In addition to preventing the taxation of wages, Henry George was obsessed with the overall fairness of a tax system. His main goal with his Single Tax (on unearned income only) was to avoid taxes which could be shifted unto consumers and wage-earners, except that he condoned a tax on consumers of luxury goods and services, because if the tax targeted only luxury items, it would not be shifted onto ordinary consumers. On this same idea, a general sales tax on grocery items would be shifted onto ordinary consumers and the poor, whereas a restaurant or meal-preparation tax would likely not.
Tax scholar Edwin Seligman also referred to George’s tax shiftability concerns as the “tax incidence,” and if you’re interested in exploring further, he well-explained the concept in “The Shifting and Incidence of Taxation” (1899).
Whether a tax is “progressive” or “regressive” is related to the tax shiftability issue. A progressive tax simply refers to a tax burden that increases as the taxable amount increases, and a “regressive tax” (the opposite) increases the tax burden as the taxpayer’s tax base, or ability to pay, decreases.
Stated differently, a regressive tax is one that can be shifted onto ordinary consumers and the poor, and a progressive tax is one that stays put when levied on a taker of unearned income.
For example, a 50-cent per gallon tax on gasoline will not detract from the net profits or dividend pay-outs of oil companies, but WILL be passed on or “shifted to” the consumer. In other words, the incidence of the tax, or who ultimately pays the tax, is the consumer and the poor. The same goes for sales taxes, property taxes, tariffs, imposts, duties, excise taxes, and one of the U.S. income taxes (the Springer income tax which targets wages). https://en.wikipedia.org/wiki/Progressive_tax
Also related to tax shiftability concern is the debate over whether the Single Tax was based on the “benefit theory of taxation,” where one is taxed on the benefits received from holding a land parcel vs. the “faculty” or “ability to pay theory,” where a tax on land gains is only collected when the taxpayer can easily pay the tax (without losing his land or going into debt to pay the tax).
Although many Georgists believe the Single Tax to be a form of property taxation, Henry George objected to property taxes because they targeted both land use (i.e., labor) and land ownership (i.e., potential ground rents) at the same time. George was concerned that, because a property tax is a direct tax on all aspects of land use and ownership, and demands a tax whether or not the landowner has access to the gain and is able to pay, that the tax would end up being falling on labor/wages.
To summarize, the debate over tax incidence, progressive vs. regressive taxation, benefit vs. faculty theory, etc. are closely related to the overall issue of tax fairness.
Another important concept which deserves mention was the concept explained by Henry George’s lawyer, Thomas G. Shearman, in “Natural Taxation” (1898).
Shearman’s basic idea was that certain kinds of people (rent-seekers) were “nature’s tax collectors,” and if government failed to heavily tax (really, retrieve or reclaim) their unearned takings (while leaving their wages untaxed), a grossly unfair tax system would result.
This idea is especially important today because under neoliberal theory we’ve been duped into believing that rent-seekers (i.e., landlords, lenders, employers and speculators) are entitled to keep most or all their income, whether earned as a wage, or taken as unearned income. And we’re taught that government is terribly inefficient and inept when it comes to providing social services.
Part of the rent a tenant pays to a landlord is a tax, and is really intended for the government so it can provide for the health, education, training, retirement, etc. of the tenant, but the tax is shifted onto the tenant if not collected by government from the landlord.
Part of the capital/land gain paid for an inflated land parcel by a land buyer is partly a tax which belongs to government for the benefit of the public at large, and is not intended for the landlord or land speculator, so tax unfairness will result if the tax on the land gain is not collected from the landlord by government.
Part of the interest a borrower pays to a lender is a tax paid by the borrower to the government, but is intercepted or privatized by the lender if the government fails to collect the lender’s net unearned income.
In addition to actual (overt) taxes on wages paid by an employee, an employee also pays a hidden (covert) tax whenever forced to accept a low or unfair wage for work performed (because of the employer’s monopoly advantage over land, corporate privilege, capital, etc.). Of course, the employer is entitled to a wage, which may be substantially higher than that of employees, but the employer should not be allowed to keep the unearned net income or profits produced, nor should the employer be allowed to pay the net income to shareholders in the form of dividends. If this unearned income is not taxed or reclaimed by government, the tax system will be unfair, and the tax will have been shifted onto to ordinary consumers and the poor.
A general “inflation tax” is shifted onto ordinary consumers if Congress does’t tax income received in Federal Reserve notes using highly progressive tax rates (under the currency-regulating Springer income tax).
(1) Taxes on unearned income, i.e., Henry George’s “single tax,” which includes taxes on net rental income, net interest income, dividends, net corporate profits, capital/land gains, gambling winnings, etc.
(2) Taxes on luxury goods
(3) Taxes on estates, prior to 1916 known as legacy, succession or inheritance taxes
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Rick is a self employed attorney from Boston, Massachusetts. He graduated from Boston College and studied law at the Massachusetts School of Law at Andover. He also administers the Facebook group called Common Wealth Tax, which seeks to explore the (currently obscure) link between modern income tax laws and the Land Value Tax (LVT) advocated by political economist and “Greenbacker” Henry George (1839-1897).