David Cay Johnston: Is It Is Time To Drop Income Taxes?.
I think DCJ is asking the right question here, at least as a top-line, and raising some important points in support of answering it.
The first is the moral principle of progressive taxation -- that the greater the gain you manage to attain, whether through hard work or luck, the greater your duty to pay back the society that made your riches possible so that it will endure. This concept is 2,500 years old, coming to us along with its civil twin, democracy, from ancient Athens.
The second is horizontal equity. Each person, or business, with the same ability to pay should pay the same tax. We must not tolerate a system in which one family or company pays far more than another with the same income, thanks to all the fine print in the tax code.
Simplicity, transparency and ease of payment should be the last three of the five guiding principles, as Adam Smith taught more than two centuries ago.
Adam Smith called these the Canons of Taxation. I urge you to read more about these ideas, including, particularly, Louis Post's expansions of these ideas, in the footnotes associated with this passage:
The best tax by which public revenues can be raised is evidently that which will closest conform to the following conditions:
- That it bear as lightly as possible upon production — so as least to check the increase of the general fund from which taxes must be paid and the community maintained. 20
- That it be easily and cheaply collected, and fall as directly as may be upon the ultimate payers — so as to take from the people as little as possible in addition to what it yields the government. 21
- That it be certain — so as to give the least opportunity for tyranny or corruption on the part of officials, and the least temptation to law-breaking and evasion on the part of the tax-payers. 22
- That it bear equally — so as to give no citizen an advantage or put any at a disadvantage, as compared with others. 23
At that same link, you'll see how Henry George expressed it, in a letter to Pope Leo XIII:
- It must not take from individuals what rightfully belongs to individuals.
- It must not give some an advantage over others, as by increasing the prices of what some have to sell and others must buy.
- It must not lead men into temptation, by requiring trivial oaths, by making it profitable to lie, to swear falsely, to bribe or to take bribes.
- It must not confuse the distinctions of right and wrong, and weaken the sanctions of religion and the state by creating crimes that are not sins, and punishing men for doing what in itself they have an undoubted right to do.
- It must not repress industry. It must not check commerce. It must not punish thrift. It must offer no impediment to the largest production and the fairest division of wealth.
DCJ goes on to raise some other good questions:
What else should we call a system that lets hedge-fund and other financial speculators defer paying taxes for years or decades on their carried interest, while discouraging investment in long-term projects that may not pay off for a decade or more? How else to explain our gross overinvestment in housing?
And what about corporate tax accounting costs?
Under President Barack Obama, business has been able to immediately write off 50 percent of new investment one year and 100 percent in two other years. We need to examine the long-term benefits and costs of full expensing. The White House says full expensing lowers the average cost of capital for business investment by 75 percent. But what other effects are there?
More broadly, we need to debate why corporations must keep two sets of books, one for shareholders and one for the IRS. How much more efficient would taxation, and commerce, be with one set of books?
I hope that DCJ, perhaps the best journalist on this beat, will explore further, to see what other tax bases might be used.
- Which ones would be just?
- Which ones would avoid taking from individuals and corporations value they've created?
- Which ones would take back from individuals and corporations value that the community created or nature provided?
- Which ones would push back on individuals and corporations the costs of the pollution they've incurred instead of permitting them to impose those externalities on the rest of us?
- Which ones would encourage good behavior?
- Which ones would create widely shared prosperity?
- Which ones could tax the value of franchises and privileges that our ancestors gave out willy-nilly, or which past administrations or Congresses have given to their BFFs (best friends forever), which rightly belongs to we-the-people?
The writings of Mason Gaffney, from the 1950s to the present, provide a wide variety of logical and just tax bases. They've remained largely hidden, for reasons that relate to how delighted the special interests have been with their privileges. DCJ could help bring these to popular attention.
Walter Rybeck's book, Re-Solving the Economic Puzzle, also provides some good approaches to this.
It would also be useful if our government would start measuring the value of these privileges. But I suspect that the powers that be will see to it that this doesn't happen.