Friedrich Hayek on Taxation and Income Redistribution

Abstract

Friedrich Hayek was a staunch advocate of the free market principle. He was convinced that progressive taxation was a great threat to individual liberty and social fairness, particularly because there is no limit how high a progressive rate can be in it. The only explanation by which a progressive taxation can be defended is a wish to alter the income distribution, but this approach cannot be explained by any scientific argument. Progressive taxation is unjust and short-sighted while, according to Hayek, a proportional tax system satisfies a standard of fairness and justice because it applies the same general rule to all and prevents discrimination against the well-off taxpayers. Key words: redistribution, fiscal system, tax policy, Friedrich Hayek.