Your State Has Budget and Tax Problems
The Three Thirds of Whatever You Buy
I bet your local government has budget and tax problems. If our local economy is like a bucket, there's a leak in that bucket -- and we all suffer as a result. Everett W. Gross describes the leak in the bucket, and suggests a fair, gradual way to fix it.
by Everett W. Gross
Who has not joined the fray about Nebraska's budget and tax problems? The same is going on in your state, wherever you live. Advice includes cutting programs or curtailing waste or raising (someone else's) taxes. The many proposals cover a lot of territory but leave a great big gap. That gap is a proposal to study how to wake up the entire economy and get much needed revenue from the increased business.
But that study would need to consider how the economy functions and what if anything, might be holding it back. So let me take a shot at it. When you buy anything, for instance food, approximately two-thirds of the price you pay is already taxes. However, only one of those thirds is a collection of hidden taxes called by the name of taxes. It includes all of the taxes including income taxes paid by all of the employees and managers who had any hand in producing and delivering and keeping books and furnishing buildings and factories involved in the article that you buy. That third of your price goes to the various branches of government. Yes, you do pay all of the income taxes of all of the people who produce what you buy; if you didn't, they would not survive.
So much for one third of the price of the item. The second third is also a tax but does not go by that name. It. may go by different names but you pay it for permission to occupy the earth. Whose permission, you ask? Every crop, every factory or store building, every employee's residence had to occupy a location that had to be paid for. That location price is over and above any goodies that any owner may have supplied or any taxes he may have paid on it. That location price is not paid to the person who created the location. Geology created the location. What made it valuable? The nearless to the school, the road, the police and fire station, the other businesses and factories and homes.
Then does this second third of your price go to pay for these schools and roads and police and fire protection, etc? No, it does not, but think about it a little while. Shouldn't it? But all of those amenities are paid out of that first third which I mentioned above. Are those two "thirds" exactly the same size? Maybe not, but experts disagree on which is larger.
So the portion of your price, about another third, not mentioned above is all that is left to reward, (that is, hire and pay) everyone who had any hand whatsoever in producing the article that you bought; yes, even that bookkeeper and the merchant who sold the ink to print the label on that can of beans. Why should you pay two thirds of your price for taxes when the government gets only half of that to pay for all of the public costs? And a noticeable fraction of the public cost is for building and maintaining utility lines and roads past empty and underdeveloped lots held idle for speculation. The speculator expects the sale price to rise if and when other people establish businesses and homes around it. He is seldom disappointed.
What. can be done about it? First, get the speculative bare lots on the tax rolls at an assessed value and levy high enough to induce the holder to sell or use the lot. But do it. gradually, as any significant change should be done. Watch the other investment opportunities open up all over town. Second, start reducing taxes on the property improvements and watch still more investments open up. Any speculator or improver who objects to that is shooting himself in the foot and doesn't know it.
Then why don't we do it that way? Why is something simple so hard to tell? All I can guess is that each person we try to explain it to is afraid to stop long enough to look into an idea that is not already commonly known and accepted by most other people. You have heard of so many things that did not work. This idea is being tested in Pennsylvania and other places. It works.
Stay tuned. This one article cannot explain it all.
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