Taxation and Utilitarianism: The Historical Evolution

We propose to investigate the history of the relation between the concept of utility and utilitarianism and the need for taxation, specifically as it relates to Anglo- American political thought from the seventeenth century in Hobbes to the nineteenth century in Mill. During this period, the justification for taxation gradually shifted from a taxation model of ‘payment for benefit’ to taxation as ‘ability to pay’. Specifically, we show that it is the enlightenment concept of self-determination, arising in one form or another in Locke, Hume, Smith and even Bentham, which makes it possible for ‘benefit’ to be conceived as both individual and social at the same time, which ultimately results in the shift from taxation as ‘payment for benefit’ to taxation as ‘ability to pay’. We first examine the concept of the idea of utility (here often understood as self-interest) as it forms the basis of the social contract. Because of the individualistic notions of benefit, Hobbes and Locke both argue that taxation should fall on all equally since the fundamental benefit of each is security. In the eighteenth century, however, we find an emphasis on ‘fellow feeling’ (Smith) which modifies the agent’s self-interest. While Hume is the first theorist to use the concept of utility systematically, Smith retreats from it out of concern that it would result in some deciding for others in matters of personal happiness. Bentham, the founder of utilitarianism, somewhat surprisingly also emphasizes critique of received opinion and personal autonomy, arguing that the concept of utility is compatible with utility maximization. This ambiguity continues in Mill, whose Utilitarianism and On Liberty have often been seen as at odds. In Hume through Mill it is the attention to autonomy conceived of socially which mitigates the idea of taxation as ‘payment for benefit’ since the benefit is understood as accruing to society as a whole.