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