One thing that confuses me about the overall thrust of conservative and libertarian rhetoric about taxes – namely, that taxation is the government taking something from you that rightfully belongs to you or would be used better by you – is what, exactly, they think the government is taking from you. This question is less obvious than many people think it is.

Your first instinct may be “well, of course, they’re taking my money!” But this is the answer that’s most clearly wrong, because it’s not your money. Money is a government instrument designed to be a store of value, a medium of exchange, and a unit of account. Take a look at it – it’s pretty clearly labeled as such. The government creates money, protects it with laws, and manages its supply in order to promote economic growth and fulfill exchanges. You have money because the government gives it to you.

More importantly, when the government increases taxes on you that is not necessarily reducing your wealth. For example, when my taxes go up I don’t need to part with any of my stuff – I get to keep my TV and my record player and my electric guitar and my collection of novelty T-shirts. What it does do is reduce my purchasing power as measured in nominal dollars – my compensation going forward. So while it may reduce my future ability to accumulate more wealth (more on this later) it doesn’t affect the wealth you’ve already accumulated.

So now you might go with something trickier – the government isn’t taking my money or wealth, but my labor. This, to me, is also a little confused. The government doesn’t make you work for them. If your taxes go up (or down, for that matter), it has very little impact on how much you work or what you do. If your taxes go up or down your laboring is probably mostly unchanged.

Aha – what you really meant is the government is taking the fruits of your labor – your productivity. Here is where the argument gets difficult. Most people these days work, and then get compensated, by the level of compensation may not necessarily be easily tied to what you produce. It used to be that Americans were mostly farmers, and if onions cost $1/lb, and you farmed two tons of onions, then you made $4,000 and that was that. But that’s not how our economy works these days for most people, especially if your job, like most people’s jobs in a modern economy, is part of a broader system in which you alone do not generate an obvious amount of productivity. If you’re a lawyer or a nurse or an electrical engineer or an HR person or a banker you are but one part of a broad and complex network of institutions that requires lots of different people to do lots of different things in order to generate any productivity. And when the system works the production can be vast indeed. But one person alone doing what they do would produce almost no productivity at all. If you do HR for yourself at home you could fill out forms all day in a vacuum and produce nothing; but if you do it for Lockheed Martin or something you are probably part of a system that is producing a significant amount of value.

And here is where I think the libertarian/conservative argument really fails to account for what’s going on in the world. Here is a graph of long-term real growth in GDP-per-capita in the United States:

As you can see, we are a far, far, far, far wealthier country then we were 100 years ago, or even 50 years ago. And there are lots of reasons for this. But one huge, foundational reason for this is that there is a publicly provided network of systems and agency that lay the bedrock for everything else. The government has defended the United States from malicious forces outside the nation and safeguards people inside the nation from malicious individuals and natural disasters. It created a powerful and reliable currency that is the envy of the world. It insures bank deposits. It funds scientific research. It provides retirement insurance, unemployment insurance, health insurance to the neediest, and all kinds of other insurances that facilitate a smoothly-running economy. In short, the government enables you productivity.

Too often, I think progressives try to justify government claims on compensation in a forward-looking manner – ie, it’s OK for the government to take a bite out of your paycheck because the programs its planning to fund with that money is worthwhile. And that may be so. But the better argument is that the very productivity and wealth you enjoy is fundamentally a product of the extraordinarily good governance America has had over the past century or so. The government has a right to part of your wealth and productivity because the government is the reason that you’re not a dirt-poor Dust Bowl farmer subsiding off the land.