ABOLITION: THE ONLY TAX REFORM
Many harebrained ideas are promoted in connection with tax reform. These include flat rate income taxes, a Tobin Tax or other forms of transactional taxes including VAT/GSTs. Although people who promote each are often well-intentioned and seized with the certainty of the efficacy of their arguments, they are thoroughly misguided.
They ignore the many great philosophers who have come to the conclusion that payment of the economic rent for the privilege of exclusively-possessed land, natural resources or other government-granted privileges is the only real solution to failing economies, because taxation does indeed destroy.
Whereas taxation is an arbitrarily-imposed fine, economic rents are a payment for a government-granted privilege. Whereas taxes add directly to costs and deadweight throughout the economy, rents do not. Although the distinction is critical, the 0.5% endeavour to fudge it with catch cries such as “a tax is a tax”. (Yes, but a rent isn’t!)
Moreover, whereas taxes continue to inflate land prices, the public capture of land rents acts to decrease them.
As the financial system sinks into Bunyan’s slough of despond, a glow of a light that glimmered wanly over the horizon has increased as a number of countries look to “property taxes” with increasing regard. Some even appreciate property improvements should remain untaxed if derived revenues are to remain rents in nature.
Given the dire situation of world economies, it was therefore very heartening to see The Economist come out in praise of the benefits of “Levying the Land” on the weekend.
Against the wishes of what should be a shamefaced 0.5%, it does seem a welcome dose of reality is beginning to set in.