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
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
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
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
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.
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?
the whole letter
Mason Gaffney: Taxation of interjurisdictional
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
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
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
House Committee on Ways and Means, Al Ullman, because he championed a
- 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. ...
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.
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.
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
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
1933 with the Riley-Stuart Act, and so did several other states.
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
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?
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
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
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
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
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
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
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
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
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
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
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
"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
"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