Wealth and Want
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History of Taxation

Mason Gaffney:  George's Economics of Abundance: Replacing dismal choices with practical resolutions and synergies

Georgist policy can be applied at any level: local, state, or national. To some extent it is even applied at a world level, through the U.N., with its concept of "common heritage" applied to oceanic resources of the deep seabeds.

Georgist tax policy can also be applied at any tax rate, low or high. A low rate does a little good; a high rate does a lot of good.

In this Century, strenuous efforts have been made to box the property tax into the local level, where local particularism tends to cap the rate. In England, this policy is identified with the half-brothers, Austen and Neville Chamberlain. Neville was so successful that in 1938 he was forced to face Adolf Hitler without any armed support, with the disaster at Munich. In America the Federal government last taxed land in the Georgist manner during the Civil War. After 1913 it taxed the income from land, but in recent years the income tax has degenerated into a payroll tax primarily. In tandem with the other payroll tax it has become a primary cause of our depressed labor market.

In 1920, about half of all state revenues (not counting local) came from state property taxes. These tended to focus on land, rather than capital, much more than now. Both the state and Federal governments could tax land again, any time the voters send that message.   Read the whole article

Mason Gaffney: Taxation of interjurisdictional e-commerce

Most writers and reporters in this new field accept state and local sales taxes as part of the ordained order of things. The predominant attitude is one of how to preserve and raise the state sales tax, by taxing purchases from "foreign" (out-of-state) sources, which are regarded as an administrative nuisance and a leakage.

Modern textbooks on public finance do not treat the general retail sales tax as the historical novelty that it is. They no longer mention that no state taxed retail sales until 1929 (GA) and 1930 (MS), and most not until 1933 (when California joined the movement with a rate of 2%) and the mid-thirties, by which time half the states joined in. Few books give any weight to the fact that 5 states and one province (Alberta) have no sales tax at all: the states are Alaska, Oregon, New Hampshire, Delaware, and Montana. The academics treat these states as eccentrics and laggards, and trivialize them for their small populations, but the states in question, which have 10 U.S. Senators among them, do not see themselves that way at all.

One of them, Oregon, in 1980 retired the powerful Chairman of the House Committee on Ways and Means, Al Ullman, because he championed a Federal VAT.

Another, New Hampshire, plays a key role in screening presidential candidates. It is rather a matter of some local pride, not to mention commercial advantage.

People speak casually about a uniform Federal standard for all states (and all cities and counties within states, over 7,000 taxing jurisdictions in all). But state taxes are a power reserved to each state; not one they will quietly abandon.

Few academics show much concern about the sales tax's partiality and non-uniformity. They enumerate a few exemptions, but then favor it because it allegedly exempts capital formation.

... I am here to explore how e-commerce may work as a lever to lower or quash sales taxes, and to show how states may do that without making catastrophic quakes or waves. ...

The Commerce Clause has preserved interstate tax competition. Without it, it is likely that state sales taxes would rise to 20% or more in short order, as the wholesome fear of interstate competition was stifled. It created and has preserved our domestic market, the greatest free trade zone in the world, an essential ingredient of American productivity and prosperity. It is not something to be thrown away lightly, especially not for the sake of something as baneful as the retail sales tax.  ....

What would happen in California if we eliminated the sales tax, and replaced it by raising the property tax?

A. No catastrophe  Five states and the Province of Alberta already get along nicely with no sales tax, so it must be possible. No state at all had a retail sales tax before 1929 (GA).
California opened its gates in 1933 with the Riley-Stuart Act, and so did several other states.
  • It was sold as an "emergency measure," at a rate of 2%.
  • As late as 1977 it was 4.75%.
  • Now it is 7.25% statewide, with many cities, counties and transportation districts adding their tolls to the total, but for most of our state's existence we got along nicely with either no sales tax, or much lower rates than today.
The Property Tax rate would rise to a level lower than it was before Prop. 13.Assessed Value (A.V.) of taxable property. Add that to the current 1%, and get 2.19%, compared to 2.7% before Prop. 13 - except that the 2.7% was applied to actual value, while today's assessed valuations are far below that. California sales tax revenues are currently 1.19% of the

The A.V. value of land is probably about 1/3 or so of market value; buildings are closer to market.

B. Greater equity:  The distribution of the tax burden would shift from poor counties to richer ones.   Thus,
  • in the poor inland counties of Fresno, Tulare, Imperial, and Stanislaus, sales tax revenues are about 1.5% of A.V.s.
  • In rich coastal and suburban counties of Sta. Barbara and Marin, sales tax revenues are about .75% of A.V.s.
Thus, the state sales tax takes a lot more money from the poor counties than it would cost them to replace the services from local taxes; the rich counties, with the high property tax bases, are contributing less to the common pool than they are saving in property taxes.

Within counties, by extension and analogy, I am reasonably certain that a careful study will show that the burden would shift from poorer cities and districts to richer ones. Again, among individuals, I believe we would find the same. One of these days, God willing, I will find the time and money to conduct or sponsor such a study.

The relevance here of this equity question is that most states and provinces have complex and expensive systems and formulae for "power equalization," and the like, designed to shift resources from rich counties to poorer ones. One reason such programs are needed is to offset the effects of the very same state sales taxes used to finance them. There are great savings to be realized by quashing this cross-hauling of public funds. Read the whole article

Bill Batt: The Fallacy of the "Three-Legged Stool" Metaphor

Tax experts, especially at the state level, ply their trade by invoking one metaphor above all others: the three-legged stool.  It rests on the claim that a sound and successful tax regime for any government needs to rely on a three tax bases: income, property and sales.  This is repeated so often that it passes today without much examination. ...

The power with which the three-legged stool analogy has underpinned tax policy is in fact rather disconcerting, because a close examination of its premises shows that they are very questionable.  These benchmark measures of a tax regime are scrutinized here in order to cast doubt on the claims so often made on their behalf. Read the whole article

Mason Gaffney: The Property Tax is a Progressive Tax


Karl Williams:  Social Justice In Australia: INTERMEDIATE KIT

There's a simple rule of thumb which will guide us here - taxes on land (in its wider sense of natural resources) are desirable and do not inhibit wages or production, and taxes on labour and capital punish both. Remember this catchy little slogan? - pay for what you take, not what you make.

The history of taxation reveals that taxation has increasingly been diverted from land to capital to today's mixture of capital and labour. Fascinating studies have shown that the prosperity of the average English labourer with a family of five actually peaked around 1495. This was the age of "Merrie England" when taxes were almost entirely on land, and land prices were low. But then the infamous enclosures of the commons accelerated, with land taxes increasingly being replaced by taxes on capital and labour. In 1495, the wages of the average English labourer were around 2.9 times the cost of living, but this relatively affluent state was rapidly turned around as taxes were shifted off land. By the mid 1600's wages were almost down to the breadline as common land had been almost entirely enclosed by the Crown and the "nobility."

Other examples of the destructive power of taxation abound. In the Middle Ages, merchants and the emerging middle class were slugged. Duties were levied on traded goods everywhere, stifling trade and enterprise and giving rise to the inefficiencies of smuggling and organised crime. Wealth taxes in France were based on the number of windows in a person's house, resulting in houses being boarded up. The same taxes were imposed in the Arab world on the number of palm trees that a person owned - you can guess the result.

Before we modern, educated citizens start chuckling too loudly at our forebears, we should look at our own tax system. What does the GST do to sales (and, by implication, production and employment)? How is a person's motivation to work affected by income taxes? What effect do payroll taxes have on the number of people on the payroll?

But the right taxes can have constructive results. The reason why some Geonomists advocate taxes on social undesirables such as tobacco and alcohol is because they are not really arbitrary taxes, but an attempt make people who choose to abuse their health pay for their future health costs. ... Read the entire article


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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper