Crawl Across the Ocean

Wednesday, February 14, 2007

Begging The Question

If you want a good example of the rhetorical trick of 'begging the question' look no further than most advocates of income splitting. In case you haven't encountered it before, 'begging the question' basically means taking your conclusions and putting them in your premises. Wikipedia defines the simplest version as:

For some proposition p:

p implies p
suppose p
therefore p

Consider the debate over income-splitting. At issue is the question of what the basic unit of taxation should be. For example, you might say that the basic unit is the individual. Therefore individuals in the same situation should pay the same taxes. Or you might say the basic unit is the couple, so that any two couples in the same situation should pay the same taxes. Another possibility would be to use the family. Those are the most likely candidates although in theory you could use many things. For example, you could use the municipality as the basic unit so that any two towns in the same situation should pay the same taxes.

The argument for income-splitting is that all couples should pay the same taxes if they have the same income. That is, the argument is that the couple should be the basic unit for taxation purposes.

Now watch how Andrew Coyne makes the case for income splitting:

Fairness does not just mean sharing the tax burden equitably between rich and poor: what economists call “vertical equity.” There’s another kind of fairness, that also has to be taken into account. If it’s important to treat people in different circumstances differently -- ie the rich pay more tax than the poor -- it’s no less important to treat people in similar circumstances the same: what’s called “horizontal equity.” And, when it comes to couples, the tax law doesn’t.

Compare two couples. In Couple A, both spouses work, each earning $50,000. In Couple B, one spouse earns $100,000, the other stays home. The combined household income for each couple is the same -- $100,000 -- yet Couple B pays thousands of dollars more in tax than Couple A. Why? Because the spouse earning $100,000 pays tax at a higher rate, thanks to the progressive income tax, than either of the spouses earning $50,000. Income-splitting amounts to treating Couple B the same as Couple A. It treats like as like."

You see how this works - start by assuming that you determine fairness by assuming that one couple should be treated the same as another, and then show that one couple should be treated the same as another.

Imagine if we had income splitting. I could then write:
"Compare two individuals. Individual A is single and earns $100,000. Individual B is married to a stay at home spouse and earns $100,000. The total income for each individual is the same but individual A pays thousands more in tax than individual B, thanks to individual B splitting income with their spouse. Ending income-splitting amounts to treating individual A the same as individual B. It treats like as like."

Now, if you support income splitting, at this point you're probably thinking, 'sure, but couples are a better basis than individuals.' Which is my point exactly. That is the argument you should be making. Simply assuming that the couple is the right unit of comparison is not a real argument.

To be fair to Coyne, while he relies on begging the question as the core of his column he does make two actual arguments. The first is this :

"Is income-splitting unfair to singles? A couple earns $100,000. A single person earns $100,000. Income-splitting would benefit one but not the other. Shouldn’t they pay the same of tax? No, of course not. Horizontal equity requires that we treat like as like. But a single person and a couple aren’t in similar circumstances. The couple has $100,000 to spend between them. The single gets to spend it all on himself. He thus has more discretionary income -- the amount left over after basic living expenses -- out of which to pay his taxes. It’s only fair he pays more."

Note how Coyne cheats here by comparing an individual to a couple rather than sticking to a comparison of individual vs. individual - which would be the whole point of basing a system on equal treatment of individuals. But let that slide. Coyne treats this as the most obvious point in the world but it is actually pretty weak. For starters, what about children or other relatives living in the house? Surely the income of the couple has to cover their expenses as well. Shouldn't we split the income among everyone in the house if this is our logic. Secondly, what Coyne is arguing is that the individual with the non-working spouse should be provided with compensation for supporting their dependent spouse which raises a couple of concerns: 1) Who ever thought Conservatives would advocate for billions of dollars of incentives for able-bodied adults to sit at home and not work? 2) Even if we allow that you should get a tax break for having a spouse who chooses not to work, the tax code already contains allowance for taking care of dependents. No other types of dependents (children, disabled relatives, etc.) generate a tax splitting benefit so why is this one special?

Coyne's second argument is as follows: "(Or suppose you view it, not as the correction of an inequity, but as a benefit for mothers who stay home with their kids. Is that so awful? Are you also opposed to maternity leave?)"

This argument is even weaker. First of all, it doesn't exactly line up with his comment earlier in the column that, "This isn’t about bribing mothers to stay home, nor is it one of those social-engineering Tory tax credits aimed at rewarding one type of behaviour or another. The fundamental case for income-splitting is one of fairness. " Secondly, is Coyne seriously suggesting that if we were trying to allow parents to spend more time with their children income splitting would be the way to do it? Given that people making six figures will reap the large majority of the benefits from income splitting it seems as though we would be better off providing support for those families which can't *already* afford to have one parent stay home with the kids. I do think government should provide more support for parents to spend time with their children, but this is an incredibly inefficient way to do it.

Anyway, next time you see someone trying to pull this rhetorical sleight-of-hand (the word 'fairness' is the dead giveaway), call 'em on it. If people want to make the case that couples should be the basic unit of taxation, they should make the case. But don't let them start by assuming it and making their case from there.

My own opinion is that the current system of treating individuals equally and providing support as appropriate for those who take care of dependents is more logical than basing the tax system on equal treatment for couples. After all, we are all individuals, but only some people are in couples. Of course, providing a special multi-billion dollar tax break for people to take care of dependents who happen to be able-bodied adults doesn't really appeal much to the (single) conservative in me either. We should call income-splitting what it is - a welfare program for non-working spouses.

7 Comments:

  • Nicely written post. I'll chew on it for a while, since I'd rather like to see income splitting.

    By Blogger Andrew, at 4:28 AM  

  • While both sides can make reasonable arguments about this, it's hard not to see it as a stealthy justification for a tax cut, which repeatedly the Canadian public has stated they do not want at the expense of other priorities (health, environment). If anyone is suggesting tax rates be raised to offset the billions in lost revenue on top of income splitting, then I could see it as a more serious argument dealing with "fairness".

    Making single people pay more because they are single is the height of unfairness. A couple saves a lot of money by combining resources. Rent/mortgage, car/insurance, utilities, phone/cable/internet, these are dominant costs, and things for which the costs don't change very much just because you happen to be single.

    And any marriages which form/stay together because of tax breaks...well, let's just say those aren't ones I'd want to be involved in.

    By Anonymous aweb, at 6:43 AM  

  • Thanks Andrew. I'd be interested to hear your thoughts.

    Aweb - good points. As I see it, there's two pieces of the puzzle which I left for a later post(s) and you've touched on both of them.

    The first is that there should be a separation between the idea of changing the tax structure and changing the total amount of tax collected i.e. would advocates of tax splitting still support it if, as you say, other taxes were raised to make the change revenue neutral?

    The second is to say, even if we accept that couples are the defining unit for tax purposes, is it fair to say that a single person (a couple of one, in this analysis), a one income couple and a two income couple are all in the same position? To what extent do we value the 40+ free hours of time each week that the single income couple has but the others don't. What kind of efficiencies does a one income couple have versus a single person (e.g. all the things you mention)? Once we allow for these differences how much of the fairness argument is left? But another day, perhaps.

    By Blogger Declan, at 8:41 AM  

  • The income-splitting advocated by Garth Turner (I pick him because he it the loudest voice for it) is based on families not couples. Meaning that to qualify you must have a child under a certain age (16, I think). So it is not "welfare for spouses".

    Though I am in favour of income-splitting I am even more in favour of flat-taxes that way everybody is treated equally. As for the argument that the rich should pay more?
    If everybody pays the same rate th person who makes twice as much as someone else pays twice the tax. Heck, it is so simple you can scale it to anything 10x more pays 10x more tax.

    By Anonymous Greg Staples, at 7:36 PM  

  • So it's not really about fairness and it is about social engineering? Did anyone tell Coyne? Does he oppose Turner's plan?

    Again, if the objective is to provide support for parents to stay home with their children there are (far) more effective ways to do it, in my opinion.

    As for flat-taxes, we should probably clarify: do you mean a true flat tax or a flat tax with two brackets (a 0% bracket up to the personal minimum, and then a second bracket once you go past the minimum).

    Only in the former case is your point that someone who makes twice as much paying twice as much in tax true. But that raises the question of why you are asking someone who can't even afford a place to live or food to eat to pay taxes. It seems pretty heartless.

    On the other hand if you support the 2 bracket flat tax, one wonders what makes it superior to the current 4 bracket flat tax. If, after all, you have already conceded that the hardship imposed by taxes decreases as income rises, how do you make the case that this hardship abruptly disappears at the personal minimum rather than gradually diminishing as income rises, as assumed by the current system?

    On the whole, the argument for tax splitting to allow parents to spend more time with their children, combined with the argument for a flat tax which would shift more of the tax burden onto those families which are in the grey area between being able to afford to have one parent stay at home or not seems internally contradictory to me (unless one is simply supporting any tax cut going and making up arguments as you go, as per aweb's comment.)

    By Blogger Declan, at 8:40 PM  

  • Coyne is also treating the two families in his example as if they're equal simply because their combined income is equal. What this ignores is the fact that the two-income family where each spouse earns n can't be converted into a single-income family earning 2n. The first spouse earns the same as ever, while the other earns zero. Any tax reductions are overwhelmed by the loss in income. For families where both parents have to work to make ends meet, this is not a choice they can make -- it might as well not be a choice at all. (Theoretical libertarian banter about abstract notions of choice can be sent to /dev/null). So the two units don't have the same nature except according to one conventiently-defined measure used by income-splitting advocates.

    Those who doubt that the two families aren't interchageable are invited to ask their employer to double their salary (or charge their customers near-double) and see what happens. Reports on how long it takes the boss/customer to stop laughing are especially appreciated.

    So yeah, it smells more of social engineering and rewarding the base, not ensuring 'tax fairness'.

    By Blogger Ian King, at 10:43 PM  

  • Classic Declan. Great read ... maybe a bit editorial in the bits about welfare programs for non-working spouses but I agree with the main thrust.

    By Blogger KevinG, at 6:36 PM  

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