Unforced Errors: Taxes, Servitude, and Duress

-- Posted by Neil H. Buchanan

Two months ago, in a post here on Dorf on Law, I expressed my extreme discomfort with everyday uses of the word "slavery" in our political discourse.  My point of departure was the casual analogies to slavery that one sometimes sees in anti-tax diatribes.  The "tax protest" movement includes people who claim that taxes violate the Thirteenth Amendment's ban on slavery and involuntary servitude in the United States, but they are hardly the only people who devalue the reality of slavery through glib abuse of language.

My latest Verdict column, published yesterday, picks up on my discussion of the more mainstream versions of the taxes-as-servitude argument that are often invoked by American conservatives.  I leave aside the "enslaving the beachcomber" argument, which I described briefly in my earlier Dorf on Law post, because that argument deserves a separate response.  (That argument is, by the way, one that even some liberals have used to analogize taxation to slavery.)  The column focuses instead on developing my objections to the Nozickian claim that income taxes are "on a par with forced labor," which forces a "person to work n hours for another’s purpose."

I begin the column with the rather unchallenging exercise of responding to the pop-culture version of Nozick's argument.  Every year, there is an announcement, dutifully reported by the media, of a day when people are "free" of taxes.  This year, the claim was that the average American had been working to pay his taxes from January 1 through April 21, and that he is now finally freed of that drudgery, once again at liberty to do as he pleases for the remainder of the year.

I will leave it to interested readers to pursue the details of my critique of "tax freedom" in the column.  My larger point, however, was to get back to the core Nozickian claim that the income tax is tantamount to forced labor.  I am currently in the process of developing a scholarly piece critiquing such claims, and I am using my Verdict and Dorf on Law writings to explore some of the ideas in a more accessible format and style.

The key error in Nozick's formulation is what I have referred to as "false aggregation."  When he said that income taxes were akin to "forced labor" because they induce citizens "to work n hours for another's purpose," he fundamentally misled his readers.  No one is forced to work because of the income tax (or, as I will explain elsewhere, by sales taxes, property taxes, or the other taxes currently in use in the U.S. and other countries).  The income tax cannot force me to start to work when I do not want to do so, and it cannot prevent me from quitting work, reducing my hours, or changing jobs.

Nozick was far too intelligent not to realize that the term "forced labor" would generally be understood in this way, with readers interpreting it to mean the government's coercive power being used to require people to toil when or where they would not choose to toil.  "Forced labor camps," after all, had a very specific historical meaning.  Even so, one could defend Nozick by claiming that my definition of forced labor is at least not the only possible definition.  Perhaps I am relying on a straw man, claiming that Nozick meant to analogize taxes to slavery when he really meant to use "forced labor" to mean something else.

What would that "something else" be?  One possibility is simply to collapse the notion of "forced labor" into the idea that "taxation is theft."  As I explained in my column yesterday, this requires one to argue that the "force" involved in taxation is merely the requirement that a person share some of the fruits of her labor with the government.  She was not actually forced to engage in labor, but once she made the choice to do some paid work, she was forced to split the proceeds with her government.  That rhetorical move, however, simply eliminates any unique content from the taxes-as-forced-labor argument.  The arguments that taxes are forced labor and that taxes are theft become the same argument, rising and falling as one.

If one still wished to believe that there is independent force (no pun intended) to the taxes-as-forced-labor argument, the best that one can make of Nozick's claim is that a person is being forced to work for more hours than she otherwise would, because the government has reduced her take-home pay.  A person facing a 20% tax rate ends up working five hours, instead of four, in order to take home enough money to buy what she wants to buy.  Taxes thus, per this reading of Nozick, force her to work that extra hour; and over the course of a year, taxes force her to work n extra hours.

But this is a truly expansive conception of force.  It is saying, after all, that there is something special about the amount of "stuff" that a person wants to buy (or the amount of saving in which she hopes to engage), such that she is operating under force when she works extra hours to reach her target earnings level.  A worker, however, is not under compulsion to consume or save a certain amount of goods and services in each time period.  (I am setting aside for now survival-level consumption, which is a special case.)  If the net-of-tax wage is lower, for any reason, than the worker would like it to be, then she has the choice to work more hours or days in order to reach her target, or to work the same number of hours and receive less net income, or even to work fewer hours (which is what most conservative economists claim will happen).  Taxes change the terms of the tradeoff, but there is no meaningful notion that the worker has been forced to make one choice over the other.  Otherwise, we are again merely collapsing the argument back to a restatement of taxes being theft, using different words.

What would be especially unusual about this possible reading of Nozick is that it is so inconsistent with general libertarian notions of individual free will.  During an economics panel a number of years ago, a left-leaning professor was describing how corporate farming operators forced laborers to work for sub-minimum wages.  After using that locution a number of times, she was interrupted by a conservative economist, who angrily shouted: "Who exactly was it that held the gun to their heads?"  The idea, of course, is that a person always has a choice not to work for the offered wage, even (or especially) when the employer is offering one that is illegally low.

Similarly, the law of "duress" is contested specifically over the question of when a person's choices are so limited as to amount to no choice at all.  Some legal scholars scoff at the very notion of the version of duress in contract law known as "economic duress," on the theory that no one is ever forced to engage in an economic transaction.  Even though contract law continues to recognize economic duress as an equitable defense, the doctrine is extraordinarily narrow, with a highly demanding definition of what counts as force.  Certainly, "I wanted to earn more than the terms of this deal allow me to earn, in the amount of time that I had hoped to earn it," would not be a successful claim.

I suppose that it is somewhat ironic that it is libertarians who generally are so tenacious about limiting the definition of force in non-tax contexts, given that some libertarians are so expansive in their use of the notion of forced labor in the tax context.  But perhaps that is merely my impression, or perhaps it is different libertarians making the argument in different contexts, such that no individual libertarian is being internally inconsistent.

That, however, is beside the point.  What matters here is the remarkably broad notion of force that would be required to save the Nozickian argument that income taxes are "on a par with forced labor."  One need not believe that people are fully free unless they literally have guns to their heads to believe that taxes are something far short of forced labor.

Which brings us back to taxation as theft.  As I argue in my Verdict column, even if one retreats from the forced labor argument entirely, by recasting taxation as a matter of forced sharing of the fruits of one's labor (which is quite different from being forced to engage in work), we are then hurled into one of the all-time great debates of classical economics: Do capitalists deserve to keep all of the surplus that they can extract from labor?

As I noted in passing in my most recent post about Thomas Piketty's blockbuster book, it is possible to simply assume that the entire output created by the combination of labor and capital is properly "earned" as wages by laborers and profits by owners, with no unearned surplus at all over which to struggle.  But that assumption is surely open to question, and the two centuries or so of scholarly inquiry about this question has turned up no convincing reason to believe what amounts to a very extreme empirical assertion: Capitalists' inputs into the labor process are, in a non-tautological sense, always (or even on average) paid exactly as much as they would be paid on the basis of their contribution to the output of the economy.

This, after all, is where the argument would stand, under this reading of Nozick.  If workers can rightly complain that the fruits of their labor have been stolen from them, by someone or something that has no legitimate claim on one's earnings, then we have to establish what the workers can truly claim as their own, and who is taking it from them.  If taxes amount to confiscation of a surplus that no one can claim as their own, then the story is quite different from the normal conception of theft.  If, on the other hand, owners are already stealing from their workers, and government steals it back and redistributes it to workers in other forms, then we have an even more complicated question of justice.

In any event, these are some initial thoughts on the notion of taxation as being akin to something slavery-like.  As noted above, I plan to return to these issues in future posts.