There are a lot of hard-liners who object to taxation and government, period, and while I sympathize to a degree, I think this also blurs important distinctions.
Not all taxes are created equal; not all taxes are equally bad - but the income tax is one of the worst.
A useful way to think of taxes is as a disincentive. A road tax is a disincentive for driving on the road; a meal tax is a disincentive for eating at a restaurant, etc.
When you think of a tax as a disincentive to a behavior, it becomes clear that not all taxes are created equal, because not all behavior is created equal.
So what does the income tax disincentivize? It disincentivizes labor. Labor, of course, is the source of all value in the economy. The income tax disincentivizes adding value to the economy.
Even if taxes were to stay at exactly the same rate, the income tax would be among the worst ways to apportion the tax burden.
The income tax has some support because it's viewed by some on the left as a "soak the rich" tax. The thing is, it's really not, because the truly wealthy are wealthy because of assets as opposed to income. As Warren Buffet has pointed out, he pays a tax rate of 17.7% for making $46 million, while his secretary gets taxed at 30% for making $60,000. What kind of 'soak the rich' tax is that?
So for the sake of argument, if taxes were to stay the same in amount raised, what would be a better way to apportion them?
The ideal maxim is; "tax what the individual takes away from society, reward what the individual contributes to society."
The income tax taxes what individuals contribute to society; their labor, their ingenuity, their passion and their skills. This is why it's among the worst possible taxes. The assemblyline worker and the CEO alike have their labor taxed in this way. When there is a high tax on labor, it shouldn't be surprising when there are high unemployment rates; it should be surprising when there aren't.
Using land, natural resources and extracting rent from others take away from societies in a real sense. Banks and speculators own much land and houses right now, which they are holding off the market to raise prices; fish such as bluefin tuna are fished at above maintainence rates to make short term profits; every year there are fewer trees than the year before; fears about peak extraction rates of oil and a host of other minerals abound, and regardless extracting them often causes great damage to the surrounding areas. Even if it's granted that taxes are always bad, these are economically better sources of tax revenue than income.
A tax on bluefin tuna would discourage eating it, and allow stocks to recover. A tax on land would make it a liability for banks or other investors to hold on to properties they're not using, possibly opening up land for homesteading but at least putting those properties on the market, which would lower the price of housing. A tax on minerals and petroleum would create a huge demand for inovation - for how to get the same results with less energy or material input, which would also reduce the collateral damage of extraction - and reduce many of the justifications for aggressive and expensive wars. A tax on lumber could reverse deforestation, so the world gets greener every year.
These taxes would have to be accompanied by tarrifs, so that if lumber is taxed at ten cents a unit in the U.S. and one cent a unit in Brazil, a nine cent tarrif would have to be levied on Brazilian lumber. This in turn would help relocalize jobs, because companies would have a double incentive to hire American workers; there is no tax on their labor, and there is less benefit in doing business in a foreign nation because it allows unchecked environmental damage.
Yes, the tax burden is way too high, period. But taxes cause varying degrees of harm and some even help in some ways. An income tax causes unemployment, which in turn requires the collection of yet more taxes for unemployment insurance, which is yet another tax on labor. A tax on idle housing property forces all such property to come to market, which drops the price of land and housing, reducing the need to government-built low income housing projects - which in turn can mean reduced government spending. Our problem isn't just the level of taxes, but where they're being placed.
So who benefits from the system we have? Some say the government, which is true to a degree - by creating problems the government creates justification for its expansion. But government workers aren't making huge dividends through capital gains - the super rich are. The system we have is a result of the market turning against itself, or the wealthiest turning against the market and influencing government to benefit themselves to the detriment of almost everyone else. Reform is nearly impossible, because the super-rich have such influence in government. Overthrowing the government is silly, because these people can easily afford to buy the next one, and would probably buy up stock in the movement to overthrow the government if it gained any steam. Only political power in the hands of individuals, in reality and not mythically through 'representation,' has any real hope.
This article on idle housing doesn't talk about where the houses are, but I'd bet that most of them are in certain concentrated areas. Probably low to low middle income.
Well, I was sort of right:
Las Vegas-Paradise, Nev., 12%
Cape Coral-Fort Myers, Fla., 11.9%
Merced, Calif., 10.1%
Riverside-San Bernardino-Ontario, Calif., 8.8%
Stockton, Calif., 8.6%
Modesto, Calif., 8.5%
Orlando-Kissimmee, Fla., 8.2%
Phoenix-Mesa-Scottsdale, Ariz., 8%
Port St. Lucie, Fla., 7.6%
Miami-Fort Lauderdale-Pompano Beach, Fla., 7.2%
Vallejo-Fairfield, Calif., 7.1%
Bakersfield, Calif., 7.1%
Naples-Marco Island, Fla., 6.4%
Reno-Sparks, Nev., 6.2%
Sacramento--Arden-Arcade--Roseville, Calif., 5.6%
Deltona-Daytona Beach-Ormond Beach, Fla., 5.3%
Sarasota-Bradenton-Venice, Fla., 5.3%
Lakeland, Fla., 5.2%
Fresno, Calif., 4.9%
Salinas, Calif., 4.8%
http://www.marketwatch.com/story/the-20-cities-with-the-highest-foreclosure-rates-2010-01-28?pagenumber=2
This is also a pretty useful link:
http://www.realtytrac.com/trendcenter/
How can we apportion theft at gun point; ahhh the eternal statist question.
ravochol: When you think of a tax as a disincentive to a behavior, it becomes clear that not all taxes are created equal, because not all behavior is created equal.
I would like to take exception to the above statement--simply as an exercise in friendly discourse!
My argument is that the OP is wrong to think of taxation as a value-generating, object-oriented phenomena, and that all taxes ARE in fact created equal because all taxes are acts of aggression against innocent people.
The taxed party can never opt out of taxation, therefore, taxation is not voluntary. If taxation is not voluntary, then it is initiation of aggression. As such, there cannot exist such a thing as a "helpful" tax because there cannot exist such a thing as "helpful" aggression against innocents. Any real or potential economic consequences from taxation should be categorized as an ethical aberration and should be treated as extraneous with respect to considerations about the development of just public policy.
If the goal is to find the best method for effectively managing resources, then taxation should be abandoned and forgotten, and private ownership should be embraced.
I think we probably agree in conclusion, but I couldn't resist thinking that perhaps I had something marginally useful to add to the OP, or perhaps not. I look forward to any replies.
@ Jorge
For the sake or argument, I'll accept the premise. If you don't think a tax can ever be helpful though, explain parking meters. Because parking meters "tax" parking on a roadside, no one parks on the taxed roadside for very long, meaning many people can go shopping down town and find a parking spot -because the parking meter creates a big disincentive for holding on to any one spot any longer than is strictly needed to do what you're there to do.
A tax on idle landed property would work the same way; it would discourage 'holding' a property and encourage putting it on the market for someone else to use. The tax would actually bring housing and land prices down, which would make the cost of living cheaper for everyone.
^Voluntarism depends entirely on your theory of property rights. If each man owns himself and has a right to his own labor, then taxation is involuntary.
Don't all taxes, at some point, disincentivize labor? Why work to buy things if the sales tax is 1000%? Or why work to buy property if property taxes are 1000%?
At most, I think only 5% of the adult population would need to stop cooperating to have real change.
ravochol: @ Jorge If you don't think a tax can ever be helpful though, explain parking meters. Because parking meters "tax" parking on a roadside, no one parks on the taxed roadside for very long, meaning many people can go shopping down town and find a parking spot -because the parking meter creates a big disincentive for holding on to any one spot any longer than is strictly needed to do what you're there to do.
If you don't think a tax can ever be helpful though, explain parking meters. Because parking meters "tax" parking on a roadside, no one parks on the taxed roadside for very long, meaning many people can go shopping down town and find a parking spot -because the parking meter creates a big disincentive for holding on to any one spot any longer than is strictly needed to do what you're there to do.
This is a helpful situation but ONLY if you ignore the costs of enforcement. But a tax is only viable if it is enforced. If there is no enforcement, people will simply ignore the tax. In this example of a tax on parking spaces, the enforcement costs are threats of or actual fines (read as extortion), impounding of vehicle (read as theft of property), imprisonment (read as kidnapping) or even death! The police will do all in their power to enforce laws, including tax laws. If a tax offender resists sufficiently, he will be killed.
No, this is not a helpful situation. If the goal is to manage parking spaces as effectively as possible, the best method would be one based on private property where the parties to each transaction are involved by their own choosing. I am, of course, describing the free market.
This same analysis is equally applicable to taxes on idle land, as well.
ravochol: ^Voluntarism depends entirely on your theory of property rights. If each man owns himself and has a right to his own labor, then taxation is involuntary. What does "having a right to your own labor" have to do with a land tax? A land tax is not a tax on labor... You are right to say that a land tax is not a tax on labor directly. But there is a relation. If a man owns his body, then by logical implication, he owns his labor. If he owns his labor, then by logical implication and assuming he hasn't violated the non-aggression axiom, he owns his extended property (here we are talking about land). | Post Points: 20
"A tax on idle landed property would work the same way; it would discourage 'holding' a property and encourage putting it on the market for someone else to use. The tax would actually bring housing and land prices down, which would make the cost of living cheaper for everyone."
Rapid housing deflation would also put a lot of people in the position where it becomes more intelligent to simply walk away from their homes. While I'm sure it will be argued that those homes would be better off in the hands of people who can actually afford them, I think the reality will simply be that no one will buy until things hit absolute rock bottom because buyers will expect prices to go lower. It's entirely possible that people who would've made payments otherwise will simply stop servicing their mortgages because they're so underwater. It's also possible that another round of mortgage defaults will create another credit crunch, something we don't want.
Since a lot of those mortgages are probably still tied to derivative type bets, significant housing deflation could lead to serious losses for banks since they're forced to mark to market all their assets everyday.
In conclusion, I don't see a point in imposing a tax that's supposed to cause housing deflation when it was rapid housing deflation that preceded the financial crisis just so resources can be reallocated more "efficiently." Just doesn't seem worth it to me.
EDIT: I've noticed that this thread is kind of taking place on two levels: one is the level of morality the other on the level of the economic effects of taxation. I'm not really interested in considering the moral consequences of taxation as much as I am interested in trying to predict the economic consequences of taxation. In other words, I'm trying to consider this thread from a value free perspective. Just wanted to make that clear.
Spideynw: Don't all taxes, at some point, disincentivize labor? Why work to buy things if the sales tax is 1000%? Or why work to buy property if property taxes are 1000%? Why stop at labor? If a tax on property reverts back to the labor associated with the property, by the same logic, it also reverts back to the originator of the labor, the person. And what comes before the person? Taxation disincentivizes life. Safe to say, taxes are just plain wrong! | Post Points: 5
Please forgive my questions/input if it seems ignorant - I am in the beginning stages of learning what most of you take for granted..
Is a parking meter a tax or a voluntary user fee???
if income taxes are a disincentive on labor - are not capital gains taxes a disincentive on investing??
I believe the "fairest" tax is a sales tax - because as far as I can see it is totally voluntary.
Be responsible, ease suffering; spay or neuter your pets.
We must get them to understand that government solutions are the problem!
I need only one distinction: is it moral, or immoral?
All taxes require the initiation of force, and are therefore immoral.
Pro Christo et Libertate integre!
Congrats on reviving Henry George.
Speaking or moral issues, there's an article in Bloomberg today which estimates that there are about 19 million vacant housing units in the U.S., while an estimate by the National Alliance to End Homelessness estimates that there are about 750,000 homeless people in America.
That's more than 25 empty houses for every single homeless person!
If all of those vacant properties were forced to find a buyer I would imagine the price of housing would go down a bunch, allowing some of those homeless people to be able to afford shelter and charities to being able to afford to purchase shelter for others.
Also, rents and mortgage prices would go down, decreasing poverty by allowing the poor to spend less on shelter.
Surely homelessness and poverty are moral issues.
The "idle resources theory" of keynesianism goes like this. There are people who need X. There's X sitting around in some warehouse doing nothing. You should give the idle X to people who need X.
Why doesn't this happen automatically? Because of speculation. People who have idle X are holding out that they can get a higher price for it. I.e. they expect that there will be a future demand for the commodity. In short, it rations the good and ensures investors know the good will continue to be valuable (and therefore worth producing in the future)
If some speculators in the housing market think the house is worth 500k, but its really only worth 300k, you should short the market. Your speculation will bring prices down and sell more houses. Obviously no one thinks housing prices will tank because of bernake's printing press. You're recommending more intervention to cure the intervention. Its all from the perspective of a central planner, who can only look at big aggregate statistics. Blind.
"Not all taxes are created equal; not all taxes are equally bad - but the income tax is one of the worst."
All taxes are essentially taxes on labor. All taxes are income taxes.
You think business owners voluntarily pay the tax?
As Warren Buffet has pointed out, he pays a tax rate of 17.7% for making $46 million, while his secretary gets taxed at 30% for making $60,000. What kind of 'soak the rich' tax is that?
Just a note. That claim by Buffett was easily debunked. Basically, he lied.
There is no way the secretary paid income taxes of $18,000 on her salary. Not possible. And if Buffett was using kitchen sink tax totals (federal,social security, state,local,etc.) for her then the comparison was not apples to apples because the 17.7% for him was federal.
Taxes are just a form of property seizure. Originally, taxes were not justified by the occurrence of a market transaction, the taxing authority simply took what was available to be taken. Taxing transactions (whether the payment of wages or any other price) is just an effective method of capturing as much property as possible. All other forms of taxation run into serious problems - poll taxes mean you don't get as much from the rich as you might be able to (or you have to start killing a lot of poor people who can't pay the high poll tax), random seizures or other direct wealth taxes quickly lead to property concealment, and so on. By taxing transactions, the taxing power can seize property that it knows exists by virtue of the act of exchange occurring in the first place. In addition, sufficiently effective taxation of transactions results in a quarantine of all large capital stocks... nothing can move without being taxed, so while the rich might be able to hide their wealth, they also won't be able to use it. So, the only way to make use of your concealed wealth is to reveal it and submit to being taxed.
Oh, and millenia of government propaganda has succeeded in getting people to believe that transactions need to be taxed because somehow transactions impose "costs" onto "society" which the government has to amend from tax revenues. And the Tooth Fairy is real.
Clayton -