CONTROVERSY

Over the next one hundred years, there will be waves of intense debate over using taxes for social programs. Defenders will package such programs as high-return investments that benefit most of society and tax only those people whose share of income and wealth could stand to come down. Opponents will decry the two-sided stifling of initiatives that invites both the taxed and the subsidized to be less productive. Both sides will invest in studies showing that they are right.

This future debate seems to follow naturally from the flow of history, the logic of self-interest, and the inevitable help-versus-incentives quandary.

The two opposing sets of arguments have been rediscovered and repeated for centuries, mainly in debates over social transfers to the poor. Any reading of the social history of early modern Europe turns up all the arguments we hear today. Long before the Fabians, there was a Left argument that the poor, elderly, and uneducated were people who needed help through no fault of their own. Many of these unfortunates could never be self-supporting, so that harsh work incentives would be cruel and unproductive. Others were the “able–bodied” whose productive potential could handsomely repay any society that wisely invested in them.

And long before Malthus there was a conservative argument that any combination of taxes and transfers is doubly costly. It erodes incentives to work, to take risks, and to accumulate, both for those being taxed and for those receiving benefits based on their low incomes.