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Source link: http://archive.mises.org/4907/flat-tax-folly/

Flat Tax Folly

April 14, 2006 by

Steve Forbes’s plan for a flat tax seems good, writes, Laurence Vance. But there are major problems, among which that it will raise many taxes. Deductions, exemptions, credits, shelters, and loopholes all accomplish the same thing; albeit in different ways: they allow people to keep more of their money. Those would be gone under his proposal, and we would experience no increased freedom. The government wins, and we lose. FULL ARTICLE

{ 79 comments }

Person April 14, 2006 at 8:37 am

I’ve never understood this love of loopholes/deductions/whatever. Yes, they let you keep your own money. However, they are also used to manipulate your behavior, and cost money in other ways — the diversion from higher-valued activities to lower, and the time and money that must be invested every year to figure out the optimal tax strategy. They are easily exploited by lobbyists, leading to the “crony capitalism” libertarians are *supposed* to be disavowing. Also, since Vance is not above “this policy will lead to this other bad policy later” type arguments, I can just as easily add that deductions will just result in tax increases later to make up the difference.

And of course, in another typical Laurence Vance tax “critique” article, most of his “arguments” (and I use that term loosely) against this policy proposal are of the form “It retains bad part X of the present system.” Well yeah. Virtually any good policy is going to fail to fix *everything*. The important question is whether it makes things *better* along the relevant axes. So the Flat Tax is progressive? If progressive taxes are bad, isn’t it good that it reduced the progressiveness? Or is the prefect the enemy of the good still?

Alan Dunn April 14, 2006 at 8:56 am

I have a solution too the problem :0).

We adopt a free market ideology whereby we dont have any government – so we get rid of taxation altogether.

The only reason we have taxes is so government can jam up the workings of the free market and misallocate productive resources.

It doesnt matter if the tax is regressive or progressive – each can serve no purpose other than to misallocate resources.

All that time and effort to avoid paying taxes could surely be used for a greater good if we removed taxes altogether.

In Australia our tax system has forced many small businesses to allocate far too much time to compliance – that indeed would be better spent servicing their core function of actually “running a business”.

cheers everyone – and don’t eat too many easter eggs. :0)

cheers

Casey Khan April 14, 2006 at 9:12 am

Person,

I agree here with you. I’m no fan of any tax, but I am not convinced that the current progressive tax code with loopholes, etc is preferable to me over the ‘flat’ tax.

As to deductions on mortgage interest, I think it is an abomination which has led many into blindly thinking that they are always better off leveraging to buy a house than renting. The common thing heard about this, without ever running the numbers, is you have to borrow for a home because you need to do it for the deduction. There are actually people out there who have cash in the fractional reserve banking system which can cover their principle mortgage payment. Why don’t they pay off their house? Mortgage deduction. In reality which is more prudent having title to the property or having a lien on it with cash in a shaky fractional reserve banking system? This tax deduction will be a major contributing factor to the ruin of many individuals and the destruction of the middle class by meddling with their time preferences.

So while Forbes’ system is fraught with problems, I’m not convinced it’s worse than what we have now. I’d gladly give the Fed’s back more of their paper money to get the trade off of not hassling with the opportunity costs with the current code and the lower likelyhood of throwing people in jail for wacky interpretations of noncompliance.

With that said, I naturally prefer no taxes.

Nick Bradley April 14, 2006 at 10:41 am

Here’s the problem that we Libertarians have when it comes to the issue of taxation:

Most (if not all) of us here have done enough reading and study to realize that any form of taxation is theft.

Be that as it may, we must still deal in reality. We must ask: “what is the least painful way for the government to rob me?” It is a sad statement, but it is true.

I accept this reality. That being the case, I support tax reform.

Out of all the politically-feasible reform proposals out there, I think the FairTax would be best. If you want to know more about the FairTax, DO NOT read the childish book by Boortz, which makes too-good-to-be-true claims and is written for the average American and his or her 8th-grade reading level. To get a true look at the FairTax, look at some of the studies done by Jorgensen & co. I learned most of my information on the FairTax from these types of sources. I have given a good run-down on the FairTax here: http://crwl.blogspot.com/

If I could impose any type of tax reform that I wished, I would do the following:

I would ban the Federal Government’s ability to tax citizens, goods, or any private entity. Instead, the Feds would be only allowed to levy a flat tax on State Treasuries. The higher the revenues a state brings in, the more in taxes it pays. This would force states to reduce their own taxable income as a result.

Preferably, state government would follow the same pattern and only tax the counties. Counties would raise their revenue from levies on cities, individuals, goods, services, and property (both developed and undeveloped). If this pyramidal tax structure were developed, the citizen’s greatest impact on taxation would be achieved at the local level. Some counties could even opt to levy $0 in taxes; this would create anarcho-capitalist counties within a statist system. Those who wish to live in such an anarcho-county could choose to do so.

Any thoughts?

Gil Guillory April 14, 2006 at 10:56 am

Nick,

That’s a great proposal! You should write an article on it.

Gil

glen April 14, 2006 at 11:07 am

My proposal:
All non-constitutional spending must be eliminated but not before this takes place (it would be nice but is not necessary). Eliminate withholding. A monthly (quarterly is acceptable) itemized tax bill from the government similar to a credit card bill. EVERYBODY is to pay their fair share; that is projected government spending/population*members of your household. You can deduct government spending of which you don’t approve (or pay more if you approve of it). If less than 100% of that amount is made available via taxes, that program is eliminated or reduced to that level.

Nick Bradley April 14, 2006 at 11:11 am

Gil,

Perhaps I will.

Nick Bradley April 14, 2006 at 11:22 am

Glen,

Although a poll tax, as you suggest, would be just, most simply couldn’t pay it. With a $2.5T budget and roughly 300 million americans, each american would be responsible for $8,333 a year in taxes; that would be $33,333 a year for a family of four. With a family-of-four median income of $65k in 2003, the median family of four would pay over a 50% tax rate.

And this doesn’t include state and local taxes.

Dennis Wilson April 14, 2006 at 11:35 am

I am at a loss to understand why critics of the current tax system–including Laurence Vance and most other Mises writers–fail to mention AND SUPPORT the Liberty Amendment:

http://www.libertyamendment.com/

If the proposed Amendment is flawed, please explain why (as Mr Vance did so superbly regarding Forbes plan). If it is sensible, then get behind it and PUSH, PUSH, PUSH. Talk about it, write about it, mention it at every opportunity, MAKE opportunities to mention it, in short: make the “public” aware of it!

There are currently nine States which have already endorsed the Liberty Amendment. These States are (in the order of which they endorsed the Amendment, from 1961-1999):

Wyoming • Texas • Nevada • Louisiana • Georgia • South Carolina • Mississippi • Arizona • Indiana

* Also, on January 28, 2003 the Hon. Ron Paul of Texas introduced in The House of Representatives the House Joint Resolution 15:

Proposing an amendment to the Constitution of the United States relative to abolishing personal income, estate, and gift taxes and prohibiting the United States Government from engaging in business in competition with its citizens.

Why continue to ignore a comprehensive Amendment movement that is already this far advanced?

Dennis Wilson

billwald April 14, 2006 at 11:53 am

First, the system will not be changed because most people are not sufficiently dissatisfied to take a chance on something new. Most people use the short forms.

Second, under the Forbes plan, half the economy would still be sub rosa.

Third, statements like “Forbes also correctly points out the huge costs of complying with the tax code” pull my chain because a balance sheet has two sides. Someone is always profiting from “hugh costs.”

William April 14, 2006 at 11:57 am

This flat plan is just flat lined. It will not work. This plan will speed up the transfer of compensation in the wealthiest folks away from income to say capital and dividends. Not that that is bad but the Feds will never buy it because they know it will cost them the money they need to buy votes.

The only solution to helping the economy is still the old fashioned one of cutting spending and proportionally reducing income tax and other tax rates. If the federal part of government costs 3% of GDP then this and any other tax argument would be pointless.

Tom Leser April 14, 2006 at 12:07 pm

Laurence Vance needs to come out of La-La Land. His solution is to “cut federal spending in half”. What a brilliant and original idea Larry. How about telling your readers how we go about doing that with a hidden tax system in place with the income tax?

You also claim a “fairest tax” would be a head tax? Sounds very much like a direct tax to me. Not sure how you believe this would be the fairest tax vs. an indirect tax.

“The advantage of taxes on articles of consumption is that their nature contains a security against
excess. §11: This type of imposition is usually called indirect taxes.”—Alexander Hamilton, FP 21

The solution for now is the FairTax, which actually has a very good chance at passing.

Tom Leser
FairTax IN Asst. State Director / FL-15 District Director
http://www.FairTax.org
http://www.FairTaxIndiana.net
http://www.FLFairTax.net

Sriram Gopalan April 14, 2006 at 12:32 pm

I support flax tax as long as the tax rate is zero percent. Assuming that doesn’t happen, it is still better than the current, highly-complicated system. At least for the simplicity, it should be lauded.

Nick Bradley April 14, 2006 at 12:53 pm

William,

You stated the best solution would be the “the old fashioned one of cutting spending and proportionally reducing income tax and other tax rates”. Could you tell me when that has EVER happened? The best we have ever had is a reduction in the rate of growth, coupled with tax cuts.

Brad Dexter April 14, 2006 at 1:40 pm

There seems to be an assumption that one tax rate is a cure all and assumes that the code will be simplified there from.

The actual calculation of tax is not all that hard, either looking it up on a table, or using the calculation grid in the instructions (granted sometimes the tax is calculated elsewhere if gains are involved).

It is the determination of the income subject to tax, and the calculation of the credits subtractable from that amount, and whether particular credits can run negative or not. So a the rates don’t necessarily need to be flat, progressive taxation is slightly different argument.

I echo the horrendous complexity of the tax law in determining the amount subject to tax, to behavioral control nested in it, and the special interests and political pork that is sewed into it. Having two or three rates at different breaking points certainly isn’t complex, it’s IRA’s, 401k’s, self dealing definition, Simple Plans, earned income credits, capital gains rates (should be done away with), AMT, deductions with floors (and circular calculations that result), contradictory bases definitions, 5 depreciation definitions, exemption differentials based on certain attributes, standard versus itemized deductions, interest expense (some deductible, some not) etc etc etc etc etc etc etc etc etc etc etc etc etc etc etc etc etc etc etc etc etc etc etc, that make the whole thing patently unfair.

My father passed away a few years ago, and while the financial remainder was not simple a W-2 and a bank account, he wasn’t CEO of Pepsi either. It took me the better part of two days to go through and prepare a return for my mother (I’m a CPA) and I still wasn’t sure I had it right (calls to the IRS were not fruitful). The long and the short of it is that tyranny seems to be imbedded in the notion that a relatively old lady cannot even hope to scratch the surface of complying with her government when her spouse dies, and needs professional assistance. It screams injustice. But it’s par for the course in this day and age. And get anything wrong, and it’s penalties and interest, too. The system is sick and perverted.

Perhaps if the system were less a mystery, and a person could do their own taxes, and feel the bite directly, then maybe people will awaken from their slumber. Don’t worry about the singularity of rates, make people aware of what is really happening.

Paul Edwards April 14, 2006 at 1:48 pm

Casey,

“I’d gladly give the Fed’s back more of their paper money to get the trade off of not hassling with the opportunity costs with the current code and the lower likelyhood of throwing people in jail for wacky interpretations of noncompliance.”

I feel for your position and I think many others do as well. The problems are that although we may really hate doing our taxes the way we do them presently, we all still do them precisely BECAUSE we really would NOT gladly give the government back more of OUR paper money just to make things easier on us. Otherwise, we would fill in the tax form, not claim any non-obvious deductions, and send it in. Easy.

Secondly, I simply cannot be convinced that adoption of a new form of taxation has any potential of improving things. The tax burden will be as great, and the inclination to avoid this burden will be as looming.

The only good kind of reform is negative: remove: remove government spending, remove the need for tax money. This concept of shifting how we get our blood drained is just not satisfactory. Do we prefer bullet or knife wounds? They both serve the same purpose and one is not less painful than the other.

Ralph April 14, 2006 at 1:48 pm

It seems that if Lysander Spooner was right, that the Constitution is a contract unsigned by any of us and therefore not binding, there is no need to pay taxes.

From a religious point of view, the churches teach us to “Render unto Caesar”, yet the churches themselves are exempt from taxes. If “Caesar” were to tell them to start paying they would scream “First Amendment!”.

Why are churches exempt while individuals are not? If government grants exemption to churches, and if churches teach us to “Render unto Caesar”, then that is violation of the church/state separation on the part of both the church and the state. What gives? (We do)

Under that First Amendment agreement, the church becomes a corporate exploiter as much as the state. The whole process forces us into a collectivist ideology as we divide up our hard earned money between the two corporate bodies.

First, there is no “Caesar” in US government. According to the Preamble, WE are “Caesar”. We should render unto ourselves.

Second, Jesus never taught the Pharisees they should pay taxes to Caesar or any other government. When he was asked “Is it lawful to pay taxes to Caesar?” He showed them a coin and asked “Whose image is on this coin?”

With that question, he tied four subjects together: law, money, taxes, and images. If we look at biblical law regarding images, we see the second commandment, FORBIDDING any service to graven images or likenesses of any kind. With his answer of “Render unto Caesar”, therefore, Jesus was telling them NOT to pay taxes at all.

If churches teach otherwise, they contribute as much to enslavement as the government, and in fact work in partnership with the government to perpetuate that enslavement.

Nick Bradley April 14, 2006 at 1:57 pm

Ralph,

The use of a tax-exemption carrot is not a lbessing for religious organizations. On the contrary, acceptance of the expemptions essentially forfeits many of the first amendment political rights.

With churches exempt from income taxes, we mysteriously find religious leaders absent from politics. However, many left-wing religious leaders stay in the public square, primarily because nobody at the IRS is going to prosecute them, especially somebody like “Reverend Al”.

Vince Daliessio April 14, 2006 at 2:00 pm

Ralph sez;

“With his answer of “Render unto Caesar”, therefore, Jesus was telling them NOT to pay taxes at all.”

I think it was more subtle than that. Jesus also appreciated that Caesar was already busy diluting the value of his coinage, for the purpose of funding war and imperialism. Local preferred currency in Palestine at the time was still hard money. I think he was also saying something about the relative morality of working for the imperium, for which one was paid in imperial coin rather than gold or silver.

“If churches teach otherwise, they contribute as much to enslavement as the government, and in fact work in partnership with the government to perpetuate that enslavement.”

Obvious, that.

R.P. McCosker April 14, 2006 at 3:22 pm

A few thoughts:

1) Vance calls the number of words in the Bible cited by Forbes “nonsense.” Weirdly, the difference between that and the number Vance considers true is relatively small. It seems like it would’ve been more appropriate for Vance to call Forbes’s figure “inaccurate.” Nonsense refers to logical, not empirical, error, and this is only by a small amount anyway. (By the way, and only speaking as one who’s not a Biblical scholar, I wonder if the difference has anything to do with that of the original Hebrew/Aramaic/Greek texts versus any of various English translations.)

2) Vance sarcastically refers to Newt Gingrich having written the forword. Unfortunately some readers who aren’t seasoned libertarians might miss Vance wasn’t serious by calling the neocon Gingrich a friend of liberty or some such thing, and then either conclude the wrong thing about Gingrich or that Vance doesn’t know what he’s talking about. Mises daily columnists might do well to consider that many readers here are novices who need to be won over to paleolibertarianism.

3) For the record — excuse the ad hominem — Forbes is a gutless, vacuous cipher who was very lucky indeed to have inherited his father’s holdings. Doubtless the book under discussion got, shall we say, a lot of help from more able hands. For example, cf.
http://www.vdare.com/pb/bell_curve_10yrs.htm .

4) Though I generally agree with Vance here, it seems peculiar to argue to make that the present income tax system shouldn’t be improved because it’s better if people hate the tax system more. I think a better variation on that would be to argue that libertarian-minded people shouldn’t waste their resources or divert themselves from the virtually infinitely more important and substantive goal of actually downsizing (perhaps including completely eliminating) the State: It affirms the legitimacy of statism and democracy on the one hand, is a waste, and compromises the meaningfulness of our message.

5) The comment by Dennis Wilson that we ought to be pushing for the Liberty Amendment seems OT. Isn’t that the proposed constitutional amendment forbidding treaty obligations from superceding constitutional provisions? Not a bad idea — if you think amending the Constitution is a good way to fix things — but what has that to do with federal tax policies?

Dave Scotese April 14, 2006 at 3:40 pm

“The important question is whether it makes things *better* along the relevant axes.”
-Person

“The solution for now is the FairTax, which actually has a very good chance at passing.”
-Tom

“it is still better than the current, highly-complicated system.”
-Sriram

Recall the story of the frog in the water. If the temperature goes up fast enough, the frog will jump out. Lowering the rate at which the water heats might lengthen the life of the frog, but its chances of avoiding death in the pot are reduced. I submit that if the sentiments I have quoted take hold and have a real effect, the end of the system will be more devastating but take far longer to happen. I think that even Paul’s input is detrimental to the poor frog unless it is drastic and reflects a change in the perception of the general population:

“The only good kind of reform is negative: remove: remove government spending, remove the need for tax money.”
-Paul

I share Brad’s sentiment:

“Perhaps if the system were less a mystery, and a person could do their own taxes, and feel the bite directly, then maybe people will awaken from their slumber.”
-Brad

The frog must suffer more in order to be motivated to jump. Let’s not try to ease his pain until he has escaped the pot.

Now for the other proposed plans:

“If the proposed Amendment is flawed, please explain why (as Mr Vance did so superbly regarding Forbes plan).”
-Dennis

The Liberty Amendment effectively uses legislation to hinder the “progress” of the federal government in its inexorable consumption of the citizenry. I cannot put my effort into supporting legislated solutions because my personal philosophy identifies fear-backed respect for authority as one of two main roots of the problem. The other main root is the expectation that others will help pay for what you want. These roots exist in the vast majority of the population, and passing an amendment will not help eliminate them. Education, courage, and voluntary trading relationships are the only things I can back.

“Not that that is bad but the Feds will never buy it because they know it will cost them the money they need to buy votes.”
-William

Limiting yourself to those proposals that you feel would gain the acquiescence of the feds seems like limiting your efforts for survival to those that will kill you.

“If this pyramidal tax structure were developed, the citizen’s greatest impact on taxation would be achieved at the local level.”
-Nick

“You can deduct government spending of which you don’t approve (or pay more if you approve of it). If less than 100% of that amount is made available via taxes, that program is eliminated or reduced to that level.”
-Glen

These both have the essential nugget of wisdom required for a system that will make things better instead of worse over time, and that is allowing people to choose whether or not to pay for what their government is doing for them. Most people insist that without the threat of criminal prosecution for tax evasion, people would not pay. This suggests that they believe that most of us pay taxes only out of fear. Imagine how much better everything would be if the most powerful institutions on the planet were supported willfully instead of coercively! Obviously, they would have to stop wasting so much of our time and effort.

So Dennis, if you can find anything wrong with Glen’s or Nick’s proposal, please let us know. Otherwise, get behind it and push, push, push!

glen April 14, 2006 at 4:42 pm

Nick,

And you win the prize…

R.P. McCosker April 14, 2006 at 5:15 pm

Oh, I didn’t know the Liberty Amendment had a provision eliminating domestic federal taxes. The thing reads like a wish list. Lots of good stuff. While we’re at it, we can come up with more things. Why not repeal direct election of U.S. senators while we’re at it, or explicitly authorize the secession of states?

Dave Scotese says the complicated current system is preferable to the (so-called) flat tax because it makes people hate the whole tax system even more. I’ve read elsewhere people write that we should have compulsory military service so more citizens will hate U.S. military expansionism.

That kind of argument won’t make any headway (and probably shouldn’t). What libertarians might do well to appreciate is that half-baked reforms — especially the misleading, insubstantial ones as in Forbes’s program — drain our resources (money, time, intellectual energy etc.) and dilute our message to the grassroots when we push for them.

Indeed, Forbes — like so many before him pursuing liberty by trying to work within the system — guts out the very heart of his idea to court politicians and other enemies of freedom. By the time Forbes (and his ghostwriters) fine-tuned his proposal, it wasn’t even a flat tax anymore. (For truth-in-advertising purposes, Forbes should call his plan “tax simplification.” But, then, that wouldn’t attract much attention or sell many books.)

BillG (not Gates) April 14, 2006 at 5:24 pm

Nick Bradley wrote:

“Most (if not all) of us here have done enough reading and study to realize that any form of taxation is theft.”

BillG responds:

actually the land value tax rather than being theft helps protect against a theft of the excluded’s fruits of labor and thus upholds property rights and the right of self-ownership

“In my opinion, the least bad tax is the property tax on the unimproved value of land, the Henry George argument…”
Milton Friedman

David Nolan
“What kind of taxation is least harmful?….My own preference is for a single tax on land, with landholders doing their own valuation.”

Stephen Moore
“One of the greatest economists and social philosophers of the past two centuries was Henry George. The world would be a vastly better place if those in Congress and the media…became familiar with George’s writings.”

xteve April 14, 2006 at 6:13 pm

“Limiting yourself to those proposals that you feel would gain the acquiescence of the feds seems like limiting your efforts for survival to those that will kill you.”

Dave, that’s a great line.

Dave Scotese April 14, 2006 at 9:15 pm

In comparison to my assertion that slowing down the demise of a parasitic system is worse than allowing it to continue on it present course, R.P. writes “I’ve read elsewhere people write that we should have compulsory military service so more citizens will hate U.S. military expansionism.”

There is a fine but very definite line between allowing stupid actions to hurt those doing them and expending effort to encourage stupid actions. Perhaps looking at it from the viewpoint of cost and the effect of paying that cost will make the line brighter:

It costs me nothing (extra) to leave the system alone and wait for widespread acquiescence to economic reality. The worse the problem is to start with, the more quickly this acquiesence will come about. Were I to invest any effort in making the problem worse, for example by encouraging compulsory military service, then I am providing a scapegoat for those on the verge of working for change to solve the problem. In other words, rather than blaming fear-based respect for authority and the expectation that others pay for what you want, people can blame compulsory military service.

R.P. McCosker April 14, 2006 at 10:13 pm

BillG:

Thanks for stealing this opportunity to make an OT argument from authority for the State to confiscate all land by its own fiat and then charge rent to anybody occupying any land that would be handed over to those running the State. How very clever. That Henry George was some genius.

David Scotese:

I have no idea what you’re saying. Did you, perchance, study writing under the tutelage of Theodor Adorno?
http://sts.nthu.edu.tw/tsts/trans/reports/reflection1.htm

BillG (not Gates) April 15, 2006 at 8:37 am

RP wrote:

“Thanks for stealing this opportunity to make an OT argument from authority for the State to confiscate all land by its own fiat and then charge rent to anybody occupying any land that would be handed over to those running the State. How very clever. That Henry George was some genius.”

BillG responds:

my claim is that the landlord’s monopoly on the economic rent is a tax in kind (but not substance) on those being excluded violating their absolute right to their labor and hence self-ownership.

the state’s role is to insure that the superior labor based property rights of the excluded are protected.

the economic rent would be shared directly and equally between neighbors in a community not go into government coffers to be spent…if it did then the economic rent would be owned collectively and not in common.

Ralph April 15, 2006 at 12:22 pm

A response to my statement about tax exemptions regarding churches: tax exemptions forfeit many rights for churches.

That is my point. The churches claim exemption, yet their exemptions not only exclude them from effective voice in government, it serves to exclude those members who render to Caesar and to the churches. If the First Amendment gave tax exemption to individuals rather than churches, who cares about political voice? People would give to the church of their choice and allow the government only what the people decided was necessary.

Mathieu Bedard April 15, 2006 at 1:11 pm

If it is Flat tax as a first step toward a degressive rate tax and then a lump sum tax and eventually a stateless society, yeah, why not..

R.P. McCosker April 15, 2006 at 1:36 pm

BillG:

Some Georgists claim to be socialists, some libertarians. Whatever. But the idea is always the same: Land is a category of property whose ownership by individual persons is forbidden. Some coercive agency — you can call it government or pretend it’s something else — owns all the land instead, and is supposed to charge said individuals for their occupation or other use of that land.

That so many self-styled libertarians fall for this socialistic, mercantilistic horror is one of the conundrums of our time.

BillG (not Gates) April 15, 2006 at 3:39 pm

RP wrote:

“Land is a category of property whose ownership by individual persons is forbidden. Some coercive agency — you can call it government or pretend it’s something else — owns all the land instead, and is supposed to charge said individuals for their occupation or other use of that land.”

BillG responds:

you’ve got it wrong…

land ownership is not a single right but actually a bundle of rights any one of which can be alienated…

so an individual justly encloses what had been owned in commons and thus has private ownership rights that include:

1. use
2. exclusion
3. possession
4. transferability

all of which are promoted by Georgists…but it is only the fifth bundled right – to the economic rent – that only appears beyond Locke’s proviso (enough and as good left in common for others) that MUST remain owned in common else if the landowner retains it, one must sacrifice the superior absolute property rights of the excluded to the fruits of their labor…

as all libertarians agree that property rights eminate from labor as the natural extension of right of self-ownership

RP wrote:

“Some coercive agency — you can call it government or pretend it’s something else — owns all the land instead, and is supposed to charge said individuals for their occupation or other use of that land.”

BillG responds:

private individuals retain the four bundled property rights cited above

private individuals have an equal access opportunity right to the economic rent as it is owned in common (an individual right)

the sole role of the coercive agency is to insure labor based property rights of the excluded are not infringed upon as they are today by landowner’s who create a legal and monetary obligation by the exclusive use of a location.

RP wrote:

“That so many self-styled libertarians fall for this socialistic, mercantilistic horror is one of the conundrums of our time.”

BillG responds:

socialism is generally thought of as the collective ownership of the means of production (land, labor, capital).

collective ownership is a group right
ownership in common is an individual right

they are actually opposite

the original classical liberals (who opposed the mercantilists) the laissez-faire French Physiocrats understood this that is why they called for all taxation to be shifted off of labor and capital and onto the land values.

R.P. McCosker April 15, 2006 at 4:30 pm

BillG writes:

“land ownership is not a single right but actually a bundle of rights any one of which can be alienated…
so an individual justly encloses what had been owned in commons and thus has private ownership rights that include:
1. use
2. exclusion
3. possession
4. transferability
all of which are promoted by Georgists…but it is only the fifth bundled right – to the economic rent – that only appears beyond Locke’s proviso (enough and as good left in common for others) that MUST remain owned in common else if the landowner retains it, one must sacrifice the superior absolute property rights of the excluded to the fruits of their labor…
as all libertarians agree that property rights eminate from labor as the natural extension of right of self-ownership”

Well, that’s clear as mud. I think the idea here is somehow this is really consistent with libertarianism because, so long as you pay your rent to the State, you can treat it pretty much like you would private land. Or something. (Hmm, I wonder if one is permitted to “sublet” out the State’s land.)

There are myriad objections to be had with all this, but I’d like to focus on two:

1) The State has a monopoly on the primary rent value of land. It can then raise the rents as high as it wants to maximize State revenue (or even higher, just to exercise power). Georgists never seem to present any program to limit the size of their single-tax. Indeed, there seems to be an implicit invitation to have the tax go high, since the tax itself is held to be a good thing (and thus quite the opposite of some “necessary evil”).

2) There seems to be an assumption — whether based in naivete or disingenuousness, I don’t know — that the State, given all this ethically endowed ownership over all land, will merely limit itself to collecting rent/tax on it. Somehow the State will resist the temptation to favor certain owners and uses, won’t utilise the land for its own statist projects, won’t restrict renters’ use of the land, etc. It doesn’t take much knowledge of history and economics to see that a coercive entity endowed with monopoly ownership of the land is sooner rather than later going to exploit that policywise to the advantage of the governing class and its cronies.

BillG:

“socialism is generally thought of as the collective ownership of the means of production (land, labor, capital).
collective ownership is a group right
ownership in common is an individual right
they are actually opposite
the original classical liberals (who opposed the mercantilists) the laissez-faire French Physiocrats understood this that is why they called for all taxation to be shifted off of labor and capital and onto the land values.”

I’m not a student of the Physiocrats, but it’s apparent they were struggling to formulate how a liberal society could be achieved. It sounds like they didn’t get there.

BillG (not Gates) April 15, 2006 at 5:06 pm

RP wrote:

“I think the idea here is somehow this is really consistent with libertarianism because, so long as you pay your rent to the State, you can treat it pretty much like you would private land”

BillG responds:

I already said the landowner pays the economic rent directly and equally to their neighbors (and they to him) as the economic rent is owned in common as an individual right.

if instead the economic rent is paid to the state and the state then spends the money – the economic rent is owned collectively as a group right not individually as a right held in common.

they are actually opposite.

RP wrote:

“The State has a monopoly on the primary rent value of land. It can then raise the rents as high as it wants to maximize State revenue (or even higher, just to exercise power). Georgists never seem to present any program to limit the size of their single-tax. Indeed, there seems to be an implicit invitation to have the tax go high, since the tax itself is held to be a good thing (and thus quite the opposite of some “necessary evil”).”

BillG responds:

the economic rent is determined by market (not personal utility) forces.

RP wrote:

“There seems to be an assumption — whether based in naivete or disingenuousness, I don’t know — that the State, given all this ethically endowed ownership over all land, will merely limit itself to collecting rent/tax on it. Somehow the State will resist the temptation to favor certain owners and uses, won’t utilise the land for its own statist projects, won’t restrict renters’ use of the land, etc. It doesn’t take much knowledge of history and economics to see that a coercive entity endowed with monopoly ownership of the land is sooner rather than later going to exploit that policywise to the advantage of the governing class and its cronies.”

BillG responds:

there you go again…

a wrong initial assumption (state ownership of land and economic rent) leads one astray every time!

R.P. McCosker April 15, 2006 at 5:57 pm

Let me see if I understand.

You pay your property tax not to the State, but to your neighbors. So I mail a check to each of my neighbors?

How do you define the boundaries of this neighborhood? If I sent these checks to the households in my neighborhood defined as a two-block radius, that’d be about a hundred households. But since all the homes in that category are worth about the same anyway, couldn’t we all save a lot of time and postage by just keeping our money and forgetting about it?

Or maybe you define the neighborhood as the whole town. There are 5-10 thousand homes in my town, so it’d be a fulltime job mailing out those babies. (I’d save a bundle on postage if I just spent all my time walking the streets dropping my checks off at each of the homes.)

But who’s going to finance county, state, and federal expenses? Is electronic transfer the answer?

I suspect what you really mean is the single tax is to be paid to a coercive “owned in common” fund. Naturally, somebody is going to administer that fund. (I don’t think it’s going to be “administered in common” — not very long, anyway!)

Now, those of you reading this who’re in possession of their faculties: What do you call a coercive agency that charges and takes tax payments, run by a select group of people who claim to be representatives of all the taxpayers?

Can you spell g-o-v-e-r-n-m-e-n-t, boys and girls?

The self-styled libertarians among the Georgists will tell you otherwise. They’ll torture logic to the bitter end. But fact is fact and fantasy is fantasy, and the Georgists will never abandon their delusional panaceas.

One last point:

The rent (notice how land can only be rented, according to the Georgists, since no individual may own any of it) is supposed to be determined by the market, not political fiat. But since the State (oh, pardon me, the owners-in-common) has a monopoly on all the land, there’s no market to go by. So the State makes all these determinations based on what its coercive, socialist instrument happens to decide. What an invitation to Statist mischief!

It’s bad enough that these noisy little Georgists infest libertarianism. But how comical that they dog after paleolibertarians, who are the best suited to see through Georgism’s statist/utilitarian/neomercantilist/socialist nonsense.

BillG (not Gates) April 15, 2006 at 6:17 pm

RP you are arguing the mechanics of implimentation while I am arguing the fundamental principle of libertarianism…self-ownership.

if you are interested in simple justice via equal liberty, you can’t logically have absolute property rights to labor at the same time as absolute property rights to land.

in order to exist I have to occupy some space somewhere…if all locations are legally claimed then there is nowhere that I can stand to excercise my right of self-ownership without paying tribute to someone.

Keith Preston April 15, 2006 at 8:27 pm

Taxes are the state’s bread and butter. The state will never give up its power to tax voluntarily nor will the state ever allow “reform” of any substance. To chase after that is to pursue a pipe dream.

Besides, the US regime is doomed in the long run for the same reason that empire states of any kind are doomed, a combination of imperial overstretch, domestic corruption and strife, and economic bankruptcy. We need to forget about trying to reform the tax code (which will never happen) and start thinking about what kind of system we will have when the present one falls apart. We need to forget about establishment brown-nosers like Forbes and start thinking along more revolutionary Jeffersonian lines. Sad, but true.

cynical April 16, 2006 at 12:19 am

To the “Fair Taxers”:

Please quit saying “… the FairTax, which actually has a good chance of passing.”

It does not have any chance of becoming law – not even in its current watered-down form. But hey, maybe if it is watered-down some more it could become a real piece of “tax reform”? Maybe the FairTax could be amended to cut income tax rates by 15%, but only for “the middle class”, and then a small 5% federal sales tax could be added to all items (with a rebate for “the poor”, of course, so they make money every April 15th). Something like this – I’m certain – would really open the floodgates for future “reforms”. Once the American citizenry gets a taste of this new “freedom”, they will surely demand that they get taxed the exact same amount… but via a national sales tax!

R.P. McCosker April 16, 2006 at 2:10 am

BillG:

Well, that’s clear as mud. Hmm, I think you’re trying to say that it compromises one’s right to his own labor to then have no choice but to be on the property of some other individual. Your solution is to have the government own all the land. Oh — excuse me — to have all the people own all the land in common.

Oh, and let’s not worry about how it’s the government that will be administering all this and collecting the tax/rent money to then expend as it chooses. After all, the government is supposed to be doing all this on behalf of the masses of people it “represents.”

You object that I’ve been discussing “implimentation” when you’re upholding some “fundamental principle.” But implementation isn’t some side issue. It follows logically (or, more precisely, praxeologically) from the coercive policies you propose.

More risible still is how you go on to conclude that the right to the fruits of one’s own labor demands that *all* land must be owned by the government (masquerading as owners-in-common) lest a propertyless individual get stuck on privately held land. For that alone, all private ownership of land must be ended!

Do you stay up all night thinking up this kind of stuff?

Keith Preston:

If what you say is true, that’s all the more reason we need to be having discussions like this about tax policy and its nature.

cynical:

Obsessed pseudo-libertarian tax reformers. They’re after us libertarians, and they won’t let up, like those pitbulls that sink their teeth in and won’t let go without a crowbar pulling them loose. There’s the [un-]FairTaxers, the [un-]flat taxers, and the Georgist land single taxers. Like a bad zombie movie, they keep rising up and coming and staggering over to unwitting libertarians to take a big bite out of their flesh.

If there’s a lesson libertarians ought to take home from all this, perhaps it’s that we do well to resist being suckered in by “reform” legislation. We need to keep our proverbial eyes on the prize — the dismantling of the centralist, expansionist, democratist State.

BillG (not Gates) April 16, 2006 at 4:36 am

RP wrote:

“Your solution is to have the government own all the land. Oh — excuse me — to have all the people own all the land in common.”

“demands that *all* land must be owned by the government (masquerading as owners-in-common)”

“all private ownership of land must be ended!”

BillG responds:

how many times are you going to misrepresent my position?

the land all starts out owned in common…

it is JUSTLY enclosed up to Locke’s proviso where the bundled rights of use, possession, exclusion, transferability remain in PRIVATE hands.

beyond Locke’s proviso, the private collection of the return on land (unimproved land values) by the landowner violate the superior absolute rights of those being excluded to the fruits of their labor so ONLY the economic rent MUST remain owned in common as an INDIVIDUAL equal access right.

RP wrote:

“how it’s the government that will be administering all this and collecting the tax/rent money to then expend as it chooses.”

BillG responds:

wrong – if the government collects and spends the money then it is owned collectively not in common…which is exactly opposite.

collective rights are group rights.
common rights are individual rights.

RP wrote:

“It follows logically (or, more precisely, praxeologically) from the coercive policies you propose.”

BillG responds:

coercion is neither good nor bad but depends on what ends it serves.

in the case of the economic rent being retained by the landowner, it FORCES a legal and monetary obligation (a claim) on the labor-based property rights of those being excluded backed by the state that is an UNJUSTIFIED use of coercion.

but the use of coercion by the state to prevent this taking in order to protect the superior property rights claim to labor, as labor is the true genesis of property rights, is totally JUSTIFIED.

the use of force to prevent a theft of individual labor products is the proper role of the state.

Paul Marks April 16, 2006 at 6:44 am

Yes the real problem is government SPENDING.

And yes replacing the present income system with a flat rate of 17% would not transform America.

However, complexity is a cost (in ways that various people have described above)and the flat rate tax would cause less harm than the present system.

BillG (not Gates) April 16, 2006 at 7:02 am

and combined with Charles Murray’s new negative income tax scheme detailed in his book “In Our Hands” could be truly revolutionary.

averros April 16, 2006 at 6:51 pm

BillG –

coercion is neither good nor bad but depends on what ends it serves.

So were the killing fields of the communist regimes justified. “When one fells the forest, spliters will fly”, yeah. That was said of human lives by one of the chief cannibals in the history.

Coercion is bad, period. Simply because in the end all coercion is murder – real or threatened.

Advocacy of coercion – for any purpose whatsoever – is the advocacy of murder.

You seem to be terribly confused on the difference between the coercion (which is making people by force to do what they do not want to do), and self-defense (which is using violence to defend oneself and one’s property against those who [i]did choose[/i] to attack or steal, knowing full well that the victim will be justified in self-defence by violent means). Self-defense is not coercion because it results from the free uncoerced choice made by the criminal.

the use of force to prevent a theft of individual labor products is the proper role of the state.

How stealing the individual labour products (by taxation and other forms of expropriation which define the state) is supposed to prevent their theft? Truely Orwellian contortion, your statement is.

The only proper role of the state is in historical books, in chapters on “Age of Militant Collectivism”.

BillG (not Gates) April 16, 2006 at 10:10 pm

averros, you are correct I mixed up the use of coercion and force…

just to be clear – the original force I am referring to is the legal and monetary obligation created by exclusive use of a specific location beyond Locke’s proviso that can only be satisfied by violating the absolute property right to labor of those being excluded.

so the use of state force to prevent this theft is justified.

Peter April 16, 2006 at 10:26 pm

BillG: please stop repeating yourself over and over and over and over …

Cornelius van Vorst April 17, 2006 at 12:09 am

BillG is notorious for derailing conversations with his Georgist nonsense. Everyone would do well to simply ignore him.

George Gaskell April 17, 2006 at 9:49 am

the land all starts out owned in common…

I believe this is where you are tripping up.

The land starts out not being owned at all. Not by anyone.

It can only go from that state to one of total private ownership, by original expropriation.

Private ownership (of anything) must include the right to be free from having others forcibly extract payment from you, if it is to have any meaning. This holds true regardless of whether the thieves demanding payment do so under the color of a fictional “collective” entity or merely by overt theft (i.e., one private person stealing from another).

Collective entities of all kinds are nothing but a pretense of authority, a form of supposed immunity from the normal rules of peaceful behavior.

That’s all there is in the world: a bunch of private persons. That’s all that exists. All forms of collective entities are pure metaphor.

The only form of authority comes from the act of people associating together in a group is agency. The first rule of agency is that no one can delegate a power to someone else that he does not have himself. You cannot rightfully hire someone to do something that you could not rightfully do yourself.

This means that I can delegate my powers to you (or anyone else). Also, several people can delegate their powers to one person, who thus acts on behalf of many people.

But the act of grouping together does not, as if by magic powers, somehow grant them a set of powers they would not have had as individuals. The act of associating together does not create any new, special powers.

The fifth, somehow special bundled right that BillG speaks of is merely another form of this collectivization fallacy — the idea that some group of people (in “common”? another “collective” form?) have the right to do something they could not do as individuals.

Hoppe laid it all out very well in Democracy. Even a genuine old-school monarchy is preferable to any State, since such a regime only recognizes the idea of private ownership, and rightly disregards this noisome, destructive pretense of collectivization.

I have no idea how BillG can justify land taxes with the idea that he has to be somewhere. Well, you have to eat, too. You aren’t born with any food, either. Everything you eat has to belong to someone, too. To survive, you must obtain that food from the owner either by gift (e.g., a parent), or by earning it by trading something valuable for it on a mutually voluntary basis. All else is theft.

Sidney April 17, 2006 at 10:45 am

We can work out the details of rates and deductions, but the primary design constraint for any replacement to the current tax code is institutionally to kneecap our elected representatives in their efforts to exert power via tax code revisions. If the Congressmen have no power individually to tinker with the code, then we will have fewer earmarks on the spending side and fewer special deductions on the revenue side. A super-majority rule on changes to the tax code is to me more important than the specific rate. The regrettable reality is that our representatives do not reliably represent their consituencies but reliably represent individual constiuents. That is the fact of representative political systems. It has always been thus. It will always be thus. The Founding Fathers in their wisdom established a system of limited powers preferring a system in which little got done over a system in which much got done and most of it to the detriment of the people. We need again to limit the power of the representatives.

BillG (not Gates) April 17, 2006 at 11:02 am

George Gaskell wrote:

“The land starts out not being owned at all. Not by anyone.

It can only go from that state to one of total private ownership, by original expropriation.

Private ownership (of anything) must include the right to be free from having others forcibly extract payment from you, if it is to have any meaning. This holds true regardless of whether the thieves demanding payment do so under the color of a fictional “collective” entity or merely by overt theft (i.e., one private person stealing from another). ”

BillG responds:

the specific case I am making is that if you don’t treat land as originally being owned in common then you come to the illogical conclusion that you can have asolute property rights to land simultaneously with absolute property rights in labor beyond John Locke’s proviso (enclosure from the commons is just so long as one leaves “enough and as good in common for others”)

George Gaskell wrote:

“Collective entities of all kinds are nothing but a pretense of authority, a form of supposed immunity from the normal rules of peaceful behavior.

That’s all there is in the world: a bunch of private persons. That’s all that exists. All forms of collective entities are pure metaphor.

The only form of authority comes from the act of people associating together in a group is agency. The first rule of agency is that no one can delegate a power to someone else that he does not have himself. You cannot rightfully hire someone to do something that you could not rightfully do yourself.

This means that I can delegate my powers to you (or anyone else). Also, several people can delegate their powers to one person, who thus acts on behalf of many people.

But the act of grouping together does not, as if by magic powers, somehow grant them a set of powers they would not have had as individuals. The act of associating together does not create any new, special powers.

The fifth, somehow special bundled right that BillG speaks of is merely another form of this collectivization fallacy — the idea that some group of people (in “common”? another “collective” form?) have the right to do something they could not do as individuals. ”

BillG responds:

George you are somehow under the false impression that collective and in common are both delegated authority and somehow similar.

they are actually opposite.

collective rights are group rights where you must get either consensus from each of the owners PRIOR to use or their delegated authority.

common rights are individual rights where you are only determined to be infringing on someone else’s equal rights to the same after the fact.

George Gaskell wrote:

“I have no idea how BillG can justify land taxes with the idea that he has to be somewhere. Well, you have to eat, too. You aren’t born with any food, either. Everything you eat has to belong to someone, too. To survive, you must obtain that food from the owner either by gift (e.g., a parent), or by earning it by trading something valuable for it on a mutually voluntary basis. All else is theft.”

BillG responds:

yes but if I had direct access to the earth itself I could ATTEMPT to sustain myself via my own labor…which is all that is required for equal liberty.

in order to exist I must occupy space.

but I can not labor to physically produce a place to legally stand apart from having to pay a tribute to someone else if all locations are legally occupied.

George Gaskell April 17, 2006 at 11:15 am

if all locations are legally occupied

All personal property is also already legally occupied (i.e., privately held). Even the necessary things, like food. Just because (a) you need them and (b) everyone else already has them doesn’t give you an interest in them, any more than you can claim to have an interest, by whatever means, in other people’s land.

Also, you have clearly not spent much time on a farm or trying to survive on your own. You could not attempt to survive with only your little acre. Where would you get the pigs you’d need to breed more pigs? The seeds to plant your crops? The tools to do any of this? Do you claim to have an economic interest in these things, which all belong to others, just because you need them to attempt to survive?

The fact that all useful things are already owned by others before you arrived on earth doesn’t change anything. Land is no different from every other useful object in that regard.

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