Wealth and Want
... because democracy alone is not enough to produce widely shared prosperity.
Home Essential Documents Themes All Documents Authors Glossary Links Contact Us


Balance in Taxation?

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.1  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.

There seem to be three arguments for this:

  1. that taxes should be drawn from as wide an array of sources as possible so as not to overburden any one base or sector.
  2. that the spread of tax burdens over a number of bases will ensure greater stability and reliability.
  3. that reliance upon a wider number of revenue streams minimizes the downside consequences which all taxes impose on the economy. ... read the whole article

Henry George: The Common Sense of Taxation (1881 article)

But it is probable that the disposition to tax everything susceptible of taxation does not spring so much from the notion that more may thus be obtained, as from the notion that as a matter of justice everything should be taxed. That all species of property shall be equally taxed, is enjoined by many of our State constitutions, and that it should be so, at least so far as direct taxation is concerned, is regarded by most of our people as a self-evident truth — the idea being that every one should contribute to public expenses in proportion to his means, or, as it is sometimes phrased, that all property, being equally protected by the State, should equally contribute to the expenses of the State.

But under no system that any of our legislatures have yet been able to devise is all property equally taxed; nor can it be equally taxed. And if it were possible to even approximate to the equal taxation of all property, this would not be to secure that equality which justice demands. For, as is evident in the case of mortgages, etc., to equally tax all property would infallibly be to levy a higher rate of taxation upon some than upon others; and even if the same proportion could be taken from the means of every member of the community, that would no more conform to the dictates of equality than would the levy upon each of an equal sum; for, as the demand for a sum which would not be felt by the rich man would fall with crushing weight on the poor man, so to take the same proportion of their means would be a very different thing to him who has barely enough, and to him who has a large surplus.

Quite as fallacious is the idea that all property should be equally taxed, because equally protected. The fact is that all property is not equally protected, cannot be equally protected, and ought not to be equally protected, if by protection anything more is meant than the mere preservation of the peace. The protection of property is not the end, it is only one of the incidents, of government. As John Stuart Mill says: "The ends of government are as comprehensive as those of the social union. They consist of all the good and all the immunity from evil which the existence of government can be made, either directly or indirectly, to bestow." And to say that government should impartially protect and equally tax all property, is like saying that the farmer should bestow the same care upon everything he may find growing in his fields, whether weeds or grain.

That there is no obligation to equally tax all property is fully realized in regard to property brought from abroad. No one contends for a tariff which should equally tax all such property. The protectionists assert that the leading idea in determining what should be taxed and what not taxed, and the different rates which various imports should bear, ought to be the promotion of the general good by the encouragement and protection of industry. Their opponents, on the other hand, do not deny the propriety of such exemptions and discriminations. They merely deny that industry can be protected and encouraged by the endeavor to shield certain classes of producers from foreign competition; and, in the enactment of a purely revenue tariff, they would make the same kind of exemptions and discriminations, with a view to the collection of the revenue with the smallest cost and least interference with trade. Both parties equally recognize the general good as the true guiding principle in taxation of this kind.

Even in internal taxation the same principle is largely recognized. On certain businesses and certain manufactures we impose taxes not imposed upon others, on the ground that it is for the public good that such businesses and manufactures should be restricted. With similar regard to the public good, we exempt certain species of property from taxation, as cotton factories in Georgia, growing crops in California, property devoted to religious and charitable uses in New York, the bonds of the United States, by Federal law, etc.

Evidently this regard for the general good is the true principle of taxation. The more it is examined the more clearly it will be seen that there is no valid reason why we should, in any case, attempt to tax all property. That equality should be the rule and aim of taxation is true, and this for the reason given in the Declaration of Independence, that all men are created equal. But equality does not require that all men should be taxed alike, or that all things should be taxed alike. It merely requires that whatever taxes are imposed shall be equally imposed upon the persons or things in like conditions or situations; it merely requires that no citizen shall be given an advantage, or put at a disadvantage, as compared with other citizens.

The true purposes of government are well stated in the preamble to the Constitution of the United States, as they are in the Declaration of Independence. To insure the general peace, to promote the general welfare, to secure to each individual the inalienable rights to life, liberty, and the pursuit of happiness — these are the proper ends of government, and are therefore the ends which in every scheme of taxation should be kept in mind. ... read the whole article

Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)

Q35. Why should land be singled out to bear the bulk of the burden of taxation?
A. Because in the private appropriation of the net rent of land is found the bulk of privilege.

... read the whole article


To share this page with a friend: right click, choose "send," and add your comments.

Red links have not been visited; .
Green links are pages you've seen

Essential Documents pertinent to this theme:

Top of page
Essential Documents
to email this page to a friend: right click, choose "send"
Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper