being poor and being exposed to the risks of diseases and starvation. That fear is not just a biological one, it is of a moral nature too. Poverty, disease and threatening starvation will make us more inclined to behave immorally. A morally good person will do his best to avoid getting himself - or bringing others - in such a situation because he will realise that it is a situation which calls for great moral trouble. At first sight, this may seem like a strong argument in favour of BIS. However, precisely that would represent a paternalistic argument, because it would assume that one should take care of people to stay out of trouble even if that were the consequence of their own actions. In fact, BIS can undermine a morally responsible attitude as it may make us less morally careful because poverty and starvation will no longer be possible consequences of our actions. This objection to BIS is not necessarily of a paternalistic kind, because it can be maintained by way of an objection against the removal of an objective condition that determines the moral quality of one's own actions as much as of everybody else's who is not a saint. Strange as it may seem, BIS can make it more difficult to act as a morally good person.

If the objection on the ground of paternalism is unfounded, the question can still be raised if our objective condition is not the same already under the in most of the richer countries prevailing system of social security, in which the fear of extreme poverty and starvation has also been taken. However, this system does not reject PSP as such. On the contrary, it confirms PSP, although it acknowledges that one may get into a position of not being able to provide for oneself for reasons that have nothing to do with disrespect of PSP. However, if someone refuses to work although he is capable of doing so, he may still bring himself into a situation in which he cannot rely on social security payments.

As the counter-argument from paternalism fails, a supporter of BIS will have to grab the moral bull by the horns. He must try and develop an argumentation for BIS that is based on the very same principle of moral autonomy of the individual as PSP itself. Moreover, it must be of greater weight than PSP. Has such an argument already been developed by BIS-proponents?

II. The justification of the basic income as an individual right

In the first part of this section I will take a critical look at Van Parijs' theory as representing the most elaborated version of what I will call the "fairness-approach" to BIS. This approach has its roots in a Rawlsian concept of justice as impartiality. Van Parijs theory will appear to have many defects. The most important objection against it is, that it offers no convincing ground to do away with PSP, as Den Hartogh en Van Donselaar (see footnote 3) have argued. However, I will argue that this criticism is valid only within the ahistorical framework of a fairness-approach.

Den Hartogh himself does not appeal to fairness directly. He understands fairness as a conventional device to solve distributional questions in situations in which nobody can make a better claim than anybody else. I will argue that fairness cannot be constructed as a conventional solution when the value of the object to be divided has not yet been determined. Assuming fairness as a conventional solution, Den Hartogh then continues to follow an "idealist"-approach to BIS in order to circumvent his own objection against Van Parijs. He does not reject PSP, but he assumes that practically everybody who does no paid work, does nevertheless socially useful work. However, I will argue that even if this idealist assumption were true, it cannot outweigh PSP.

I will criticise both Van Parijs' conceptualist and Den Hartogh's pseudo-conventionalist idea that fairness would demand an equal right of everybody in the value of natural resources. This follows only from an abstract, timeless and non-economic concept of fairness in which property of natural resources is isolated from the historical process in which its value appears as the outcome of social-economic choice.

Instead of fairness, I will propose auctions as the conventional device to deal with rivalling claims for natural sources. The are three questions to be answered in this connection: (1) why agree with auction-rights in natural resources?; (2) how deal with later claims of those who were not able to express their interest at a particular auction, for instance, because they were not yet born?; (3) what about value increases of particular natural resources after an individual property right in them had been properly established ?

In dealing with the first question, I will argue, that one cannot simply presuppose that nature is "up for grabs" and has no immaterial, uncommodifiable value for man. The "fairness"-approach abstracts from the inherently political nature of questions concerning the relationship between man and nature. What is needed, and what I will try to provide, is a political theory of BIS strong enough to override PSP. It will include some remarks on a third non-fairness approach to BIS, the "republican-democratic" approach, which sees BIS as a payment enabling active citizenship. I will not reject that approach completely. However, I will argue that it cannot provide an independent foundation of BIS as an individual right.

1. The fairness-approach

The prevailing approach to justifying BIS constructs it as a compensation for rights that make their holders profit more from them than they deserve. I will call this the fairness-approach. The most elaborate construction of justifying BIS using the fairness-approach has been proposed by Philippe van Parijs. The basis of his construction is what he calls "real-libertarianism". "Libertarianism" refers to the idea that each person is "owner of himself", whereas "real" refers to a structure of society such that "each person has the greatest possible opportunity to do whatever she might want to do". The latter condition implies both redistribution and absence of a duty to work. However, the first condition has a "soft-priority" over the latter, because the assumption of self-ownership implies that the theory does not assume a view of society in which "any particular substantive conception of the good life is being privileged". This raises the following problem in connection with BIS: if everybody is owner of himself, how can it be justified to take what a person has produced from him to improve the position of others? Would that not imply that the receivers are partial owners of the producers? This problem is solved by demanding a fair distribution of external resources or, as this is more efficient, a fair redistribution of the benefits of exploiting external resources. The external resources considered by Van Parijs are: natural resources, gifts and bequests, technology and employment rents.

Technology, as a source of rents that might be taxed to finance BIS, is rejected by Van Parijs himself. Technology is not exclusively owned except when protected by patent-law, which derives its justification from its (supposedly) general utility of stimulating inventions.

We can also disregard gifts and bequests. I agree with Den Hartogh that gifts and bequests are not external goods. They are external to the receiver, but not to the donor. Taxing gifts and bequests would imply taxing altruism and would imply discrimination of what is possibly, from a (first-order) moral point of view, the most praiseworthy form of disposing of one's possessions.

Interestingly, Van Parijs does not propose to tax natural resources via a property tax. In his view, all property in natural resources has to be acquired, in principle, from previously earned labour income, as property in natural resources should be taxed away, just as all other forms of capital, when given away or bequested. Therefore, it would be unjust to tax properly acquired property of natural resources.

However, Van Parijs is not blind for the considerable negative effects of a 100% taxation of gifts and bequests. He is willing to concede a lesser percentage that maximises the fiscal yield. He only does so grudgingly, however, as appears when he discusses capital tax. In itself, he admits, "there would be no justification to tax away the benefits deriving from the decision not to consume and to invest instead. But given that even an optimal taxation of material gifts (including bequests, I assume) and labour income would leave people's external endowments highly unequal, interests and dividends can also legitimately be subjected to maximum-yield taxation, at least provided that no forced savings occur and that the tax scheme can be adequately anticipated".

In fact, shortly before, in the context of self-employment, Van Parijs had argued that the latter is usually dependent on capital-credit which will not be granted unless there is sufficient security. The result of this would be a capital-rent, because interest-rates will be lower than if there were free access to credit-markets. This rent would be comparable to the rent of efficiency-wages. Efficiency-wages include a sum that will make employed people afraid of loosing their job and will make them work harder or will save employers the costs of introducing and training new employees to replace old ones if these should leave their jobs for other ones. However, apart from the question of how much taxation such capital and employment rents would justify, it seems to me that the argument fails both in the case of capital and of labour, because these "rents" reflect real transaction-costs, that is, structural costs of markets which cannot be opposed to the equilibrium-price that would be reached if we lived in an ideal world with perfect information and instant adaptation. These can be distinguished from other, non-structural costs, like minimum- wages and union-monopolies, which, according to Van Parijs, would also support his thesis that employment rents can justify (income-)taxation to finance BIS. However, as Claude Gamel has pointed out, these arguments are question begging: why not, especially after BIS has been introduced, abolish minimum-wage legislation and forbid union-monopolisation of labour-markets?

The only source left for financing BIS, therefore, would be the rents from owning natural resources. However, they would be of no avail to finance a regular BIS from within Van Parijs' theory, as he assumes that its whole yield would have to be spend on financing people with "handicaps" defined in terms of Ackerman's "dominated internal activa". Ackerman' "handicaps" represent the jealousy-free residue of differences to be compensated from the point of view of a Rawlsian theory of justice as fairness. However, a much more serious objection against Van Parijs' theory of property of natural resources can be made.

Van Parijs correctly assumes that nothing follows directly from the ownership of the individual of himself with respect to property rights of natural resources. However, he believes that there is an indirect way. Since ownership in itself cannot be real unless there are also secured property rights in external things, it follows, according to Van Parijs, that, assuming equal endowments, fairness demands that each individual will have an equal right to the value of natural resources.

Giving everybody an equal right in the distribution of the value of natural resources is not a self-evident principle. The value of a natural resource would seem to depend on the variable ambition to exploit it. For someone who has no ambition to do so at all, its value will be zero. It would be unfair to let such a person share in the value of a natural resource. This is why Den Hartogh and Van Donselaar conclude that a basic income paid to such a person from tax money would represent a form of parasitism. In defense of Van Parijs, however, one might argue that each individual will at least be ambitious enough to exploit natural resources to secure his own survival and that there is nothing wrong with trading a real interest in natural resources to more ambitious individuals who are willing to guarantee the survival of the less ambitious in return. This is not a form of parasitism, because one will only be able to sell one's interest if a buyer thinks that the deal is profitable for him also, its price notwithstanding. However, the counter-argument can be developed into a criticism that applies to Van Parijs also: ambitions and the historical distribution of property rights are not independent factors.

The atemporal fairness-approach abstracts from the historical fact that it is the decollectivisation of property of natural resources that has made a degree of specialisation of labour possible such that, in more developed countries at least, only a small minority of the population still earns its income from the direct exploitation of natural resources. In a historical perspective one might argue, therefore, that the utility losses caused by individual appropriation of natural resources have been more than compensated by the new economic opportunities it has created. Historically speaking most "internal" activa are as "external" as natural resources. Conversely, if one yields to the spatio-temporal metaphor of Lockean metaphysics, it is difficult to maintain that natural resources remain external as soon is they have been transformed into capital. Why would "owning" one's body and mind that have been trained to become an economic asset (internal activa) be fundamentally different from owning a piece of land (external activa) one has plowed?

In contrast to Van Parijs, John Locke was well aware that the metaphor through which he was able to reduce property to acts of creation, could be stretched back into the past. Therefore, he had to struggle with Filmer's thesis of Adam's ownership of mankind, by distinguishing fatherhood from ownership, reducing both, in the end, to functionally distinct forms of trusteeship given to man by the Supreme Creator. Obviously, depending on how one conceives of the final nature of creation, one can mould one's theory of property. In both primitive and some modern environmentalists' holistic imaginations of the relationship between the individual and nature, for instance, nature has internal "activa" of itself of which human "activa" are an integral part. Instead of a transformative view of the relationship between man and nature, it will evoke the image of a balanced harmony in which individuals should integrate within the larger framework of nature.

From a post-metaphysical perspective, these sort of controversies make no sense except as objects of second-order observations about the human mind. The human mind is obviously capable of variable conceptions of the relationship between itself and its environment. Man is not related to his environment in the way that the rest of nature is. It is from this reflection that one can make the otherwise paradoxical concept of "self-ownership" meaningful. The concept is paradoxical, because "self-ownership" would imply that an individual might also alienate himself. However, it is precisely what the concept intends to exclude. "Selfness", in a practical sense, refers to the very capacity of man to make up his own mind on what is in his own interest or not, and act accordingly. However, do animals, for which we assume that they can be owned, not do the same? They do. However, they cannot claim to be free in the sense that humans can. This is not because practically no animals can communicate symbolically with us, but because their conditions of well-being are objectively given. They are practically the same for all animals of a certain kind, as they are not in the case of humans. From the point of view of the interests of animals, there is no reason to object to being owned as long as their objective interests are not in conflict with being owned. In the case of human beings who are compos mentis, such ownership is literally impossible for lack of an objective nature of their conditions of well-being. This is not the same as claiming that there are no objective conditions for human well-being at all. There are obviously some universal natural conditions of human well-being. However, human well-being is not only dependent on these natural conditions.

This analysis is not meant to restore an Aristotelian sort of argument from "is" to "ought". To claim that certain rights, like integrity of the body, individual property, free speech, etc., are "natural" in a functional sense, because they are necessary conditions for the realisation of man's nature, does not imply that they are "natural rights". In fact, our very analysis shows that this cannot be the case since man's nature is precisely that he can have quite variable and intersubjectively incompatible ideas about the fundamental values and goals in life, nature and society.

That this can be highly problematic can be illustrated by confronting Van Parijs' metaphysics with the alternative one we have suggested. Thus, the Indian Chief who, not having read John Locke, resisted colonisation, was, from a modernist perspective, not only being "irrational", but, following Van Parijs, also "unfair" in so far as he wished to maintain the Indian's luxurious taste to live in balance with nature as, predominantly, hunters and gatherers. However, that would seem to be a very perverse sort of accusation since it is precisely the immodest demands of the more developed parts of the world which make the taste of the less developed ones "expensive".

Traditionalism is expensive indeed, in so far as it risks to develop insufficiently endowments to allow people to survive in constant competition with others. Van Parijs might counter, therefore, that he assumed equal endowments and that redistribution will be affected by dropping that assumption. If people are seriously disadvantaged, according to him they should be compensated. However, in so arguing, he would miss the point of the argument which is, that the value of nature is very different for different people and that it may be infinite, because their very survival is at stake or because people do not only stand in a material relationship to nature. One must have commodified nature already to make comparative quantitative value assessments.

As regards natural resources there is simply a no-right situation, which implies that property rights can only be established through some sort of convention; and if there is no good reason, for some people at least, to agree to a convention, there simply is no complete solution for the problem of the justification of property in natural resources. The only thing that will be left for people who would like to subscribe to a certain convention, is to try and make a deal with people who do not accept it, provided that both subscribers and non-subscribers have an interest to come to a settlement of the conflict instead of fighting it out violently.

Interestingly, Den Hartogh, when dealing with the justification of property of natural resources, does not appeal to a concept of fairness directly, but to the idea of a conventional solution. A conventional solution is a stable pattern of expectations that results from a series of decisions, such that earlier decisions are the context of those following. Conventional solutions refer, therefore, to solutions as historical processes and not as abstract schemes.

If one would like to solve the problem of how individual property of natural resources can come into existence as a stable institution, one must try to imagine under what conditions people who are excluded from such property would consent to such exclusion. We have already argued why it is not self-evident that people would agree to a conventional solution, because it presupposes a common frame of value reference in relation to nature. It already demands a certain degree of moral relativism to accept a definition of nature as an object the value of which is to be measured in fractions and in terms of subjective opportunity costs, as is usual in a market society.

However, let us assume that such moral relativism is shared by those seeking a conventional solution. Would the convention to them be, as Den Hartogh suggests, that everybody would have an equal share in the value of natural resources? This solution, Den Hartogh himself states, is impossible, because the market value of natural resources is not known until the property rights of market-partners has been established. However, if that is so, equal rights cannot be the conventional solution, because a conventional solution demands a time-series of decisions of which each is determined by those which preceded it. Den Hartogh simply ignores this fundamental problem and proposes a second-best solution, which is an equal right in the value of the production accountable to natural resources, of which he estimates the value, via a fanciful procedure, at about 25% of all production. Leaving aside what this sum should be, the question remains of a just collection of that part of tax-money. Why would someone who earns his money as a singer have to pay 25% of his income as if 25% of his production would be from natural resources? However, if, instead, the whole value of natural resources would be taxed away from their owners, nobody would be interested in owning them any more.

Den Hartogh's own criticism that an equal sharing of the value of natural resources would be unfair in the case of people who have no interest in exploiting a natural resource as such, implies that differences in the ambitions of people must be taken into account. Even though this argument will be seldom used at birthday parties, it is, strictly speaking, unfair that someone who does not like cake so much, gets the same piece of it as someone who is really fond of cake. Possibly trade will be the consequence and the person who sells his cake can make a profit. However, trade reduces value because it goes along with transaction costs, and especially so if hold-out options exist.

Equal division in terms of value and in terms of objects only matches if it is money that is being divided. Can the distribution of natural resources be seen like a fair distribution of money among its finders when nobody has showed up to claim it as having lost it? In fact, Den Hartog himself has argued that it cannot, because it would be unfair to include someone who is not interested at all in using a particular natural resource. He avoids this problem by parallellising his abstraction from the process of allocating property rights by an abstraction from the willingness to use a concrete natural resource to a willingness to work in general. As long as someone's work has some social value at all, paid or unpaid, he is willing to grant a claim in the value of natural resources, form which, he believes, BIS might be financed (see below).

The problem of assessing the value of a natural resource is a matter of estimating its opportunity costs, i.e. the value of the natural resource in terms of alternative economic choices. This can be done by means of an auction, preferably a non-interactive one. A non-interactive auction is one in which the first bid is also the last and all bids are made without knowledge of those of others. This is a device to counter speculation. However, unless a realistic minimum-price has been set in advance, it does not prevent parasitism, because it still allows "safe bets", that is bids that are obviously too low and that are only made to acquire a share in the division of the spoils of the auction.

Obviously, the distribution of an auction-price should be related to the height of each offer, since that height reflects the negative utility of not acquiring ownership. Nevertheless, it seems better to simply divide equally, however unfair that may seem in the face of real differences in expected utility, because speculative bidding cannot be excluded completely. However, there is a second reason not to discriminate between loosers, which is that people who could not be present at the auction, for instance, because they were not yet born, might claim that it is unfair that the resource was sold out without their having had a chance to take part in the auction. This may seem absurd, because it would imply that no natural resource might be exploited until the very last man had been born. However, if the capital-value of the auction is saved and not distributed, everybody can profit from its rents.

Once a natural resource has been auctioned, it can be dealt with as capital in general. If its value increases after it has been acquired, that increase should be taxed like any other capital-value increase (see next section). But could one not argue that natural capital-value increases should be taxed to the full if they are not the consequence of pure market-developments, but e.g. of an invention which allows exploiting a particular resource more profitably? However, this would be highly unfair, because inventions can also make natural resources less valuable.

There is only one special feature about capital in the form of natural resources which makes them different. Some of them, like land, can also be used for the consumption of the owner. If its value then increases, it is reasonable that this consumption will also be taxed just as if the land had been leased out to someone else.

In conclusion I can distinguish my own position as a convention-theoretical solution from Den Hartogh's in two respects. The first is, that I do not assume that a conventional solution of the allocation of individual property in natural resources is generally acceptable in the sense that someone who would refuse to agree with it, is being irrational. People may refuse to consent in establishing individual property rights for good reasons. This is most important, because it follows that the problem of individual ownership of natural resources as such is insufficient to justify BIS and that it requires another convention that precedes it. However, and this is the second difference, for people who prefer to avoid fighting about access to natural resources and are willing to commodify them, the solution they would rationally consent to is not an equal share in the value of natural resources, but a combination of an auction for property concessions and taxing value increases of natural resources in the same way as capital gains in general.

A few more remarks must be spent on how Den Hartogh, in contrast to Van Donselaar, finally justifies BIS, his objection on the ground of parasitism notwithstanding. He assumes an "idealist" view, according to which most people work, even if it is unpaid, and the amount of real loafers would be negligible. However, we know nothing about how the attitude to work may be affected by BIS. Secondly, those who object to other people's living off their efforts will not necessarily think that they are less taken advantage off when people who undertake unpaid social activities define what they do as work, even if it were socially useful. The question will remain useful to whom? And why do those for whom it is useful, not pay for it, if it is indeed useful?

The labour of a housewife or a houseman is most useful. However, they are paid informally by their relatives, who profit from their labour. They may be underpaid, but that is something for which their relatives are responsible, not outsiders. Similarly, one may acknowledge that other forms of unpaid work can be useful for a larger section of society. However, why is that work unpaid if and to the extent that it is indeed useful? If the market fails to do so, the state should take its responsibility and compensate those market failures by hiring people. BIS is an economically clumsy way to do so, because it does not distinguish between a greater and a lesser social utility of work. The work a BIS-receiver may decide to do, may have a utility purely for himself or, if meant to be for others, it may only exist in his own imagination only.

Therefore, although I have argued that Den Hartogh's objection against Van Parijs' theory as based on parasitism, does not hold, as transfer of property rights and motivation to work are not independent factors, his idealistic attempt to get around his own objection is also unconvincing.

2. Law as second-order morality

The assumption we have been making implicitly when developing our conventional solution by establishing property rights via an auction was, that its value represents opportunity costs. But these are opportunity-costs in terms of market values. This implies that non-market values that a natural resource may be related to, drop out. To justify this, fairness-theoreticians like Van Parijs will invoke the neutrality-axiom, a fairness condition for competing theories of the good. It stipulates that since at least different internally consistent theories of the good can be defended, each individual should have an equal chance to realise his or her conception. However, the problem with this is that only money, but not natural resources as such can always be divided in equal parts. If natural resources as such are assigned a non-marketable, social or natural value, equalisation is impossible.

Adherents of the fairness-approach confuse the logical truth of moral relativism with the moral truth of moral relativism. However, a consistent moral relativism must accept that a certain theory of the good may actually be correct. Admittedly, we have no theoretical ground to know whether it is or not. However, one may have non-theoretical grounds for believing that one's theory of the good is actually true. If that theory of the good forbids practical relativism, that is, tolerance for deviant beliefs, one has reached the end of any moral discussion. People, in contrast, who prefer to live in peace with others with deviant conceptions of the good, will have to look for a solution of the problem of living in a pluralist society. They will have to develop a conventional morality, a "second-order morality".

If people are serious about wanting to avoid conflict, they can only keep others bound to premisses these people acknowledge themselves. In other words, in constructing a second-order morality one can apply Occam's razor. Obviously, someone who objects to holding nature up for grabs, would try to impose his strong metaphysical assumptions about the relationship of man with nature on people who make weaker assumptions. In contrast, objecting against a use of natural resources which would create a danger to survival, is consistent with a second-order morality, since its whole point was to make survival possible.

Van Parijs' claim that "freedom" must be distributed equally is in conflict with LSOM. Such a claim is rooted in the identity-theoretical assumptions of modernism. Of course, if people are "essentially" identical, they will also have to have, as much as possible, identical possibilities to realise this essence. By contrast, if it is assumed that man has no essence in the sense of a definite nature like animals have it, no such implication can be drawn. Men can only be demanded to serve others when survival is at stake. When survival is at stake it can no longer be expected that someone will obey the law and remain faithful to his own moral standards. Unequal opportunities as such, however, cannot be a ground for a claim for support or solidarity from others, because these others have no reason to feel responsible for these circumstances, although they are free, of course, to be as altruistic as they like.

The essentialist nature of Van Parijs approach is not directly evident, because he himself uses the term "freedom" to refer to human essence. Freedom, as Van Parijs understands it, is the ability to do whatever one might want to do. Since that ability is related to one's income, it follows that if it is of the essence for man to be free, a free society is one in which each person is as free as possible and that, whatever economic value has not been created by an individual, should be distributed in a way that will maximize freedom in society. Of course, everybody is free to use his own definitions. Note, however, that this definition of freedom also applies to animals. An animal that has a greater choice of habitats and kinds or qualities of food, would be more free. This indicates the oddity of Van Parijs' concept of freedom. Freedom as we have conceived it by contrasting man with animals, is not the ability to do whatever one might want to do, but the possibility to live according to one's own moral standards. The fact that one's moral standards are such that the ideals one sets oneself are difficult to realise, does not imply that one is unfree to pursue those ideals. Nevertheless, moral standards and conceptions of the good life can be incompatible, but this implies no more than that subjective freedom has limits which have nothing to do with the distribution of income. It is precisely the absence of objective conditions of human well-being, at least at a level on which survival is guaranteed, which makes it impossible to maximise freedom as defined by Van Parijs. We cannot have absolute freedom, but only a limited, second-order form of it. One might argue that this form maximises subjective freedom in the sense in which we have defined it. However, once this second-order freedom has been established, freedom in that sense can no longer be increased by redistributive measures, even if its establishment, as I will presently argue, requires a certain amount of redistribution in the form of BIS. A BIS that would no longer be "basic", however, would be good from the point of view of Van Parijs concept of freedom, but it would be incompatible with LSOM (see below).

There is a direct line from a view of human nature as differentiality and a market society as an economic second-order device to cope with scarcity. A market is a peaceful way of dealing with conflicting economic interests, both in consumption and in production. The virtue is not just a matter of efficiency, as Van Parijs wnat us to believe. A market allows us to be free in what we want to spend our money on. Everybody is also owner of himself in an economic sense when he or she, as an actor in a free labour-market, can determine himself what sort of (self-)employment is good and acceptable for him or her. However, the freedom of a commodified society is one of a second-order level. It is based on an exclusion of all those worldviews which reject commodification.

In a free society one will have to negotiate if one wants somebody else to do or not do something he is not inclined to, unless that person has a valid legal obligation to that effect. This also goes for exclusive rights of access to nature. Natural resources are as marketable as any economic resource, provided that collective environmental and health interests are safeguarded and the problem of establishment of private rights can be solved. One will have to negotiate a price to acquire the privilege of having an exclusive right when it comes in conflict with incompatible interests of others related to a natural resource. Once a natural resource has been privatised, it can be dealt with, as argued above, as any kind of capital, provided that its substance is kept as capital in a monetary form for later generations. Obviously the solution proposed by Van Parijs en Den Hartogh: equal rights, is not a solution which respects human differentiality. Differentiality explains why one and the same resource can be more valuable for one person and less valuable for another person.

I see a truly pluralist democratic political system, the structure of which I have recently analysed in a soon to be published article, as the political expression of "law as second order morality" (LSOM), as it maximises the possibility to live according to one's own conception of the good without getting into conflict with the same right of others. BIS (in combination with a VAT-tax system) has an essential role to play in that system, as a pay-off to those who cannot realise their conception of the good due to the constraints and limits which even a truly pluralist democracy will remain imposing upon them. It has the function of preventing that the problem of how to survive can be used as an excuse for illegal behaviour by those who, for principled reasons, would refuse to provide for themselves and thus contribute to the maintenance of a certain society or its political system they reject. This argument for BIS is derived from the same principle of moral responsibility as the principle that each individual has the duty to provide for himself. However, it does not artificially separate the responsibility for work from its concrete historical and socio-political conditions. It is important to realise that even democratic political systems are forms of domination, however tolerant and pluralistic they may be. The structure and territorial scope of democracies is relatively arbitrary and not neutral as far as the outcome of decision-making is concerned. Moreover, voting by foot by emigrating is very difficult for most people nowadays. An alternative society within one's own cultural community is often unavailable or inaccessible. Therefore, it is always possible and, in fact, often true, that people strongly disagree with the rules they are submitted to via democratic forms of decision-making. Even a particular democratic society can be hard to identify with for some people, because they make high demands for adaptation and conformity. In fact, proponents of BIS have often argued for BIS on this ground in connection with the pressure that the obligation to work creates for people living on social security. Obviously, BIS allows people a minimal degree of participation in and responsibility for a society they may reject. In other words, BIS can be justified as a political pay-off to make people refrain from giving up a relativistic attitude. By not forcing people to contribute actively to a society which they reject, it takes away what might be a reason for revolutionary action, if only because refusing to participate in economic activity can no longer be used as an excuse for illegal forms of securing survival.

Of course, identification with society and its political system is a matter of degree. Since a truly pluralist democratic society maximises freedom, it can be expected to minimise alienation. However, it would be naive to believe that freedom is valued by everybody. With some people, depending on their cultural backgrounds, freedom is a source of great anxiety. Free societies are usually also highly competitive and competition implies material and social risks of for those who turn out as loosers in teh competition. BIS will reduce this fear by guaranteeing minimal social security as well as by destigmatising failure by making it less conspicuous.

BIS as a back-up for social cohesion in a democratic society has been advocated already before. However, this was in view of a different kind of support, although it is not unrelated to the one we have just developed. BIS can also be seen as a means to realise the republican ideals of democracy. BIS invites dissenters to put as much energy as they want in using democratic means for convincing their fellow citizens of the necessity of change. BIS enables every citizen to participate in politics, full time if deemed necessary.

In a complex modern society, politics and public administration have become highly professionalised and bureaucratised. This explains why the alienation between political parties and citizens has grown and why inofficial politics has become more and more important in comparison to official politics. Obviously, our "risk-society" needs much political information and control. Therefore, from the point of view of democracy, BIS cannot only be regarded as a means to make dissenters live with a form of political domination they reject, it can also be seen as a citizen's financial credit for political activity. This is especially true for those who are dependent on the existing system of public social security. The obligation to work and the risks of loosing social security if they do not comply with the conditions that authorities impose upon them, can operate as restrictions on political freedom. In fact, the fear of loosing one's job without a right to social security, may already block the freedom of political action. According to Ralf Dahrendorf, this would be incompatible with republican-democratic ideals of equality and political freedom.

The argument for BIS from republican-democratic ideals is much more attractive than our construction of BIS as a "pay-off". Nevertheless, I cannot accept the republican arguments for BIS as more than secondary. They cannot provide an independent justification of BIS that overrides the objections based on PSP. What about those who do not participate in the democratic process for principled reasons or who do not participate in any way although they do not have any of these objections, but who simply do not care? And why giving a basic income to those who are obviously rich enough to live off their capital if they would like to spend their times in republican activities?

Therefore, the republican argument, attractive as it may appear, cannot stand on its own feet, unless one first accepts the "ugly" side of BIS, its being a "pay-off". If one does, the republican argument can be integrated easily. Obviously, if opponents of the democratic republic are given the opportunity to voice their opposition, provided they do it peacefully, the supporters of that ideal should be given an equal opportunity to defend it.

3. Conclusion

Let us now, in conclusion of this section on the justification of BIS as an individual right, compare our approach to BIS with the one followed by Van Parijs. A first important advantage of our approach is that we do not have to deny PSP. However, we have founded this duty in a more general and broader duty to take moral responsibility for one's life. PSP does not necessarily have priority within this broader responsibility. Under particular social-economic or political conditions it may demand, depending on a person's worldview, not to fully participate in society and contribute to it through paid work.

The second advantage is that we can explain why BIS would have to be a truly basic income and not more than that, as Van Parijs would prefer. I think this is an advantage, because against the prima facie intuition that everybody has to provide for himself, it is hard to explain why even more than just the minimum necessary for social survival would be covered by BIS. I have pointed out that BIS should take away a possible justification for illegal behaviour on the ground of the necessity of survival in connection with one's morally motivated refusal to work under certain socio-political conditions.

That BIS should be a basic income only, does not imply that BIS should have the same height for everybody. The needs of people for survival can differ. For instance, some physically handicapped people will need extra means if they are to survive without any other sources of income.

A third advantage is that we are not restricted to taxing natural resources to finance BIS. It can be financed from all other sources of which taxation can be justified (see below).

A fourth advantage is that although BIS was disconnected from being financed exclusively from property-taxes on natural resources (considering that all other sources of taxation Van Parijs suggested are untenable), we have nevertheless identified a basis of taxing natural resources. It consists of VAT in two forms: a 100% VAT for the establishment of original property rights when there are more than just one claimant, and later an ordinary tariff for value added.

The practice that VAT is not paid back when the value of an object goes down after being sold, would explain why there would also be no such claims against the community when the value of natural resources fall under the price for which they have been acquired from the community. However, this is only the case if we can explain the non-reimbursement of VAT in case of price-drops in general. If VAT were the fiscal form through which property rights in natural resources can be justified, one can presume that a more general justification of VAT will throw a clearer light on the relationship between property rights and taxation in general. Another question that poses itself is, whether BIS might play a special role in the justification of VAT. These are the subjects of, respectively, the third and the fourth section of this paper.

III. Principles of taxation

1. The principle of equal charges and benefits

Taxation is subject to the general principle of equal public charges. However, as we have seen, these charges can be positive and negative. Therefore one may formulate it better as the principle of equal charges and benefits. Benefits from public expenditures can be diffuse or specific. In so far as they are specific, they should be subject to retributions. Impure taxation should also be specific, as they are connected to compensating negative effects of individual behaviour. General taxation is unavoidably class-biased in some respects. Expenditures for social security are by their very nature more to the advantage of the poorer social classes. This also is the case in a society with BIS, because BIS will represent a larger part of the income of poorer classes. Public expenditures for education and culture, however, are usually more profitable for the richer classes. The advantages of public investments in infrastructure, justice and defense, are by and large related to income. Therefore, if income is taxed proportionally, the scales will be roughly in balance, although the principle may demand some further refinements (see below).

Even if the advantages of public expenditures would thus be roughly in balance, one may still question whether the charges of taxation are divided equally. An argument that can cast doubt on this this, is the idea of the negative marginal utility of income. This idea is often rejected on purely logical grounds, because it would imply interpersonal and intertemporal utility functions. However, I do not think that these objections which are valid on an individual level, are also conclusive if and in so far as fiscal justice has to be established on the group level only. Even if e.g. a negative marginal utility of income can not be established on an individual level, it might still hold as a generalisation. Legal justice can often be an approximative justice only, and we should therefore seriously consider whehter there is, as so many people believe, a justification for progressive income taxation.

2. Progression in income tax

A first reason to think that the marginal utility of income decreases, is that standard neo-classical economy would predict that people will work less when income increases, because the value of leisure will increase. However, the direct evidence for this thesis would seem to indicate the contrary rather, because people in general cannot be observed to work less as their income per hour increases. The income effect is many times higher than the substitution effect. It is true, of course, that as income increases, the work as such one does tends to become more attractive, but the relative impact of that factor is unknown.

The second argument is based on a well-known paradox, discovered by Kahneman and Tversky, consisting in the fact that people, in general at least, tend to be loss-averse. People prefer to avoid a small chance of losing a certain amount of money over a much greater chance of gaining that amount. Can this "irrationality" be explained as indicating a decreasing marginal utility of income? It certainly cannot because Kahneman and Tversky did not find a decreasing loss-aversiveness with increasing income. Nor do others, as far as I have been able to establish from handbooks on economic psychology. In fact, gambling is more typical of the lower social classes. However, this may reflect a lesser sense of control over one's life and seeing one's life being as governed by chance. Moreover, there is only a gradual distinction between gambling and, as richer social classes do more often, investing money.

A final reason to suppose that the marginal utility of income decreases, is that saving-rates increase as income increases. However, increasing saving-rates only indicate that, as income rises, saving becomes more attractive than direct spending. Again, this may also be explained as refuting the thesis of the decreasing marginal utility of income, because saving will usually aim at a greater income in the future. In fact, not only do saving-rates increase with income, so do de-saving rates. What these empirical data reflect is that richer people can better afford to develop longer term consumption plans. Needs are not independent of income level therefore. Empirical studies show that the need for income is highly dependent on reference groups, which are, in general, the group of one's own income-bracket. The most likely assumption is, therefore, that the marginal utility of income is at least constant as a proportion of income. A proportional income taxation would therefore be a just form of taxation in terms of the disutility of fiscal charges.

There are other arguments against progressive income taxes except the implausibility of the negative utility of marginal proportional income. Income tax only takes financial costs of gaining an income into account, and not non-financial sacrifices like taking risks and working hard. Someone who works only half-time when nothing keeps him from working full-time if he or she wanted to, will not pay more or less income tax than someone who works full-time or even in overtime, and makes the same amount of money. Another way of expressing this is, that income tax systems do not tax a preference for free time. It would be very hard to do so, of course, because it would presuppose an objective standard for "full time work". Moreover, it would contradict a deep rooted sentiment that we are owners of our own time and that we have no obligation to work, at least as long as we do not ask society to support us to do so. In fact, if one would tax free time, one would also have to tax reasons to do work under one's earning capacity. A surgeon who prefers to make his money as a professional painter, would have to be taxed for his preference to be poorer but more satisfied about his work. Nevertheless, the fact that non-financial sacrifices are not discounted in income tax, does not only count as an objection to progressive taxes, it is an argument against income taxes as such. In fact, that is not the only objection against income taxes.

3. Income and corporate tax vs. consumption tax

Many income tax systems with progressive tax rates are marred by possibilities of regressive tax deductions. However, this is not a structural feature of income tax. A more structural problem for such systems is at stake when income is used to create income at a later time, for instance, through pension insurance. One might argue that insuring one's pension is irrelevant for income tax. One's preference to consume income later is just as irrelevant as any other decision to save instead of consuming. However, the future income should then not be taxed except in so far as it exceeds what has been saved. One might also argue that pension-insurance spreads income more evenly, and that it is a justified form of avoiding unjust taxation that results from the combination of unequal income in time and changing tax rates. In fact, tax systems usually allow an administrative spreading of income over a limited number of years in order to avoid unequal taxation caused by progressive tariffs. However, the usually limited duration of that term is arbitrary. Moreover, if such spreading is justified, any form of tax-exempted saving to compensate unequal income over the years would be justified. However, it would be hard to know whether savings will be used to do so or not, because it is often difficult to predict one's future income. Another way to make the same point is that the value of income differs depending on whether it concerns regular or irregular income, whether it is protected against inflation and whether it can be used for consumption or not. The tax man cannot know when and to what amount acquired income can be spent more usefully. That is why a consumption tax system would seem to be more just as an indicator of spending power.

Important in this connection is also that an income tax system, in contrast to a consumption tax system, is not neutral towards consumption and saving. Suppose that A and B have an income from work of 500 dollar during two consecutive taxation periods. Let us assume a tax rate of 50% and also that A consumes his income completely. A will then be indifferent to whether he would be under an income tax system or a consumption tax system. Under both systems he will pay half of his income to the tax man. Assume that B, in contrast to A, saves his income of both periods at an interest rate of 10%. In an income tax system, B would have saved 250 dollar. His income in the second period would therefore be 550 dollar, which will lead to a tax sum of 275 dollar. Over two periods B will have paid 525 dollar therefore. However, would B have been subject to a consumption tax after the second period, when he spends 1100 dollar (1000 dollar regular income plus 100 dollar interests), he would have to pay 550 dollar in tax. The direct value of A's tax duty is 500 dollar. So is B's in case of a consumer tax system (his income minus the value of his sacrifices for saving). However, if he were subject to an income tax system, the direct value of his tax debt would be 525,50 dollar (500 dollar of his regular income plus 25 dollar tax on interests minus 10% of the latter amount that represents his sacrifice of saving that amount).

Not to discriminate between consumption and saving makes sense economically, because they represent each other's opportunity costs. However, one should realise that the rationale of a consumption tax system implies not only that the rewards for the sacrifice of saving, but all capital gains remain untaxed until they are used for consumption, including the consumption of labour, buildings, machinery, etc. This does not imply, however, that capital gains as such will become greater at the expense of generating income via other means. The taxation of capital gains is only shifted to the moment the gains are consumed. The advantages of a consumer tax over capital tax are that capital taxes go no longer hidden in consumer prices and that the choice between alternative combinations of production factors, which are usually not equally taxed, will no longer be determined by fiscal motives.

Furthermore, in absence of a capital tax, the losses caused by mistaken investments can no longer be deducted from profits. In other words, the taxman will no longer subsidise bad entrepreneurs. Moreover, one also does no longer have to account for the value of stocks, debts, depreciation of capital as well as for reserves. All the fiscal problems created by differences of taxation depending on the legal form of firms, and of buying, merging and liquidating firms, will be over, just as the difficulties created by bonus-shares and agio-payments.

Nevertheless, it must be admitted that without taxing interests and capital gains, differences in wealth will increase because saving will become relatively more attractive than consumption. The rationale of a consumption tax would also seem to be incompatible with taxing gifts and bequests. However, that is a matter we already dealt with when discussing Van Parijs' theory. We concluded that there is no ground for the state to claim a share of A's willingness to give or bequeath something he owns to B. Nevertheless, in the absence of an inheritance tax, differences in wealth will also increase. However, as savings rates increase with income, high savings rates will stimulate cheap credit and cheap credit will stimulate investments and employment. Moreover, poorer people will also profit more from BIS as it represents a larger proportion of their income. In other words, one should not conclude too quickly that a BIS in combination with a consumption tax would have a negative effect on real income differentials, quite apart from the fact that such differentials are not necessarily objectionable from the point of justice.

4. Direct vs. indirect consumption tax

The question remains whether consumption tax should have a direct or an indirect form (VAT). The direct form has some important disadvantages. The first is that it is less controllable, because it is not a source-tax. The second disadvantage is that it demands a fiscal control over citizens' spending that goes much further even than in an income tax system. The tax man will have to estimate what one's possessions were at the beginning and what at the end of the year. So does the tax payer who does not want to be confronted with too great a debt to the state at the end of the year.

Fiscal control will also have to face special problems. Whenever things are bought on credit, they do not have to appear in the fiscal administration of the debtors with the effect that money that has actually been spent already may appear as still unspent. Payments from bank accounts that are kept abroad will be even more difficult to control. All these considerations are arguments for a indirect consumption tax in the form of VAT.

VAT has a further advantages over direct consumption tax. It makes repairing much more interesting. A direct consumption tax is indifferent to whether a product is new or not. VAT used as the only form of pure tax would no longer have the disadvantage of the present VAT which is also calculated over the other fiscal components that are a part of the price one pays. If these components have different tariffs, VAT reinforces the market-disturbing effect of these differentials.

Finally, VAT has a great psychological advantage of indirect taxes in general. They are not paid seperately by the consumer, for whom tax appears as just another price factor. And in so far as the consumer is aware of the tax-component, it has a frame which suggests that the consumer is paying tax out of his own free will as much as he or she is free to buy or not to buy a particular good or service.

IV. The coherence between VATS and BIS

We must now consider, on the one side, how our critical analysis of the justification of taxation-systems in general are related to the justification of BIS and how, conversely, a BIS contributes to the justification of VATS.

If BIS would also be financed from income taxes, it would affect employed people as a cheap trick. However, if it is financed from an indirect form of taxation like VAT, taxes go hidden in prices.

When considering the choice between a direct consumption tax and VAT, social security considerations are supporting our thesis that VAT is to be preferred over a direct consumption tax in combination with BIS. Often social security will only be provided if one's capital and savings are below a certain level. The implication is that two people who have generated the same amount of income over a number of years, can have received very different amounts of social security, depending on whether they were forced to live from their capital and savings or not. In fact, the very fact that one had to live off one's capital and savings may have prevented the possibility of having an income from which earlier social security payments might easily have been paid back. This is another good argument to prefer a BIS over any other social security system, including a negative tax system.

We have seen that a consumption tax system is more in conformity with the idea that taxes should be related to spending power. It should be kept in mind, however, that it is only consumptive spending power that counts. Saving, in whatever form, was interpreted as a preference to spend later. However, when deconstructing income tax we saw that income tax systems cannot take differences in efforts into account, nor preferences for free time or preferences for more interesting work instead of for better payed work. It can also not account for differences in the willingness to take risks. Finally, in par. 2.3 we had already encountered a most successful but self-made artist in whose case it would be difficult to explain that his high income had much to do with public investments made in his education.

If one would nevertheless like to defend that people with equal incomes should pay tax equally, one must look for another justification of taxation than spending power. A consumption tax does not only have the advantage of mirroring spending power more realistically, it also suggests that tax is a price for consumption. But what is it a price for? From an economic point of view one can see taxation as a retribution for the public production of collective goods or of merit-goods, the presence of which contributes to the production of other goods and services. Admittedly, that relationship is also unspecific, because it is usually difficult to tell to what degree public investments have contributed to which products and services. The paintings of our self-made artists are as little the product of collective investments as is the talent of their author. However, disregarding such real differences is quite a different thing in the case of VAT, because everybody spends his income on many different goods and services, such that the plus and minus of the collective component of each of their values will compensate each other by and large. Moreover, VAT can be differentiated when differences in the contribution from collective means are plausible. Via such differentiation, VAT also allows a citizen a very indirect say concerning the question what taxes should be spent on. If tax payers prefer goods and services the production of which presupposes greater collective investments, they will also pay extra tax when buying those products if VAT-tariffs would take such differences into account.

The principle of equal treatment is not just an economic matter. If that were the case, people who do not pay for their own basic income via taxes, would have no claim whatsoever on the basis of that principle. The principle also expresses the neutrality of the state towards styles of life, independently from whether they go along with high or no yields for the state. Suppose that it would be profitable for the state to tax higher income brackets less, because the loss from the tax rate would be compensated by the amount of extra production that is caused by this lesser rate. However, the neutrality-principle forbids to do so, just as it allows to support people with a basic income just as a pay-off.

VAT is not only levied on value produced from natural resources, but also on value produced by labour. For an employer, the input of capital rather than labour is a matter of relative marginal efficiency. It is indifferent to him what his inputs are from a technical point of view. If labour can replace the input of natural resources or a piece of machinery such that efficiency is enhanced, a rational employer will do so, and the reverse as well. For an employer, labour is as much a natural resource as natural resources properly. Although someone who works for an employer obviously has an interest to be employed, an employer takes a risk by investing in labour as much as when he invests in natural resources or machines. However, if VAT in the case of natural resources is paid as a price to the community, how could it be justified to impose VAT on the employment of labour, given the fact that an employee, unlike a non-human natural resource, owns himself?

For society, that makes all sort of public investments to allow labour to be used as efficiently as possible, the decision of an employer to hire labour also represents a risk of public investments. To the extent that the potential value of labour has been created via public investments, labour is "owned" by society vis a vis employers. These public investments are equally profitable, of course, for labour. However, wage-earners will be taxed for this when consuming their wages. The wage they are paid includes a part through which they ultimately also repay, as consumers, the employers for their labour VAT-costs, at least as long as employers manage to sell their products and services at cost-price (including VAT-costs).

Is the justification of VAT-ing labour not inconsistent with our objection against income tax on the ground that income might be quite unrelated to public investments in the skills that go into a particular sort of production of goods or services? The answer to this criticism is the same as in the case of products and services which may contain differential value derived from collective sources. Minus and plus in the collective part of labour value hired by an employer will often cancel each other out more or less. However, there is nothing against differentiating VAT-tariffs on labour depending on the amount of collective investments that they require for education. Since un- and less skilled labour will demand lesser investments, it is only just that it will be taxed less. By being taxes less, it will also become more competitive. Differentiating labour-VAT would help to compensate the often high public investments made in people with higher education. In fact, it might also help to compensate the structural trend to overeducation and overqualification created by the fact that the costs of higher education are, at present, often not paid by those who have been enabled to earn a higher income thanks to the public investments which made their education possible.

Speaking of society "owning" labour in the sense that it has a legitimate interest to be used as efficiently as possible, may suggest that society might also expect labour to use its productive potential as productively as possible. However, that conclusion would seem to go directly against our whole justification of BIS. In fact, there is no contradiction involved. The logical structure of our justification is, that if an employer puts in labour, after it has freely decided to be employed, the VAT-risk of an eventual misinvestment of the value of labour, in so far as it has been created through public investments, is on the employer if his VAT-payments would be higher than his VAT-receipts. The state should avoid to subsidise bad entrepreneurship. Labour appears on a market. Hiring labour has opportunity costs for other employers. A good employer will not hire labour in too large quantities and at too high a price. If he does, he is wasting labour force that might have been hired at a lower price by another employer. The logic of not repaying VAT in this case is precisely the same way as when a natural resource is bought by someone who makes imprudent investments and thus wastes the possibilities that others might have had by buying the same resource at a lower price.

Although there is no contradiction involved then to argue that an employer owes society VAT when consuming labour, the coherence with BIS should also be noted again. Because of BIS, nobody is, as an individual, forced to become an employer in order to secure survival for himself. At the deepest level the coherence between BIS and VAT is based on the fact that legal responsibility only starts once survival is secured. That is the only service of society that is gratis. If one decides to profit more from collective investments, one owes tax, irrespective of whether one consumes or risks to waste means which owe their value, to a certain extent at least, to collective investments.

After this analysis of the nature of VAT on wages, there is one more remark to be made, which hopefully also puts the yield of property auctions in the right perspective. One might question that solution, arguing that the price for a property concession should also be subjected to VAT. However, the value that is added by that concession is created by the state itself, assuming that the value of exploitation was minimal before an exclusive right was established. The state can therefore rightfully claim all the value added which is paid to it by the first owner. If the state would impose VAT, it would have to impose it upon itself, which would obviously be pointless. Moreover, even if it would try to impose that VAT-charge on the first owner, this would be pointless, since he would then discount it from the price he offers or from the VAT he will have to pay on the products or services he plans to produce by exploiting his natural resource.

Now that we have argued why the price of first property rights in natural resources can be seen as value added by and therefore due to LSOM, it is also easy to see the coherence of BIS and VATS at its deepest level. BIS is nothing but negative VAT, a price for the value one adds by complying with the law - property law and other law - of a society based on second-order morality.

V. Administrative qualities of a VAT-system with BIS

Now that the coherence between the justification of BIS and VATS has been demonstrated, the question of its administrative effectiveness and efficiency must be faced.

As far as efficiency is concerned the relative simplicity of a mono-tax must be emphasized. One can get rid of a whole lot of public and private experts in fiscal law as well as a considerable amount of specialisation among them. With the exception of owners of natural resources, only (self)-employed people would be taxed. Moreover, all the problems of assessing personal income and personal wealth would become irrelevant. So would business accounts, except for the assessment of transactions and payments.

As far as effectiveness is concerned, I would like to make one preliminary observation. The society that would be created by a combination of a VATS and BIS would differ so much from the existing one, that the public attitude towards tax payment might differ considerably from the existing one. If the system we propose is more fundamentally just and more transparent, it may turn out that tax will be less seen as a catch as catch can fight between the state and the tax-payers.

Another obvious advantage is that VAT is an indirect form of taxation. VAT has already become more and more important as a source of taxation, because it is experienced as a part of a price that is being paid. It does not suggest extortion as much as direct forms of taxation do, because it is relatively impersonal. At the same time it may also appear to be personal in another respect. As much as one is free to buy a product or a service one may appear to be free to pay the tax that is included in it. This may be a useful framing effect.

The VATS we have proposed is a mono-tax. Mono-taxes are often objected to because the high tariff that it implies, would make fraud attractive, whereas the limitation of the sources of taxation would offer the tax man less possibilities to discover fiscal fraud. However, the VATS we have proposed will have several sources, as it is levied at each transaction in the production chain, including the payment of wages.

Especially for non-employers and non self-employed in the lower income brackets, VAT has the great advantage that one will not have to pay tax afterwards. Otherwise, there would be a considerable chance of incurring a fiscal debt one would not be able to pay except from one's basic income. Finally, although it may be an advantage to have many sources of taxation to reduce the chance of fraud as determined by the tariff, its complexity and intransparency will offer more opportunities for fraud at the same time. The system we have proposed does away with almost all sort of existing taxation except VAT. Maybe even more important than opportunities for fraud, however, is the large number of opportunities that the present complexity of tax systems offers to evade taxes, because loopholes cannot always be avoided even if they were not deliberately created. Tax deductions do not figure at all in the VATS proposed here.

When it comes to sanctioning fraud, an obvious advantage of the combination of VATS and BIS is, that the forfeiture of the right to a basic income would seem to be a powerful additional possibility to sanction tax fraud.

VAT has advantages from the point of view of control also wherever data about stockflows are available or open trade takes place. Its weaknesses are concerned with services, but that is a problem which does not differ from the present situation, both as regards VAT and "black" labour. Another problem in connection with VAT are international trade and services. The present system is such that VAT already paid by an exporter will be reimbursed to him, whereas importers may sell for a price which includes VAT, which they can put into their own pockets, making sure they have disappeared before the tax police could easily arrest them. Another trick is pretended export, when products are in reality illegally sold at much lower prices without VAT.

A partial solution of this problem would be not to reimburse to exporters, which will keep all the VAT that was already paid for previous production in the country from which export takes place. Only the value added by the importer then remains to be a problem, since it is reasonable that the part of the value added by the importer will be taxed in the country where the product is sold. I cannot see why VAT should be treated differently in any way from any other form of taxation that is now, by and large, an element that goes into prices, like the income tax part of labour costs, for instance. In fact, it is another advantage of a (mono-)VATS that it does not double-tax, as VAT is now still calculated over prices in which the costs of other taxes are by and large included. It again implies a discrimination of labour as the relatively highly taxed production factor.

The solution proposed implies that international competitiveness will also depend on VAT-tariffs. Once more, I cannot understand why this should be allowed in the case of all other forms of taxation, like income tax, which has its effect via labour prices, but not with VAT. The effect of this show of neutrality is that states will now compete via corporate taxation or even via privileges, special tariffs or subsidies for foreign investors. Such practices that are very annoying both for foreign states and home competitors, would also be over a with a (mono-)VATS. On the other hand, that states would also compete on the basis of their tax costs, might stimulate an efficient use of tax money. It does not imply that there would be a tendency to an ever lower tariff. Of course, a lower tariff will be attractive for investments in itself. However, because too low public investments may hurt the quality of the infra-structure as well as the quality of labour and its living conditions, there is no reason to expect a domino-effect of ever lower tariffs. It is true, however, that there are also public duties to expenditures of which the productive effects are absent or low, like assisting the poor, for instance.

Finally, the relation between VATS and the financing of BIS should be considered. When discussing the justification of property of natural resources, what is paid owners to justify their rights should be kept as a capital of which only the rents should be distributed via BIS. Obviously, financing BIS from public capital funds is the solution to stabilise financing BIS and make it less vulnerable to economic tides. I do not have to argue this case any further as I can refer to Edwin Morley-Fletcher's paper for this matter.

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