Taxes

Taxes– Truth Not Spoken

During the last election the voter was bombarded endlessly with this tax scheme or that.  They were hit with accusations of higher taxes and the promise of lower taxes.  It became so confusing that I feel the people stopped listen and moved on to other promises and accusations.

I waited quietly for someone to explain to the people why this proposal would raise taxes or lower them…just saying so…does not make it so.  You people do realize that without taxes their would be very little income for the country, right?

So Irene let us take a look at taxes and what is meant by promises and accusations.

Payroll tax is a “fine” imposed on those who organize employment.

Income tax fines people who engage in production or render services.

Sales tax penalizes people for purchasing goods.

Customs tariffs fine people for buying goods produced in other countries. To do this is economic aggression, and invites reprisals which endanger peaceful relations and are a prelude to war.

Excise duties increase the cost of certain products, reduce demand for such, and worsen unemployment, as do all taxes.

A tax is a compulsory payment to a government unrelated to any direct penalty, voluntary service, or debt. Some payments to governments have the form of a tax, as compulsory payments, but not the substance, since the payment is for a service or rent for the use of property. When an oil company pays a lease for offshore oil fields, for example, this is a rental charge for property owned by the government on behalf of the people, so it is not a tax in substance. Likewise, the collection of land rent by a community may be tax in form as a compulsory payment once the land is obtained, but not in substance, since the ownership of land is voluntary and the payment is a rent for land if one agrees it is properly owned by the community.

Taxes can be imposed on two basic types of items: property and transactions. Transaction taxes includes those on sales, value-added, income, gifts, and inheritance. The effect of imposing such arbitrary costs on transactions is to skew the prices of the items taxed, distorting the price signals of a market economy. Sales taxes make goods more expensive, labor taxes make labor more expensive, and taxes on profits make entrepreneurship and enterprise more expensive by reducing profits. Such taxes have the same effect as an increase in the cost of production due to more expensive inputs. Depending on the responsiveness of supply and demand to changes in price, transaction taxes are partly borne by workers as lower real wages, partly by enterprises as lower total profits, and partly by consumers as higher prices and a lower quantity of goods purchased. Gift taxes punish the free transfer of goods; inheritance taxes punish the preservation of family heritage and the ability to pass on an enterprise to one’s children.

Taxes on income and on sales have a similar effect in reducing output, employment, and income. Taxes on wages, such as income taxes, impose a “tax wedge” on labor, making it expensive to employers while reducing the net wages of workers. This, especially combined with minimum wages, creates unemployment by making the lowest-quality labor too expensive to hire. Taxes on sales also reduce income, since the purpose of production is consumption, and if goods are taxed, purchasing power is reduced. A “value added” tax is imposed at each stage of production; for example, when trees are cut down, when lumber is cut, when furniture is made, and when it is sold, each state gets taxed according to the increase in value from one stage to the next. The result is higher prices, lower output, and lower employment.

Thanks to Henry George there is an answer to the taxation question and the problem.

A tax on land values is of all taxes that which best fulfills every requirement of a perfect tax. As land cannot be hidden or carried off, a tax on land values can be assessed with more certainty and can be collected with greater ease and less expense than any other tax, while it does not in the slightest degree check production or lessen its incentive. It is, in fact, a tax only in form, being in nature a rent — a taking for the use of the community of a value that arises not from individual exertion but from the growth of the community. For it is not anything that the individual owner or user does that gives value to land. The value that he creates is a value that attaches to improvements. This, being the result of individual exertion, properly belongs to the individual, and cannot be taxed without lessening the incentive to production. But the value that attaches to land itself is a value arising from the growth of the community and increasing with social growth. It, therefore, properly belongs to the community, and can be taken to the last penny without in the slightest degree lessening the incentive to production.

There you go, Irene…the Land Value Tax(LVT) could be the answer to a whole plethora of questions…at least it should be considered and not dismissed handily.