The President’s surprise proposal to abolish dividend taxes is big news.<\/p>\n
There are many ways to evaluate the idea, including consideration of the<\/p>\n
effects on short- and long-term economic growth, equity, and the federal<\/p>\n
budget. The Administration also emphasizes that a dividend tax is unfair,<\/p>\n
since the income that was used to buy the shares was already taxed once.<\/p>\n
(The response from commentators like Paul Krugman is that there are many<\/p>\n
double taxes, including all sales taxes.) Another consideration seems<\/p>\n
to be overlooked. I believe we should retain a distinction between earned<\/p>\n
and unearned income, and we should be less hesitant to tax the latter.<\/p>\n
There is nothing wrong with investment income. But work—purposeful<\/p>\n
human effort—is much more closely linked to human dignity and value.<\/p>\n
As Pope John Paul II wrote in Laborem Exercens (1981), "Work is a<\/p>\n
good thing for man-a good thing for his humanity-because through work<\/p>\n
man not only transforms nature, adapting it to his own needs, but he also<\/p>\n
achieves fulfillment as a human being and indeed in a sense becomes ‘more<\/p>\n
a human being.’" <\/p>\n
Robert Nozick, the great libertarian philosopher, denied that there was<\/p>\n
any moral difference between work and other activities (such as investing)<\/p>\n
that produce value. He was reacting to the old leftist idea that labor<\/p>\n
alone creates value, and therefore laborers deserve the full price of<\/p>\n
their products. It is a scandal of capitalism that some of the reward<\/p>\n
goes instead to capitalists, who do not work. In the words of Ralph Chaplin’s<\/p>\n
old Wobbly anthem, "Solidarity Forever" (1915):<\/p>\n
\n\nIt is we who plowed the prairies; built the cities where they<\/p>\n
trade;<\/p>\n
Dug the mines and built the workshops, endless miles of railroad laid<\/p>\n
* * *<\/p>\n
All the world that’s owned by idle drones is ours and ours alone.<\/p>\n
We have laid the wide foundations; built it skyward stone by stone.<\/p>\n
It is ours, not to slave in, but to master and to own.<\/i><\/p>\n<\/blockquote>\n<\/blockquote>\n
This song implies that we should recoup the money that capitalists have<\/p>\n
taken from the workers who really made everything. Dividend taxes would<\/p>\n
then be a good idea, and the higher the better. Unfortunately, the song<\/p>\n
is pretty clearly wrong: investors, managers, and inventors create value,<\/p>\n
just as workers do. However, we can still understand labor as morally<\/p>\n
different from other economic activities. Compare two people, one of whom<\/p>\n
makes a living by digging ditches, while the other profits from inherited<\/p>\n
stocks even though she is comatose after an accident. The first labors;<\/p>\n
the second does not. An intermediate case is someone who actively invests,<\/p>\n
mixing knowledge, intellectual labor, and accumulated capital to generate<\/p>\n
wealth. I think that the work aspect of wealth-creation is virtuous, onerous,<\/p>\n
and not sufficiently rewarded by the market. This is an argument for policies<\/p>\n
(such as dividends taxes) that favor work.<\/p>\n