Being absolutely well off means,

• first, that one is able to rise substantially above subsistence through peaceful and honest means, whether from one's labor, from one's rightful share of natural and contractual benefits, or from gifts.
• Secondly, to be absolutely well off requires complete liberty, so that the only legal restriction is the prohibition of coercive harm to others. Liberty includes security against attack, either by government or by private persons, since one is not really free if one is under substantial threats of death and theft against which one is helpless. ...

1. To the creator belongs the creation.
2. The profit of nature's creation belongs equally to all.
3. The benefit of what is created by government belongs to all the people in its jurisdiction.
4. When the initial distribution is just, the outcomes of free exchange are just and should not be hampered  ... Read the whole article
   

Adam Smith, in The Wealth of Nations, suggested that any "tax" should be a charge for services which benefit all people and are more efficiently preformed by a single cooperative effort. He postulated four principles of taxation which any source of revenue should meet:

1. Light on the production of wealth, and does not impede or reduce production;

2. Cheap to collect, requiring few collectors, and easy to understand;

3. Certain; can't be avoided, little opportunity for corruption, and provides adequate revenue;

4. Equitable and fair, payment for benefits received, impartial, and just.

Collecting public revenue from land rent is the only revenue source, or "tax", that meets these criteria. ...

While the major argument for raising public revenue from land rent and natural resources is because it is equitable and fair, it is also the most efficient method of raising the revenue which is needed for public facilities and services. Land is visible, can't be hidden and its valuation is less intrusive than valuations of income and sales. Taxes on labor and capital cause people to consider alternative options, including working with less effort, which produces less real goods. For example, a tax on wages will reduce after-tax net wages and weaken the incentive to work. A person might be willing to work hard for a wage of $20 per hour, but decide to drop out if the taxes take $8 and the net wage is only $12 per hour. Economists claim that present taxes account for a 25% loss in production in the United States. Production and consumption would be greatly improved if public revenue came primarily from land rather than a wage tax. The same would occur when buildings and machinery are taxed. The tax on building reduces the quantity and quality of buildings produced. A tax on sales, commerce or value added reduces consumption, production and net wealth. Sales tax evasion in the United States has exceeded 30% in recent years.

As new inventions and more efficient ways of producing goods are discovered, people's economic well-being is not improved, because they have lost access to land and must pay both rent and taxes. (5) Instead of rent being used to provide community services, capital and wages must be depleted, which obstructs private enterprise.

When the rent of land is taken for public purposes production and distribution are not held back. This is because the same amount of rent would otherwise have been taken by some private individual. The rent would be the same, the difference is how it is utilized. There is evidence that communities who raise their revenue from land, rather than from labor and capital, are more prosperous, many increasing productivity by more than 25%.  ... Read the whole article

• pay rent to somebody else ... or
• live in a caravan park or
• share a home with relatives or friends or
• have no place to call "home". 

Recognition of the equal rights of all to natural opportunities, through land value taxation and its extension to charges for the use of other resources, is not only just and efficient, but has the capacity to make a major contribution to economic growth. This occurs through a variety of paths.

The most important path is that public collection of the value of exclusive use of natural opportunities provides revenue that makes it possible to remove taxes from the earnings of labor and capital. When people are taxed less, they earn more. Using data that emerged from changes in U.S. tax rates, Feldstein has estimated that the elasticity of earnings with respect to the fraction of income not taken at the margin by federal taxes is at least 1.0 (and more for workers in higher tax brackets).6 When the entity that removes a tax on labor is less than global, this action also attract labor to the region.

When taxes are removed from capital, the effect is even more powerful, as long as the entity removing the tax is less than global. Capital is extremely mobile in response to regional changes in net returns. It is highly counterproductive for any locality or nation to tax capital, because there will be virtually no effect on the return to capital after taxes. Capital will merely be driven from the taxed region until the return after taxes matches what can be obtained elsewhere. If the whole world removes taxes from capital, the resulting increase in the rate of return to capital will increase the rate of saving, but the adjustment will occur over some years.

Taxing land has an additional effect that increases the stock of capital. A tax on land represents a redistribution from living adults to the young and unborn, who will now be born with rights to land. Unless there is a perfectly offsetting reduction in the desire to accumulate assets to transfer to the next generation, this redistribution will induce the living, who now have fewer assets, to accumulate at a more rapid rate than they would otherwise do. That is, saving and capital accumulation will increase.

Taxing land also increases the efficiency with which land is used. This occurs through three paths.

• First, a tax on land reduces the return to land speculation, and therefore reduces the quantity of land speculation.
• Second, as taxes on land are capitalized into the selling price of land, the result is the substitution of a recurring cost (the annual tax) for a one-time cost (the purchase price). This makes land relatively more attractive to bidders with high discount rates and relatively less attractive to bidders with low discount rates. To the extent that the former are more entrepreneurial and the latter more passive investors, land will tend to flow into the hands of persons who will choose to use it more intensively.
• The third path by which a tax on land increases the efficiency with which land is used is that, for those who are using land inefficiently, it substitutes an explicit cost (the tax) for an implicit one (the income foregone by inefficient use).

Psychologically, explicit costs tend to be more effective in motivating efficient behavior than implicit ones.

VIII. An Estimate of the Magnitudes of the Consequences of Taxing Land

For all of the above reasons, the substitution of tax on land for taxes on labor and capital will increase the efficiency of an economy. To estimate the magnitudes of these consequences, one needs a model of the economy. Consider the following model. There is a three-factor CES (constant elasticity of substitution) production function:

Q = (aTà + bLà + cKà)(1/à). (1)

where Q is output, T is the quantity of land, L is the quantity of labor, K is the quantity of capital, a, b and c are coefficients, and à is related to the elasticity of substitution, å, by à = 1 - 1/å. Land has a completely fixed supply. Labor is assumed to have an elasticity of supply of 0.8 (adjusting Feldstein's number for the fact that he was considering only federal income taxes. Capital is assumed to be supplied perfectly elastically. Taking the ratio of compensation of employees to Net Domestic Product in National Income and Product Accounts, I assume that labor receives two thirds of output. Somewhat arbitrarily, I assume that the remaining third is divided equally between land and capital. I estimate that the marginal tax rate on labor is 43% (28% for the federal income tax, 12% for the combination of state income taxes indirect taxes, and 3% for the Medicare tax--I treat social security as having benefits equal to its costs, and therefore not a tax.) I estimate the marginal tax rate on land and capital at 50% (28% for the federal income tax, 12% for the combination of state income taxes and indirect taxes, plus 10% for profits taxes). The elasticity of substitution is a parameter that I am very unsure of. But Feldstein has estimated that the marginal welfare cost of taxation is 1.65, and I get that result with a å of 0.68, so I assume that å = 0.68.

I have a spreadsheet that takes parameters such as the ones named and determines what would happen (in a comparative static framework) if all taxes were removed from labor and capital, and 100% of the rent of land were taxed. Here are the results:

• The quantity of labor would increase by 55%.
• The quantity of capital would increase by 145%.
• Output would increase by 53%.
• The wage before taxes would fall by 1.7%, but the wage after taxes would increase by 72%.
• The rent of land would increase by 87%, and would provide more than enough revenue for all existing expenditures of all levels of government in the U.S., other than social security.
• The aggregate improvement in well-being of citizens would be about 12.6% of output, or about $1 trillion per year. ... Read the entire article