As the end of the pandemic finally seems to be in sight in many parts of the world, governments are starting to shift their focus from “stopping the virus” to recovering the economy that their lockdowns and other pandemic restrictions were strangulating.
In the United States and Canada in particular, the federal governments are seeing the aftermath of the pandemic as an opportunity to “build back better.” In their language, “better” means a society where income inequities will be erased.
The governments both in the U.S. and Canada are planning to spend their way to economic recovery and a more equitable society while at the same time increasing the cost of energy (by banning fossil fuels to avert a climate “catastrophe” that is predicted by the same modelers who claimed that millions would die of COVID-19 in the U.S. alone). That spending will be funded, not only by debt and deficits but also by proposed steep tax hikes, particularly to the wealthy and to corporations.
In the United States, the Biden Administration has proposed trillions of dollars worth of new taxes, including raising the top marginal tax rate and hiking the corporate tax rate by 33% (to 28%). This is in addition to the $1.9 trillion American Rescue Plan that was already approved.
In Canada, the federal government has ratcheted up its borrowing and has shied away from announcing big tax increases until after the next election, expected in the fall. However, as Jack Mintz observes in a recent Financial Post editorial, total taxes and fees collected in Canada have increased by a fifth (from $800 billion to $1 trillion) since the Liberal government took power in 2015.
Many take the government handouts (such as the pandemic relief checks) for granted and see taxes merely as a necessary payment for the “benefits” that the government provides, during, and outside of, pandemics. Few question whether the government should be providing benefits such as social security, infrastructure, health care, or education.
Perhaps more people should question taxes. As Mintz points out:
“…taxation is a form of servitude. A good chunk of our working time goes toward paying our income, payroll, property, and sales taxes. And when taxes rise, that means we spend more time working for the government.”
Mintz makes a case against tax increases based on pragmatism: We are already “pretty heavily” taxed; trying to squeeze out more money from taxpayers by making them work even more time for the government is impractical.
But his observation of taxation as a form of forced labor contains the crux of the argument against using taxes to try to make the economy recover (although Mintz does not make it explicit). Taxes are a form of coercion, and coercion is not conducive to productivity—which is needed for economic growth, prosperity, and human flourishing.
Coercion (including coercive taxation) is evil because it severely limits, or makes impossible, our ability to survive and flourish.
What productivity and its beneficent consequences require is freedom: protection of the rights to liberty and property.
The historical record on this is clear. The freest countries have also been the most productive and prosperous, such as America in the past, and the countries that top the various freedom indices today: Australia, Ireland, New Zealand, Singapore, and Switzerland. Even partial increases in freedom, such as Deng Xiaoping’s economic reforms in the 1980s in China, have raised prosperity (although not overall flourishing because China has otherwise remained an oppressive totalitarian regime).
The connection between freedom and prosperity becomes even clearer when we compare the freest countries to the least free—those where the rights to liberty and property don’t exist, such as the Soviet Union in the past, and Cuba, Iran, North Korea, and Venezuela today.
The rights to liberty and property lay the foundation for productivity. When they are not violated through coercion but protected by the government, people are incentivized to think, innovate, create businesses, and produce and trade material values, for their own benefit, which also benefits others.
If the governments want the economy to recover and grow, they should drastically scale back (and over time, give up entirely) their economic interference and focus solely on the protection of the rights to liberty and property and other individual rights of their citizens. That would be the only sustainable way to ensure economic growth, higher prosperity for all, and innovative solutions to problems, from reliable energy to accessible health care and education that develops independent thinkers.
Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada. How to Be Profitable and Moral” is her first solo-authored book. Visit her website at profitableandmoral.com.