Progressive Taxation for a Just Redistribution of Incomes Is the Chief Source of Irresponsibility of Democratic Action

By the tenets of post-Keynesian economics — with its ‘emancipatory’ objectives of social justice — the spontaneous order of a competitive market economy must be tempered (at least) by state coercion of the right kind. Although Austrians accept that some degree of state coercion is unavoidable, they insist that it should be ‘reduced to a minimum and made as innocuous as possible . . . [b]eing made impersonal and dependent upon general, abstract rules’ (Hayek 1960). Yet, state coercion is insidious; and so there must be safeguards and vigilance. Hayek cites the illustration provided by progressive taxation. Once the principle of progressive taxation was conceded, there were no guidelines

by which such progression can be made to correspond to a rule which may be said to be the same for all, or which would limit the degree of extra burden on the more wealthy, . . . a generally progressive taxation is in conflict with the principle of equality before the law and it was in general so regarded by liberals in the nineteenth century. (Hayek 1978)

The view that a just redistribution of incomes can be achieved through progressive taxation is condemned as ‘the chief source of irresponsibility of democratic action’ and ‘the crucial issue on which the whole character of future society will depend’ (Hayek 1960). The drive for social justice is both flawed (because it has no definitive meaning) and dangerous to the ideal of individual freedom. That drive is simply incompatible with the notion of general impartial rules — blind justice — that are integrated within the structure of a liberal market economy.

—G.R. Steele, Keynes and Hayek: The Money Economy, Foundations of the Market Economy (London: Routledge Taylor and Francis e-Library, 2002), 177.