Justice Demands a Tax Shift
Minimizing the Pain of Taxation
Below is the text of a radio broadcast. See if you can guess the year of the original broadcast.
Let us consider the painful subject of taxation. Even though citizens may differ on the extent of revenue needed by the government there can be no doubt that governments do supply services which are necessary to citizens and which have to be paid for. The public funds needed have to be drawn from the wealth produced by the nation as a whole and the method of raising them is by taxation.
In fact, a tax is simply a charge imposed by authority upon some basis for the support of a government. It all depends upon what is selected as the basis for the charge or tax whether it is good or evil in its effects. It has been said by Supreme Court Justice Marshall of the United States that "Taxation is the power to destroy -- or to create." Let us look closer at the principles of the taxes open to us to see which have those opposite effects.
Although there is a multitude of taxes they can all be reduced to two clear cut types. In fact there are only two possible alternative forms of taxes. The First -- Taxation of the individual according to values which he himself has produced by his own labor or capital. The Second -- Taxation of the individual according to the share he holds of values produced by the community as a whole apart from his individual effort.
Of the first type are income taxes, sales taxes, excise, tariff taxes, motor taxes, dog taxes, flour taxes, amusement taxes. They all take from the citizen part of the results of his own labor quite unrelated to the value of any service he receives from government.
In the second group are land taxes and levies falling on the value of land itself apart from buildings or other improvements made by the owners. The site-value or ground rental-value of land is a public value due to the growth of the community as a whole apart from the individual effort. This value is largely created by the provision of those very public services for which we are asked to pay in taxation. It is therefore a matter of commonsense that governments should draw upon that public value as its primary source of revenue.
The taxes imposed on the results of individual efforts, such as income tax, sales tax, tariffs, are all anti-social in their nature. Their effect is to limit the production of wealth. Just as dog taxes have the effect. of restricting the number of dogs, so these taxes restrict production of wealth. We see this with primary producers who could do more but will not, because they are in an income tax range where the government would take most of their extra production. Government exhortations to produce more have proved fruitless for this reason.
Likewise, tariffs and sales taxes mean higher prices to consumers, so there is less of their income available to buy other goods -- hence less such goods. The result is that there is less total wealth available to divide among the citizens. It is these taxes that fall on the individual according to values he produces of which show the power of taxes to destroy.
The land value taxes, which we recommend, have the opposite effect. They do not restrict production -- they encourage it. The amount of the charge is independent of whether the holder of these public values makes use of them or not. Owners of under-developed holdings must, therefore, at least develop them enough to make them earn the tax -- and whatever they produce above that figure is theirs to keep.
Owners who are now developing their holdings would gain far more from the removal of their income and tariff taxes than the increase in their basic land tax.
Taxes upon land values are the most just and equal of all taxes. They fall only on those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking for the community of that value which is the creation of the community. It is the application of the common property to common uses.
When all "ground rent" is taken by taxation for the needs of the community, then will the equality ordained by nature be attained. No citizen will have an advantage over any other citizen save as is given by his industry, skill and intelligence; and each will get what he fairly earns.
Then, but not till then, will labor get its full reward and capital its natural return.
--- A.R. Hutchinson
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