Not all forms of taxes impose a burden. But few Americans realize this;
as my mother would have expressed it, our education has been neglected!
Income taxes are a burden. Sales taxes are a burden. Building taxes are
a burden. So what's left? What is there that is fundamentally different from
wages, sales and buildings? Land value!
Reassessment is a way of making sure
that the burden of property taxes is distributed in proportion to the current
values of all the properties within a tax district, so that the owners
of faster-appreciating properties bear their fair share of the tax burden,
and those whose properties
are not so favored (perhaps because they lack attractive views, or access
to infrastructure, jobs or services, or are near noxious neighbors) are not
more than their current share. Georgists will argue that the tax burden
should not fall on the manmade additions to one's property, that apportioning
tax burden in proportion to the value of the land itself is more just and
provides a more desirable set of incentives.
"In my opinion the least bad tax is the property tax on the unimproved
value of land, the Henry George argument of many, many years ago."
-- Milton Friedman, Nobel laureate in Economics
"Pure ground rent is in the nature of a 'surplus,' which can be
taxed heavily without distorting production incentives or reducing efficiency."
-- Paul Samuelson, Nobel laureate in Economics
The true purposes of government are well stated in the preamble to the Constitution
of the United States, as they are in the Declaration of Independence. To
insure the general peace, to promote the general welfare, to secure to each
individual the inalienable rights to life, liberty, and the pursuit of happiness — these
are the proper ends of government, and are therefore the ends which in every
scheme of taxation should be kept in mind.
As to amount of taxation, there is no principle which imposes any arbitrary
limit. Heavy taxation is better for any community than light taxation, if
the increased revenue be used in doing by public agencies things which could
not be done, or could not be as well and economically done, by private agencies.
Taxes could be lightened in the city of New York by dispensing with street-lamps
and disbanding the police force. But would a reduction in taxation gained
in this way be for the benefit of the people of New York and make New York
a more desirable place to live in? Or if it should be found that heat and
light could be conducted through the streets at public expense and supplied
to each house at but a small fraction of the cost of supplying them by individual
effort, or that the city railroads could be run at public expense so as to
give every one transportation at very much less than it now costs the average
resident, the increased taxation necessary for these purposes would not be
increased burden, and in spite of the larger taxation required, New York
would become a more desirable place to live in. It is a mistake to condemn
taxation as bad merely because it is high; it is a mistake to impose by constitutional
provision, as in many of our States has been advocated, and in some of our
States has been done, any restriction upon the amount of taxation. A restriction
upon the incurring of public indebtedness is another matter. In nothing is
the far-reaching statesmanship of Jefferson more clearly shown than in his
proposition that all public obligations should be deemed void after a certain
brief term — a proposition which he grounds upon the self-evident truth
that the earth belongs in usufruct to the living, and that the dead have
no control over it, and can give no title to any part of it. But restriction
upon public debts is a very different thing from restriction upon the power
of taxation, and reasons which urge the one do not apply to the other. Nor
is increased taxation necessarily proof of governmental extravagance. Increase
in taxation is in the order of social development, for the reason that social
development tends to the doing of things collectively that in a ruder state
are done individually, to the giving to government of new functions and the
imposing of new duties. Our public schools and libraries and parks, our signal
service and fish commissions and agricultural bureaus and grasshopper investigations,
are evidences of this.
But while no limit can be properly fixed for the amount of taxation, the
method of taxation is of supreme importance. A horse may be anchored by fastening
to his bridle a weight which he will not feel when carried in a buggy behind
him. The best ship may be made utterly unseaworthy by the bad stowage of
a cargo which properly placed would make her the stiffer and more weatherly.
So enterprise may be palsied, industry crushed, accumulation prevented, and
a prosperous country turned into a desert, by taxation which rightly levied
would hardly be felt.
Now discarding all idea that there rests upon us any obligation to equally
tax all kinds of property, and assuming for our guidance the true rule, that
taxation should be levied with a view to the promotion of the general prosperity,
the securing of substantial equality, and the recognition of inalienable
rights, let us consider upon what species of property it may be best laid.
To consider the nature of property of this kind is again to see a clear
distinction. That distinction is not, as the lawyers have it, between movables
and immovables, between personal property and real estate. The true distinction
is between property which is, and property which is not, the result of human
labor; or, to use the terms of political economy, between land and wealth.
For, in any precise use of the term, land is not wealth, any more than labor
is wealth. Land and labor are the factors of production. Wealth is such result
of their union as retains the capacity of ministering to human desire. A
lot and the house which stands upon it are alike property, alike have a tangible
value, and are alike classed as real estate. But there are between them the
most essential differences. The one is the free gift of Nature, the other
the result of human exertion; the one exists from generation to generation,
while men come and go; the other is constantly tending to decay, and can
only be preserved by continual exertion. To the one, the right of exclusive
possession, which makes it individual property, can, like the right of property
in slaves, be traced to nothing but municipal law; to the other, the right
of exclusive property springs clearly from those natural relations which
are among the primary perceptions of the human mind. Nor are these mere abstract
distinctions. They are distinctions of the first importance in determining
what should and what should not be taxed.
For, keeping in mind the fact that all wealth is the result of human exertion,
it is clearly seen that, having in view the promotion of the general prosperity,
it is the height of absurdity to tax wealth for purposes of revenue while
there remains, unexhausted by taxation, any value attaching to land. We may
tax land values as much as we please, without in the slightest degree lessening
the amount of land, or the capabilities of land, or the inducement to use
land. But we cannot tax wealth without lessening the inducement to the production
of wealth, and decreasing the amount of wealth. We might take the whole value
of land in taxation, so as to make the ownership of land worth nothing, and
the land would still remain, and be as useful as before. The effect would
be to throw land open to users free of price, and thus to increase its capabilities,
which are brought out by increased population. But impose anything like such
taxation upon wealth, and the inducement to the production of wealth would
be gone. Movable wealth would be hidden or carried off, immovable wealth
would be suffered to go to decay, and where was prosperity would soon be
the silence of desolation.
And the reason of this difference is clear. The possession of wealth is
the inducement to the exertion necessary to the production and maintenance
of wealth. Men do not work for the pleasure of working, but to get the things
their work will give them. And to tax the things that are produced by exertion
is to lessen the inducement to exertion. But over and above the benefit to
the possessor, which is the stimulating motive to the production of wealth,
there is a benefit to the community, for no matter how selfish he may be,
it is utterly impossible for any one to entirely keep to himself the benefit
of any desirable thing he may possess. These diffused benefits when localized
give value to land, and this may be taxed without in any wise diminishing
the incentive to production.
Every consideration of policy and ethics squares with this conclusion. The
tax upon land values is the most economically perfect of all taxes. It does
not raise prices; it maybe collected at least cost, and with the utmost ease
and certainty; it leaves in full strength all the springs of production;
and, above all, it consorts with the truest equality and the highest justice.
For, to take for the common purposes of the community that value which results
from the growth of the community, and to free industry and enterprise and
thrift from burden and restraint, is to leave to each that which he fairly
earns, and to assert the first and most comprehensive of equal rights — the
equal right of all to the land on which, and from which, all must live.
Thus it is that the scheme of taxation which conduces to the greatest production
is also that which conduces to the fairest distribution, and that in the
proper adjustment of taxation lies not merely the possibility of enormously
increasing the general wealth, but the solution of these pressing social
and political problems which spring from unnatural inequality in the distribution
of wealth. ... read the whole article