Prompted by SIL forwarding to me a call for abolishing property taxes altogether.
Land taxes have a long and venerable history in Western civilization. It’s also a wealth tax that the Left so desperately wants, since only those who own it—us landed gentry—pay taxes on it.
The thing is, as long as we’re going to go about hiring governments to manage and enforce the social compact we’ve agreed to and live under, we need to give it the money it needs to manage and enforce it.
We defined, in our Constitution, only three legitimate purposes for taxes; they’re enumerated in the Preamble to Article I, Section 8: to pay the Debts and provide for the common Defence and general Welfare of the United States. That general Welfare is just as clearly and limitedly enumerated in the ensuing 16 clauses of the Section.
The only way, other than donations out of the civic-mindedness of our kindness, to get that money to government is via land taxes; consumption (sales or VAT) taxes, which are sales at every goods transfer point; income taxes; head taxes, money you pay over just because you exist; or tariffs. Consumption taxes, unlike land taxes, most heavily hammer the poor. The rest of us can adjust what we buy and how much so as to hold down the tax we pay, but there are necessities that must be bought, even by the poor, and they have no purchasing options to manage.
Head taxes have been anathema to, at least, Anglo-Saxon Western civilization ever since we got rid of monarchical power, and in the US’ particular case, started getting racism out of our electoral-civic life.
Tariffs, which are taxes on imported goods and services (and so they’re sometimes referred to as border taxes), increase the cost of goods and services across the board when they’re used as revenue raisers (tariffs as foreign policy tools are a separate matter and outside the scope of this post), and so they’re generally inflationary—which, like sales taxes, hurts the poor disproportionately.
That leaves income taxes, which for me are the least evil of the several necessary evils that are taxes. Beyond that, land taxes, for me, are an acceptable complement to income taxes for funding our government.
Within all of that, there will certainly be efforts by the taxed to manipulate their taxed whatever so as to minimize the taxes owed. It then is important to do the tax on the whatever that minimizes the market distortions—business or personal—that any tax unavoidably causes, along with minimizing the follow-on consequences of a tax’s existence. Property taxes are passed along to buyers and renters by the seller, for instance, and that runs up the cost, of particular interest, of renting—one of those necessities faced by the poor. Landlords also face those tax payments as subtractions from funds available for maintenance and will adjust their treatments accordingly.
Sales taxes lead to tax regime distortion as efforts become necessary to mitigate the tax’ effect on the poor. Exempt necessaries from the tax? Who defines what’s necessary? Under what conditions? The definitions will vary across States, even across lesser jurisdictions. Give refunds to the poor? Based on what criteria? How to measure an individual’s tax expenditure? When to pay those refunds? Tax refunds or reimbursable tax credits for those with no measurable income, or income below the Guideline make the poor wait until tax filing season to get reimbursed. Being poor, though, means they need the money today, not next year.
Income taxes are the least susceptible to such distortions, although a less byzantine tax regime—a single flat tax on all income regardless of source and with no subsidies or credits or deductions—would virtually eliminate opportunities for distortion by either the taxee or the taxer. Even here, land taxes would be a useful complement and supply the progressive tax structure that so enamors the Left. Income varies over time and across individuals, but land values are much more stable, being invariant with respect to who owns or rents the property, rising or falling only with the improvements made or not made by the owner, and only slowly rising in value, in the long term.
As an aside, our various welfare programs are technically unconstitutional, however long they’ve been in existence, as Congressman James Madison noted during a discussion of aid to Haiti after a hurricane: …he could not undertake to lay his finger on that article in the Federal Constitution which granted a right of Congress of expending, on objects of benevolence, the money of their constituents. We also, though, have a Judeo-Christian duty to aid those who are less well off, and we are wealthy enough as a nation that we can wink at such Constitutional strictures, unlike the straits we were in those years ago.
The tension between that duty and what’s constitutional, though, drives the existence of our welfare programs. Deviation from our Constitution, even for the Very Best of Reasons, opens the ramparts to further deviations everywhere. Our welfare spending would be far more tolerable, or at least far less offensive, to our Constitution, though, were that portion of government spending strictly limited to the poor defined by the Federal poverty guidelines, instead of being allowed to be spent on folks with incomes as high as 400% of the Guideline. Folks above the Guideline, after all, are by definition not poverty-stricken.