Three Views

Journal of Business Ethics (2006) 67:15–35 Springer 2006
DOI 10.1007/s10551-006-9002-z
Three Views on the Ethics of Tax

Evasion Robert W. McGee
ABSTRACT. In 1944, Martin Crowe, a Catholic priest, of that book a few other articles have addressed the
wrote a doctoral dissertation titled The Moral Obligation of issue of tax evasion from an ethical perspective.
Paying Just Taxes. His dissertation summarized and ana- Those articles are discussed in the next section.
lyzed 500 years of theological and philosophical debate The ethics of tax evasion can be examined from a
on this topic, much of which took place in Latin. Since number of perspectives. Some of these are of a
Crowe’s dissertation, not much has been written on the
religious nature while others are more secular and
topic of tax evasion from an ethical perspective, with a
few exceptions. In 1998 and 1999, a few articles were
philosophical. One approach is to examine the
published on the ethics of tax evasion in the Journal of relationship of the individual to the state. Another is
Accounting, Ethics & Public Policy. An edited book on this the relationship between the individual and the
topic was published in 1998. The present paper summa- taxpaying community or some subset thereof. A
rizes, updates and expands on Crowe’s work and the third is the relationship of the individual to God.
other more recent work that has been published on this Crowe (1944) examined the literature on these ap-
topic. Three basic views on the ethics of tax evasion have proaches, which are the three main approaches that
emerged over the centuries. This article presents and have been taken in the literature over the past five
critiques those three views and raises some questions centuries.
about points that have not yet been explored in the lit-
erature.
KEY WORDS: ethics, tax evasion, duty Review of the literature
The most comprehensive 20th century work on the

ethics of tax evasion was a doctoral thesis written by
Crowe (1944), titled The Moral Obligation of Paying Just
Introduction Taxes. This thesis reviewed the theological and
philosophical debate that had been going on, mostly
Most articles written on tax evasion are published in within the Catholic Church, over the previous
tax practitioner journals and take a practitioner or 500 years. Some of the debate took place in the Latin
legal perspective. The economics literature has language. Crowe introduced this debate to the English
examined tax evasion from the perspective of public language readership. A more recent doctoral disser-
finance. However, some authors have taken a tation on the topic was written by Torgler (2003),
philosophical approach (McGee, 1994a). One of the who discussed tax evasion from the perspective of
most comprehensive analyses on tax evasion from a public finance but also touched on some psychological
philosophical perspective was a doctoral thesis and philosophical aspects of the issue. Morales (1998)
written by Martin Crowe in 1944. The Journal of examined the views of Mexican immigrant street
Accounting, Ethics & Public Policy published a series of vendors and found that their loyalty to their families
articles on tax evasion from various religious, secular exceeded their loyalty to the government.
and philosophical perspectives in 1998 and 1999. One empirical study on the ethics of tax evasion
Most of those articles were also published in an was done by Nylén (1998), who did a survey
edited book (McGee, 1998a). Since the publication soliciting the views of Swedish chief executive
16 Robert W. McGee
officers (CEOs). McGee (1998e) commented on this pay taxes to Caesar, Jesus replied that we should give
study. A study by Reckers et al. (1994) presented to Caesar the things that are Caesar’s and give God
participants with a case study and asked them whe- the things that are God’s (Matthew 22:17, 21). But
ther they would be willing to evade taxes. Eng- Jesus did not elaborate on the point. He did not say
lebrecht et al. (1998) did a study involving 199 what we are obligated to give government or
subjects who replied to 29 ethical orientation ques- whether that obligation has limits.
tions, some of which had to do with tax evasion. There are passages in the Bible that seemingly
There have been a few studies that focus on tax take an absolutist position. Romans 13, 1–2 supports
evasion in a particular country. Ethics are sometimes the Divine Right of Kings, which basically holds
discussed but, more often than not, the focus of the that whoever is in charge of the government is there
discussion is on government corruption and the with God’s approval and anyone who disputes that
reasons why the citizenry does not feel any moral fact or who fails to obey is subject to damnation. It is
duty to pay taxes to such a government. Ballas and a sin against God to break any law. Thus, according
Tsoukas (1998) discuss the situation in Greece. to this viewpoint, Mao, Stalin and Hitler must all be
Smatrakalev (1998) discusses the Bulgarian case. obeyed, even though they were the three biggest
Vaguine (1998) discusses Russia, as do Preobra- monsters of the twentieth century, because they are
genskaya and McGee (2004) to a lesser extent. A there with God’s approval. This viewpoint is not
study of tax evasion in Armenia (McGee, 1999b) widely held in modern liberal societies but it is
found the two main reasons for evasion to be the probably fair to say that some religious fundamen-
lack of a mechanism in place to collect taxes and the talists still adhere to this view, since it is in the Bible,
widespread opinion that the government does not which they believe to be the literal word of God, a
deserve a portion of a worker’s income. A follow-up belief that is disputed by McKinsey (1995, 2000),
study (McGee and Maranjyan, 2006) found a Templeton (1996) and others (Barker, 1992; Burr,
widespread perception that tax evasion is often not 1987; Lewis, 1926).
unethical because of the widespread belief that there The fact that this Divine Right of Kings view-
is no duty to pay taxes to a corrupt government. point is still alive has been verified anecdotally. The
A number of articles have been written from author attended a conference in 2006, where an
various religious perspectives. Cohn (1998) and American professor with a business PhD asserted that
Tamari (1998) discuss the Jewish literature on tax Saddam Hussein could have become the leader in
evasion, and on ethics in general. McGee (1998d, Iraq only with God’s approval and that God must
1999a) comments on these two articles from a sec- have had some plan for Iraq that required Saddam
ular perspective. Hussein to be in that position of power. When
A few articles have been written on the ethics of Hussein was no longer required to fill that position,
tax evasion from various Christian viewpoints. God used George Bush as an instrument of God’s
Gronbacher (1998) addresses the issue from the grace [or perhaps wrath] to remove him. The pro-
perspectives of Catholic social thought and classical fessor also asserted that tax evasion is never ethical
liberalism. Schansberg (1998) looks at the Biblical because the Bible says that we must give to Caesar
literature for guidance. Pennock (1998) discusses just the things that are Caesar’s. When the author
war theory in connection with the moral obligation mentioned some of the reasons that have been given
to pay just taxes, and not to pay unjust or immoral in the literature to justify tax evasion over the cen-
taxes. Smith and Kimball (1998) provide a Mormon turies, the professor dismissed them out of hand,
perspective. McGee (1998c, 1999a) comments on since these reasons contradicted (his interpretation
the various Christian views from a secular perspec- of ) the Bible.
tive. A few other religious views are also addressed in
The Christian Bible discusses tax evasion and the the literature. Murtuza and Ghazanfar (1998) discuss
duty of the citizenry to support the government in the ethics of tax evasion from the Muslim perspec-
several places. Schansberg (1998) and McGee tive. McGee (1998b, 1999a) comments on their
(1994a, 1998a) discuss the biblical literature on this article and also discusses the ethics of tax evasion
point. When Jesus is asked whether people should under Islam citing Islamic business ethics literature
Three Views on the Ethics of Tax Evasion 17
(McGee, 1997). DeMoville (1998) discusses the democracy does not mean that the government
Baha’i perspective and cites the relevant literature to represents the interests of all the people, or that the
buttress his arguments. McGee (1999a) commented government works for the general welfare. Many
on the DeMoville article. McGee (2004) discusses instances could be cited where the government
these articles in a book from a philosophical per- works for special interests and against the interests of
spective. the general public. Trade policy is only one of many
examples that may be cited (McGee, 1994b, 2003).
The Public Choice School of Economics has
An examination of the three views examined hundreds of cases where government
officials work either for themselves or for some
Over the centuries, three views have emerged special interest to the detriment of the general public
regarding the ethics of tax evasion. One view is that (Gwartney and Wagner, 1988; Rowley et al., 1988;
tax evasion is never ethical. Three main reasons have Tullock, 1970, 1983, 1989; Van den Broeck, 1988).
been given to justify this position. Tax evasion is All corporate welfare policies fit within this cate-
never ethical because there is a duty to God, to the gory, as do many other government programs. So it
state or to some segment of the community. These cannot be said categorically that the government
three rationales are not mutually exclusive. represents the will of the people, or even that it
The second view is that tax evasion is never usually represents the will of the people. All that can
unethical because all government (or at least the be said is that the government represents the will of
present government) is illegitimate and unworthy of some of the people some of the time. Does that
receiving tax payments. The third view is that tax justify the moral duty to always pay whatever taxes
evasion may be ethical, depending on the facts and the government demands?
circumstances. The argument could be made that, in a
democracy, if you don’t like the government you
have, you have the power to throw out the rascals
View one: Tax evasion is never ethical at the ballot box and replace them with people
who better represent your viewpoints and inter-
One strand of this view is that individuals owe a duty ests. This view is prevalent in democracies, but a
to the state to pay whatever taxes the state demands. close analysis reveals that this possibility is often
There is no such thing as taxes that are too high not realistic. The reason why America has red
because the people determine the level of taxes. In a (Republican) states and blue (Democratic) states is
democracy, this view is justified under the consent because ‘‘the people’’ cannot agree on the kind of
theory. The peoples’ representatives are designated individuals they want running their government.
to work out the details of democracy because the Even in states that usually vote Republican there is
people are too busy earning a living and dealing with a large minority of democrats who do not agree
their own problems to actively participate in the with the outcome, and vice versa.
government. It is an application of the division of One might also point out the rather inconvenient
labor theory. The legislators, chief government fact that one vote really does not count. The prob-
executives and the government bureaucracy are the ability that a U.S. Senate or House race will be
specialists. They know best how to run things determined by just one vote is statistically improb-
because they devote their whole working life to the able, and even if some member of Congress were to
task, and are thus more knowledgeable than the win by a single vote, there really is not much dif-
private citizenry can be because private citizens have ference between the Democrats and Republicans
neither the time nor the inclination to devote to anymore. It used to be said that, as a general rule,
acquiring the expertise and apply their knowledge to Democrats want to increase federal spending by 8
the running of government. percent a year, whereas Republicans want to in-
There are several criticisms that could be made of crease it by a mere 3 percent, which means there was
this viewpoint. One obvious weakness in this a 5 percent difference between the two parties. But
argument is that just because someone lives in a even that can no longer be said. President George
18 Robert W. McGee
W. Bush, a supposedly conservative Republican, • A Jewish person must not do anything that
managed to increase federal spending during his first could discredit the religion.
term more than twice as fast as President Clinton did • Since it is essential for a Jewish person to
in his first term. The bottom line is that if you don’t perform as many commandments and good
like the government you have, you really cannot deeds as possible, it is essential to stay out of
throw them out and replace them with someone you jail, since the Jewish religion cannot be prac-
like better. You are thus left with the option of ticed properly in prison.
either putting up with the government you have or
move, if you can. While these reasons for paying taxes may be used as
Another argument that has been used to justify general guidelines, Cohn seems to indicate that they
the ethical obligation of paying all taxes is what may are absolutes or near absolutes according to Jewish
be called the ‘‘vote with your feet’’ argument. If you law. If they are indeed absolutes, all four rules are
don’t like the government you live under, move. Go subject to criticism. For example, the case can be
somewhere else. This argument has a certain amount made that there may not always be a duty to follow
of plausibility. But there are some problems with it. all the laws of one’s country. Martin Luther King,
For example, what if you live in a country that does Gandhi and numerous other civil rights activists and
not allow exit? The former Soviet Union is only one war protesters would argue that there may at times
of several examples that could be cited. North Korea be a moral obligation to break certain laws if they are
and Cuba are current examples. evil laws and if the legislature is unlikely to change
Even if it is theoretically possible to move to them any time soon.
another country, it may not be practically possible or One could counter argue that if you don’t like the
feasible. Many people prefer to live close to family laws of the country where you are living you can
and friends, which acts as a barrier to free move- move, but, as previously mentioned, that option
ment. In some countries, it may be difficult to move may not always be attractive, or even possible. Also,
because other countries don’t want to take you or what if you are already living in the greatest country
‘‘your kind.’’ If you are young, single and living in on earth? To move to another country would be to
Eastern Europe, the possibility of immigrating to the move to a place that is not as acceptable as the place
United States is much lower than if you are Mexican you now live.
or Canadian and already have 10 or 20 relatives If one were to play devil’s advocate, one might
living in the USA. The U.S. immigration policy ask whether Jews have an obligation to obey all the
favors some groups over others. So do the immi- laws of the country, and to pay all the taxes they
gration policies of many other countries. legally owe, if Hitler were the tax collector. I asked
If the articles by Cohn (1998) and Tamari Cohn this question via e-mail but he did not reply.
(1998) are representative of the Jewish view, one Interestingly enough, some surveys that asked this
may say that the Jewish view is near absolutist. question found that there is a widespread perception
Since Cohn is an Orthodox rabbi and Tamari is a that Jews have at least some obligation to pay taxes
well-known and highly respected Jewish scholar, even to Hitler (McGee, 2005a, b; McGee and
one must at least concede that the viewpoints Bernal, 2006; McGee and Lingle, 2005; McGee
expressed in their articles represent some segment and Rossi, 2006; McGee et al., 2005; Nasadyuk and
of Jewish thought on the issue. Some of the lit- McGee, 2006).
erature Cohn bases his position on goes back Thus, while one may state that there is a general
3300 years. The literature Tamari cites also goes obligation to obey the laws of the government of the
back hundreds of years. country where you live, philosophical problems arise
According to Cohn (1998), the Jewish legal per- when one attempts to make this general guideline an
spective on paying taxes has four components: absolute.
The second reason Cohn offers for paying taxes –
• There is a duty to follow the country’s stat- that laws prohibit lying – may also be an acceptable
utes. general rule, subject to exceptions. But there may be
• Laws prohibit lying. situations when lying is the only moral thing to do.
For example, what if your neighbor comes running that does not necessarily have anything to do with
into your house, brandishing a gun or axe, and asks, ethics.
‘‘Where is my wife? I’m going to kill her. Do you Tamari (1998) cites some of the same reasons as
know where she is?’’ If his wife were like the Cohn for a duty to pay taxes. Tamari points out that
average wife, who is probably less than perfect but the Jewish law states you must follow the laws of the
probably not bad enough to consider killing, it country where you live. But he also points out that
would be safe to say that you can honestly lie and tell the Mishnah Torah states that there is no moral
him you do not know where she is, even if you are obligation to pay taxes where the king usurps power
actually hiding her in the basement. or is arbitrary or capricious or discriminatory or
One might use a similar example to justifiably lie where taxes are confiscatory.
to the government. What if, instead of a husband But he also points out that the Jewish literature
looking for a wife to kill, it were the Gestapo regards tax evasion as theft. The theft may be from
looking for Jews? Certainly there would be no moral other citizens, who have to pay more taxes if the tax
duty to tell the Gestapo you are hiding a few Jews in evader pays less. Clark (n.d.), on the other hand,
your basement, even if lying would tend to tarnish states that the Mishnah Torah regards tax evasion as
respect for the rule of law. theft from the king. Either way, tax evasion is
One might argue that if the government lies to considered to be theft according to the Jewish lit-
the people, the people no longer have any duty to erature, at least most of the time.
tell the truth to the government. This argument Christian views are mixed on the issue, although
holds some weight from the perspective of contract there is a strand within Christianity that is closely
theory, which holds that a breach of contract by one akin to the Jewish view. The Mormon view basically
party relieves the other party to the contract of any agrees with the Jewish view that tax evasion is always
further obligation (Calamari and Perillo, 1970; unethical, although for different reasons than those
Simpson, 1965). However, the counter-argument advanced by Jewish scholars. In fact, the Mormon
can be made that two wrongs do not make a right. view may even be considered more absolutist than
There is no doubt that governments sometimes lie to the Jewish view because the Mormon view seem-
the people (Colson, 2005; MacPherson, 2005; Wise, ingly does not allow for exceptions.
1973). But it is not always clear whether such lies Smith and Kimball (1998) cite several passages
relieve taxpayers of the obligation to pay taxes to the from the Mormon literature that support the view
government. that there is a duty to pay taxes. One such argument
Cohn’s third reason, that one must not do is that one must obey the laws of whatever gov-
anything that would discredit the religion, may be ernment you live under. One passage cited from The
labeled as self-serving. This argument falls under Pearl of Great Price states that Mormons believe in
the category of paying taxes because there is a being subject to kings, presidents, rulers, etc., in
duty to some segment of the community, the obeying, honoring and sustaining the law. The
segment in this case being the Jewish community. thirteenth Article of Faith states that Mormons believe
Also, it is not always clear that the whole religion in being honest which, according to Smith and
is seen in a bad light just because one member of Kimball, includes honesty in the payment of taxes.
the religion engages in activity that is considered The Encyclopedia of Mormonism (1992) is also cited as
dishonest. This argument would be stronger in an standing for the position that church members are
Orthodox or Hasidic community than it would be required to obey tax laws. It goes on to say that if a
in a Reform Jewish community, where religion church member disagrees with a particular tax law
plays a lesser role in the life of the average par- he may attempt to change the law or challenge the
ticipant. law in court. Any member who refuses to file a tax
Cohn’s fourth reason, that one should not evade return or to pay whatever income tax is required is
taxes because it would limit the ability to practice in conflict with the teachings of the Church. Smith
one’s religion, is basically another way of saying that and Kimball cite secondary Mormon literature that
one must not disobey the laws because you might be takes the position that tax evasion is a form of theft,
punished. As such, it is a strong argument, but one although their mention of this position does not state
20 Robert W. McGee
whether it is theft from the government or theft area of belief. Compromise in this area is not per-
from the taxpaying community. They cite several mitted even under threat of death or expulsion.
other sources and conclude that tax evasion is against The Baha’i position may seem abhorrent to liberal
the teachings of the Church. Nowhere in their democrats in the West, who believe there are limits
article do they mention any exceptions to this rule, to what any government may legitimately do.
leading one to reasonably conclude that there are no Anyone who believes in freedom of speech, the
exceptions. press and religion certainly would not agree with the
One may criticize their absolutist position on Baha’i position. But that does not automatically
several grounds. For example, did the Mormons in mean that it is an incorrect position, only that there
nineteenth century New York State have an abso- is room for disagreement. Certainly, no one is forced
lute ethical obligation to pay taxes to the very to be or remain a member of the Baha’i faith, at least
government that was running them out of the state, not after reaching the age of adulthood, although
sometimes at gunpoint? What about the various there may be a lot of peer group pressure not to cast
governments that prohibit them from practicing off the religion or even to take a cafeteria approach
their religion? A number of modern governments to the religion’s doctrine.
fall into this category. Ayn Rand might refer to this The absolutist position for having an ethical
mentality – the belief that the individual is morally obligation to always and in all cases pay taxes is
obliged to obey the government even as it is placing mostly found in the religious literature. Where there
its jackboot on your throat – as an example of the is a duty to the state, it is because the religion
‘‘sanction of the victim,’’ which she discusses in commands obedience to the state. The rationale that
several of her works (Binswanger, 1986; Rand, there is a duty to fellow taxpayers is found in view
1968). three, which is discussed below. The Jewish litera-
DeMoville (1998) presents the Baha’i view on the ture mentions that there is a duty to other members
ethics of tax evasion. Although he mentions the civil of the religious community, but that duty is not
disobedience of Henry David Thoreau, Martin Lu- because of the fair share doctrine, which holds that if
ther King and Gandhi, their views are not the views some pay less than their fair share, others must pay
of the Baha’i faith. He cites several passages from the more. The fair share argument is only found in view
Baha’i literature to show that the Baha’i view is three.
absolutist, much like the Mormon view. The rea-
soning is also similar to that of the Mormons. Indi-
viduals must be loyal, faithful and honest toward the View two: Tax evasion is always ethical
government under which they live.
DeMoville quotes from a letter written by the The second view, which I label the anarchist view
grandson of the Baha’i faith’s founder to the Baha’i for lack of a better term, begins with the premise that
community in Germany in 1934, which stated that all government is illegitimate. Government is a mere
members are under a sacred obligation to whole- thief, which confiscates assets, percentages of pay-
heartedly obey the Nazi regime, at least as long as the checks, etc., without the consent of the owners of
regime does not trample on religious freedom. The the property. The definition of theft is the taking of
letter goes on to say that, although individuals should property without the owner’s consent. The fact that
be prepared to sacrifice their own interests to those it is sometimes some government that does the
of the government under which they live, they do taking does not alter this basic definition.
not have to endure violations of their religious The counterargument is that governments that
freedom. But the letter goes on to say that if some derive their authority from the consent of the gov-
government such as that of Germany or Soviet erned are legitimate and are thus entitled to some
Russia prevents the holding of meetings or the kind of support, although the exact specifics of the
publication of religious literature, Baha’is have a amount and type of support may not be easy to agree
duty to obey. Baha’is are morally obligated to obey upon. Some supporters of government would re-
their government in all administrative matters. The strict the scope of government to defense functions
only time there is no duty to obey is regarding the such as the support of an army, a police force and
some sort of court system. Others would go beyond Lysander Spooner (1870), the nineteenth century
this night watchman state to include welfare state American lawyer and anarchist, provided one of the
functions and redistribution of income. best arguments for this position. According to his
Archists (those who believe in some government view, the U.S. Constitution, which was signed by a
legitimacy and are thus not anarchists) often put few people in the last quarter of the 18th century,
forth the argument that any kind of workable had little legitimacy even on the dates of signing
democracy is legitimate and that individuals who live because the individuals who signed it represented
under the protection of a democratic regime have only themselves. Even in the cases where the signers
some duty to obey the laws of the country in which were elected by some constituency, they were only
they live. Democracy may not be perfect, and may elected by some minority of eligible voters. Anyone
even at times trample on minority rights, but some who did not vote for them cannot be bound by any
duty is owed in any event just because some segment agreement they enter into. So at most, only a few
of the community supports the regime. individuals who were living and who were of the
Not all governments are democratically elected, age of majority could be bound by the U.S. Con-
of course, including the government of China, stitution. Anyone not living at the time of the
which has the largest population in the world. Thus, signing certainly cannot be bound. By the time
not all supporters of government can use the dem- Spooner wrote his pamphlet on this topic (1870),
ocratic argument. However, even a certain per- most, if not all of the signers of the U.S. Constitu-
centage of the Chinese population believes that there tion were dead. Thus, even if one concedes that
is some duty to obey the government and its laws. some laws that are passed by some individuals who
Legitimacy of government is deeply ingrained in represent some part of the eligible electorate are
Chinese culture. The mere fact that the Chinese legitimate as of the date of signing, any such laws
government is not a democracy does not alter this become null and void at some point, and are not
pervasive belief. binding on a major part of the populace even while
In the West, the social contract theory is often the ink is still wet.
used to legitimize government. According to this Thomas Jefferson, the third president of the
theory, whether it is the version put forth by Locke United States and the author of the U.S. Declaration
(1689), Hobbes (1651) or Rousseau (1762; also see of Independence, was certainly no anarchist. Anar-
Leiker, 1998), some segment of the population, at chists do not run for president, as a general rule.
some point in history decided to give up some However, Jefferson, who died several decades before
portion of their liberty in exchange for government Spooner’s 1870 pamphlet came into existence,
protection. Governments were formed to protect agreed with a watered down form of Spooner’s
basic rights like the right to life and property. For argument. In a letter to John Wayles Eppes in 1813,
those who do not believe that such rights exist, there Jefferson states:
is another argument, that governments were formed
for protection purposes, and that subjects owe some We may consider each generation as a distinct na-
duty to pay for the protection offered by their tion, with a right, by the will of its majority, to bind
government. themselves, but none to bind the succeeding genera-
Anarchists would be quick to dispute this position, more than the inhabitants of another country.
tion. They would assert that there never was such a
social contract, and even if some group of individuals
Nearly a quarter of a century earlier (1789), writing
did, at some point in history, gather around a fire to
to James Madison from Paris, Jefferson said:
discuss the formation of government to protect them
from external and internal aggression, it does not The question Whether one generation of men has a
follow that the current generation is bound by such right to bind another, seems never to have been star-
agreement. It is a well-established principle of law ted either on this or our side of the water. Yet it is a
that one person may not be bound by a contractual question of such consequences as not only to merit
agreement entered into by another unless there is decision, but place also, among the fundamental
some sort of principal agent relationship. principles of every government ... no such obligation
22 Robert W. McGee
can be transmitted ... the earth belongs ... to the liv- voluntary associations (Hessen, 1979). One can be-
ing ... come a member by buying shares and one can exit
by selling the shares. If one wants to cease being part
Jefferson believed that laws have a natural expiration of a particular government, one must move to an-
date as members of the generation who were of the other jurisdiction where some other government has
age of majority when the law was passed start to die. a monopoly position.
For example, if half of the people who were 21 at Which argument carries the day? There is a
the time a particular law was passed are dead 19 years certain amount of disagreement on this point.
later, the law becomes null and void after 19 years. If Although the vast majority of the population
half of the adult population dies 22 years after a subscribes to some form of archism, majorities are
particular law was passed, then the law dies after not always right. But the interesting point from the
22 years. One generation cannot bind another perspective of determining when tax evasion is
generation. ethical and when it is not is the fact that
The view that one generation cannot bind an- some people who consider themselves to be
other was a common view before the American archists – believers in the legitimacy of govern-
Revolution. English libertarian writers John ment – sometimes take an anarchist position when
Trenchard and Thomas Gordon, who were it comes to the ethics of tax evasion.
influential in forming intellectual opinion in pre- Anarchists generally do not even address the issue
Revolutionary America, said the following in the of the obligation of the individual to the state to pay
early 1720s: taxes because they believe that there is no obligation
to the state in any area. Anarchists also do not
All men are born free; liberty is a gift which they re- address the issue of whether there is an obligation to
ceive from God himself; nor can they alienate the God to pay taxes. Such an argument would be
same by consent, though possibly they may forfeit it ridiculous to an anarchist. Likewise, anarchists do
by crimes. No man ... can ... give away the lives and not discuss the obligation to other members of the
liberties, religion or acquired property of his poster- taxpaying community. If the failure of one person to
ity, who will be born as free as he himself was born, pay his or her fair share means that others must pay
and can never be bound by his wicked and ridicu- more than their fair share, it is the government that
lous bargain. (Trenchard and Gordon, 1965) is acting unethically by confiscating more property
from other taxpayers. There is no obligation to
Archists would be quick to challenge this view of the surrender one’s own assets so that others will be
legitimacy of laws. They would argue that laws, robbed less. Also, there is no such thing as fair share
once passed, remain binding on all who live within for an anarchist, so talking about paying more or less
the jurisdiction as long as the law exists. Laws dis- than one’s fair share is gibberish.
appear only when repealed, unless there is a clause
within the law that states that the law is good for
only a certain period of time. View three: Tax evasion is sometimes ethical
Another argument that archists might put forth
would be to assert that governments are like cor- This view is the prevalent, or at least a widely held
porations. They continue to exist independently of view, based on the existing literature. Some recent
their owners. Just like corporations do not die when empirical studies that solicited the views of segments
a shareholder dies, governments do not go out of of the populations in Romania (McGee, 2005a),
existence when a citizen dies. China (McGee and Guo, 2006; McGee and Yuhua,
Governments are not quite like corporations, 2006), Hong Kong (McGee and Ho, 2006),
however. Governments are of necessity a monopoly Argentina (McGee and Rossi, 2006), Guatemala
within any particular jurisdiction. Governments (McGee and Lingle, 2005), Poland (McGee and
must have a monopoly on force in order to be Bernal, 2006), Armenia (McGee and Maranjyan,
effective. Corporations, on the other hand, are 2006), Germany (McGee et al., 2005) and Ukraine
(Nasadyuk and McGee, 2006) found this view to be consumers and to give ‘‘protection’’ to the
widespread. interests of a class of producers in the name
This view holds that tax evasion is ethical in some of industrialization.
cases and unethical in others. Crowe (1944) spends • Since it is the duty of the state to dispense
177 pages discussing when tax evasion is ethical and justice free of charge, therefore, there must
when it is not. He summarizes 500 years of theo- not be any court-fees, revenue stamps or fees
logical and philosophical debate on the issue. of any kind for the transaction of any official
Angelus of Clavisio (1494) took the position that business.
there is no ethical obligation to pay taxes if the • There must not be any ‘‘income’’ tax as
government does not use the revenues collected to such. Besides curbing the initiative it assumes
provide for the common good, at least as long as illegitimacy of the income of the rich. The
neither lying nor perjury are involved. Berardi state should levy, if need be, a proportional
(1898) took the position that there is probably no tax on the pattern of zakat on the accumu-
moral duty to pay a tax even if lying or perjury are lated wealth of the capable tax-payers.
involved, since the Prince merely dictates what is • The state should not resort to indirect taxa-
owed. Taxpayers never enter into a contract with tion. If the state has to tax, then, it should
the Prince, and thus are not bound to pay anything. do so directly so that the taxes represent a
Genicot (1927) states that partial evasion is justified conscious contribution of the people to the
on the grounds that the government does not have cause of public interest.
the right to the full amount and that it would be • That there is no justification for imposing
unfair to impose heavier taxes on conscientious men death duty. Islamic laws of inheritance take
while wicked men usually pay less. Crolly (1877) care of the wealth left by the deceased.
takes the position that there is no duty to pay taxes
unless evasion would result in violence. If the view of this Islamic scholar (Yusuf, 1971)
Lehmkuhl (1902) takes the position that it is accurately reflect the Muslim position on the moral
unethical to evade taxes when the result is that obligation to pay taxes, then it would seemingly not
nonevaders have to pay more. In other words, there be unethical for a Muslim to evade indirect taxes,
is some moral duty to other taxpayers even if there is which include excise taxes, customs duties and
no moral duty to the government. But Davis (1938) perhaps corporate income taxes. Muslims could also
takes the position that it would be unfair to require morally avoid paying tariffs and could engage in
honest taxpayers to take up the slack and pay higher smuggling, provided the goods being smuggled are
taxes to make up for the evasions of others. not against Islam, such as alcohol or cocaine.
The Muslim view toward tax evasion seemingly Evading income taxes also would not be immoral,
falls under category three, that evasion is sometimes although evading a property tax might be.
ethical (McGee, 1997, 1998b, 1999a). Ahmad Ahmad (1995) states that there is no moral obli-
(1995), citing Yusuf’s Economic Justice in Islam (1971), gation to pay any tax that has the effect of increasing
lists the following practices that would be considered consumer prices. Sales taxes, excise taxes and tariffs
unethical in an Islamic state: fall into this category.
However, it would be premature to conclude
• It is immoral on the part of the state to use that all Muslims agree with this position, or even
its power and privilege to make monopolistic that it is the Muslim position. One Muslim scholar
gains or to tax the common people indirectly the author spoke to vehemently disagreed with the
for replenishing the exchequer thereby. position of Yusuf (1971) and Ahmad (1995) and
• There is no room in Islam for custom barri- stated that the Quran forbids tax evasion, a view
ers, restrictive tariffs or exchange control. that is quite interesting, given the fact that Yusuf
The Islamic state, therefore, must not resort and Ahmad both cite the Quran to support their
to them. position. All that can be said is that the only two
• It is illegitimate and unlawful for the state to pieces of Muslim literature that the author could
tax directly or indirectly the general body of find both agreed that tax evasion can sometimes be
24 Robert W. McGee
justified on ethical grounds. Where there is a duty What if you are in a high tax bracket and the
to pay, the duty is either to God or to the state, not government takes more than 90 percent of your
to some community of other taxpayers. Thus, it marginal income, while taking a much lower per-
seems that more research could be done to clarify centage from people who have lower incomes? In
this point. such cases you are being treated as a resource, as a
An argument can be made that there is nothing means rather than an end, which violates Kantian
unethical about not paying all the taxes that are ethics (1952a,b,c; 1983). If the government uses the
legally owed if you are a Jew living in Nazi Ger- tax system as a means of redistributing income rather
many. There is no moral obligation to help pay for than as a means of financing legitimate government
the canisters of poison gas that the government plans functions, are you justified in evading taxes? What if
to use to kill you and your family. Likewise, there is the government’s tax system has both the goal of
no moral obligation to pay taxes if you are a Mor- raising revenue for legitimate government functions
mon living in New York State during the period of and also redistribution? Are you justified in evading
the nineteenth century when Mormons were being only the portion that goes for redistribution? What if
run out of New York at gunpoint. There is no 80 percent of your neighbors view redistribution as a
ethical obligation for a member of the Baha’i faith to legitimate goal of government? Does that change
pay taxes to the Iranian government when the your answer? Even though a strong case has been
government is expending funds to kill or otherwise made that redistribution is inherently unethical
persecute Baha’is. (deJouvenel, 1952), many people, perhaps a clear
People who agree with any of these above- majority, disagree with this view.
mentioned positions are not absolutists, since they Is there a duty to pay taxes if the government
believe that tax evasion is ethical in some cases. But supports the Anglican Church, as is the case in
taking such a position only begins to answer the England, if you are a Catholic? Or an atheist? What
question. The next question that needs to be an- if the government subsidizes abortions and you think
swered is, if tax evasion is ethically justified in certain that abortion is murder? What if the government
circumstances, what are the limits? At what point supports affirmation action programs (reverse dis-
does tax evasion become ethically justified? Sch- crimination programs) and you are a white male?
ansberg (1998) raises this point, as do other scholars What if evading a tax actually benefits society? Is
(Gronbacher, 1998; McGee, 1994a, 2004; Pennock, there an ethical duty to evade in such a case? If a tax
1998). actually does more harm than good, an argument
What if your country is fighting a war that you based on utilitarian ethics could be made that
consider to be unjust? Or what if you are a pacifist evading the tax is a moral obligation since evasion
and consider all wars to be unjust? If the war truly is would result in the greatest good for the greatest
unjust, perhaps there is some ethical obligation not to number. Evading tariffs is one such case where
pay taxes. Pennock (1998) discusses some of these evasion might actually increase societal well being,
issues. If 22 percent of the federal budget is spent on since tariffs are negative-sum games. They produce
national defense, are you morally justified in evading more losers than winners. Evading a tariff would
22 percent of the tax you legally owe, or are you thus prevent a negative-sum game from taking place.
ethically justified in evading more than 22 percent, The point is that, once it is conceded that tax
since all tax collections go into a common pot evasion is sometimes ethical, there is no clear
anyway and whatever taxes you pay might be used dividing line that people can agree on regarding
to further the war effort? when evasion is ethical and when it is not.
What if you live under a corrupt government,
where a large portion of tax revenue goes to corrupt
politicians and their friends and family? Are you any Other aspects of the issue
less justified in evading taxes if those corrupt friends
and relatives use part of the proceeds to build roads Some scholars have asserted that democracy has
and hospitals than if they send the funds to secret become the new God (Hoppe, 2001). If that is the
offshore accounts? case, then to criticize democracy is to blaspheme.
Any decisions arrived at by the democratic process The abortion clinic argument is a strong one. But
are necessarily the correct decisions, which must be it is not the only example that could be given.
obeyed no matter what. Should childless couples be forced to pay for the
Hamilton et al. (1961) and others (Acton, 1985) education of other people’s children? Should parents
have warned against the dangers of untrammeled who send their children to private schools be forced
majoritarianism. It could also be pointed out that to pay for public education? It seems inherently
both Hitler and Mussolini gained power through the unfair to make some individuals pay for the educa-
democratic process. If two wolves and a sheep voted tion of other people’s children. Yet it is done on a
to determine what to have for lunch, the sheep universal basis.
would not be bound by any adverse decision, even One could argue that since the older generation
though it was arrived at democratically. Indeed, the paid for your education, you have a moral duty to
sheep would be morally justified in resisting the pay for the education of the younger generation. But
democratic decision with deadly force. In other this argument does not hold up under analysis. For
words, just because some democratically elected one, it is a non sequitur. One might just as easily say
government imposes a tax, it does not automatically that since your father beat your mother, you have an
follow that there is a duty to pay. Whether there is a obligation to beat your wife. If there is a moral
duty to pay depends on the facts and circumstances. obligation to pay for the education of other people’s
Or perhaps there is never any duty to pay, if one children, some other argument must be found.
takes the Spooner (1870) position that all govern- The argument has been made that there is some
ment is illegitimate. If government is really no more moral obligation to society, and that paying for the
than a mafia where the victims get to choose their education of other people’s children is an example of
godfathers and capos, then it seems that there is no that obligation. However, this argument suffers from
ethical duty to pay anything. However, space does several weaknesses. Perhaps the strongest counter-
not permit a full discussion of the issue of govern- argument is that ‘‘society’’ does not exist. Society
ment legitimacy, so we will save it for another day. does not eat, sleep, breathe or flatulate. Only indi-
What if the government provides services that viduals do these things. Society is merely a collective
certain taxpayers do not want or need? Do they still term that is used to describe a group of individuals
have an ethical obligation to pay? Do evangelical who live within a certain geographic area and who
Christians, Orthodox Jews and Muslims have a perhaps share some common values or experiences.
moral duty to fund abortion clinics? I think not. Hayek (1967, 1976) has pointed out this misuse of
Politicians who force these people to fund abortion language in several of his writings (Nishiyama and
clinics are acting immorally. If funding for abortion Leube, 1984). It is a convenient term to use at times
clinics is considered a legitimate function of gov- but merely using it does not result in bringing
ernment, it should be funded on a user fee basis, or society to life. When someone makes the argument
by the segment of the taxpaying public that thinks that there is a duty to society, what they are really
that funding abortion clinics is a legitimate function saying is that some individuals have a moral obliga-
of government. That way, taxpayers who do not tion toward other individuals. But it does not follow
approve of abortion will not be forced to pay for that this duty is absolute, or even that such a duty
them. exists in certain cases.
Under present law, it is not possible for taxpayers There is no moral obligation to force Muslims to
to pick and choose which functions of government pay for the education of Christian or Jewish children
they will support. However, this need not be the who attend religious schools. Indeed, it is immoral
case. Podolsky (2002) has suggested that tax forms to force them to do so. Is it any less immoral to force
include a list of government functions and that Shiite Muslims to pay for the education of Sunni
taxpayers be allowed to check off the functions of Muslim children? Or atheists to pay for the educa-
government they want their taxes to be spent on. tion of theist children? Or childless individuals to pay
Implementation of this proposal would do much to for the education of anyone’s children?
alleviate the problem of forcing taxpayers to fund The point is that it cannot be stated categorically
activities that they deem abhorrent or unwanted. that the moral obligation to pay for the education of
26 Robert W. McGee
other people’s children is absolute. If such an obli- that there is some civic minimum obligation but the
gation exists, it is conditional and subject to limita- political theory literature is filled with discussions of
tion. the limits of such obligation (Capriotti, 1992; Dunn,
If there is such an obligation, where does it come 2002). According to at least one author (Kahn,
from? The argument that we owe it to society does 2004), the emergence of the modern concept of
not hold up under analysis. So if forcing some people political obligation has its roots in the seventeenth
to pay for the education of other people’s children is century. The U.S. Declaration of Independence pointed
ethical, another justification must be found. The out that political obligations may be severed, in spite
existing literature does not discuss this point much. of Lincoln’s view to the contrary. So it becomes a
An obligation is merely assumed to exist. This point question of what obligations individuals owe to the
needs to be examined in greater depth. state to obey in general or to pay taxes in particular.
The whole redistribution argument is constructed Are people obligated to pay taxes just because
on a shaky foundation, as Bertrand de Jouvenel they receive something in return? Does it depend on
pointed out a few generations ago (1952). Taxing what they receive in return? Is there an ethical
some people more than others just because they have obligation to pay taxes if the government takes your
more than others fails the Kantian ethics test (Kant, car and gives you a bicycle in return? Or two cars?
1952a,b, c, 1983). Such individuals are being used as What is the relationship between what you receive
means rather than ends in themselves, which Kant from government and what you are obligated to
concludes is unethical. pay? These are all the questions that have not been
The graduated income tax, which is one example adequately addressed in the literature. More research
of this approach to taxation, fails the test of utilitarian is needed. Presumably, there should be some rela-
ethics because the primary and secondary effects of tionship between the amount received from the
the graduated income tax result in what economists government and the amount paid, but the details of
call a negative sum game (Blum and Kalven, 1953; this relationship have yet to be worked out in the
McGee, 2004, pp. 111–119). There are more losers literature.
than winners. The small amount that is gained by Another strand in the existing literature mentions
soaking the rich is more than offset by reduced a relationship between taxpayers. One argument that
economic growth rates and inefficient allocation of has been made for the ethical duty to pay taxes is that
resources. if one person evades paying taxes, other taxpayers
The argument that taxpayers in a democracy have must pay more. The evader becomes a free rider, but
consented to be taxed is a weak one. As has been only in cases where the evader receives benefits from
pointed out in the literature, only some people have government. One cannot be a free rider if one
consented to be taxed. It is difficult to justify the receives no benefits.
argument that politicians actually represent the best Is there an ethical obligation to others when it
interests of the people who have elected them. Many comes to paying taxes? Such an obligation has been
politicians do not even know what the best interests asserted but not really discussed or analyzed. The
of their constituents are. If they did, the Democrats argument that an evader owes a duty to taxpayers
and Republicans would never disagree on anything. even in cases where the evader does not receive
Special interest politics is alive and well. Politi- benefits from government is a weak one. The free
cians tend to represent special interests rather than rider arguments to justify forced payment cannot be
the general public, as the Public Choice School of used in such instances. If an obligation exists, some
Economics and others have been pointing out for other arguments must be found.
decades (Rowley et al., 1988; Tullock, 1970, 1983, The argument that taxpayers who do receive
1989, 2004a, b). This phenomenon is not new. benefits from government have an ethical obligation
America’s Founding Fathers were aware of this to other taxpayers is a stronger one. But it does not
tendency when they were constructing America’s follow that this obligation is unlimited or absolute.
constitution (Hamilton et al., 1961; Peters, 1987). Many people receive less in benefits than what
That being the case, what obligation do taxpayers they have to pay in taxes. Leona Helmsley, who has
have to their government? White (2003) has argued paid many millions of dollars in taxes over her long
life, received free room and board for a few years at a and the shares of the other patrons would be more. If
government correctional institution because she paid Jack keeps silent, is he violating an ethical duty to the
a few million less than what the government said she other patrons? Surely the patrons as a group are
owed. H. Ross Perot, who during one of the U.S. being treated unfairly because they are having their
presidential campaigns boasted about paying one property rights violated. But it appears to be the
billion dollars in taxes over the years, undoubtedly mugger who is treating them unfairly, not Jack. If
received much less than a billion dollars in benefits Jack keeps silent he is merely being treated less un-
from the government. fairly than the other patrons, but it is the mugger
While the argument has been made that people who is acting unethically, not Jack, who is merely
who receive benefits from the government some- protecting his property by keeping silent. Protecting
how have an ethical duty to pay taxes, the statement one’s own property can never be unethical. Thus, it
has merely been asserted, not sufficiently analyzed. appears that Jack is not acting unethically by keeping
The fact that others might have to pay more if silent about the $20 in his hat.
evaders pay nothing is a separate question. Let’s take another example. Let’s say that some-
Let’s assume for the sake of argument that if some one who works in the property tax office of some
people evade taxes, others will have to shoulder a local community manages to manipulate the agen-
larger portion of the total tax burden. This assump- cy’s software program that computes the amount of
tion may not be accurate, since government may cut tax liability so that the perpetrator owes $1,000 in
back on spending or resort to financing its expendi- property tax rather than $10,000. In effect, manip-
tures if it does not collect enough from taxpayers. But ulating the software has resulted in a $9,000 tax
let’s assume that if some pay less because of evasion, evasion. Since the municipality incurs the same exact
others will have to pay more. What duty do the expenses regardless of whether the software has been
evaders owe to the taxpaying community? manipulated or not, the other taxpayers in the
In the case of Jews paying taxes to Hitler, it would community must have their taxes increased by
seem that there is no obligation to other taxpayers. If $9,000 as a result of the software manipulation.
non-Jews must have their taxes increased to pay for What duty does the software manipulator, let’s call
the poison gas, it seems that it is the German gov- him Tom, have to the other taxpayers in the com-
ernment that is treating the taxpayers unfairly, not munity?
the Jews. Thus, it cannot be said that evaders always Let’s say that the budget for this particular com-
owe a duty to taxpayers. If evaders owe a duty to munity goes mostly to fund elementary and sec-
those who must shoulder the tax burden, it is a duty ondary education. Does Tom’s duty to the other
that exists only under certain conditions. What are taxpayers in the community depend on whether he
those conditions? The literature has been silent on sends his children to the public school? What if Tom
this point. Although a duty has been asserted, it has sends his children to private schools? Or what if he
not been adequately discussed or analyzed in the does not have any children? Is Tom’s duty to the
literature. Thus, there is a need for further research other taxpayers in the community dependent on
on this point. It is not intellectually adequate to whether he receives benefits from the local gov-
merely assume that such a duty exists. The specifics ernment? If not, why not? This point has not been
need to be spelled out. addressed in the literature.
Let’s say that an armed mugger walks into a café If it can be argued that Tom has a duty to the
and orders the patrons to collectively give him $100. other taxpayers in the community even if he derives
The patrons discuss among themselves how this no benefit from the local government, can it also be
burden should be allocated and they decide that each argued that Jews have an obligation to other German
patron should pay an equal percentage of the cash taxpayers even though they receive no benefits from
that is in their wallets and purses. Does Jack, one of the Nazi government? Merely asserting that Tom
the patrons, have an ethical duty to reveal that he has has an obligation to other taxpayers is not sufficient.
$20 in his hat? Is he ethically obligated to include If Tom has a duty to other taxpayers but Jews living
this $20 in the calculation? If he does not, his share in Nazi Germany do not, some justification must be
will be less than what would otherwise be the case found for treating the two cases differently.
28 Robert W. McGee
The argument could be made that all taxpayers in business ethics journal certainly should say some-
the community are benefited by having an educated thing about business ethics. Should different rules
populace. Thus, there is an ethical duty to pay for apply to businesses?
the education of other people’s children because One reason for focusing on the ethical duty of
everyone benefits therefrom. There are several individuals rather than corporations to pay taxes is
problems with this line of reasoning. For one, it is a because most of the literature on the ethics of tax
non-sequitur to assert that just because you benefit, evasion centers on the duty of individuals, not the
you must pay. If Otto wears deodorant on the duty of some artificial legal entity like a corporation.
subway on a hot summer day, everyone close to him Only individuals can go to heaven or hell (assuming
benefits, but it does not follow that everyone has a either place exists). Corporations cannot be either
moral obligation to chip in to pay for his deodorant. ethical or unethical. When one speaks about cor-
Just because you may benefit from a certain porations being unethical or acting unethically,
expenditure, it does not automatically follow that what is really meant is that some individuals
there is a moral duty to pay. working on behalf of the corporation are acting
The case of paying for the education of other unethically. Corporations are incapable of being
people’s children is another case in point, but in the either evil or saints. Only individuals can have such
case of education, some taxpayers are actually attributes.
harmed by educating other people’s children. Edu- That being said, do corporations have any ethical
cating the younger generation in the use of com- duty to pay taxes? The answer is no, of course, since
puters makes the younger generation more only individuals can have ethical duties. However,
competitive in the marketplace and also makes those corporations have a legal obligation to pay whatever
who are computer illiterate less marketable. It does taxes the government demands even if the taxes are
not seem fair to force computer illiterates to pay for unfair, in the sense that the owners of the corpora-
the computer education of other people’s children. tion are being treated unfairly by the government by
Thus, it cannot be said that everyone in the com- requiring the corporation to pay taxes.
munity benefits by educating the younger genera- Which brings us to the argument that what is legal
tion. Some individuals benefit while others are is also ethical and what is illegal is also unethical. It is
harmed. an argument that goes back to biblical times. But the
The argument has been made that there is a duty argument suffers from several weaknesses. For one, it
to resist a government that is involved in an unjust implies that the legislature determines what is ethical
war (Crowe, 1944; Pennock, 1998). One form of and what is not. Something what is deemed ethical
resistance is tax evasion. Although breaking laws has today could be made unethical tomorrow if the
a tendency to chip away at respect for the law and legislature passes a law making some previously legal
for government, sometimes that is a good thing. The activity illegal or vice versa. What if the legislators
mere fact that the governments of Hitler and Mus- who pass the laws are evil, corrupt and/or unethical?
solini were duly elected does not mean that they are Could the laws they pass still be ethical just because
worthy of citizen respect. Tax evasion in such cases the laws are legitimate? Or can laws even be ethical?
might actually be good from the perspective of A few minutes ago it was argued that only individ-
utilitarian ethics, since reducing respect for an evil uals can be ethical.
government tends to delegitimize it. An argument Until the mid-1950s it was illegal in some
could be made that there is a duty to evade taxes in a southern states in the USA for a black person to sit in
corrupt or oppressive state, at least in cases where the front of a bus. They had to sit at the back. Any
potential punishment is remote. There may be a black person who sat up front was acting unethically
duty even where punishment is swift and guaran- according to this viewpoint. Martin Luther King
teed. The extent of such a duty needs to be ex- would disagree, but he was viewed as a rabble rou-
plored. ser, someone who would go around breaking laws
So far, the discussion has revolved around the that he considered to be unjust. The same could be
ethical duty of individuals to pay taxes. But what said of Mahatma Gandhi, another troublemaker who
about business ethics? An article that appears in a refused to obey unjust laws.
So it cannot be stated categorically that there is an mously. So unanimity is not enough, it must also be
ethical duty to obey all laws. At most, one could a law that does not violate anyone’s rights.
argue that there is an ethical duty to obey all just Laws against murder and theft would seemingly
laws. That is actually the question that Crowe (1944) qualify as just laws even if they were not passed
addressed in his 1944 thesis on the ethics of evading unanimously, as would laws against rape. So perhaps
just taxes. Which leads us to the question of what is a the measure of whether a law is just is whether it
just law? Discussions of this issue go back to Plato violates anyone’s rights rather than whether it was
(1982), if not before, and a full discussion here passed unanimously.
would be both impossible and inappropriate. But a That said, let’s return to the discussion of business
few comments can be made. ethics, which is just a subset of individual ethics. Is it
There is no duty for a sheep to obey a law that ethical for a corporation, or rather for individuals
was passed by two wolves, even if the law was ar- who represent the corporation, to not pay taxes that
rived at through the democratic process. The argu- are legally owed? The fact that a corporation is in-
ment could be made that any special interest volved adds a level of complication. While it can be
legislation – a law that benefits some special interest said that individuals only have an ethical duty to pay
at the expense of the general public – need not be just taxes, it cannot be automatically concluded that
obeyed. Frederic Bastiat (1850/1968) referred to individuals representing a corporation need pay only
such laws as legal plunder. He makes the following corporate taxes that are considered to be just.
comment: Representatives of a corporation have a fiduciary
duty to the corporation, or rather to the share-
But how is this legal plunder to be identified? Quite holders of the corporation, to maximize profits
simply. See if the law takes from some persons what (Friedman, 1970). Evading taxes, whether just or
belongs to them, and gives it to other persons to unjust, could result in fines and a decline in stock
whom it does not belong. See if the law benefits one price. In some countries, evading corporate taxes
citizen at the expense of another by doing what could even lead to a confiscation of corporate assets,
the citizen cannot do without committing a crime which is certainly not in the interest of shareholders.
(p. 21). Thus, the argument could be made that individuals
who help a corporation evade taxes might be acting
Thus, any tax law that has the intent of redistribution unethically even if the tax itself is unjust because
rather than merely raising revenue is unjust, a con- they are breaching a fiduciary duty to the share-
clusion that Kant would agree with, since such laws holders.
treat individuals as means rather than ends in Let’s return to the example where an individual
themselves (Kant, 1952a, b, c, 1983). manipulates the software of the local property tax
If one takes a utilitarian approach, only laws that office so that he reduces his own property tax lia-
benefit the majority can be considered just laws. But bility. But this time let’s say that the individual doing
utilitarian ethics suffers from several flaws, the most the manipulation is an employee of Corporation X,
important of which is the total disregard of property and that he somehow gains access to the software of
rights, so even the laws based on utilitarian ethics the local property tax office. Is he acting unethically
might not always be just. if he manipulates the property tax software so that
Buchanan (1967) and the Public Choice School his corporate employer owes just $1,000 in property
of Economics (Buchanan and Tullock, 1965) discuss taxes instead of $10,000?
the concept of unanimity, a concept that can be The corporation has no ethical duty to pay for the
traced back to Wicksell (1896). One might argue education of other people’s children. Corporations
that the only just law is a law that is passed unani- are merely private associations that are formed for
mously. If that is the case, then very few laws are the purpose of making a profit for their owners
just. And there may be cases where even laws that (Hessen, 1979). If one individual does not have
are passed unanimously may not be just. We cannot an ethical duty to pay for the education of someone
say that a law making slavery legal is a just law even if else’s children, neither does a collection of individ-
the Alabama legislature passes such a law unani- uals.
30 Robert W. McGee
But the situation is more complicated than that. absolute moral duty for a master to pay whatever the
Even though the corporation does not have any servant demands.
moral duty to pay for the education of other people’s This moral argument is weakened if the govern-
children, the individual who manipulates the prop- ment provides services that the taxpayer does not
erty tax software is not acting in the best interests of want or need. Merely providing taxpayers with a
his corporate employer because he is subjecting the service does not create a moral obligation to pay for
corporation to legal liability, the potential loss of the service. Christian Scientists have no moral duty
corporate assets and a possible decline in stock price, to support government health care, since they do not
none of which are in the stockholders’ interests. His believe in going to doctors. Individuals who do not
act is thus unethical because he is breaching his believe in abortion have no moral duty to pay for the
fiduciary duty to the corporation. support of abortion facilities. People who do not
The same could be said for individuals who work have children have no moral duty to pay for the
in the tax department or the accounting department education of other people’s children.
of a corporation. They are acting unethically if they The argument that tax evaders always have a duty
resort to illegal means to reduce the corporation’s to government or to other taxpayers does not hold
legal tax liability, not because tax evasion is unethical up under analysis. If such an obligation exists, it is
per se but because they are subjecting their employer less than absolute. Or perhaps no duty ever exists.
to legal liability and a possible decline in stock price. Some framework has to be constructed to determine
under what conditions an evader has an obligation to
others. That framework has not yet been constructed
Concluding comments in the literature, as Block (1989, 1993) has pointed
out. Thus, there is a need to address this issue.
The argument that tax evasion is never justified is What conclusions, if any, can be drawn from this
the weakest of the three options. To argue that a discussion? It is probably accurate to say that una-
taxpayer is never justified in evading a tax, no matter nimity on the ethics of tax evasion will not be
how unfair the tax or corrupt the government, is forthcoming anytime soon. The existing literature
simply untenable (McGee, 1999a). To hold other- shows that educated members of society cannot even
wise would be to assert that Jews have a moral agree on whether Jews living in Nazi Germany have
obligation to pay taxes to Hitler so that the Nazi an ethical obligation to pay taxes. If there cannot be
government will be able to afford the poison gas that agreement on such extremist cases, how much more
will be used to exterminate a segment of the pop- difficult will it be to reach agreement on more
ulation. If that is true, then it could also be argued mundane cases? Of course one may argue that there
that Jews have a moral obligation to reimburse the is no need to take a vote on such issues, that majority
Nazi government for the cost of the train ride to the opinion is irrelevant, or at least should be dis-
death camps. The absolutist view is simply untena- counted. What is a minority opinion today may
ble. become a majority opinion tomorrow, or what is a
The other two views are not so easy to dismiss. majority opinion in New Jersey may be a minority
Taxpayers who live under a government that does opinion in Utah.
more to them than it does for them have a strong Thus, it is perhaps better to examine the strengths
moral argument to evade at least a portion of the tax or weaknesses of the various arguments rather than
(Crowe, 1944; McGee, 1999a). If one begins with to look at what segment of the population holds this
the premise that the government is the servant and view or that. If we do that, it appears that tax evasion
the people are the masters, then an argument could may be ethically justified in at least some cases.
be made that there is some obligation to pay at least The strongest ethical case for evasion that the
some taxes to reimburse the government for the author can think of is the case of Jews living in
services it provides, just as a master is obligated to Nazi Germany. But perhaps there are even
pay the salary of his servant. But it does not follow stronger instances for tax evasion. Cambodians
that one must pay whatever the government de- living under Pol Pot or victims of any of the
mands, even in a democracy, just like there is no several other holocausts that have been perpetrated
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