Harmonious Tax Reform

But who among us could lay claim to the sunlight for his own? Sounds ridiculous, right? Yet isn't that the exact thing that is done for land? No one has right to your labor, yet no one has right to that which he did not create! This is different from what one labored to ... improve! If you're going to tax, tax what we take (from the land and others), not what we (others) make! Tax what we take, not what we make!

Try to keep an open mind in what follows.

What?

In light of the increasing calls for guaranteed income from the Left and calls to reel in 'property' and other taxes on the Right, it is time to revisit Thomas Paine's and others' plans, at least conceptually, that would likely resolve differences with those on the left and the right, hence harmonious tax reform.

To understand, we must first understand that NONE of US made the SUNLIGHT (electromagnetic spectrum), the LAND (minerals and surface), or the AIR. Imagine how many of us would challenge someone who had declared he could prevent one from collecting rainwater or sunlight! Yet, we allow this EXACT thing for the land, without which NONE of us can feed ourselves and which NONE of us created. The result is forced reliance on the system we have created at the expense of our natural rights to the LAND, SUNLIGHT, WATER, etc. The problem is that property has been defined as including the LAND itself, rather than the result of LABOR, which would be improvements on the LAND.

Consider this quote:

• "The classical liberal distinctions between land, labor and capital were greatly confused by socialists, and particularly Marxists, who substituted the fuzzy abstract term, "means of production," for all three factors. They also blurred the distinction between common property and state property, for socialists believed, as royalty also believed, that they were the people.

Today, the confusions between land and capital and between state property and common property are shared by socialists and royal libertarians, and only classical liberals keep these distinctions clearly defined. Yet royal libertarians frequently duck the land issue by charging that it is the classical liberals, not the royal libertarians, who have embraced socialist ideas." See: Wealth and Want.

The same page states:

• "We are libertarians who make the classical liberal distinction between land, labor and capital. We believe in the private possession of land without interference from the state, but in the community collection of land rent to prevent monopolization of land.

We believe that all government activities should at least be limited to those which increase the value of land by more than what the government collects, and that government should be funded entirely from the land value increases it creates.

We oppose direct state monopolization of land as well as state-sanctioned private monopolization of land, and advocate that state and federally held land pay land rent to the communities the same as private land.

We advocate that government be allowed to spend only what is authorized by voter referendum or similar device and that it take for itself the minimum it is authorized to spend. Those who advocate collection of the full rent stipulate that the proceeds be divided among community members on a per-capita or similar basis, for the land, and the rent, belong to the people, not the state.

We condemn the taxation of property improvements, and of all activities, productive, consumptive, or recreational, as invasions by the state into the private affairs of free individuals."

What a novel idea? Not really, but it has gotten lost.

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Using a caricature of extremist Leftist views (die evil capitalist pigs die), what if one could claim exclusive use of the sunlight to detriment of his or her neighbor, and his claim on the sunlight could earn him a profit, which could eventually be used to lay claim to even more sunlight? Further, if none could claim the sun, yet it were possible to consume it, how quickly would its light be blotted out like the buffalo on the American plains? We call this the Tragedy of the Commons in some circles. I also propose that those on the Left are right in that everyone deserves an equal opportunity.

Where I differ is that equal opportunity does not mean equal result. To demand equal result is unbalanced thinking with the logical conclusion turning us all into termites - having no distinctions in skills or mindset whatsoever.

However, if I borrow a metaphor from sports, proponents of the Left and the Right may agree that not everyone can be a successful quarterback. The objective of football is for each player to match his skills to a given position and for everyone to do their JOB! How is life any different? The problem becomes one of self-interest mixed with one's skills and natural abilities on the grander playing field of life.

For a Rightist perspective, one should work for their keep - good quarterbacks get their recognition, but don't forget the offensive line! Where I differ with the Right is when one's Labor can be used to acquire the exclusive use of the LAND, SUNLIGHT, or AIR from others without some just compensation, over THE DIMENSION OF TIME! Think bigger picture folks. Everyone should have access to the SUN, the AIR, and the LAND to provide for themselves - to be driven by their own hunger to plant a garden! It is a type of birth right given to us by who or whatever made this world.

But, alas - life is not so simple - some time ago, we redefined property to include the LAND. We might as well have included the SUN. We have been taught our whole lives that the LAND is something you own rather than occupy during your sojourn here. Perhaps the Tribes of the Continent called America had a way of thinking that had some validity, no one "OWNS" the land.

In the event that you think these notions are completely off-base, consider that note worthy founding father Thomas Paine, Jefferson, Adam Smith, John Locke, et all have numerous quotations to support a way to balance labor with the land (the natural resources).

Paine:

• “The present state of civilization is as odious as it is unjust…The contrast of affluence and wretchedness continually meeting and offending the eye, is like dead and living bodies chained together.”

• “Man did not make the earth, and though he had a natural right to occupy it, he had no right to locate as his property in perpetuity any part of it; neither did the Creator of the earth open a land-office, from whence the first title deeds should issue. Thus, Every proprietor, therefore of cultivated lands, owes to the community a ground rent (for I know of no better term to express the idea)... Each individual attaining the age of 21, should receive the sum of fifteen pounds sterling, as compensation in part, for the loss of his or her natural in heritage, by the introduction of land property…and the sum of ten pounds per annum, during life, to every person now living, of the age of fifty years, and to all others as they shall arrive at that age.”

• "But the earth in its natural state, as before said, is capable of supporting but a small number of inhabitants compared with what it is capable of doing in a cultivated state. And as it is impossible to separate the improvement made by cultivation from the earth itself, upon which that improvement is made, the idea of landed property arose from that parable connection; but it is nevertheless true, that it is the value of the improvement, only, and not the earth itself, that is individual property."

It's subtle: "it is the value of the improvement, only, and not the earth itself, that is individual property".

Did you catch it?

Jefferson:

• "Legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree, is a politic measure, and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise."

• "Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a commonstock for man to labour and live on. If for the encouragement of industry we allow it to be appropriated, we must take care that other employment be provided to those excluded from the appropriation. If we do not the fundamental right to labour the earth returns to the unemployed."

• "It is too soon yet in our country to say that every man who cannot find employment but who can find uncultivated land shall be at liberty to cultivate it, paying a moderate rent. But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small land holders are the most precious part of a state."

Regarding Jefferson's last quote - some have argued that we have lost our social equilibrium - that the jobs have left the country. Trump is one of those. Others argue that a high-school education is hardly enough to raise a family anymore. While smart folks may find themselves quickly moving beyond minimum wage, consider that for those who can't understand why minimum wage would hurt them, that they may still want to raise a family. Just thinking out loud.

Lincoln (before using cannon fire to force his views):

• "The land, the earth that God gave to man for his home, his sustenance, and support, should never be the possession of any man, corporation, society, or unfriendly Government, any more than the air or the water, if as much. An individual company or enterprise requiring land should hold no more in their own right than is needed for their home and sustenance, and never more than they have in actual use in the prudent management of their legitimate business, and this much should not be permitted when it creates an exclusive monopoly. All that is not so used should be held for the free use of every family to make homesteads, and to hold them as long as they are so occupied.

• "A reform like this will be worked out some time in the future. The idle talk of foolish men, that is so common now, on 'Abolitionists, agitators, and disturbers of the peace,' will find its way against it, with whatever force it may possess, and as strongly promoted and carried on as it can be by land monopolists, grasping landlords, and the titled and untitled senseless enemies of mankind everywhere." (todo: add source link)

Modern Economist, Piketty:

• A few years ago, a French economist by the name of Thomas Piketty made waves with the publication of Capital in the 21st Century, a prodigiously weighty economic tome that simplified the perpetual problem of inequality down to three symbols: “r > g”. Translated, this equation claims that wealth begets wealth faster than economic growth creates wealth, or in other words, the rich get more of the pie faster than the pie itself can grow the size of the slices for everyone. Assuming this is true, there is then no way around redistribution of wealth outside of another wealth-destroying world war or social revolution, because humans have their inequality limits.
• The Internet, however, is full of surprises, and a critique of Piketty’s hypothesis by a college student called Matt Rognlie bubbled up from an online comments section to gain notoriety. Rognlie is now credited with adding an incredibly important insight to this discussion by pointing out that if one looked really closely at the letter “r” in Piketty’s equation, only one part appeared to be responsible for almost all the growth, and that lone part was land ownership." (todo: add source link).

Consider reading a bit more:

• Consider: Agrarian Justice by Thomas Paine
• Consider: Locke's treatise on property.
• Consider: What is Land Value Tax?
• Consider: The idea of property
• Consider: Why LIbertarians should support a land value tax
• Consider: Affordability ranking comparing Texas which relies more heavily on property taxes including land value, and California which relies heavily on income Taxes
• Consider this discussion of property and reason: [1]
• Consider: Royal Liberty vs. Classical
• Consider this discussion of Thomas Jefferson et al on land, Thomas Jefferson, letter to James Madison, dated October 28, 1785:
• Consider: Article on Land Titles

Why

The idea behind the land value tax is to provide a fair opportunity for those entering this world. Note: I did not say result! Fairness for what people have labored to create. No one has right to your labor, yet no one has right to that which he did not create! See another article here for a deeper explanation.

How

From a practical perspective, many states already have an existing property tax system. One proposal is simple - identify a county or even smaller subdivision, perhaps even a privately held tract, to run as a pilot program to test for feasibility of a land value rent system.

In the chosen microcosm, allow for exemption from most property tax or gradually reduce the taxation on structures and improvements to nil, and gradually raise the taxation, or rather, allow for economic rent to be extracted from the land- basically provide some compensation to members of the chosen entity to either distribute the funds or make improvements for the community as a whole. It sounds sort of strange, right? See here: an example.

For a more detailed discussion see this video series. Many taxation systems may employ an exemption system and the land value tax could and has incorporated exemptions on the basis of homesteading or agricultural usage - this may mitigate the negatives of this system, at least from a perception standpoint.

Examples of Success?

On a national level: Denmark, Singapore, Hong Kong, Taiwan, laid the foundation of the land value tax in their system and appears to have reaped the rewards; however, they eventually turned towards income taxes and the like. Why? It is my understanding that after using this system, eventually taxes drop lower and lower, which results in the system itself being dropped by the taxing authorities. See here for commentary and discussion.

Here is a sample quote:

"Apologists for state planning and state partnership with big business point enthusiastically to Pacific Rim Asia but overlook the fact that all these success stories began on a firm footing of land reform. The city-state Singapore, founded on Georgist tax principles, reached a tax rate on land of 16%. Hong Kong existed only on crown land, funding 4/5 of their budget with 2/5 of site Rent (Yu-Hung Hong, Landlines, 1999 March, Lincoln Inst., Cambridge, MA). The city uses land rent, not subsidy, to fund their new metro and in its suburbs grows much of its own food. Hong Kong enjoys low taxes, low prices, high investment, and often the highest per capita salaries. The city is often voted the world’s best city for business and the freest for residents. " 

Some towns in America have had success with one town, Fairhope, Alabama noting a key part of our current issues:

"There was fierce opposition to the idea of taxing 100% of the rental value of land on the part of railroads, mining companies, land developers, and others, and the single tax was never implemented. In the 1880's when the single theory was being promoted, the responsibilities of government were such that the revenues from a single tax on land could probably have paid all government obligations of the time. As years went by, however, the role of government has changed to the point where a single tax on land could not generate the revenues required to fund the expanded government activities."

Note: "role of government has changed to the point where a single tax on land could not generate"

More discussion follows here: [2]

Challenges

All systems have their challenges, here are a couple for the LVT or similar proposals. LVT has its own set of issues if is implemented by a State/Country. See the Strengths and Weaknesses of Various Ideologies.

• Some segments of the population may spend their inheritance on frivolous living
• It may not deal well with derivative financial instruments
• There may need to be homestead or other exemptions, similar to how 'unimproved' food is exempted in many sales tax systems.
• Consider: [3]

Local Conditions

Local conditions may alter the value proposition or what makes sense. When I visited Iceland I learned that they have very cheap energy there. It has something to do with the island being on top of one big volcano.

The Game Plan / Next Steps

• Join the Facebook group if you would like to support efforts to implement at the state, county, or local level, particularly for Texas.
• Create a bill to adjust Texas property tax system
• Identify and recruit politicians to sell the idea in a pilot for an independent county, city, or school district.