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
The U.S. tax system is widely perceived as too complex, too intrusive, and
too demanding of workers’ paychecks. Taxes today claim a greater share
of the average family’s budget than food, clothing, housing, and transportation
combined.1 In 2005, the average American had to work 107 days just to pay
taxes, compared to 44 days in 1930.2
Tax reform proposals, not surprisingly, are popular among voters and the politicians
who represent them. President George W. Bush created an advisory panel on tax
reform. Some economists and institutes have proposed reforms to flatten
and simplify the income tax, or to replace it entirely with a national sales or
consumption tax or value-added tax.
These would be an improvement, but if we seek to reform taxes, we should
consider all the possibilities and choose, as Milton Friedman puts it, the “least
bad” tax.
Even a relatively flat income tax imposes what economists call a “deadweight
loss” or “excess burden” on society. Taxes on productive
activity increase the price of labor or goods beyond economic costs, and
so reduce the quantity provided. This reduction in production, income, and
investment
is a misallocation of resources. Resources are wasted because they do not
go to where they are most wanted. We can reduce this excess burden by reducing
taxes, but changing the type of tax can also reduce this deadweight loss.
Economists
recognize that if we tap for public revenue a resource whose quantity is
fixed, the excess burden disappears. The tax does not reduce the supply and
does not
increase prices. ...
It is widely understood that when something is taxed, we get less of it.
As discussed above, this reduction in labor, production, and investment is
called
the “excess burden” or “deadweight loss” of taxation.
Income taxation discourages work, sales and value-added taxes discourage
consumption, capital gains taxes discourage investment, and real property
taxes discourage
building and improving property. Those taxes make the asset or activity more
costly, which then reduces the
quantity bought of the thing being taxed.
What makes land different is that its supply is fixed, and it is independent
of human action. When land value or rent is tapped for public revenue, the land
does not shrink, flee, or hide. ...
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 per year.29
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 $2,000. ...
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. ...
The national rent in the United Kingdom has been estimated at 22 percent
of national income, which exceeds the amount
raised in that country by the income tax.41 Steven
Cord42 estimated
the annual economic rent of land in the U.S. in 1986 at $680 billion, 20 percent
of national income, while Mike Miles (1990) arrived at a similar figure using
data from the Bureau of Economic Analysis.43 The totals
include government lands but do not include the increase in geo-rent that would
occur with the elimination of market-hampering
taxes.
Making up about one-fifth of national income, land value taxation would provide
about 60 percent of current U.S. federal, state, and local government revenue,
which would be more than adequate for government spending if it did not include
transfer payments. The taxable value of the land in the economy would increase
over time for two reasons.
...
An ideal public revenue policy respects a person’s right to privacy,
does not discourage work or savings, and does not induce dishonesty. While
income, sales, and value-added taxes fall woefully short of this ideal, land
value taxation meets each requirement.
Imagine the increased prosperity and opportunities for advancement that would
exist if people could keep all of the money they earn; if billions of dollars
wasted on efforts to avoid high income taxes were suddenly turned to productive
endeavors; and if the growth of government were constrained by a tax system
that would raise only
enough to pay for services actually provided. ...
Impact on behavior
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 per
year.29
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 $2,000.
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