Why Able Abel has to be taxed?

Karl Smith points to this morality tale by Bryan Kaplan,

Suppose there are ten people on a desert island. One, named Able Abel, is extremely able.  With a hard day’s work, Able can produce enough to feed all ten people on the island.  Eight islanders are marginally able.  With a hard day’s work, each can produce enough to feed one person.  The last person, Hapless Harry, is extremely unable.  Harry can’t produce any food at all.
Questions:
1. Do the bottom nine have a right to tax Abel’s surplus to support Harry?
2. Suppose Abel only produces enough food to support himself, and relaxes the rest of the day.  Do the bottom nine have a right to force Abel to work more to support Harry?
3. Do the bottom nine have a right to tax Abel’s surplus to raise everyone‘s standard of living above subsistence?
4. Suppose Abel only produces enough food to support himself, and relaxes the rest of the day.  Do the bottom nine have a right to force Abel to work more to raise everyone‘s standard of living above subsistence?
How would most people answer these questions?  It’s hard to say.  It’s easy to feel sorry for the bottom nine.  But #1 and #3 arguably turn Abel into a slave.  And #2 and #4 clearly turn Abel into a slave.  I suspect that plenty of non-libertarians would share these libertarian moral intuitions.  At minimum, many would be conflicted.

The tale and the conclusions drawn lie at the heart of libertarian opposition to taxation and government intervention. But in the real world, the tale does not end as Kaplan envisions, but goes on. And here is a possible (among many) sequel.

Able Abel knows that he can produce more (of say, dates) and sell it to others and use the money realized to increase the quality of his leisure. He has heard of the neighbouring village island, Fishland, where he can pursue his dream hobby, fishing. So he strikes a deal with his other inhabitants. He offers to transfer a share of his extra production, if they help him with laying a road to transport his produce from the far-off fields to their village. 

Accordingly, the eight marginally able people sell one-fourth of their time to help Able Abel lay the road. However, taking pity on Harry, they also demand that he be provided subsistence feed by Able Abel, who readily agrees. Within three months the road is completed and simultaneously Able Abel has stored enough food for a week to cover his fishing expedition. 

He travels to Fishland and starts fishing. Now the people of Fishland find the dates which Abel eats irresistible and they offer him a deal. If Abel supplies them with ten bags of dates, they will in turn provide him accommodation for his fishing expeditions and also five buckets of fish, which he can take back and sell to his desert island villagers. Abel takes back fish samples to his village. As anticipated, his villagers like the fish and immediately agrees to buy it. 

But again the transportation problem crops up. Abel needs help to lay the road so as to transport dates and fish. Now it is a much longer road and needs help from the people of Fishland too. They all agree to contribute a share of their work in return for a share of Abel's earnings - dates for the people of Fishland and fishes for those from his village, including for Harry. And so the story goes on.

As can be seen, the fundamental issue here is not taxation or other transfers. Able Abel can pursue his economic activity only with help from his co-inhabitants. In the barter-world, this help comes in the form of work-sharing in return for a share of Abel's production. In the modern world, instead of the in-kind transfer, a share of his production or revenues is appropriated, in the form of taxation, to meet the cost of the infrastructure required to carry out that activity.

This help or support required to sustain an economic activity can be in many forms - maintenance of law and order to protect against thieves; mechanism to enforce contractual obligations; infrastructure to transport and store goods, and so on. It is unviable for individual economic agents to establish these support mechanisms. Someone has to co-ordinate the demands of all those needing these support systems and collect the cost required to establish and maintain them. The government steps in to provide them in return for a share in their incomes, in the form of taxation.

As I have blogged earlier, the abler, and consequently those more likely to be rich and well-off, generally benefit greater from these support systems. It is therefore only appropriate that they bear a greater share of the cost required to establish and maintain these systems.

Just as the eight villagers sympathized with Harry and demanded that Abel provide him with a share of Abel's produce in return for their labour to construct the road, there are certain underlying currents of morality in any society. Once social agreement on them break-down, Harry would not be able to rely on society to provide for him. Thankfully, societies today collectively agree on certain minimum moral principles, whose fulfillment they seek to achieve by setting apart a share of the proceeds from the taxation revenues. In simple terms, their willingness to contribute to the establishment of the support systems (which help people like Able Abel disproportionately) is conditional on the fulfillment of these moral obligations. 

To paraphrase Adam Smith, the villagers of the desert island and Harry get a share of Able Abel's produce not because of charity or some moral code or government expropriation, but because his own self-interest encourages Abel to strike the deal.