Tax
Administrability
Louis Post: Outlines of Louis F. Post's
Lectures, with Illustrative Notes and Charts (1894)
4. CONFORMITY TO GENERAL PRINCIPLES OF TAXATION
The single tax conforms most closely to the essential principles of Adam
Smith's four classical maxims, which are stated best by Henry George 19 as
follows:
The best tax by which public revenues can be raised is evidently that which
will closest conform to the following conditions:
- That it bear as lightly as possible upon production — so as least
to check the increase of the general fund from which taxes must be paid
and the community maintained. 20
- That it be easily and cheaply collected, and fall as directly as may
be upon the ultimate payers — so as to take from the people as little
as possible in addition to what it yields the government. 21
- That it be certain — so as to give the least opportunity for tyranny
or corruption on the part of officials, and the least temptation to law-breaking
and evasion on the part of the tax-payers. 22
- That it bear equally — so as to give no citizen an advantage or
put any at a disadvantage, as compared with others. 23
19. "Progress and Poverty," book viii. ch.iii.
20. This is the second part of Adam Smith's fourth maxim.
He states it as follows: "Every tax ought to be so contrived as
both to take out and to keep out of the pockets of the people as little
as possible over and above what it brings into the public treasury of
the state. A tax may either take out or keep out of the pockets of the
people a great deal more than it brings into the public treasury in the
four following ways: . . . Secondly, it may obstruct the industry of
the people, and discourage them from applying to certain branches of
business which might give maintenance and employment to great multitudes.
While it obliges the people to pay, it may thus diminish or perhaps destroy
some of the funds which might enable them more easily to do so."
21. This is the first part of Adam Smith's fourth maxim,
in which he condemns a tax that takes out of the pockets of the people
more than it brings into the public treasury.
22. This is Adam Smith's second maxim. He states it as
follows: "The tax which each individual is bound to pay ought to
be certain and not arbitrary. The time of payment, the manner of payment,
the quantity to be paid, ought all to be clear and plain to the contributor
and to every other person. Where it is otherwise, every person subject
to the tax is put more or less in the power of the tax gatherer."
23. This is Adam Smith's first maxim. He states it as
follows: "The subjects of every state ought to contribute towards
the support of the government as nearly as possible in proportion to
their respective abilities, that is to say, in proportion to the revenue
which they respectively enjoy under the protection of the state. The
expense of government to the individuals of a great nation is like the
expense of management to the joint tenants of a great estate, who are
all obliged to contribute in proportion to their respective interests
in the estate. In the observation or neglect of this maxim consists what
is called the equality or inequality of taxation."
In changing this Mr. George says ("Progress
and Poverty," book viii, ch. iii, subd. 4): "Adam Smith
speaks of incomes as enjoyed 'under the protection of the state'; and
this is the ground upon which the equal taxation of all species of
property is commonly insisted upon — that it is equally protected
by the state. The basis of this idea is evidently that the enjoyment
of property is made possible by the state — that there is a value
created and maintained by the community; which is justly called upon
to meet community expenses. Now, of what values is this true? Only
of the value of land. This is a value that does not arise until a community
is formed, and that, unlike other values, grows with the growth of
the community. It only exists as the community exists. Scatter again
the largest community, and land, now so valuable, would have no value
at all. With every increase of population the value of land rises;
with every decrease it falls. This is true of nothing else save of
things which, like the ownership of land, are in their nature monopolies."
Adam Smith's third maxim refers only to conveniency of
payment, and gives countenance to indirect taxation, which is in conflict
with the principle of his fourth maxim. Mr. George properly excludes
it.
a. Interference with Production
Indirect taxes tend to check production and cause scarcity, by obstructing
the processes of production. They fall upon men as they work, as they
do business, as they invest capital productively. 24 But the single
tax, which must be paid and be the same in amount regardless of whether the
payer works or plays, of whether he invests his capital productively or wastes
it, of whether he uses his land for the most productive purposes 25 or in lesser
degree or not at all, removes fiscal penalties from industry and thrift, and
tends to leave production free. It therefore conforms more closely than indirect
taxation to the first maxim quoted above.
24. "Taxation which falls upon the processes of production
interposes an artificial obstacle to the creation of wealth. Taxation
which falls upon labor as it is exerted, wealth as it is used as capital,
land as it is cultivated, will manifestly tend to discourage production
much more powerfully than taxation to the same amount levied upon laborers
whether they work or play, upon wealth whether used productively or unproductively,
or upon land whether cultivated or left waste" — Progress
and Poverty, book viii, ch. iii, subd. I.
25. It is common, besides taxing improvements, as fast
as they are made, to levy higher taxes upon land when put to its best
use than when put to partial use or to no use at all. This is upon the
theory that when his land is used the owner gets full income from it
and can afford to pay high taxes; but that he gets little or no income
when the land is out of use, and so cannot afford to pay much. It is
an absurd but perfectly legitimate illustration of the pretentious doctrine
of taxation according to ability to pay.
Examples are numerous. Improved building lots, and even
those that are only plotted for improvement, are usually taxed more than
contiguous unused and unplotted land which is equally in demand for building
purposes and equally valuable. So coal land, iron land, oil land, and
sugar land are as a rule taxed less as land when opened up for appropriate
use than when lying idle or put to inferior uses, though the land value
be the same. Any serious proposal to put land to its appropriate use
is commonly regarded as a signal for increasing the tax upon it.
b. Cheapness of Collection
Indirect taxes are passed along from first payers to final consumers through
many exchanges, accumulating compound profits as they go, until they take
enormous sums from the people in addition to what the government receives.26
But the single tax takes nothing from the people in excess of the tax. It
therefore conforms more closely than indirect taxation to the second maxim
quoted above.
26. "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 on money loaned, as has been
often attempted, the lender will charge the tax to the borrower, and
the borrower must pay it or not obtain the loan. If the borrower uses
it in his business, he in his turn must get back the tax from his customers,
or his business becomes unprofitable. 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. If we impose a tax upon manufactures or imported
goods, the manufacturer or importer will charge it in a higher price
to the jobber, the jobber to the retailer. and the retailer to the consumer.
Now, the consumer, on whom the tax thus ultimately falls, must not only
pay the amount of the tax, but also a profit on this amount to everyone
who has thus advanced it — for profit on the capital he has advanced
in paying taxes is as much required by each dealer as profit on the capital
he has advanced in paying for goods." — Progress and Poverty,
book viii, ch. iii, subd. 2.
c. Certainty
No other tax, direct or indirect, conforms so closely to the third maxim. "Land
lies out of doors." It cannot be hidden; it cannot be "accidentally" overlooked.
Nor can its value be seriously misstated. Neither under-appraisement nor
over-appraisement to any important degree is possible without the connivance
of the whole community. 27 The land values of a neighborhood are matters
of common knowledge. Any intelligent resident can justly appraise them, and
every other intelligent resident can fairly test the appraisement. Therefore,
the tyranny, corruption, fraud, favoritism, and evasions that are so common
in connection with the taxation of imports, manufactures, incomes, personal
property, and buildings — the values of which, even when the object
itself cannot be hidden, are so distinctly matters of minute special knowledge
that only experts can fairly appraise them — would be out of the question
if the single tax were substituted for existing fiscal methods. 28
27. The under-appraisements so common at present, and
alluded to in note 25, are possible because the community, ignorant of
the just principles of taxation, does connive at them. Under-appraisements
are not secret crimes on the part of assessors; they are distinctly recognized,
but thoughtlessly disregarded when not actually insisted upon, by the
people themselves. And this is due to the dishonest ideas of taxation
that are taught. Let the vicious doctrine that people ought to pay taxes
according to their ability give way to the honest principle that they
should pay in proportion to the benefits they receive, which benefits,
as we have already seen, are measured by the land values they own, and
underappraisement of land would cease. No assessor can befool the community
in respect of the value of the land within his jurisdiction.
And, with the cessation of general under-appraisement,
favoritism in individual appraisements also would cease. General under-appraisement
fosters unfair individual appraisements. If land were generally appraised
at its full value, a particular unfair appraisement would stand out in
such relief that the crime of the assessor would be exposed. But now
if a man's land is appraised at a higher valuation than his neighbor's
equally valuable land, and he complains of the unfairness, he is promptly
and effectually silenced with a warning that his land is worth much more
than it is appraised at, anyhow, and if he makes a fuss his appraisement
will be increased. To complain further of the deficient taxation of his
neighbor is to invite the imposition of a higher tax upon himself.
28. If you wish to test the merits in point of certainty
of the single tax as compared with other taxes, go to a real estate agent
in your community, and, showing him a building lot upon the map, ask
him its value. If he inquires about the improvements, instruct him to
ignore them. He will be able at once to tell you what the lot is worth.
And if you go to twenty other agents their estimates will not materially
vary from his. Yet none of the agents will have left his office. Each
will have inferred the value from the size and location of the lot.
But suppose when you show the map to the first agent you
ask him the value of the land and its improvements. He will tell you
that he cannot give an estimate until he examines the improvements. And
if it is the highly improved property of a rich man he will engage building
experts to assist him. Should you ask him to include the value of the
contents of the buildings, he would need a corps of selected experts,
including artists and liverymen, dealers in furniture and bric-a-brac,
librarians and jewelers. Should you propose that he also include the
value of the occupant's income, the agent would throw up his hands in
despair.
If without the aid of an army of experts the agent should
make an estimate of these miscellaneous values, and twenty others should
do the same, their several estimates would be as wide apart as ignorant
guesses usually are. And the richer the owner of the property the lower
as a proportion would the guesses probably be.
Now turn the real estate agent into an assessor, and is
it not plain that he would appraise the land values with much greater
certainty and cheapness than he could appraise the values of all kinds
of property? With a plot map before him he might fairly make every appraisement
without leaving his desk at the town hall.
And there would be no material difference if the property
in question were a farm instead of a building lot. A competent farmer
or business man in a farming community can, without leaving his own door-yard,
appraise the value of the land of any farm there; whereas it would be
impossible for him to value the improvements, stock, produce, etc., without
at least inspecting them. ...
f. The Single Tax Retains Rent for Common Use.
To retain Rent for common use it is not necessary to abolish land-titles,
nor to let land out to the highest bidder, nor to invent some new mechanism
of taxation, nor in any other way to directly change existing modes of holding
land for use, or existing machinery for collecting public revenues. "Great
changes can be best brought about under old forms."109 Let land be held
nominally as it is now. Let taxes be collected by the same kind of machinery
as now. But abolish all taxes except those that fall upon actual and potential
Rent, that is to say, upon land values.
If that were done it is doubtful if land-owners could any longer confiscate
enough Rent to be worth the trouble. Even though some surplus were still
kept by them, it would be so much more easy to secure Wealth by working for
it than by confiscating Rent to private use, to say nothing of its being
so much more respectable, that speculation in land values would practically
be abandoned. At any rate, the question of a surplus — Rent in excess
of the requirements of the community — may be readily determined when
the principle that Rent justly belongs to the community and Wages to the
individual shall have been recognized by society in the adoption of the Single
Tax. 110
110. Thomas G. Shearman, Esq., of New York, author of
the famous magazine article on "Who Owns the United States," estimates
that sixty-five per cent of the present annual value of the land in the
United States would pay all the present expenses of American government — federal,
state, county, and municipal. ... read the book
Louis Post: Outlines of Louis F. Post's
Lectures, with Illustrative Notes and Charts (1894) — Appendix:
FAQ
Q8. What would be the expense of collecting the single tax as compared with
that of collecting present taxes?
A. Much less. It is easier to assess fairly, and easier to collect fully;
the machinery of assessment and collection would be simpler and cheaper,
and it would not enable first payers to collect the tax with profits upon
it from ultimate payers.
... read the book
Bill Batt: Painless Taxation
Abstract
Real tax reform could do away with those taxes that are resented
by the large proportion of our population. We could replace all taxes on
wages and on interest by instead taxing economic rent. Rent is windfall income;
it is income that arises not from the efforts of any person or corporation;
it comes about as a surplus gain from common social enterprise. There is
ample moral warrant for society to lay claim to that which it has created,
as well as to that which no individual or party has earned. Analysis increasingly
makes clear that economic rent in all its forms is far larger than official
government figures indicate; in fact it is likely sufficient to supplant
all current taxes on labor and capital (wages and interest) which are acknowledged
to have so many negative effects. Recovering economic rent in all its manifestations
by taxing its various bases actually can foster economic performance and
yield other benefits that make it the natural source of revenue for governments.
Such a tax is essentially painless. ...
Tax Principles
The starting points should be the lessons that have been learned over the
course of the past three hundred and more years about what is a good tax.
Most basic textbooks in public finance enumerate them in very clear form,
and they constitute benchmarks against which to measure the soundness of
any particular tax. They are listed as few as three or as many as eight such
principles but little disagreement exists as to their substance, regardless
of ideology or government. Most commonly enumerated are neutrality, efficiency,
equity, administrability, simplicity, stability, sufficiency.[3] Tax
theorists typically measure revenue structures according to any or all of
these criteria: ...
Administrability refers to the ease with which a tax can
be administered and collected. Taxes which distort the economy are inefficient
but so are taxes that cost lots to administer. This is measured not only
in the direct costs of tax avoidance and accounting expenses, but in the
level of evasion and cheating, and by the cost of government auditing and
policing. When the taxpaying public perceives that a tax is easily evaded,
cumbersome, and unfair, it loses its legitimacy and calls government itself
into question. ... read the whole article
Bill Batt: The Merits of Site
Value Taxation
Administrability refers to the ease with which a tax can be
administered and collected. Taxes which distort the economy are
inefficient as are taxes that cost lots to administer. This is measured
not only in the direct costs of tax avoidance and accounting expenses,
but in the level of evasion and cheating, and by the cost of government
auditing and policing.16 When
the taxpaying public perceives that a tax is easily evaded, cumbersome,
and unfair, it loses its legitimacy and calls government itself into
question.
16Alan Durning
notes in
his book
Tax Shift (1998, p. 17), that "Complying [with the personal income tax alone]
takes Americans 5 billion hours each year. For every dollar raised, U.S. taxpayers
spend
nine cents obeying the law. Cheating is widespread; roughly one-fifth
of income goes unreported.
This is why the principle of simplicity
is important: the more complex the tax design, the more lawyers
and accountants will find loopholes, encourage the appearance of
unfairness, and drive up the cost of its administration. With simple
taxes other parties cannot avoid paying their fair share, thereby
enhancing the legitimacy and hence the compliance of the tax system.
... Read the whole piece
see also Bill Batt: How Our Towns
Got That Way (1996 speech)
Charles T. Root — Not a Single Tax! (1925)
The proverb "There is nothing sure but Death and Taxes," is at
once a recognition of the tendency to change in all human affairs, and a
triumphant
assertion of Conservatism that there remain at least two immutable things.
But the tooth of time which respects no mortal institution is boldly at
work on even this proverb and threatens to remove Taxes from the meagre list
of
things permanent. It is the purpose of this booklet to give some account
of this startling phenomenon. With this in view let us lay down and briefly
defend
the proposition that —
Taxation as a means of meeting the proper expenses of government is oppressive,
unjust, inexpedient and unnecessary.
This proposition will strike a good many readers as absurd, but all must at
least recognize the timeliness of the topic and the importance of any contribution
to the discussion of a subject which is agitating the whole civilized world,
for the methods, subjects and amounts of taxation are among the pressing problems
of every country.
The most obvious question which arises in the mind of anyone who reads for
the first time the proposition above laid down is this:
"If taxation is unnecessary, what is to take its place? Government and
its functions are increasingly expensive. They require a lot of money. Where
is it to come from?" The answer may be placed in the form of a second
proposition:
Every community, whatever its political name and extent — village, city,
state or province or nation — has its own normal, unfailing income,
growing with the growth of the community and always adequate to meet necessary
governmental
expenditure.
To explain: Every community has an indefeasible original right to the land
on which it exists, and to all the natural, unmodified properties and advantages
of that particular area of the earth's surface. To this land in its natural
state, undrained, unfenced, unfertilized, unplanted and unoccupied, including
its waters, its contents and its location, every individual in the community
(which may consist of any political unit selected) has an equal right, while
all the individuals together have a joint right to the value for use which
society has conferred upon these natural advantages.
This value for use is known as "Land Value," or by the not particularly
descriptive but generally adopted name of "Economic Rent." ...
An authority on municipal taxation estimates the present economic rent of
the land embraced in the City of New York at from $350,000,000 to $400,000,000.
Assuming the lesser of these figures and adding the receipts from licenses,
fees and fines, New York City should receive, of her own income, enough to
pay all her own legitimate bills, to make her proper contributions to county
and state and build a new subway or its equivalent every year.
And this with nobody paying a dollar of taxes, or, if we except the fines,
a dollar that he was not ready and glad to pay for his own advantage.
We repeat, this is not taxation; but for the sake of those who cannot grasp
the idea of public revenue without taxation, let us state the matter in their
own language.
Think of a tax which both assesses itself and collects itself, which burdens
no one, which is paid voluntarily, and only by those who do so for their
own profit or other advantage. Compare this with our present system of taxes,
which
everyone despises, which can be collected in full only from the very scrupulous
and from the helpless, from trust funds of widows and orphans, or from
estates which lie naked before the tax gatherer on the records of court;
a system which
drives men of property from state to state and town to town in flight from
the assessor, and well-nigh forces many worthy citizens to practices of
evasion which must make it hard for them to look into their own mirrors during
the
season for "Correction of Assessments;" there can be but one
verdict upon such comparison. ...
The amount of economic rent which is taken by the community for public purposes
is not a tax paid by the land-holder, but whatever amount of such rent is left
in his hands is a gift to him by the community, or else is the compensation
which the community allows him for acting as its agent and collector in the
matter of economic rent.
This is an important distinction which is necessary to make the facts and
the relations clear. It is also highly expedient. Taxation and the idea
behind it are abhorrent to men. As a result of long experience the very word
Taxation
connotes to them injustice, oppression, and antagonism between the individual
and the community. To the mass "The Single Tax" means simply
rolling into one the manifold injustices and oppressions of the present
complex system.
Only slow headway can be made by a proposition which at first sight seems
to promise merely to shift the burden from one shoulder to the other.
But make it plain to the wayfaring man that taxation can be abolished and
will be abolished whenever the voters of any political unit so decree,
and a force of hope and purpose will be liberated which must bring nearer
the time
when the things that are the community's will be rendered to it, and the
things which are the individual's will be left in his unmolested possession.
The watchword
of our friends the Georgeites is "A Single Tax." The true slogan
is "Not a Single Tax!"; and the triumph of the cause behind that
slogan would cut more of the taproots of poverty, vice and social unrest
than any other progressive step which is a legislative possibility. ... read
the whole article
Fred E. Foldvary — The
Ultimate Tax Reform:
Public Revenue from Land Rent
Nevertheless, many economists have recognized and supported land value taxation
for public finance. Léon Walras, known for his development of general-equilibrium
theory, wrote land rent provides the best means for funding a state.22 Knut
Wicksell, a Swedish economist who integrated classical, neoclassical, and
Austrian economic thought, wrote, “the general economic development
of the community” increased the value of its land, and he proposed
taxing such increases.23 Contemporary economists who have written favorably
about land value taxation include Kris Feder, Mason Gaffney, C. Lowell Harris,
Fred Harrison, Nicolaus Tideman, the late William Vickrey (winner of the
1996 Nobel Prize in economics), and myself.
Other economists have opposed the public collection of rent. William Fischel
(1998) accuses land value taxation of high administrative costs in “the
knife-edge goal” of “getting almost all land rent.” He
does not say why there has to be such an impossible “knife-edge goal.” Others
claim the administrative costs of property taxes are greater than for income
taxes. But even if this is so, real property taxes already exist, so eliminating
income and sales taxes can only reduce total tax-collecting costs, not increase
them. ...
Costs of collection and administration
Consider the effect of abolishing income taxes and sales taxes, replacing
them with a land value tax. There would no longer be any tax audits. There
would be no record-keeping for taxes. You, the landowner, would instead get
a monthly bill, like you get for utilities. You would simply pay the bill
or have it automatically deducted from some financial account. At the same
time, government would avoid the high cost of processing complex accounts
and keeping individual tax records. It would only need to keep real estate
records and assess the land values, both of which it already does for property
tax purposes.
Those who are retired or temporarily have little cash income would be able
to defer taxes by accumulating liens on the real estate until they die or
sell the property, as is commonly done today with real estate taxes.
If you thought the assessment of the land value was too high, you could
appeal, as one can today’s real estate taxes. The land value assessments
would be public records available on the Internet, unlike income tax records,
which are quite properly hidden from public view. You could easily compare
your assessment with those of your neighbors. If the appeals board rejected
your claim, the assessment could be appealed to a jury, if you were willing
to pay the cost of the jury’s decision.
Nobody would be sent to prison for tax evasion, because there would be no
tax evasion. A non-payer would lose title to his land or lose the protective
services of government, depending on the local enforcement practice. Property
taxes are already being assessed and collected by counties in the U.S. A
complete shift to the taxation of land values would not increase these costs,
but would eliminate the expenses involved in collecting sales and income
taxes. ... read the whole document
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