First, unlike theft, taxation is legal - and this turns out to be a more significant difference than it first seems since we rely on laws to determine who owns what. Second, taxation is a device for solving collective action problems and thus allowing us (by coercing us) to meet our moral obligations to ourselves and each other - including our obligations to respect each others' property rights. One can't coherently be in favour of enforcing property rights, e.g. by having a police force and judges to catch and punish thieves, without also being in favour of a sustainable system for funding that enforcement.
1. Taxation is Legal
The straightforward rebuttal of the claim that taxation is theft goes like this:
- Theft is when someone takes something from you in a way that violates your legal property rights
- When the government taxes money from you they do not violate your legal property rights
- Taxation is not theft
To many people this semantic analysis is rather unsatisfactory. Whether things are legal or not is after all determined by the government. But whether something is right or wrong is determined by morality, which is not something determined by governments, not least because it is an important independent criteria against which they should be held accountable. The point of the claim that taxation is theft is that taxation is immoral in just the same way that theft is, i.e. that taking people's property from them against their will and under threat of violence is wrong whether it is done by an ordinary person or by an agent of the government.
I agree that people do have an intuitive idea of normative concepts like property, consent, and theft independent from how governments choose to define them. Yet these 'pre-political' intuitions are impractically vague. As natural rights theorists like John Locke acknowledge, we need to know much more precisely what property means if we are to successfully respect each other's moral rights in a complicated modern society. For example, if I own a piece of land do I also own the part of the river that runs through it? Do I also own (some of) the fish in it? Do I also own the copper underneath it? If I mine the copper and kill the fish, do I owe people downstream compensation for killing 'their' fish? If I rent the land to someone else and they invest in agricultural improvements, who should get what share of the increased yield? If I go bankrupt who should decide which creditors get what share of my land and other assets? If I sell the land to two different people, which is the real owner? And so on.
It is clear that we need clear and reliable answers to such peculiar questions if we are to know where we stand - who owns what - in a modern economy with its sophisticated and complex economic transactions and interdependencies. But it is also clear that these questions don't have straightforward common sense answers that are already obvious to everyone in the way that our moral intuitions are supposed to be. We need another source for those answers, and that source is the laws made up by governments.
Therefore it turns out that law is of greater moral significance than it at first seemed. The strong normative intuition that people shouldn't take your things without your consent requires a clear shared understanding of exactly whose things they are in the first place. You can only say that such and such is your property and that someone else who takes it is a thief because of the legal definitions provided by the government (and also interpreted and enforced by them, as we will come to below).
To put it another way, the very idea of private property can be understood as one person's right to exclude all others from using certain objects without their consent, i.e. property rights are a restriction of the freedom of all other people except the rightful owner. Suppose one of those people disagrees with another about who owns an object. The moral determination of which person is the rights holder and which is the wrong doer will turn on the application of legal definitions.
If the idea of theft itself depends on government defined and interpreted laws, then law is clearly not so irrelevant to our moral intuitions after all. Thus the fact that taxation is legal is a central, not incidental, difference with theft. Governments make the laws on which the definition of property depends. To deny the relevance of laws to determine what counts as whose rightful property is to undermine the concept of property on which the concept of theft itself depends.
2. Funding Property Rights
Government in general and taxation in particular are cultural technologies that allow us to overcome collective action problems and fulfill our moral obligations to each other. For example, suppose it is generally agreed that all children should have access to a good quality education regardless of their parents' ability to pay, or suppose it is generally agreed that a new waste water treatment plant is needed. The practical problem is that however good an idea it may be from the perspective of the whole society to build these public/club goods, from the perspective of individual members of that society it is an even better idea to avoid paying your share of its costs.
Individuals' ranking of outcomes in order of preference
- Everyone except me pays their share, which is enough to provide the public good.
- Everyone including myself pays their share, so the public good is provided.
- No one pays their share, so the public good never gets provided.
- No one except me pays their share, which is not enough to provide the public good.