The Meritocracy Trap claims that meritocratic inequality resists many of the most politically potent arguments for progressive taxes. Aristocratic rentiers exploited workers while contributing nothing to society save their (inherited) wealth. This made them soft targets for redistributive arguments that sound in basic fairness. At the same time, widespread poverty confronted society with an imperative to act. The poor were compelling claimants for redistribution. The War on Poverty arose, at mid-century, at the nexus of the moral vulnerability of the rich and the moral imperative to help the poor.
But today, as Chapter Four observes, “arguments against exploitation lose their power when aimed at the hundred-hour-per-week lawyer, whose industry and exhaustion inoculate her against charges of inherited and unearned advantage, and who also exploits herself.”[1] At the same time, “[h]umanitarian concern loses force when poverty is reduced and the main claims of economic justice are made on behalf of the middle class.”[2] The War on Poverty foundered on these new and morally inhospitable shores.
The moral case for taxing a meritocratic elite is not hopeless, of course. Philosophers have proposed that people do not deserve their talents, skills, and even characters. Perhaps most famously, John Rawls argued that “[t]he assertion that a man deserves the superior character that enables him to make the effort to cultivate his abilities is . . . problematic; for his character depends in large part upon fortunate family and social circumstances for which he can claim no credit.”[3] (This sentiment is now widely shared among philosophically inclined progressive thinkers, who insist that “[b]eing ambitious or slothful is no more a choice than being left-handed.”[4]) Rawls sought, on this basis, to persuade people to “agree[] to regard the distribution of natural talents as a common asset and to share in the benefits of this distribution whatever it turns out to be.”[5]
But while this view captures a certain philosophical logic, it remains at odds with deeply felt moral experience. As Robert Nozick once observed, “[o]ne doubts that the unexalted picture of human beings Rawls’ theory [that an egalitarian insistence that people do not deserve their characters] presupposes and rests upon can be made to fit together with the view of human dignity it is designed to lead to and embody.”[6] Nozick’s point, moreover, is practical and not just academic, and the culture that surrounds meritocracy makes the stakes of Nozick’s worry vivid. Whereas mid-century rentiers took an impersonal view of the physical and financial capital that sustained their incomes, superordinate workers today have an intensely personal relationship to their skills, or human capital. Human capital constitutes the contemporary meritocrat’s status, much as land constituted aristocratic status in the ancien régime. Elite incomes, because they come from meritocratically validated labor and skill, express the personalities of the new superordinate workers who command them. A state that confiscates top incomes therefore cuts the rich much closer to the bone today, when incomes are dominated by meritocratic labor, than it did at mid-century, when incomes were dominated by aristocratic capital. Where industry constitutes honor, taxing its proceeds attacks the persons and threatens the status of superordinate workers.
This makes it unsurprising that the working rich resist redistributing their labor incomes on much the same register as aristocrats for centuries resisted land redistribution. Meritocratic elites insist that redistribution that excessively burdens labor and skill resembles involuntary servitude and offends the dignity of the workers whose merit it expropriates. Chapter Four catalogues examples of this insistence, including from Gregory Mankiw, Arthur Brooks, and the finance-workers who circulated “We Are Wall Street.”[7]
Some version of these arguments pervades elite thought. Certainly, it is the most natural explanation for the meritocratic elite’s distinctive attraction to “low taxes and free trade” and distinctive opposition to “social spending and labor unions.”[8] Today’s rich are so rich that material self-interest simply cannot explain why they resist, often strenuously and at a real cost, even modest increases in progressive taxation. An example makes the point concrete. Mitt Romney lost only about 15 percent of his nearly $15-million (2019 dollars) income to taxes in the early years of this millennium, leaving him with nearly $13 million annually to live off of.[9] Reducing his average tax rate from 15 percent to 10 percent, or for that matter increasing it to 30 percent, could not possibly have a significant, or even noticeable, impact on his quality of life.[10] Someone who can spend more than $5 million per year, every year, literally wants for nothing, and there is thus no difference in the quality of life led by someone taking home an annual after-tax income of $10 million, $12 million, or $14 million. And yet, Romney nevertheless strenuously opposed progressive taxes, even when his opposition caused serious political damage to his 2012 presidential campaign—something he unquestionably did experience as a cost. Only a principled objection to redistributive taxes can rationalize this behavior.[11]
The elite’s principled opposition to progressive taxes may seem unreasonable, and the analogy to involuntary servitude may appear especially hyperbolic and even self-indulgent. But to appreciate the argument’s force, consider the consequences if the virtues and talents of the rich—their capacities to work hard and productively—really did belong to the collective, as Rawls proposes. One naturally imagines that, in such a case, the collective would exploit its asset by taxing whatever market returns the rich achieve from working. Of course, the collective would also, as a backstop to its taxation of high earners, need to impose sanctions on persons who disguised high market incomes in order to avoid paying their taxes. But if the collective owned individual virtues and talents, then it might surely also exploit its asset more directly, by requiring the rich to deploy their efforts and skills in whatever way generates the greatest social product. And the collective would then (again as a backstop to its program of exploiting its ownership of individual talents) impose sanctions on persons who possessed the capacity to generate high market incomes, and the associated tax revenues, but declined to realize them.
Now imagine that someone who is capable of productive hard work declines to do that work and instead consumes a fortune in leisure: perhaps he works only a few hours per week; or perhaps he retires in his late twenties; or perhaps he works only at tasks that he finds intrinsically appealing and relies on his prodigious talent to make those tasks pay enough to survive, even where they would pay less-talented persons nothing. (Note that he cannot enjoy his leisure on his own any more than more conventional consumers can enjoy bought goods on their own—he again needs the collective to frame his leisure and safeguard his person.) He thereby deprives others of their shares of the value of his work product and the collective of the taxes that it would have raised on his share. But when this person avoids remunerative work in order to avoid being taxed on its returns, he commits tax fraud just as surely as someone who does the work but hides her market income. He merely exchanges disguised cash income for disguised income taken in the form of (untaxed) leisure.
A society that, having taken collective ownership of individual virtues and talents, asserts its ownership managerially by directing the talented into highly productive work, whose product it then expropriates, straightforwardly and literally enslaves the rich. The society uses their personal capacities—the virtues and talents that enable them to command high market incomes—as means to its collective ends. Rawls famously accused utilitarianism—a view that rejects every consideration of distributive justice in single-minded pursuit of maximizing aggregate well-being—of failing “to take seriously the distinction between persons.”[12] He meant that utilitarianism is indifferent to the particular relationship that each person stands in toward her own well-being, as a patient, and thus to the fact that an increase in aggregate well-being is not good for persons who do not, individually, share in it. But theories of distributive justice that collectivize individual virtues and talents (including Rawls’s) must face an analogous charge—namely of failing to take seriously the distinction between persons as agents, the special relationship a person stands in toward her own virtues and talents, her own work effort.
If the rich become slaves when the collective chooses at what tasks and how much they work, then they become (equivalently if not quite identically) slaves in the case in which the collective does not direct their work managerially but instead imposes taxes on its market returns. Taxation, no less than management, appropriates the personal virtues and talents of the rich in the name of the collective. At least, taxes have this effect as soon as they become so high that they, rather than market forces, determine ultimate wage structure—so that the state does not just participate in establishing the conditions of private choice about how and how much to work but instead subsumes the labor market and effectively determines the private returns to various forms of work. (Note that a perfectly analogous distinction arises on the managerial side: even as collective control over careers would enslave those whose talents were controlled, more modest regulation, against monopolization for example, does not enslave those who possess the capacity to monopolize.) Such high wage taxes subject the labor of the virtuous and talented to indirect rather than direct collective control. But the fact that the state controls the talented through its tax collectors rather than its industrial administrators does not change the basic, enslaving character of its ministrations. And the fact that such taxes are backstopped by sanctions for avoidance reveals that the collective appropriation is coercive, backed by force.
An intermediate regime bridges the gap between the direct enslavement of the managerial model and the indirect enslavement of the taxation model. By connecting the two, the bridge shows that they are, morally, of a piece. Suppose that taxes were imposed not on persons’ actual market incomes but instead on the maximum market incomes that, given their work ethic and skills, they could command.[13] (This is not so far-fetched as it might sound, as IQ tests or school performance might serve as proxies for potential market wages.) In effect, such a regime would treat persons who work at less than their maximal market returns as consuming the difference in leisure, and it would impute taxable income to them in respect of their leisure.
Such a scheme possesses a natural moral appeal for progressives who incline to treat talents as collectively owned on account of being morally arbitrary. After all, why should talented people, whom justice forbids from exploiting their talents to get rich in money terms, be permitted to exploit their talents to become rich in leisure (by working only few hours or only at intrinsically enjoyable tasks). But the moral appeal of the scheme is less relevant, for present purposes, than its consequences. Taxing persons based on their maximum possible rather than their actual earnings would severely constrain their freedom to choose what work to do. In order to be able to afford to pay their taxes, the talented would be required to work more remuneratively than they might like. And as the distribution of talent becomes more dispersed, and especially as it acquires a long tail at the high end, those who possess the capacity to earn at the top of the distribution will become unable to meet their tax bills at all unless they earn nearly their maximum incomes.
Something very much like this would occur should the United States today adopt the imagined scheme. Most senior elite servants of business—managers, bankers, consultants, and lawyers—enjoy market wages over $1 million per year. If such persons were taxed based on their maximum possible earnings, and at an average rate of 50%, then they would owe $500,000 in taxes, regardless of what work they actually did. But only a small share of the jobs available in the American economy pay $500,000 per year. And so a person—with the capacity to be an elite banker or lawyer, say—would find that the tax structure deprived her of most of her career options. She could not, for example, afford to work as a doctor in general practice, a journalist, a university professor, a teacher, or a civil servant, or indeed at any other middle-class job. Her work life would be controlled by the state just as surely as on the managerial model. She would have become a slave to her talent.
Both managerial control and control through taxation thus treat the virtuous and talented not as ends in themselves but rather as mere means to be exploited in the collective interest. Both regimes thereby offend against the freedom and dignity of the individuals who are so used.[14] Importantly, the offense to dignity remains the same even where the virtuous and talented do not morally deserve their good fortune. Slavery, after all, is not just theft on steroids—stealing everything that the slave owns. Rather, slavery offends directly against the slave’s person, and not just against her possessions. The slave is deprived of liberty and not just property; and the collective that enslaves her uses the slave herself—her person, and not just her things—merely as a means to serve its own ends. And virtues and talents are so bound up in the persons of those who possess them that the collective can expropriate virtue and talent only by simultaneously seizing the persons of the virtuous and talented as well. The wrong of the second seizure is unaffected by who deserves the virtues and talents that the collective is, in the first instance, after. Progressives thus commonly mistake the true intellectual center of gravity of conservative opposition to the progressive program. Conservatives need not impute private moral desert for market outcomes. All conservatives need insist on is a space for the independent, even if constrained, economic liberty of the individual.
Some progressives have sought to rescue redistributive taxation from the charge of talent slavery by proposing that it does not involve collective ownership of the persons of the talented but only of their talents. Some have even taken a similar line with respect to collective efforts to assert duties on the talented to work productively and for the collective good, arguing that such requirements merely prevent the talented from unjustly exploiting talents that they happen to control but do not, in any moral sense, own.[15] Such arguments possess an air of clever unreality, however. They can succeed, as Nozick once pointed out, “[o]nly if one presses very hard on the distinction between men and their talents, assets, abilities, and special traits.”[16] Dignity stripped of all its accidents becomes too spare and too pure to have value for actual human persons.
These difficulties do not now trouble economic redistribution that treats physical capital as a collective asset and hence taxes high capital incomes or even asserts collective control over how concentrations of physical capital are administered. To be sure, property, especially in land, constituted social status and even moral personality in the ancien régime. For a feudal lord, every encroachment was less a tax and more an intimate personal assault (a little like being disinherited of a family estate); and feudal elites fought redistribution as if their honor depended on it. But the bourgeois revolutions broke feudal associations between land and honor and made land into a commodity like any other (as Chekhov lamented[17]). This broke land’s cultural and moral spell and opened aristocratic wealth to redistributive taxation that feudal norms had previously foreclosed. Today, there is no trouble with pressing “very hard” indeed on the distinction between a person and her ordinary, impersonal, physical property. She may be almost arbitrarily constrained in her use of it, or indeed deprived of it altogether, and yet her personality will remain inviolate and intact. (This is just the public face of the private sentiment expressed in Mark Zuckerberg’s giving away his Facebook fortune to honor his daughter.[18]) Once again, the traditional progressive argument for redistribution worked well for the variety of inequality that it was, in historical fact, developed to address.
But these considerations are (to put it mildly) less well-suited to the economic inequality that society faces today. The meritocratic re-valuation of leisure and industry raises the stakes, specifically as they are applied to income from labor. Where industry constitutes honor, taxing labor gives personal offense that resembles the affront of land redistribution in feudal times. The sensibilities and arguments that so adroitly dismantled aristocratic inequality threaten, when applied against meritocratic inequality, to metastasize into denials of human dignity altogether. Equality cannot easily demand this price.
These arguments do not, of course, settle matters against redistributive taxation. Progressives can and have proposed any number of rebuttals of the conservative argument. But the conservative case is unquestionably more powerful today than it was at mid-century, and the root of its power is the exchange of aristocratic for meritocratic inequality. The Meritocracy Trap does not endorse the conservative position, but it does not make any sustained effort to defeat that position, either. Instead, the book’s first and main response to the difficulties that meritocratic inequality presents for classical arguments for progressive taxation is to sidestep them. The policies proposed in the conclusion promote economic equality not by redistributing market incomes but rather by reconstructing education and labor in ways that make market incomes themselves—before redistribution—more equal.
At the same time, it is worth noting that the book also underwrites a new way of meeting the conservative argument head on and of defending progressive taxes on labor income against the objections just set out.[19] Philosophers who write about equality with an eye to responsibility, luck, and desert sometimes distinguish between what they call resultant luck and constitutive luck.[20] Resultant luck arises when fortune confers advantages or disadvantages on a person who has no control over them. A person who discovers buried treasure at the bottom of her garden enjoys good resultant luck; and a person whose house is struck by lightning suffers bad resultant luck. Constitutive luck, on the other hand, arises when fortune intervenes to constitute a person’s character in ways beyond her control. A person blessed with an honorable character and level-headed disposition enjoys good constitutive luck; and a person cursed by unfortunate genes or indifferent parenting to be selfish and irrational suffers bad constitutive luck.
Philosophers often argue that while justice permits and may even require redistribution to correct for undeserved inequalities in resultant luck, justice does not require, and may not even permit, redistribution against unequal constitutive luck. Very roughly, this is because treating constitutive luck, and thus moral character, as undeserved calls into question the very idea of responsibility and desert, in general. This, of course, is another way of stating the elite objections to progressive taxes on labor incomes just rehearsed. Meritocracy entails that even if it is in a sense true that the rich acquire their skills and work ethic without choice and by accident of birth, their good fortune remains constitutive rather than resultant luck. This, in a way, is meritocracy’s central point—that a person’s character is constituted by her effort and accomplishment (much as, under aristocracy, a person’s character was constituted by breeding and landedness). To treat meritocratic achievements as individually undeserved—and therefore as a collective asset—simply because they are at some level caused by good fortune is therefore to undermine the very idea of moral responsibility. This just restates the potent argument against the progressive taxation using new terms.
The larger argument of The Meritocracy Trap underwrites a new defense of progressive taxation, which is proof against these objections. The key insight appears most expressly in Chapter Nine, in the argument that the feedback loops between education and the labor market—that concentrating training in a super-educated elite induces innovations that increase the wages that elite skills command—denaturalizes merit, by making elite skills themselves into artifacts of prior economic inequality (in education). Accordingly, while it remains constitutive luck that elite children are studious and that superordinate workers are industrious, it becomes resultant luck that elite workers confront a world in which their effort and skill has such a high payoff—in which their capacities constitute merit—just as it is resultant luck that mid-skilled, middle-class workers confront a world that has little use for their skills. (Indeed, this may not be luck at all, but rather a consequence of the elite’s responsible choices, made in line with its constitutive character, that set the snowball of training and skill in motion.)
Redistributive taxes levied on top labor incomes therefore should be thought of not as targeting the elite’s constitutive luck in its training, skill, and effort but rather the resultant luck that these virtues constitute merit and command high wages. And redistribution that aims to correct for inequalities in this resultant luck poses no general threat to moral responsibility.
[1] Daniel Markovits, The Meritocracy Trap: How America’s Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite (New York: Penguin Press, (2019), 78.
[2] Markovits, 78.
[3] John Rawls, A Theory of Justice (Cambridge: Belknap Press, 1971), 104.
[4] Alex Rosenberg, “Free Markets and the Myth of Earned Inequalities,” 3:AM Magazine (August 26, 2013), http://www.3ammagazine.com/3am/free-markets-and-the-myth-of-earned-inequalities/.
[5] Rawls, A Theory of Justice, 101.
[6] Robert Nozick, Anarchy, State, and Utopia (New York: Basic Books, 2013), 214.
[7] Markovits, The Meritocracy Trap, 108–10.
[8] Markovits, The Meritocracy Trap, 214.
[9] See John Whitesides, “Romney Paid at Least 13 Percent Tax Rate Over 20 Years: Letter,” Reuters, September 21, 2012, https://www.reuters.com/article/us-usa-campaign-romney-taxes/romney-paid-at-least-13-percent-tax-rate-over-20-years-letter-idUSBRE88K11Y20120921; Philip Rucker et. al., Mitt Romney releases tax return for 2011, showing he paid 14.1 percent tax rate, The Washington Post, Sept. 21, 2012, available at https://www.washingtonpost.com/politics/decision2012/romney-earned-nearly-14-million-in-2011-paid-141-percent-tax-rate-campaign-says/2012/09/21/e62e5096-0417-11e2-91e7-2962c74e7738_story.html.
[10] A generational contrast further emphasizes this point. When Mitt Romney’s father, George, ran for President in the middle of the last century, he released 12 years of tax returns showing an average adjusted gross income of roughly $2 million per year and an average net taxable income of roughly $1.4 million (both in 2019 dollars) and showing that he paid taxes equal to roughly half of his taxable income. See Why George Romney Released His Tax Returns, Buzzfeed, Jul. 16, 2012, available at https://www.buzzfeed.com/buzzfeedpolitics/why-george-romney-released-his-tax-returns?utm_term=.fhewlzN0Ge#.mwWBJ6pPav. George might just possibly have had a material private interest in reducing his average tax rate from 50 to, say, 30 percent, which would have increased his after-tax income from $700,000 to $1,000,000 dollars. He would not use the additional few hundred thousand after-tax dollars to buy necessities, of course, being too rich for that. But there might exist luxuries that a person could plausibly covet and that the additional money would bring within reach. Nevertheless, George did not oppose progressive taxes then nearly as intensely or comprehensively as Mitt does now. The most natural explanation again invokes political principle: the mid-century elite, being less meritocratic, did not feel itself nearly so powerfully attacked by redistribution as today’s meritocratic elite does.
[11] It is also worth noting, in this context, that the rich remain extremely reluctant to move to avoid taxes. For example, California’s millionaire’s tax has not driven the rich out of the state. Cristobal Young, Charles Varner, Ithai Z. Lurie, and Richard Prisinzano, “Millionaire Migration and Taxation of the Elite: Evidence from Administrative Data,” American Sociological Review 81, no. 3 (2016), 426. See also Maxwell Strachan, “Super-Rich Don’t Actually Leave Paradise Because of Higher Taxes,” Huffington Post, November 12, 2013, http://www.huffingtonpost.com/2013/11/12/california-rich_n_4261617.html. The rich have so much money that even substantial gains in after-tax income are simply not worth the burdens of moving.
[12] Rawls, A Theory of Justice, 187.
[13] The argument in this and the next two paragraphs follows Daniel Markovits, “How Much Redistribution Should There Be?,” Yale Law Journal 112, no. 8 (2003): 2291 and Daniel Markovits, “Luck Egalitarianism and Political Solidarity,” Theoretical Inquiries in Law 9, no. 1 (2008): 271 [symposium issue on Moral and Legal Luck].
[14] The regimes violate Kant’s formula of humanity, which commands: “[a]ct in such a way that you always treat humanity, whether in your own person or in the person of any other, never simply as a means, but always at the same time as an end.” Immanuel Kant, Moral Law: Groundwork of the Metaphysic of Morals, trans. H. J. Paton (New York: Routledge, 2013), 17.
[15] G. A. Cohen, Rescuing Justice and Equality (Cambridge: Harvard University Press, 2008), Chapter 2.
[16] Nozick, Anarchy, State, and Utopia, 228.
[17] Markovits, The Meritocracy Trap, 37.
[18] Markovits, 94–95.
[19] Conversations with Gideon Yaffe helped to develop the points that follow.
[20] See, e.g., Thomas Nagel, “Moral Luck,” in Thomas Nagel, Mortal Questions (Cambridge: Cambridge University Press, 1979), Chapter 3 and Bernard Williams, “Moral Luck,” in Bernard Williams Moral Luck (Cambridge: Cambridge University Press, 1981) Chapter 2.
How America’s foundational myth feeds inequality, dismantles the middle class, and devours the elite.