It is often said that it is hard to have high taxes when capital is easy to move. If, for instance, the corporate tax gets too high, companies can simply pack up and leave for countries where labor is cheaper and taxes are lower; and if dentists are forced to pay too much income tax, they can likewise move to another country. This is often framed in a language that invokes necessity and unchangeability. We simply can’t raise taxes.
It is, however, important to remember that, at bottom, this is more a question of “won’t” than “can’t”. If we “can’t” raise taxes, it is simply because some people do not want to pay higher taxes. In the same way, the problem of incentives to work is not a problem that necessitates one particular solution to the tax problem. It is not a “natural” given that the more you earn, the less willing you will be to pay more taxes. By the same token, it is not “logically” necessary that a society becomes poorer whenever you raise taxes. It all depends on whether people want to pay taxes or not, whether they believe in sharing their resources in this way; whether they believe that one ought to work not only for the benefit of oneself (or one’s family), but also for the benefit of total strangers.
So when people say that we cannot raise taxes, because people and businesses will leave (or avoid taxes by the means of tax havens and the like), the reason is not that taxes in themselves are bad or hurtful to the economy. The reason is that some people simply do not want to pay taxes. This fact is often obscured by the latter group’s way of framing the problem like a problem of the necessity kind, rather than as question of their own unwillingness. When businessmen (or the parties who represent them) say that we must lower taxes, we should not (at least not as a first reaction) simply say “oh well, I guess we have to do it then, because otherwise they will leave”. Our first reaction should be to ask those very businessmen why they are so unwilling to share their wealth. And if they stand for egoism, then let them stand for it openly and proudly in the public arena, instead of just pointing to some economic “necessity” that does not exist.
This may not alter the fact that the globalized economy makes it difficult for one country to have substantially higher taxes than other countries. But it is important to establish the right reasons for this – that globalization is not a “force of nature” or a historically inevitable process, but a result of people’s (moral) choices. By the same token, the reason that some people must work for starvation wages in sweatshops is not some natural necessity. People (who are very much richer than the sweatshop workers) can choose to pay more for the products they are making, and the companies can choose lower profits in favor of higher wages for their workers. These, more fair and just, choices are not made, because people do not want to make them. Globalization can be just and fair if we want it to be. If we don’t want it to be fair and just then it won’t be so. There are no natural necessities involved here. We decide how the world will turn out.