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Sales Taxes

Are they desirable?  What are their effects? Is there a better tax base? Georgists consider sales taxes a very poor choice.

Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)

THE mere abolition of protection — the mere substitution of a revenue tariff for a protective tariff — is such a lame and timorous application of the free-trade principle that it is a misnomer to speak of it as free trade. A revenue tariff is only a somewhat milder restriction on trade than a protective tariff.
 
Free trade, in its true meaning, requires not merely the abolition of protection but the sweeping away of all tariffs — the abolition of all restrictions (save those imposed in the interests of public health or morals) on the bringing of things into a country or the carrying of things out of a country.

But free trade cannot logically stop with the abolition of custom-houses. It applies as well to domestic as to foreign trade, and in its true sense requires the abolition of all internal taxes that fall on buying, selling, transporting or exchanging, on the making of any transaction or the carrying on of any business, save of course where the motive of the tax is public safety, health or morals. Thus the adoption of true free trade involves the abolition of all indirect taxation of whatever kind, and the resort to direct taxation for all public revenues.

But this is not all. Trade, as we have seen, is a mode of production, and the freeing of trade is beneficial because it is a freeing of production. For the same reason, therefore, that we ought not to tax anyone for adding to the wealth of a country by bringing valuable things into it, we ought not to tax anyone for adding to the wealth of a country by producing within that country valuable things. Thus the principle of free trade requires that we should not merely abolish all indirect taxes, but that we should abolish as well all direct taxes on things that are the produce of labor; that we should, in short, give full play to the natural stimulus to production — the possession and enjoyment of the things produced — by imposing no tax whatever upon the production, accumulation or possession of wealth (the things produced by labor), leaving everyone free to make exchange, give, spend or bequeath. — Protection or Free Trade — Chapter 26: True Free Trade - econlib -|- abridged 

... go to "Gems from George"

Louis Post: Outlines of Louis F. Post's Lectures, with Illustrative Notes and Charts (1894)

8. A tax upon shoes, paid in the first instance by shoe manufacturers, enters into manufacturers' prices, and, together with the usual rate of profit upon that amount of investment, is recovered from wholesalers. The tax and the manufacturers' profit upon it then constitute part of the wholesale price and are collected from retailers. The retailers in turn collect the tax with all intermediate profits upon it, together with their :usual rate of profit upon the whole, from final purchasers — the consumers of shoes. Thus what appears on the surface to be a tax upon shoe manufacturers proves upon examination to be an indirect tax upon shoe consumers, who pay in an accumulation of profits upon the tax considerably more than the government receives.

The effect would be the same if a tax upon their leather output were imposed upon tanners. Tanners would add to the price of leather the amount of the tax, plus their usual rate of profit upon a like investment, and collect the whole, together with the cost of hides, of transportation, of tanning and of selling, from shoe manufacturers, who would collect with their profit from retailers, who would collect with their profit from shoe consumers. The principle applies also when taxes are levied upon the stock or the sales of merchants, or the money or credits of bankers; merchants add the tax with the usual profit to the prices of their goods, and bankers add it to their interest and discounts.

For example; a tax of $100,000 upon the output of manufacturers or importers would, at 10 per cent as the manufacturing profit, cost wholesalers $110,000; at a profit of 10 per cent to wholesalers it would cost retailers $121,000, and at 20 percent profit to retailers it would finally impose a tax burden of $145,200 — being 45 per cent more than the government would get. Upon most commodities the number of profits exceeds three, so that indirect taxes may frequently cost as much as 100 per cent, even when imposed only upon what are commercially known as finished goods; when imposed upon materials also, the cost of collection might well run far above 200 percent in addition to the first cost of maintaining the machinery of taxation.

It must not be supposed, however, that the recovery of indirect taxes from the ultimate consumers of taxed goods is arbitrary. When shoe manufacturers, or tanners, or merchants add taxes to prices, or bankers add them to interest, it is not because they might do otherwise but choose to do this; it is because the exigencies of trade compel them. Manufacturers, merchants, and other tradesmen who carry on competitive businesses must on the average sell their goods at cost plus the ordinary rate of profit, or go out of business. It follows that any increase in cost of production tends to increase the price of products. Now, a tax upon the output of business men, which they must pay as a condition of doing their business, is as truly part of the cost of their output as is the price of the materials they buy or the wages of the men they hire. Therefore, such a tax upon business men tends to increase the price of their products. And this tendency is more or less marked as the tax is more or less great and competition more or less keen. ... read the book

Bill Batt: The Fallacy of the "Three-Legged Stool" Metaphor

Tax experts, especially at the state level, ply their trade by invoking one metaphor above all others: the three-legged stool.  It rests on the claim that a sound and successful tax regime for any government needs to rely on a three tax bases: income, property and sales.  This is repeated so often that it passes today without much examination. ...

The power with which the three-legged stool analogy has underpinned tax policy is in fact rather disconcerting, because a close examination of its premises shows that they are very questionable.  These benchmark measures of a tax regime are scrutinized here in order to cast doubt on the claims so often made on their behalf. Read the whole article

Henry George: The Condition of Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)

As to the right of ownership, we hold: That —

Being created individuals, with individual wants and powers, men are individually entitled (subject of course to the moral obligations that arise from such relations as that of the family) to the use of their own powers and the enjoyment of the results. There thus arises, anterior to human law, and deriving its validity from the law of God, a right of private ownership in things produced by labor — a right that the possessor may transfer, but of which to deprive him without his will is theft.

This right of property, originating in the right of the individual to himself, is the only full and complete right of property. It attaches to things produced by labor, but cannot attach to things created by God.

Thus, if a man take a fish from the ocean he acquires a right of property in that fish, which exclusive right he may transfer by sale or gift. But he cannot obtain a similar right of property in the ocean, so that he may sell it or give it or forbid others to use it.

Or, if he set up a windmill he acquires a right of property in the things such use of wind enables him to produce. But he cannot claim a right of property in the wind itself, so that he may sell it or forbid others to use it.

Or, if he cultivate grain he acquires a right of property in the grain his labor brings forth. But he cannot obtain a similar right of property in the sun which ripened it or the soil on which it grew. For these things are of the continuing gifts of God to all generations of men, which all may use, but none may claim as his alone.

To attach to things created by God the same right of private ownership that justly attaches to things produced by labor is to impair and deny the true rights of property. For a man who out of the proceeds of his labor is obliged to pay another man for the use of ocean or air or sunshine or soil, all of which are to men involved in the single term land, is in this deprived of his rightful property and thus robbed. ...

Nor do we hesitate to say that this way of securing the equal right to the bounty of the Creator and the exclusive right to the products of labor is the way intended by God for raising public revenues. For we are not atheists, who deny God; nor semi-atheists, who deny that he has any concern in politics and legislation.

It is true as you say — a salutary truth too often forgotten — that “man is older than the state, and he holds the right of providing for the life of his body prior to the formation of any state.” Yet, as you too perceive, it is also true that the state is in the divinely appointed order. For He who foresaw all things and provided for all things, foresaw and provided that with the increase of population and the development of industry the organization of human society into states or governments would become both expedient and necessary.

No sooner does the state arise than, as we all know, it needs revenues. This need for revenues is small at first, while population is sparse, industry rude and the functions of the state few and simple. But with growth of population and advance of civilization the functions of the state increase and larger and larger revenues are needed.

Now, He that made the world and placed man in it, He that pre-ordained civilization as the means whereby man might rise to higher powers and become more and more conscious of the works of his Creator, must have foreseen this increasing need for state revenues and have made provision for it. That is to say: The increasing need for public revenues with social advance, being a natural, God-ordained need, there must be a right way of raising them — some way that we can truly say is the way intended by God. It is clear that this right way of raising public revenues must accord with the moral law.

Hence:

It must not take from individuals what rightfully belongs to individuals.

It must not give some an advantage over others, as by increasing the prices of what some have to sell and others must buy.

It must not lead men into temptation, by requiring trivial oaths, by making it profitable to lie, to swear falsely, to bribe or to take bribes.

It must not confuse the distinctions of right and wrong, and weaken the sanctions of religion and the state by creating crimes that are not sins, and punishing men for doing what in itself they have an undoubted right to do.

It must not repress industry. It must not check commerce. It must not punish thrift. It must offer no impediment to the largest production and the fairest division of wealth.

Let me ask your Holiness to consider the taxes on the processes and products of industry by which through the civilized world public revenues are collected — the octroi duties that surround Italian cities with barriers; the monstrous customs duties that hamper intercourse between so-called Christian states; the taxes on occupations, on earnings, on investments, on the building of houses, on the cultivation of fields, on industry and thrift in all forms. Can these be the ways God has intended that governments should raise the means they need? Have any of them the characteristics indispensable in any plan we can deem a right one?

All these taxes violate the moral law. They take by force what belongs to the individual alone; they give to the unscrupulous an advantage over the scrupulous; they have the effect, nay are largely intended, to increase the price of what some have to sell and others must buy; they corrupt government; they make oaths a mockery; they shackle commerce; they fine industry and thrift; they lessen the wealth that men might enjoy, and enrich some by impoverishing others.

Yet what most strikingly shows how opposed to Christianity is this system of raising public revenues is its influence on thought.

Christianity teaches us that all men are brethren; that their true interests are harmonious, not antagonistic. It gives us, as the golden rule of life, that we should do to others as we would have others do to us. But out of the system of taxing the products and processes of labor, and out of its effects in increasing the price of what some have to sell and others must buy, has grown the theory of “protection,” which denies this gospel, which holds Christ ignorant of political economy and proclaims laws of national well-being utterly at variance with his teaching. This theory sanctifies national hatreds; it inculcates a universal war of hostile tariffs; it teaches peoples that their prosperity lies in imposing on the productions of other peoples restrictions they do not wish imposed on their own; and instead of the Christian doctrine of man’s brotherhood it makes injury of foreigners a civic virtue.

“By their fruits ye shall know them.” Can anything more clearly show that to tax the products and processes of industry is not the way God intended public revenues to be raised?

But to consider what we propose — the raising of public revenues by a single tax on the value of land irrespective of improvements — is to see that in all respects this does conform to the moral law.

Let me ask your Holiness to keep in mind that the value we propose to tax, the value of land irrespective of improvements, does not come from any exertion of labor or investment of capital on or in it — the values produced in this way being values of improvement which we would exempt. The value of land irrespective of improvement is the value that attaches to land by reason of increasing population and social progress. This is a value that always goes to the owner as owner, and never does and never can go to the user; for if the user be a different person from the owner he must always pay the owner for it in rent or in purchase-money; while if the user be also the owner, it is as owner, not as user, that he receives it, and by selling or renting the land he can, as owner, continue to receive it after he ceases to be a user.

Thus, taxes on land irrespective of improvement cannot lessen the rewards of industry, nor add to prices,* nor in any way take from the individual what belongs to the individual. They can take only the value that attaches to land by the growth of the community, and which therefore belongs to the community as a whole.

* As to this point it may be well to add that all economists are agreed that taxes on land values irrespective of improvement or use — or what in the terminology of political economy is styled rent, a term distinguished from the ordinary use of the word rent by being applied solely to payments for the use of land itself — must be paid by the owner and cannot be shifted by him on the user. To explain in another way the reason given in the text: Price is not determined by the will of the seller or the will of the buyer, but by the equation of demand and supply, and therefore as to things constantly demanded and constantly produced rests at a point determined by the cost of production — whatever tends to increase the cost of bringing fresh quantities of such articles to the consumer increasing price by checking supply, and whatever tends to reduce such cost decreasing price by increasing supply. Thus taxes on wheat or tobacco or cloth add to the price that the consumer must pay, and thus the cheapening in the cost of producing steel which improved processes have made in recent years has greatly reduced the price of steel. But land has no cost of production, since it is created by God, not produced by man. Its price therefore is fixed —

1 (monopoly rent), where land is held in close monopoly, by what the owners can extract from the users under penalty of deprivation and consequently of starvation, and amounts to all that common labor can earn on it beyond what is necessary to life;
2 (economic rent proper), where there is no special monopoly, by what the particular land will yield to common labor over and above what may be had by like expenditure and exertion on land having no special advantage and for which no rent is paid; and,
3 (speculative rent, which is a species of monopoly rent, telling particularly in selling price), by the expectation of future increase of value from social growth and improvement, which expectation causing landowners to withhold land at present prices has the same effect as combination.

Taxes on land values or economic rent can therefore never be shifted by the landowner to the land-user, since they in no wise increase the demand for land or enable landowners to check supply by withholding land from use. Where rent depends on mere monopolization, a case I mention because rent may in this way be demanded for the use of land even before economic or natural rent arises, the taking by taxation of what the landowners were able to extort from labor could not enable them to extort any more, since laborers, if not left enough to live on, will die. So, in the case of economic rent proper, to take from the landowners the premiums they receive, would in no way increase the superiority of their land and the demand for it. While, so far as price is affected by speculative rent, to compel the landowners to pay taxes on the value of land whether they were getting any income from it or not, would make it more difficult for them to withhold land from use; and to tax the full value would not merely destroy the power but the desire to do so.

To take land values for the state, abolishing all taxes on the products of labor, would therefore leave to the laborer the full produce of labor; to the individual all that rightfully belongs to the individual. It would impose no burden on industry, no check on commerce, no punishment on thrift; it would secure the largest production and the fairest distribution of wealth, by leaving men free to produce and to exchange as they please, without any artificial enhancement of prices; and by taking for public purposes a value that cannot be carried off, that cannot be hidden, that of all values is most easily ascertained and most certainly and cheaply collected, it would enormously lessen the number of officials, dispense with oaths, do away with temptations to bribery and evasion, and abolish man-made crimes in themselves innocent.

But, further: That God has intended the state to obtain the revenues it needs by the taxation of land values is shown by the same order and degree of evidence that shows that God has intended the milk of the mother for the nourishment of the babe.

See how close is the analogy. In that primitive condition ere the need for the state arises there are no land values. The products of labor have value, but in the sparsity of population no value as yet attaches to land itself. But as increasing density of population and increasing elaboration of industry necessitate the organization of the state, with its need for revenues, value begins to attach to land. As population still increases and industry grows more elaborate, so the needs for public revenues increase. And at the same time and from the same causes land values increase. The connection is invariable. The value of things produced by labor tends to decline with social development, since the larger scale of production and the improvement of processes tend steadily to reduce their cost. But the value of land on which population centers goes up and up. Take Rome or Paris or London or New York or Melbourne. Consider the enormous value of land in such cities as compared with the value of land in sparsely settled parts of the same countries. To what is this due? Is it not due to the density and activity of the populations of those cities — to the very causes that require great public expenditure for streets, drains, public buildings, and all the many things needed for the health, convenience and safety of such great cities? See how with the growth of such cities the one thing that steadily increases in value is land; how the opening of roads, the building of railways, the making of any public improvement, adds to the value of land. Is it not clear that here is a natural law — that is to say a tendency willed by the Creator? Can it mean anything else than that He who ordained the state with its needs has in the values which attach to land provided the means to meet those needs?

... read the whole letter

 


Mason Gaffney: Taxation of interjurisdictional e-commerce

Most writers and reporters in this new field accept state and local sales taxes as part of the ordained order of things. The predominant attitude is one of how to preserve and raise the state sales tax, by taxing purchases from "foreign" (out-of-state) sources, which are regarded as an administrative nuisance and a leakage.

Modern textbooks on public finance do not treat the general retail sales tax as the historical novelty that it is. They no longer mention that no state taxed retail sales until 1929 (GA) and 1930 (MS), and most not until 1933 (when California joined the movement with a rate of 2%) and the mid-thirties, by which time half the states joined in. Few books give any weight to the fact that 5 states and one province (Alberta) have no sales tax at all: the states are Alaska, Oregon, New Hampshire, Delaware, and Montana. The academics treat these states as eccentrics and laggards, and trivialize them for their small populations, but the states in question, which have 10 U.S. Senators among them, do not see themselves that way at all.
  • One of them, Oregon, in 1980 retired the powerful Chairman of the House Committee on Ways and Means, Al Ullman, because he championed a Federal VAT.
  • Another, New Hampshire, plays a key role in screening presidential candidates. It is rather a matter of some local pride, not to mention commercial advantage. ...
Few academics show much concern about the sales tax's partiality and non-uniformity. They enumerate a few exemptions, but then favor it because it allegedly exempts capital formation. ...

Even more surprising is the attitude of business sources. You'd think they'd show some delight that a new way has been found to undercut the sales tax. Instead, many of these works might as well be written by tax administrators. Their main concern may be making sure that other firms pay, too.

My viewpoint is the reverse. I am here to explore how e-commerce may work as a lever to lower or quash sales taxes, and to show how states may do that without making catastrophic quakes or waves.

The U.S. Constitution bans state taxes on interstate commerce. "The Congress shall have the power ... to regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes; ... " - (Article I, Sect. 8).

"No State shall, w/o the consent of Congress, lay any Imposts or Duties on Imports or Exports, ... (Article I, Sect. 10). This reinforces the commerce clause of Sect. 8.

The Commerce Clause has preserved interstate tax competition. Without it, it is likely that state sales taxes would rise to 20% or more in short order, as the wholesome fear of interstate competition was stifled. It created and has preserved our domestic market, the greatest free trade zone in the world, an essential ingredient of American productivity and prosperity. It is not something to be thrown away lightly, especially not for the sake of something as baneful as the retail sales tax.

States may tax imports "with the consent of Congress." McGoldrick v. Berwind White (1940) established they might apply a sales tax if the seller has a nexus in the taxing state. Quill Co. v. N.D. 1992, seems to have established that Congress has the power to enact legislation allowing states to levy sales and use tax on remote sales, including mail-order and electronic sales, without the current requirement of physical presence. Congress and the President have the power to require all online vendors (and all mail-order sellers) to collect sales and use tax on all sales to all states.

That's interesting, but Congress doesn't pass laws just because it may.

Net result:  Look forward to a new world in which forms of taxation must change substantially. There must be more emphasis on immobile assets. That is not necessarily a bad thing: we've been there and done that, and it wasn't half bad. Professor Wallace Oates, Univ. of MD, writing in the current Review of Economic Literature, refers his readers to his study of Pittsburgh, where he and a colleague found that a shift to a more immobile tax base, land, may have caused a rise in building activity. I cite Prof. Oates because he and Prof. Robert Schwab approached their subject in the most cautious imaginable way, and their conclusions are about as soft-pedaled as is humanly possible from the data they present.

What would happen in California if we eliminated the sales tax, and replaced it by raising the property tax?

A. No catastrophe Five states and the Province of Alberta already get along nicely with no sales tax, so it must be possible.  No state at all had a retail sales tax before 1929 (GA).

  • California opened its gates in 1933 with the Riley-Stuart Act, and so did several other states. It was sold as an "emergency measure," at a rate of 2%.
  • As late as 1977 it was 4.75%.
  • Now it is 7.25% statewide, with many cities, counties and transportation districts adding their tolls to the total, but for most of our state's existence we got along nicely with either no sales tax, or much lower rates than today.

The Property Tax rate would rise to a level lower than it was before Prop. 13. California sales tax revenues are currently 1.19% of the Assessed Value (A.V.) of taxable property. Add that to the current 1%, and get 2.19%, compared to 2.7% before Prop. 13 - except that the 2.7% was applied to actual value, while today's assessed valuations are far below that.

The A.V. value of land is probably about 1/3 or so of market value; buildings are closer to market.

B. Greater equity: The distribution of the tax burden would shift from poor counties to richer ones. Thus,  
  • in the poor inland counties of Fresno, Tulare, Imperial, and Stanislaus, sales tax revenues are about 1.5% of A.V.s.
  • In rich coastal and suburban counties of Sta. Barbara and Marin, sales tax revenues are about .75% of A.V.s.
Thus, the state sales tax takes a lot more money from the poor counties than it would cost them to replace the services from local taxes; the rich counties, with the high property tax bases, are contributing less to the common pool than they are saving in property taxes. Read the whole article


Dan Sullivan: Are you a Real Libertarian, or a ROYAL Libertarian?
Two different kinds of indirect taxation
One of the most perverted twisting of concepts is reflected in what Hamilton called "indirect taxation." To him, and to many royal libertarians, indirect taxation is "hidden" taxation, as a value-added tax or sales tax that is buried in the price of purchased goods. This kind of indirectness is hardly admirable, and is similar to the kind of indirectness involved in chicanery and duplicity. Small wonder Jefferson called Hamilton a monarchist.

The Articles of Confederation embodied an entirely different concept of indirect taxation. The United States was to levy a tax, not on individual property holders, but on each state, based on its aggregate land value. The assumption was that each state would levy a similar tax on each county, and so on down to the individual. In this way, the individual would never have to face a federal tax agent directly, and if the federal government did not have the full support of the states, it could not bully them as easily as it could bully individuals.

Unfortunately, states did not support the federal government to its satisfaction from the beginning (being strapped from the war). Rather than working things out patiently, Hamilton introduced power-centralizing measures into the new Constitution. One was the other kind of indirect taxation, the mosquito-bite kind that you don't see happening. Royal libertarians trumpet this covert taxation as a virtue over direct real estate taxation, even when it means that "free trade" is being taxed. ... Read the whole piece

 

Fred E. Foldvary — The Ultimate Tax Reform: Public Revenue from Land Rent

Impact on behavior

Income taxes impose on the economy a large administrative cost by government and a cost to payers of filling out forms, paying lawyers and accountants, and trying to comprehend the complex requirements. The compliance cost of lost time in the U.S. is 5 billion hours per year, the equivalent of two million people working full time just to process the income tax. In dollar terms, the compliance cost is estimated to be more than $200 billion per year.29

Reformers who want to impose a national retail sales tax are well aware of the substantial impact taxes have on human behavior. That, indeed, is often why such reforms are proposed: The reformer wishes to discourage borrowing, reduce consumption, or encourage savings, for example. But moving to a national retail sales tax results in little improvement.

Most people use their wage income to pay for goods and services and sales taxes. Switching from an income to a sales tax is like taxing you when you leave a room instead of when you enter the room.

Income taxes punish savings, but sales taxes punish borrowing. If you borrow $10,000 to buy a car and there is a 20 percent sales tax, you need to borrow an extra $2,000 to pay the tax. Some folks might decide to not buy the car, spending the $10,000 on something else, without borrowing $2,000.

There is no good economic reason to tax-punish consumption or borrowing. The purpose of production is consumption! If we punish consumption, we punish production. Consumption is not an evil to be thwarted, but the very benefit we get from the economy. We may as well also tax fun and joy! Those seeking to tax consumption act as though they have a Puritan streak that considers enjoying goods to be evil and working and saving to be good for their own sake. ... read the whole document


Hanno Beck:  What The Polluter Pays Principle Implies

    "But the funny thing is, you don't really believe it yourself," says Vernon. "You aren't being consistent. You say goods and services that we produce belong to the producers and no one else. But you support the income tax and the sales tax. Those taxes take away from the producer, without his or her consent, part of what he or she produced. So it doesn't seem that you really believe your own claims. Why should people support the Polluter Pays Principle that says they are stuck with negative products they produce, when at the same time you wouldn't allow them to keep the positive products they produce? Sounds like an uneven deal."

    Sara is shocked. But she has to admit Vernon has a point. "Hmm, I guess this might be part of why the Polluter Pays Principle doesn't excite as much support as it should. If we lived in a world where people get to keep the full value of whatever their labor and their investment yields, then pollution would stand out in sharp contrast, as a crime against innocent people and their property. The Polluter Pays Principle would be totally obvious then."

    "And instead," says Vernon, "we're surrounded by cases of theft by income tax, by sales tax, and so on. Well then, no wonder people aren't shocked when the Polluter Pays Principle isn't applied. And no wonder some people don't even see the wisdom of it. "

    The bottom line question is this -- can a person support the Polluter Pays Principle and support involuntary taxation both, or is that inconsistent? Your opinion, please! ... read the whole article


Weld Carter: An Introduction to Henry George
Another area in which George applied these inherent differences between land and products was the field of taxation. To determine the incidence of taxation, George had to know what was to be taxed, products or the value of land. In each case he traced out the effect from the essential nature of the thing to be taxed: "...all taxes upon things of unfixed quantity increase prices, and in the course of exchange are shifted from seller to buyer, increasing as they go. ...If we impose a tax upon buildings, the users of buildings must finally pay it, for the erection of buildings will cease until building rents become high enough to pay the regular profit and the tax besides. ...In this way all taxes which add to prices are shifted from hand to hand, increasing as they go, until they ultimately rest upon consumers, who thus pay much more than is received by the government. Now, the way taxes raise prices is by increasing the cost of production, and checking supply. But land is not a thing of human production, and taxes upon...[land value] cannot check supply. Therefore, though a tax on...[land value] compels the land owners to pay more, it gives them no power to obtain more for the use of their land, as it in no way tends to reduce the supply of land. On the contrary, by compelling those who hold land on speculation to sell or let for what they can get, a tax on land values tends to increase the competition between owners, and thus to reduce the price of land." ... read the whole article


Alanna Hartzok: Who Would Jesus Tax?  The Saga of Susan Pace Hamill's Alabama Tax Crusade

A University of Alabama School of Law Professor has asked God's forgiveness for the years she lived in the sin of ignorance about tax injustice. Susan Pace Hamill, a tax expert, business consultant, and dedicated United Methodist church goer, thought there was a misprint when she first read that personal incomes as low as $4,600 for a family of four were being taxed by the state, while timber owners holding 71% of the land of Alabama were paying less than $1 per acre in property taxes. Two hours later she found out there had been no mistake and that Alabama has the most regressive tax code in the country. Her righteous rage spawned a tax crusade that has reverberated onto the national scene.

"As somebody who knows a lot about taxes, I could not have imagined a design of a tax structure this bad," she said in a Tuscaloosa News story last February. "The state's tax code is really horribly unjust and has no moral, ethical leg to stand on. Period."

Alabamians with incomes under $13,000 pay 10.9 percent of their incomes in state and local taxes while those who make over $229,000 pay just 4.1 percent. Commercial property owners pay more than 50 percent of property taxes, with homes approaching one-third. Alabama's sales taxes are among the highest in the nation, up to 10 percent in some areas, and do not exempt even the most basic necessities such as food. The state's 1901 constitution was written primarily by large landholders to secure their economic interests, consequently property taxes are extremely light on their holdings. ...

"Alabama's tax system is most abusive because it taxes items like milk, yet offers tax breaks for certain farm products," she said in a Huntsville Times (3/26/03) interview. "It's also unfair to allow timberland (which Hamill found out accounts for 71 percent of Alabama land) to generate only two percent of all state property taxes."

While resoundingly condemning the current system (she uses words like "horrific" and "monstrous injustice") Hamill clearly articulates a tax reform approach which shifts taxes off of low wage earners and onto large land owners. Through a combination of her own reasoning, caring heart, and inherent sense of justice and a thorough investigation of Judeo-Christian ethics, Hamill arrived at a tax policy approach which bears remarkable similarities to the economic justice crusades of 19th century reformer, Henry George.

Her appeal is to the 93 percent of Alabama residents who call themselves Christians. Hamill challenges them to put their faith into practice. Her message fell on many already listening ears. The state's two largest denominations, United Methodists and Southern Baptists, had passed resolutions favoring tax reform in 2000. In 2001 the state's Episcopalians, Presbyterians and Catholics approved similar calls. The Public Affairs Research Council of Alabama and the Business Council of Alabama had long clamored for tax change. In fact, tax reform is now supported by most of the state's religious organizations, according to Charles Durham, pastor of the First Presbyterian Church in Tuscaloosa.

What makes Hamill's work so compelling is her deep grasp of the Alabama tax code combined with her thorough documentation of the scriptural bases for economic justice. She quotes chapters and verses which proclaim that the poor should not be oppressed and that society should create conditions for their advance. Among her favorites are Jesus' words in Matthew 25:45: "Whatever you did not do for one of the least of these, you did not do for me." Luke 16:19-31 is a parable of a rich man sent to hell because of his indifference to the disadvantaged and in Jeremiah 22:15-16, "He defended the cause of the poor and needy, and so all went well." ...

Riley's tax plan, inspired in large measure by Hamill's prophetic tax justice ministry, would bring in an additional $1.2 billion in revenue while raising the income threshold at which families of four start paying taxes from the current $4,600 a year to more than $17,000, scrapping the federal income tax deduction, and increasing exemptions for dependent children. It would give property tax breaks to small family farms, while costing millions to the state's 500 or so farms and timber tracts with more than 2,000 acres each, which includes companies like Weyerhaeuser and Boise Cascade, which own hundreds of thousands of acres.

"I've spent a lot of time studying the New Testament and it has three philosophies: love God, love each other, and take care of the least among you," said Riley (New York Times, 6/10/03, "What Would Jesus Do? Sock It to Alabama's Corporate Landowners")

Unfortunately, Alabama voters overwhelmingly voted against the plan on September 9, 2003. Some said that the poor did not trust the Republican tax relief plan and the rich had solidly organized against it. Opponents made hay out of the proposed sales tax increase on cigarettes, cars and lawn mowers and services like car repairs in a state where sales taxes already reach 11% in some areas. ...  read the whole article


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