18 June, 2015

Justice, Fairness and Taxation, Part Four

This article was originally published by
The Distributist Review on 24 April, 2011

I would like to wrap up this series with an examination of a few more types of taxation. Keep in mind, that this series is not intended to be exhaustive. It is intended to open the door to discussion by presenting ideas for consideration. I do not pretend to provide the definitive “Distributist view” on taxation. It is a complex topic and there can be legitimate differences of opinion while staying true to the idea of Distributism.

Inheritance Tax

Inheritance tax is another Keyensian method of wealth redistribution. It is based on the idea that a portion of the accumulated wealth of individuals needs to be redistributed through the government to those in greater need. It is, in my opinion, an excellent example of a society that takes a utilitarian view of its citizens. What else can explain the willingness to add to the grief of surviving relatives by making them pay for what they inherit from the one who died? Beyond that, there is not much difference between the inheritance tax and an income tax. The inheritance is treated as a special form of income and taxed at its own special rate.

Property Tax

The main problem I have with property tax as it is implemented here in the United States is that it actually negates the principle of ownership. I say this because, regardless of what it may say on the deed of title, you can be evicted from what is supposed to be your property for failure to pay the tax. In what way is this different from the early feudal period where the landlord could kick out the tenants for failure to pay the required tax? I can see none. Despite the fact that we claim to own our property, we are in fact nothing more than tenants with more rights to the property than renters.

Another problem with property taxes is that the government claims a revenue from that which it has not provided. John M├ędaille makes excellent points on the claim that a community can make on the value it has provided to the land, but the current practice of property taxes goes well beyond that. It also taxes the value provided by the individual or business as though the community has some natural claim to it. It is one thing to say that the presence of community has provided value to a piece of land and therefore the community can make a claim against that value; it is quite another thing to say that the community can make a claim against an increase value of your house on that land because you decided to improve it at your own expense.

These problems are the reason I cannot support property taxes as they are currently implemented. With these defects in place, I would personally prefer the sales tax.

Ground Rents

The idea of ground rents is very close to that of property tax. While I disagree with Henry George on the idea that land ownership should be socialized, I believe other aspects this idea solves the problems of property tax I mentioned above. Ground rents, unlike property taxes, do not lay any claim to the improvements an individual or business makes on the land. The value against which the community can lay claim is to the land as “unimproved,” and not against the buildings and other improvements because the community does not provide that value.

We must understand that the value of land is derived from two sources. While part of the land’s value is from the land itself, the community also provides value by its existence on and around the land. Two parcels of land may have the same productive value in absolute terms but, if one of them is located within a community where the product may be sold and where needed items may be purchased, the presence of that community provides a value to that parcel that is not present for the other. We can argue from this that the community has a legitimate claim on the value it gives to the land.

Where I personally disagree with Mr. George is his views against claims of title ownership of land. I do believe our current system needs to be reformed to inhibit many of the injustices which he points out, but land is a necessity not only for business, but also for living. I agree that all can make a legitimate claim to land on which to live and provide a living. I also believe that there is a legitimate dual claim of ownership by the community and the individual or business.

In the later medieval period, the idea of land ownership developed to the point where both the landlord and the resident peasant could truthfully claim a title to the same piece of land. They each had different rights to that land, but the peasant was a true owner and could not be evicted at the whim of the landlord as was the case in previous centuries. He could pass his title to the land to his spouse and children. He could sell it to another. He also had true ownership of the improvements (buildings) he added to the land. The exact nature of this is beyond the scope of this article, but I feel that this could provide the solution to the problems previously mentioned with other forms of taxation.

The land is of definite scope and the unimproved value provided by the community is not something which rapidly changes. Therefore, it can easily become the stable basis for determining the income of the government. As previously mentioned, the implementation of subsidiarity is likely to greatly reduce the tax burden. Because most government programs will become the responsibility of local organizations and governments, the local community will have more say in what programs the government will provide. We could simply look at the amount of land against which the local government has the authority to apply a ground rent at appropriate rates according to the value provided by the existence of the community. This would determine the funds available to government with much more accuracy than the current system. This improved accuracy combined with subsidiarity would make it easier for governments to make accurate budgets, and easier for the community to catch when government is spending irresponsibly and correct the problem.

Note: As I explained my my article on Christian Socialism, my current position on the topic of progressive taxation is that it should only be considered as an extreme solution when other, more just, methods have failed. However, the following paragraph is reprinted as originally published.
Progressive Taxation
I believe there are legitimate points of justice in the arguments for and against progressive taxation. Progressive taxation is a tool to achieve a social end. Present implementations of progressive taxes are used to achieve wealth redistribution according to the Keyensian principle. I disagree with this. However, I agree with Hilaire Belloc that progressive taxation could (and should) be used to achieve the wider distribution of land ownership, to prevent the formation of large monopolistic companies and to disperse existing monopolies into locally owned small businesses. I know that there are those who will not like this idea, but Belloc points out that laws, including tax laws, are part of what brought about our current economic situation. We should not be surprised at the need to use the same tools to help accomplish the correction of that situation with a more just system. As long as the laws used are consistent with the end – if they do not violate the principles of justice advocated by Distributism – they may be considered legitimate.

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