
End All Taxes...Except One - robg
http://www.theatlantic.com/doc/200907/ideas-tax
======
pg
I think one reason governments use a variety of taxes is that otherwise there
is a single point of attack for people who want to game the system, and all
that energy focused on one point could produce weird distortions.

In this case there would be a great incentive for people to live less densely,
which seems a bad thing. Someone who went off and lived in the sticks where
land was practically worthless could reduce their tax bill to next to nothing.
Especially if they lived in a mobile home (deluxe versions of which would
rapidly appear).

~~~
ivankirigin
I think you have it exactly backwards. The more points of attack, the larger
the vulnerability. There are laws passed for specific corporations to reduce
tax liability.

What's wrong with low density? There is a real economic value to variety and a
minimum density to support certain kinds of commerce. You can't take this to a
limit assuming there is no cost (if only opportunity cost) to moving to a less
dense area.

Also, at least in the easy coast, the least dense areas are typically already
state or national parks. Wyoming is the exact opposite. 5 digit license plates
are common there.

~~~
pg
Where did I say that having few taxes made it easier to avoid them? My comment
was about the amount of distortion caused by people's efforts to avoid taxes,
not the amount of tax people would succeed in avoiding.

~~~
ivankirigin
If the concern in the distortion is that people don't pay taxes, my comment is
valid. If the concern is for the people themselves, I'm not sure what the
problem is with low population density. It doesn't even need some government
program to correct if we decide it is bad for society. People already have
social and economic incentives to live near eachother.

Also, I'm surprised you would suggest that law makers give a shit about the
distortion taxes cause, and hope to minimize it. A politician's actions can
pretty much always be directly tied to motovations to increasing influence and
getting elected. Altruistic politicians that actually care about society don't
exist.

------
grellas
The problem with this single-tax approach, as with all others, is that it
ignores human nature.

It falsely assumes that the single tax will supersede all others.

The probable outcome, though, is that such a tax would be, in effect, a
massive tax increase on a particular asset class, which would then be _added_
to the other taxes, if not at inception then slowly over time.

There is a compelling reason why average Californians cling to Proposition 13
even though its major beneficiaries by far are commercial property holders.
They sense intuitively that, if they repeal Prop 13, the dispensers of public
largesse in Sacramento (and their counterparts at the county level) will
simply devour the new funds and stand there panting for more.

If that is the historical record with Prop 13 (and it is), why would anyone
want to permit the government to declare open season in a tax sense upon such
property as an asset class? Could we really trust our leaders to honor the
limitation that is implicit in the idea of a single tax?

~~~
thristian
For people like myself who aren't familiar with the history of California's
constitutional reforms, Wikipedia describes this "proposition 13" as follows:

"The proposition's passage resulted in a cap on property tax rates in the
state, reducing them by an average of 57%. In addition to lowering property
taxes, the initiative also contained language requiring a two-thirds majority
in both legislative houses for future increases in all state tax rates or
amounts of revenue collected, including income tax rates. It also requires
two-thirds vote majority in local elections for local governments wishing to
raise special taxes."

\--
[http://en.wikipedia.org/wiki/California_Proposition_13_%2819...](http://en.wikipedia.org/wiki/California_Proposition_13_%281978%29)

~~~
grellas
Just to clarify further:

In 1978, Californians voted a radical roll-back in property taxes when they
enacted Prop 13. This proposition also stipulated that every person owing real
property got a baseline valuation (either its fair market value in 1978, when
Prop 13 took effect, or its fair market value on the date of any transfer upon
its sale), from which the tax could only increase at a maximum of 2% per year.

Thus, companies like HP, which owned vast tracts of valuable property in prime
areas, have reaped huge benefits from this cap because they are effectively
paying property taxes on values from a different era altogether.

Young couples who bought small condos within the past 5 years are also paying
far more in property tax than upper middle class persons living in fancy
suburbs (those who have held their homes since 1978).

Yet, in spite of the obvious inequities that have resulted, voters won't even
touch any attempts to repeal Prop 13 or even to enact special propositions
that would put commercial property owners on a separate, higher-taxed path.

The reasons, I think, are those I set forth in my comment above - they don't
trust what public officials will do with an expanded taxing power.

------
ShabbyDoo
It strikes me that environmentalists should want to tax land improvements
and/or the procurement of physical goods. Imagine if a new toaster cost $100
after taxes but the toaster repairman only charged $30/hour because he was
able to keep 100% of his earnings. Today, if you can buy a new toaster for $60
and toaster repair costs $50/hour, you're a lot more likely to buy a new one
and put the old one out on the curb for the trash man. Would people buy houses
so large if property tax rates were twice what they are today?

The problem with radical changes to taxation schemes is that they have to be
made slowly to avoid chaos. Ignore for a moment the last ten years of US
housing history. If property taxes doubled tomorrow, the prices of houses
would drop by some percentage as the marginal cost of a bigger house
increased. And, we now know what happens when housing prices drop :) Slow
changes could allow for gradual adjustment.

------
mattmcknight
It's odd that this would be suggested now, when falling property values are
killing the tax revenue across the USA. The government just adjusts the tax
rate every year so they have adequate funding. Of course, why limit the tax to
land, why not tax all property, like my county does to my business? Even if I
lease a printer, I end up paying a surcharge for keeping it here. Property tax
sucks.

I think a consumption tax is much more reasonable, with the end goal of
increasing exports in mind.

~~~
anamax
> It's odd that this would be suggested now, when falling property values are
> killing the tax revenue across the USA.

Actually, falling property values are not killing tax revenues in CA. Because
of Prop 13, the taxable basis for a lot of property is less than the market
value, so the taxes on that property will continue to go up.

Yes, the property taxes paid by recent buyers will go down because their
taxable basis is decreasing with market value.

The net result is that the hardest hit areas are seeing a modest decline in
property tax revenues.

Before Prop 13, CA govts simply adjusted the rates to keep revenues
stable/increasing when property values dropped. When values increased again,
the rates didn't go back down, thus ratcheting revenues up.

That's why Prop 13 was passed.

~~~
mattmcknight
It's very different in my county in VA, assessments are done every year on
commercial and residential property. So, the revenue drops quickly if the tax
rate isn't increased. They actually did drop the tax rate as values were
rising, but not enough to prevent a $315M gap this year, even with a 12%
increase in the tax rate. [http://www.washingtonpost.com/wp-
dyn/content/article/2009/06...](http://www.washingtonpost.com/wp-
dyn/content/article/2009/06/29/AR2009062903924.html)

The scenario is different in CA and other locales with only event driven
reassessments, but prop 13 and similar measures only provide upside protection
for the consumer, there isn't downside protection for the state.

~~~
anamax
> there isn't downside protection for the state.

Actually, there is downside protection for govt, and we're seeing it now.

The downside protection is in the property whose taxable basis is lower than
its market value. If the taxable basis tends to grow slower than the market
value, some basis will be going up even when overall market value goes down.

And then there's the question why govt should have downside protection. I
don't.

~~~
mattmcknight
Ah, but then you just go challenge the assessment. The taxable basis should
always reflect the market value. In any case, the downside protection for the
property owner in prop 13 is the 2% cap on annual increases.

The government really shouldn't have downside protection, it's just more
evidence as to why property taxes aren't a very good basis for taxation, as
the original article suggested and I disputed. Property had the distinction of
being a more stable asset price, but when the market rose abnormally,
government got fat off of the proceeds, and is now paying the price as capital
is being reallocated from property assets.

------
mblakele
Let's see.... Fewer people would invest in property because of the increased
tax burden, making property owners a minority in the electorate. Then non-
taxpaying voters would notice that they can vote in officials who give them
free stuff. Then taxpaying property owners would declare a tax strike.

At that point the system would be reformed, peacefully or not. Either the
burden of taxation would be shared more evenly across the electorate, or a new
electorate would consist entirely of taxpaying property owners.

My only question is: why does Reihan Salam want to start a civil war?

All this brings up an interesting point: the saving grace of the USA's
hideously complex tax code is that practically everyone complains about paying
taxes. Maybe that's what holds the country together.

(I'm joking, but only a little bit).

~~~
ShabbyDoo
All costs are transferable. So, whether you rent or own, you will pay property
tax -- just like today. In my hometown, one prominent landlord sent out
letters to his tenants telling them that, if an upcoming school levy passed,
their rents would be raised. The same transfer goes for commercial property as
well. If the "single tax" was levied, one conceivably could compute the
portion of the cost of a gallon of milk attributable to the cumulative
taxation through the supply chain.

My issue with property taxes is that the government gets into the estimation
business. I'd prefer a sales tax because it seems less likely to distort
market behaviors and is less susceptible to political manipulation.

~~~
yummyfajitas
Regarding renting, there is a huge problem with that in many eastern states:
rent control.

As for estimation, we can create good incentives. If the government estimates
the value at X, and you can't sell it for at least 95% of X (lets say in 6
months), then the government must buy it at X.

(Not that I expect this to ever happen.)

------
TrevorJ
A single tax, or a flat tax will never ever be allowed for a very simple
reason: Power. The government uses taxes to encourage behavior it likes and
discourage behavior it dislikes.

Tobacco tax and tax breaks for energy efficient cars being prime examples.

They will never willingly give up that kind of power to modify behavior.

~~~
tybris
The majority of society wants those things to be punished and encouraged and
tax is not an especially powerful tool.

------
aberman
"In 1879, Henry George...published Progress and Poverty, a scathing polemic
that blamed all economic ills on the private ownership of land.[he] found it
perverse that we tax productive activities like work and innovative investment
while letting landowners grow rich simply because they scooped up property at
the right time. "

People don't really get rich simply by owning land -- well, not since the
Industrial Revolution in early 1800s. One tax on land would have made sense
then, but it would not make sense now. People now make money on land by buying
and selling it -- as an investment. By taxing land now, you would be doing
what you are trying to prevent, namely, taxing productive behavior.

I can't think of a modern day equivalent to land 200 years ago. The closest I
can get is inheritance -- tax people for winning the lucky sperm club.

~~~
ivankirigin
Taxing land (and not the buildings on top of it) would incentivize people to
improve the buildings to add value. Currently, other taxes such as capital
gains disincentivizes improvements to the property.

The biggest benefit to such a simple tax system is the simplicity itself. It
isn't just that a complex tax code makes for dead weight loss in paying taxes
and the loopholes to evade them.

The process of creating loopholes is extremely corrupting.

If you want a heathly democracy, keep things simple to disincentivize
corruption. The US is not a healthy democracy, largely due to the incredible
size of government and extreme corruption of our tax code. Other problems such
as unfunded liabilities or overly influencial corporations stem from this core
issue.

------
fizx
Any time you tax something, you disincentiveize it.

I think the point is to tax things that society considers negative: carbon,
alcohol, nicotine, potentially marijuana. Because you can't raise enough from
those, we may also tax land. But let's not tax the positives, like
income/production.

------
psadauskas
I think this is the best proposal for just one tax: <http://www.fairtax.org>

Essentially, a national sales tax, and low-income people get a rebate for what
they might have spent on taxes every year. Encourages individual saving and
exports.

~~~
yummyfajitas
Why do we want to encourage exports?

~~~
DougWebb
If we make something and sell it overseas, it brings wealth into the country.
That's good for us. It's the opposite of what we've been doing: importing
massive amounts of cheap products, sending all of our wealth overseas to other
countries.

International trade is a good thing, but if it's balanced or if you're on the
exporting side. Being a net importer is impoverishing.

~~~
Darmani
I've never bought arguments like that. To me, this is just neo-mercantilism.

I don't see why it makes a difference if the person who buys our product is in
Seattle or Vancouver. If we're producing the most value we can at the least
cost (not in the naive sticker-price sense), it doesn't matter who or what is
the least cost labor. Drawing borders around countries and treating them as
fundamental units of trade is just 19th-century nationalism in disguise.

~~~
DougWebb
It's a local-market vs extended-market issue. Money is the medium of trade; it
has to circulate or trade stops.

If you have a local market, the people producing products, and getting paid to
produce the products, are also buying the products and/or buying other local
services from people who can then afford to buy the products. The same money
can circulate many times within the local market to keep the economy moving,
and support the production of valuable things.

In an extended market, you've got a separation between the people creating the
products and the people buying them. Money has to travel between these groups
in order for trade to exist. If there is a balance of trade between the
groups, the money circulates evenly and both groups benefit; it's like the
local market, but bigger.

If trade is not balanced, the money winds up on one side and the products on
the other. Eventually, the flow of money stops because one side runs out. For
the people running out of money, must do one of the following:

(1) Start producing additional goods/services that can be sold to the other
side, in order to increase the flow of money back and restore a balance of
trade.

(2) Reduce the amount of goods/services being bought from the other side in
order to reduce the flow of money out, also restoring a balance of trade (at a
lower level than #1).

(3) Purchase the goods/services on credit rather than with cash, in hopes of
having the cash later to pay off the debt.

(4) Inflate the money supply by producing more money, and hope that the other
side doesn't increase prices to reflect the lower value of your money.

In the US/China trade, the US has been buying lots of Chinese goods, but the
Chinese haven't been buying much US goods. Instead, the Chinese have been
collecting US money (in the form of both actual currency and bonds.) Trade has
been out of balance, with the US on the side running out of money. We'd like
to do #1, by selling more into the Chinese marketplace, but the Chinese
government has been very slow to open its markets to outside companies. We
can't do #2 for a number of reasons; we've lost our capacity to produce many
of the good we buy, we can't produce similar goods at competitive prices, and
for political reasons we can't raise tariffs on Chinese imports to bring their
prices in-line with domestically produced goods.

So, we've been stuck with #3 and #4: going into debt and inflating our money
supply. These options can only work for so long before the other party stops
accepting credit and inflated currency. The US has pretty much reached that
point with China now, so we're going to have to go back to #1 or #2.

------
johnnybgoode
I am familiar with Georgist ideas but I didn't expect to see them in the
Atlantic. The single land value tax is perhaps the least evil of all tax
systems, but it has serious flaws (beyond simply being a tax in the first
place).

1) It is difficult or impossible to properly assess the unimproved value of
the land. This means political power would be used to influence the process,
just as it is today.

2) There is no guarantee whatsoever that the single tax would remain so.

3) Although a land value tax would cause fewer distortions than virtually any
other tax, these distortions would still reduce economic productivity.

------
TweedHeads
Taxes are evil.

The bigger the government the more taxes they need to collect to sustain
themselves, making it a vicious cycle, where the only one who gets fucked is
the people whom the government is supposed to serve.

End all taxes, minimize government, serve the people.

~~~
lsb
Economies of scale make taxation efficient if you have publicly available
goods, like water, or mass transit, or roads, or primary health care.

~~~
anamax
> Economies of scale make taxation efficient if you have publicly available
> goods, like water, or mass transit, or roads, or primary health care.

Only if providing said goods is done efficiently, which it never is.

~~~
tybris
It's not about efficiency, it's about need. These services need to stay at a
basic level for everyone regardless of economic conditions. That's why you
can't (fully) leave them to the market. However, hybrids between markets and
governments can work very well. In the Dutch health insurance system, for
example, the market is forced to provide basic health insurance to everyone,
but is otherwise free to compete on price, service and additional products.

~~~
anamax
> It's not about efficiency, it's about need. These services need to stay at a
> basic level for everyone regardless of economic conditions.

It's always about efficiency. More to your point, the more important the need,
the more important efficiency is.

Do you really think that it's better to provide water for $100 than it is to
provide it for $10?

Remember - the claim was "Economies of scale make taxation efficient".
Economies of scale aren't the only factor as taxation isn't necessarily
efficient. In fact, it tends to be inefficient because it's folks spending
other people's money on other people's behalf, which is the worst possible
situation for efficiency. (Your money for your benefit is the best - you care
about cost and quality. Your money for someone else's benefit, you care less
about quality. SOmeone else's money for your benefit, you care less about
cost.)

I'm glad that the Dutch govt seems capable of doing certain things. However,
that experience doesn't translate. (Current US govt healthcare isn't as good
as govt healthcare advocates assert that US govt healthcare will be. In other
words, we have an existence argument. Fix US govt healthcare, and their
argument becomes credible.)

