The luxury tax (English translation)

GIOVANNI BIRINDELLI, 29 June 2012

(original publication: Catallaxy Institute –  L’Indipendenza)

The City of Milan yesterday approved the new Italian property tax and varied the rate according to whether a real estate unit is considered to be a ‘luxury’ property or not.
In a totalitarian democracy, that is, in a political system such as our own in which there are no limits of principle to what the political majority can decide and therefore no limits on political power, this measure has provoked no outrage, just as progressive taxation does not.
But let us reflect for a moment, as though, merely for the sake of argument, Italy were governed by the rule of law, which – being an abstract principle, the result of a spontaneous process of cultural selection of uses and conventions (as the Italian language is, for example) – is a limit to arbitrary power, rather than an instrument of it.
Let us imagine two individuals: Claire and Paul. For the sake of simplicity, let us suppose for the moment that they have the same income. Because they are different individuals, they will probably have different tastes and preferences. We can suppose, for example, that for Claire living in a ‘luxury’ home (leaving aside the fact that ‘luxury’ is a totally arbitrary term devoid of any objective meaning whatsoever) is less important than travelling and therefore that, because of her individual tastes and scale of priorities, Claire is quite prepared to live in a ‘non-luxury’ home in order to be able to see the world. Vice versa, let us suppose that living in a ‘luxury’ home is more important to Paul than travelling: because of his individual tastes and scale of priorities, Paul is prepared to do without travelling around the world in order to live in a ‘luxury’ home.
Now let us imagine that the local administration of their city imposes a higher property tax on ‘luxury’ homes. If the country where that city is situated (Italy in this case) were governed by the rule of law, such measure would be considered a crime: in fact, it would discriminate against Paul because of the fact that his tastes and scale of priorities are different from Claire’s, that is, because he is different from Claire. What would distinguish this measure, on an abstract level (that is, from the point of view of the abstract idea of law and of equality before the law) from the apartheid? Is it not true that in both cases the coercive power of the state is used to discriminate against those who are different simply because they are different? Of course, the arbitrary parameters defining such differences and the particular forms of discrimination may change, but the fact that the coercive power of authority is used to discriminate against those who are different because they are different (in this case, because they have different tastes and scales of priorities or, as modern socialists would put it, because they have “expensive tastes”) remains unchanged.
The same is true, of course, of progressive taxation, so let us modify the assumption that Claire and Paul have the same income. Indeed, Claire may prefer a safe job even though it means a lower income whereas Paul may prefer an opportunity to earn a higher income even though it means running greater risks. It is true that, as Robert Nozick claimed, “Often people who do not wish to bear risks feel entitled to rewards from those who do and win; yet these same people do not feel obligated to help out by sharing the losses of those who bear risks and lose”, but this does not mean that recourse to state coercion to satisfy this desire to benefit when a risk-taker wins out is not criminal.
In the final analysis, what makes it possible for those who wield political power today to feel perfectly comfortable with imposing these forms of discrimination and committing these crimes in broad daylight, even proud of doing something apparently good and just, is an abstract idea of law: that is, the fact that the law is identified with particular political decisions (which depend on the will of those who have the power to make them) rather than with abstract and general principles (which are independent of the will of those who should have the power to defend and preserve them but who could not ‘make’ them any more than a linguist could make the Italian language).
Today we are living in a lawless state. Worse, we are living in a lawless state without realising it. The worker, the professor and the lawyer are almost invariably reunited in a single group by ignorance of this fact.
And yet we still talk about economic growth, as though the market economy and the rule of law were two separable concepts, and as though economic growth did not fundamentally depend first of all, and always, on respecting and often, ultimately, on imitating those who are different, or even heretical.
The ‘law’ understood as political decision is an instrument of intolerance because it gives someone (the political majority in a modern totalitarian democracy) the ability to use coercion on those who are different simply because they are different, thus giving free rein to feelings of envy or to the conservative inclinations of the majority. Because it is an instrument of intolerance, and more in general because it is incompatible with the market economy, the ‘law’ understood in this way is a significant factor in economic destruction and decline.
On the contrary, the law understood as principle, which is the only idea of law compatible with the market economy, implies tolerance, respect for those who are different and economic growth. The law understood in its original sense gives no one, least of all a political majority, the right to use coercion on others because they are different. Where the law is understood as abstract and general principle, that is, as the rule of just individual conduct, the state can use coercion only to defend the sovereignty of the law.
The economy will present us with the bill for our lawless state. I fear that what we are seeing now is only the beginning.

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