link: 120TN0887.pdf
A few lifts:
- While median income rose year-over-year in 2007, it was still smaller than way back in 1999 by $408 or nearly 1 percent. Eight years and no gain is not good news. My analysis of the latest reports from the IRS Statistics of Income Division showed that in 2006, taxpayers reported higher average income for the first time since 2000. But the gain was just $740, from $57,289 in 2000 to $58,029 in 2006.
- Looking deeper, the data show that the gains are almost all at the top. Among people making less than $75,000 — roughly 8 of every 10 taxpayers — 2006 average incomes remained below those of 2000 levels. And of the gains of the top fifth, an astonishing 42 percent went to the 1 in 400 taxpayers who reported seven figures or more of adjusted gross income on their Form 1040.
- The dominant and often only form of income for most Americans is slowly eroding, while the capital incomes earned by those at the top are soaring.
- And while it is true that the top 10 percent pay the lion’s share of income taxes, this levy explains only about a sixth of the dollars that governments at all levels collect. When you look at all federal taxes that fall directly on individuals, the data show that schoolteachers, cops, and office workers pay marginal tax rates of more than 40 percent on wages that have been mostly stagnant over the past three decades. But at the very top, where the marginal tax rate is just 15 percent, incomes soar.
- We need policies that focus on wages if we want broad prosperity. We need to look at the world the way employers do, who see the payroll tax as a good reason to shed workers and hire people on contract and, when they can, shift jobs overseas.
"Capital incomes." Hmm. Capital tends to depreciate. What appreciates is what the classical economists classified as LAND. Neo-classical economists have managed to tuck land into capital as a subset, and thus appear to justify a lot of things which simply have no justification. Oil revenues are somehow treated as if corporations had created that oil. (The governor of Alaska declared recently that that resource rightly belonged to all Alaskans, and raised the tax rate a bit.)
The classical economists saw three non-overlapping factors of production: land, labor and capital. The returns to each are rent, wages and interest. If those who would open a business need a bit of land on which to operate, and that bit must be very choice in order for their business to succeed, they must pay a very high rent to the current owner of that site, leaving them less for employing workers and buying the things which will make that business a success and which, by the way, will enhance the economy. The land rent can go either of two places. As we conduct things now, a tiny share of it goes to the commons, as part of the local property tax; the remainder is permitted to collect in private pockets, lining those pockets more each year. As we should do things, the lion's share of that land rent should be collected by the commons, and used to fund our common spending -- leaving wages untaxed, sales untouched, buildings unpenalized. We can
Which of these options seems wise? Which seems sustainable? Which seems just? Which seems efficient? Which seems administrable?
If we shifted our taxes onto the wide range of important things which the classical economists called land, and off productive effort and commerce, we would see wages rise and land prices decrease, which would allow all of us to afford that which we depend on for our being -- a place to live and a place to work -- without enriching the FIRE sector -- finance, insurance and real estate. Think about this from the Statistics of Income data: Among those who itemize their deductions, home mortgage interest deductions are about 3 times what property tax deductions are. People complain about the property taxes, which go to support the commons, but seem to be okay with paying 3 times as much to the corporate mortgage lender who paid off the previous owner ... who didn't create the land value, which, in the case of most properties in major metro areas, is more than half of the value of the property!
So a large share of our income is going to paying the mortgage lender and the previous owner of the bit of land we occupy. Is this any way to run a sane economy?
An "investment" in land does not add an iota to the community's economic activity. It is inert. Wouldn't we be smarter to structure ourselves so that what one buys from the previous owner is the house or the building, and then we pick up the responsibility for paying the land rent, or land value tax, on the parcel of land, based on its current value?
Those who can look at things from 30,000 feet, and consider the effects of such a reform on our local and national economies, and on our distributions of wealth, and our distributions of income, not to mention economic justice, can't fail to be impressed.
See Charles Fillebrown, The Principles of Natural Taxation, available at books.google.com and an FAQ from the book, at http://wealthandwant.com/docs/Fillebrown_Catechism.htm
Johnston's article brings to mind an interesting thing we do in the English language. We use the word "makes" as a synonym for "earns." But many of the gains that individuals receive are truly unearned. They represent the privatization, the appropriation, of things which rightly belong to the commons. Finders keepers, losers weepers? Tag, you're it, and now I get to keep your wages? Musical chairs, and I beat you to the only remaining seat, so it's mine? Pinata, and when I open the earth, my friends get to keep the bounty as if they had created it?
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