Hayek's The Constitution of Liberty - Institute of Economic Affairs

h ay e k ’ s t h e c o n s t i t u t i o n o f l i b e r t y
themselves unjust. A just system of taxation, as Hayek conceives
it, is one that is limited by a principle or rule that applies to
everyone. Progressive taxation is not constrained by any such
limiting principle. It applies different rules to different people,
depending on their degree of wealth; and it has no principled
way of deciding who should be taxed and how much. Progressive
systems permit a majority ‘to impose a discriminatory tax
burden on a minority.’ By making actual income relative to one’s
tax rate, they violate ‘what is probably the only universally recognized
principle of economic justice, that of “equal pay for equal
work.”’ A whole class of persons is practically deprived of the
normal incentives because their income is not in line with the rest.
None of these progressive measures can be defended on grounds
of justice (313–17, 322).
Proportional taxation meets Hayek’s standard of justice. It
applies the same general rule to everyone, prevents discrimination
against the wealthy and, by requiring that political majorities
abide by the rules they enact, deters high rates of taxation.
Since the principle of proportionality, like that of progressivity,
does not itself specify appropriate rates of taxation, Hayek speculates
that the maximum admissible rate of direct taxation might
reasonably be set ‘at that percentage of the total national income
which the government takes in taxation.’ It should be noted that
Hayek does not object to a majority granting ‘to an economically
weak minority some relief in the form of a proportionately lower
taxation.’ Also, to compensate for the effects of indirect taxation,
he grants that ‘some progression in personal income taxation is
probably justified’ (332–3).
12 STOPPING COERCION IN EMPLOYMENT
(Chapter 18)
Hayek points out in an earlier chapter that most people today
work as employees of large organisations. Some employees are
unionised workers; and it is with reference to them that Hayek
takes up the problem of coercion in employment. Hayek acknowledges
at one point that coercion should ‘be treated as equally
illegitimate whether employed for or against organization, by
the employer or by the employees;’ but he is mostly silent about
preventing employer coercion, except to recommend contractual
arrangements that provide for a grievance procedure and
some degree of employee self-government. Generally speaking,
Hayek takes the view that workers’ interests are best served by
encouraging competition among many employers; and it is likely
that he would argue that the need to compete for workers is the
most effective check on employer coercion. He acknowledges
that workers have the right to voluntary agreement among themselves
and also the right to ‘withhold their services in concert,’
but thinks that there are certain employments where the right to
strike should be renounced contractually (278, 276–7, 269).
Coercive unionism
Unions employ coercion to gain benefits for their own members,
especially higher wages. In fact, ‘raising wages by the use of
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