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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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