How much is it worth to you to have the potholes and cracks in the roads in your town promptly filled in? Probably roughly what it costs you to have each of your cars fixed a couple of times a year.
So is it better for the local economy to (1) keep the tire retailers and alignment shops in business; or (2) to pay city employees or contractors to maintain the roads in a condition that minimizes damage to cars and tires?
Fans of small government might opt for the first choice. Fans of individuals having more money to spend on discretionary purchases or to invest toward their own futures might opt for the second one.
Some things ought to be done by the community, and financed by the community.
So how should we pay for this sort of public works?
- Should we impose sales taxes on goods sold within the town providing services?
- Should we impose a wage tax on workers within the town providing services?
- Should we tax the buildings within the town?
- Should we throw an extra tax on tobacco, alcohol, cell phone use, cable TV subscriptions, electricity use in the town?
- Should we tax all the cars and trucks garaged within the city limits?
- Should we tax the gasoline and diesel sold within the city limits?
- Or should we finance this by taxing the land value within the town limits?
If you're new to this concept, all these may make equal sense to you. (Indeed, some people argue for "balance" in taxation, or for spreading taxes across many tax bases in order to "keep rates low." But I think there is one option that is far better than the others.
Who benefits when we make it less expensive to live within a particular community than it would otherwise be, as we do by improving road maintenance? Isn't it ultimately those who own land within the city limits -- the landlords (residential and commercial), the homeowners, the business community -- who benefit, both as individuals and as property owners, when people are more prone to drive in their community than in one which does not maintain its roads to the same standards? Even those who don't own cars benefit.
Some would say that this fails to collect from the tenants -- residential tenants, commercial tenants -- who also benefit, but I'd have to disagree with that argument. Their landlords can charge them more in the presence of such services than they could charge in the absence of that road maintenance. Should that benefit accrue to the landlords, or should it be passed through to the community whose spending created it?
I'll return to something a Tennessee business man wrote to his governor in 1873:
"Never tax anything
That would be of value to your State,
That could and would run away, or
That could and would come to you."
The same is true of individual towns, too. Don't tax jobs, or workers, or buildings, or equipment, or products.
This is not a reason not to raise public revenue; rather, it is a reason to think carefully about what should be taxed -- and what should not be. Charge for that which the community's presence and activity creates, and the privilege of using that which nature or community provides in limited supply, e.g., water, electromagnetic spectrum, geosynchronous orbits, minerals, oil, natural gas; privileges like franchises for monopolies; landing rights at congested airports; on-street parking; etc.