What's Wrong with an Income Tax?
that is, a tax on wage income
Ethically, it is theft. It treats as common property that which individuals
create through their own labor. It may
be that, having taxed completely the more ethical tax bases — that
is, taxes on land and natural resources and other things humans cannot create — we
as a society might decide
that
we still needed
more
revenue for public purposes. At that point, a case might be made for taxing
wages. But clearly a tax on wages should not be one of our first taxes,
but one of our last-resort taxes, and then starting only at the highest of
incomes,
particularly if there is still huge concentration of income after tax reforms
are undertaken.
Income taxes require income tax forms, and require compliance by the taxpayer.
Much income is not reported. Loopholes create opportunities for the rich. Underground
economies are encouraged.
What we tax we get less of — as long as the item is of elastic supply,
which labor certainly is. When we tax labor, we discourage people from
working. We reduce their incentives to work. This is equally true at the
top and bottom
of the income spectrum.
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. ... read the whole letter
Louis Post: Outlines of Louis F. Post's
Lectures,
with Illustrative Notes and Charts (1894)
2. THE TWO KINDS OF DIRECT TAXATION
Direct taxes fall into two general classes: (1) Taxes that are levied upon men
in proportion to their ability to pay, and (2) taxes that are levied
in proportion to the benefits received by the tax-payer from the public.
Income taxes are the principal ones of the first class, though probate and inheritance
taxes would rank high. The single tax is the only important one of the second
class.
There should be no difficulty in choosing between the two. To tax in proportion
to ability to pay, regardless of benefits received, is in accord with no
principle of just government; it is a device of piracy. The single tax, therefore,
as the only important tax in proportion to benefits, is the ideal tax.
But here we encounter two plausible objections. One arises from the mistaken
but common notion that men are not taxed in proportion to benefits unless
they pay taxes upon every kind of property they own that comes under the
protection of government; the other is founded in the assumption that it
is impossible to measure the value of the public benefits that each individual
enjoys. Though the first of these objections ostensibly accepts the doctrine
of taxation according to benefits,12 yet, as it leads to attempts at taxation
in proportion to wealth, it, like the other, is really a plea for the piratical
doctrine of taxation according to ability to pay. The two objections stand
or fall together.
Let it once be perceived that the value of the service which government
renders to each individual would be justly measured by the single tax, and
neither objection would any longer have weight. We should then no more think
of taxing people in proportion to their wealth or ability to pay, regardless
of the benefits they receive from government than an honest merchant would
think of charging his customers in proportion to their wealth or ability
to pay, regardless of the value of the goods they bought of him." 13
... read the book
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