Table of Contents
1. Introduction: Gary Johnson and the FairTax
2.
Libertarian Tax Principles
3.
Georgist Tax Principles
4.
The Basics of Georgism
5.
Georgism, Advanced
6.
The Geo-Libertarian Synthesis
7.
Georgism as Libertarian
8.
Thomas Paine's Citizens' Dividend
9. Taxation and Social Welfare
10.
The Geo-Painean-Friedmanite Synthesis
11.
Conclusion: Social Welfare Programs
Content
1.
Introduction: Gary Johnson and the FairTax
The Libertarian Party
needs a tax policy.
In 2016, the party's
presidential nominee Gary Johnson advocated the FairTax. Under this
proposal, the federal tax on individual income would be replaced by a
nationwide value-added tax on consumption; a 23% tax (paid by the
customer) on all goods sold nationwide, functioning the same way that
state and local sales taxes do.
Since about half of
federal revenues derive from taxes on individual income, it's
possible that if the sales tax rate could be doubled (to 46%),
capital gains taxes, estate taxes, and gift taxes, and maybe other
types of taxes as well, could become unnecessary, in addition
to personal income taxes (of course, few libertarians - and few
followers of Henry George's Single Tax philosophy - would support
prohibiting voluntary donations to government paid from
charges on earned income, sales, capital gains, etc.).
During the 2016
campaign, on Chris Cuomo's CNN show, Gary Johnson answered concerns
that the FairTax proposal is regressive (despite the plan's “prebate”
which would compensate consumers for their purchases). Additionally,
John Oliver criticized Johnson for declining to go into enough detail
about whether the FairTax's “prebate” is a welfare program.
It seems that the public
and the media are not quite ready for the FairTax. Judging by
Johnson's disappointing 3% vote in the 2016 presidential election
(after sustaining 5-9% polling averages, and even registering as high
as 13% in one poll, all still short of the 15% threshold to get into
the debates), party members themselves might be ready to move on to
better tax policies as well.
Given the misinformation
and contentiousness surrounding Johnson's candidacy and surrounding
the FairTax, it might behoove the party to consider tax policies that
are different from the FairTax, but which still retain its intent and
spirit. A new tax policy should ask the same question that inspired
the FairTax: “Which behaviors ought to be taxed in the first
place?”
2. Libertarian Tax
Principles
The tax-skeptical party
that we are, we go back to first principles. Our members might be
likely to advocate funding government entirely from voluntary
contributions, others from user fees, perhaps others want to keep
income taxes but allow individuals to choose which spending items to
pay for.
Others simply want
whichever tax policy will place the lowest burden on people who
engage in productive economic behavior. We understand that income
taxes and sales taxes are really taxes on earning money and taxes on
buying and selling (respectively). We also understand that when you
tax an activity, you risk discouraging that behavior if you impose
too high a tax rate. This is because high tax rates can deter people
from engaging in the activity that is being taxed.
Hence,
each kind of tax has the effect of penalizing and deterring the
activity that it taxes. The result is that when you tax income and
sales, less people are working and earning money, and less trade is
taking place because fewer things are being bought and sold.
Art Laffer, former economic adviser
to Ronald Reagan, theorized what is called the “Laffer curve”.
The Laffer curve is essentially a bell curve, plotted on a graph; a
graph in which the X-axis depicts rates of income or productivity,
while the Y-axis depicts tax rate percentages.
Laffer
hypothesized that some nominal tax rate might exist, which, if
applied, would allow the government to take as much revenue as
possible from our paychecks, without risking making us quit our jobs
altogether because we can't afford to pay taxes at rates any higher
than they already are.
The pervasiveness of the sentiment
that we're “taxed enough already” - and a new political
environment that firmly believes that too much regulation and
taxation stymies production and growth - suggest that Laffer's
concern is valid. Some among us might even believe that the Laffer
curve peaks at zero; which is to say that any
percentage tax rate - even 1% - at least somewhat deters a person
from engaging in taxed behaviors.
That's why it's
important for us to ask ourselves how to ow do we adopt a tax policy
that satisfies the concerns of all members of the party, while making
sure that the people who actually deserve to be “punished”
(with these punitive taxes) are the ones that will bear the burden of
federal taxes?
3. Georgist Tax
Principles
If
taxes do punish, then they should be levied with intent
to punish. Understanding this could lead to a society where the
people who pay for government, are criminals - those who
destroy lands, restrict access to vast areas, rob us of our natural
rights, waste our tax dollars, and enrich themselves through cronyism
- while the people who reap the rewards are, by large, innocent
civilians who engage in little or no economic activity which harms
anybody else.
The key to achieving
that kind of society is to “tax bads, not goods”;
that is, fund government through imposing intentionally deterrent,
quasi-punitive fines on wasteful behaviors, not through
imposing “taxes” on productive economic behavior that harms
nobody and steals nobody's property.
But taxing waste is
precisely the issue; the FairTax taxes consumption. And so, we
must ask, do we want to tax consumption? Do we risk
discouraging people from buying things; from using the products they
want to buy, including eating the foods they want to buy? Why should
we be taxing economic activity at all? Shouldn't we tax luxury items
before we tax ordinary consumer goods? Isn't conspicious (excessive)
consumption a more waste-like activity to tax instead of taxing all
sales nationwide?
That's why “tax bads,
not goods” and “tax land, not man” are some of the slogans of
the Georgists (also called Geoists). Georgists are students of
19th-century American economist Henry George, whose 1871 book
Progress and Poverty influenced the development of philosophy
and policy concerning property rights, taxation, environment,
economics, and other topics.
Some of George's
modern-day admirers have created a hybrid “geo-libertarianism”,
integrating George's libertarian communalist philosophy into the
broader ethics and politics of libertarianism, bringing George's
“Single Tax” (or Land Value Taxation) together with a die-hard
support for civil liberties, and a desire to decentralize government
towards local communities.
4. The Basics of
Georgism
While adherents to the
Libertarian Party's platform are, for the most part, known as strong
supporters of private property, Georgists want most land held
in common (with open access), but with communally recognized private
property rights. However, Georgists and geo-libertarians want
intentionally deterrent fines to be imposed on people who have full
private property ownership rights, including the right to exclude
others from their land.
Henry George's philosophy is known by many names: Georgism, Geonomics, Land Value Taxation or location value taxation (L.V.T.), split-rate taxation, two-rate taxation, two-tier taxation, or "the Single Tax". The Single
Tax is a policy that funds government entirely through taxes on land;
specifically, through taxes on the non-improvement of land, collected
as land rents. Despite the "Single Tax" term, taxes on the
non-improvement of land actually include multiple different
types of taxation. This is because the
full economic definition of land includes space, air, water, raw
materials, mineral deposits, parts of the electromagnetic spectrum,
and other natural resources that exist in fixed supply.
The
more libertarian among the geo-libertarians might argue in favor of
limiting the types of behavior which the perhaps deceptively-named
Single Tax might apply, but to fail to fully tax all behaviors,
goods, and services which fall under the full economic definition of
land (which includes raw materials, and does not include land not yet
capitalized) would likely mean deserting George's vision to some
degree.
A
full “Single Tax” could potentially involve imposing monetary
penalties upon: 1) the hoarding of landed property; 2) the enclosure
of common lands; 3) emission of pollutants, potentially including the
emission of carbon; 4) the extraction of natural resources without
compensating neighbors or the community; 5) allowing land to become
unusable and fall into disuse, disrepair, or blight; and / or 6)
failure to homestead, otherwise sustainably develop, and demonstrate
sufficiently frequent and active use of the land.
The
main revenue sources of a hybrid geo-libertarian tax policy would
most likely be: 1) (as much revenue as possible from) voluntary
contributions (from whatever sources); 2) (most of the remaining
revenue) from user fees (through running as many government services
as possible on fee-for-service models); and 3) taxes on land (funding
whatever constitutional and necessary programs cannot be funded
through donations and user fees.
It's
important to keep in mind that not all Georgists want to abolish the
individual income tax, corporate income and capital gains taxes, and
sales taxes. Of course, neither
Georgists nor libertarians could rationally argue against abolishing
voluntary donations to
government from any of these sources. Despite those facts, it's not
unreasonable to suggest that taxing solely land
should logically involve eliminating (mandatory) personal
income taxes, sales taxes, luxury taxes, capital gains and corporate
income, estate taxes, and gift taxes. However,
personal or corporate income from land sales,
and gifts and bequeathing of land,
might also be taxed. These provisos should provide plenty of room for
negotiation with parties representing a host of different ideologies.
5. Georgism, Advanced
An extensive
application of Georgism might even include something like a carbon
tax, but if each community could develop its own method of taxing
pollution, then these communities could have a chance to convince
urban and suburban communities not to adopt the United Nations carbon
taxation plan.
While this might sound
unusual or risky - maybe to the more conservative members of the L.P.
- taxing non-improvement of land could turn property taxes on
their head, making it unnecessary to tax property value,
freeing people to make unlimited improvements to their own property
without paying taxes to the community (as long as the improvements
are sustainable).
As
a side note, in addition to George's demands, adherents of the
property philosophies of John Locke and Pierre-Joseph Proudhon
would likely promote punitive measures against property owners who do
nothing to physically protect and secure their land, and instead rely
on government to do it for them instead.
Additionally,
these property owners - "absentee property owners" - rely
on government to make land artificially scarce, resulting in takings
of common lands that drive populations into urban centers,
conscripting the people into the reserve army of labor, so that they
are artificially impoverished through deprivation of natural rights,
and are forced to compete for artificially scarce resources. This
competition in the job market is not limited to the profession of
working as a security guard to protect and defend someone's private
property.
6. The Geo-Libertarian
Synthesis
But the geo-libertarians
simply want to realize George's vision of ending taxes on all forms
of labor (like personal income taxes), ending taxes on all forms of
capital (like sales, capital gains, and taxes on profits), and taxing
the waste and destruction of landed property, instead of
taxing productive and sustainable improvements to landed property.
Such a policy would
render about 90% of current revenue sources obsolete. It would shrink
the tax burden of renters, low-income workers, and ordinary consumers
to practically zero; causing the burden of funding government to fall
mainly upon the wealthiest of landed property owners, and the
companies that release the most pollutants into common land, water,
and air.
This policy would ensure
that the people who deserve to be punished by taxes - the
beneficiaries of government protection of landed property (in
addition to other artificial, taxpayer-funded privileges which
destroy true free market conditions) – are the ones being punished.
Additionally, this policy would minimally interrupt ordinary
production and trade (aside from land); like sales, the earning of
income, the earning of dividends through investment, and sustainable
improvements to one's landed property (however, as one small
possible downside, community governments' roles in mediating the sale
and transfer of landed property would increase).
The Land Value Taxation
rate could even be set at a fixed number – maybe the same 23% as
the FairTax; or maybe another number, maybe reflecting a very
different budget – so Georgism would likely satisfy those in the
L.P. who desire flat tax rates.
7. Georgism as
Libertarian
Without government
taxing the income and purchases of ordinary people, prosperity would
likely rapidly increase among low-income people. Social welfare
programs could become unnecessary, making it possible to eliminate
the majority of the activities of the Internal Revenue Service,
focusing it on the taxation of non-improvement to landed property.
Aside from simplifying
the tax code and scaling back the affairs of the I.R.S., Georgists
and Libertarian Party members might also choose to embark upon any or
all of the following: 1) scale down the affairs of the Department of
the Interior and bureaus of land management; 2) loosen requirements
to claim homesteading, such as demonstration of exclusion and
duration of occupancy; 3) pass homesteading tax credits at all levels
of government, credits which are applicable to apartments, trailers,
and small homes; 4) urge the federal and state governments to sell
and grant public lands to local governments, potentiating more land
sales to citizens; and 5) passing a new Homestead Act, allowing each
resident to claim up to 7 or 8 acres of land.
But perhaps the most
important way to test the viability of a geo-libertarian alliance
will be to see where libertarians and Georgists agree about what to
tax, why we should be taxing it, and how much it should be taxed.
8. Thomas Paine's
Citizens' Dividend
In 1998, a group of
libertarian Georgists called the Thomas Paine Caucus hosted a booth
at that year's Libertarian Party convention in Washington, D.C.. Some
members of the caucus were also members of the Libertarian Party,
while others were not.1 The caucus's efforts to get the
L.P. to accept its land rights platform were derailed, so as a
result, the party has perhaps paid less attention to Paine - and to
George - than it should.
In
Common Sense, Paine explained that each of us deserves
compensation for being deprived of the natural right to inherit and
fully own landed private property, we begin to understand that if we
want our government to perform basic functions like zoning and
recognizing exclusive property titles, then we should be free to have
private property; we should be free to claim an area of land
commensurate with world land divided by world population.
But we should also be
free to choose monetary compensation instead of landed private
property. Paine advocates a citizens' dividend; similar plans are
called residents' dividends, sovereign wealth funds (such as the
Alaska Permanent Fund), and the kind of universal basic income
guarantees advocated by libertarian Charles Murray of the American
Enterprise Institute (and many on the left, and in Europe).
If you think about it,
the idea of cash payouts to citizens, may not be too far off from the
FairTax's “prebate”, which would compensate consumers up to
several thousands of dollars for paying taxes on everything they buy
in a given year.
9.
Taxation and Social Welfare
Despite the suggestions of John Oliver and others, a “prebate”
isn't exactly a social welfare program. Citizens' dividends
and basic income guarantees don't have to be run like social
welfare programs either.
As libertarians, we interpret the Constitution's General Welfare
Clause, and the direct tax and capitation clauses, to suggest that
taxes and spending should impact all citizens universally, and
equally, with spending benefiting everyone.
Given these principles, a prebate, basic income, or citizens'
dividend should only be passed if it leaves more money in the hands
of ordinary people, so that they can buy in the market what those tax
dollars previously paid for. The idea is to shrink spending and
revenues, and return those revenues to everyone in the form of cash
payouts.
Truthfully, any basic
income program, citizens' dividend, sovereign wealth fund, or
Negative Income Tax -type program, could easily be implemented and
administered in a way that ensures that as flat as possible tax rates
- and the tax burden in general - fall equally upon those who can
afford it (i.e., those above the poverty line); while
ensuring that each citizen receive an equal share of the government's
cash payout (and / or land-gift), as long as they are not a
beneficiary of government land protection.
10. The
Geo-Painean-Friedmanite Synthesis
Out of the debate
between FairTax and Negative Income Tax proponents, and basic income
advocates, has come the suggestion of a “Geo-Painean-Friedmanite
Caucus” in the party; one which unites the ideas of Henry George
and Thomas Paine, with those of Milton Friedman.
Friedman supported the
Negative Income Tax, though he did not originate it. Daniel Moynihan
and Sargent Shriver advocated for the passage of similar legislation,
while presidents Johnson and Nixon considered similar measures.
The Negative Income Tax
aims to eliminate the "poverty trap" created by rules that
cut people off from social welfare benefits when they start working,
thus removing the monetary incentive to work rather than stay on
welfare. The N.I.T.'s solution is to flatly tax people above the
poverty line (or some nearby amount), while paying "negative
taxes" (i.e., rebates) to people below the poverty line.
In a
1968 interview with William F. Buckley, Friedman defended the
Negative Income Tax. He gave as an example a 50% negative tax for
those below the poverty line; explaining that everyone below the
poverty line would receive half of the difference between the poverty
line and their annual income.
Friedman
described it essentially as a flat tax which is not regressive, but
which is effectively progressive because the “negative tax”
(read: payout to people below the poverty line or some other income
threshold) would be redistributed from the rich, who would pay the
same flat tax rate on all the taxable productive behaviors in which
they engage.
That
would go regardless of whether that would involve keeping the current
tax code, or whether the code were totally overhauled; this fact
could allows some wiggle room for compromise on probably almost all
forms of taxation.
Additionally, to exempt
low-income earners from having to pay the Negative Income Tax, and to
relieve the tax burden of those who own the smallest areas of land,
could both be described as plans to compensate ordinary
residents for the taking of their property; both administered as flat
taxes with exemptions for those below a certain level of property
earning or ownership.
And
there's nothing left or right about government compensating the
people for the illegal theft of their property rights, whether you
want to call that "redistribution" or a "welfare
program" or just call it what it is, which is shrinking
government and giving it back to the people (as money and/or land
rights), while restoring reason to the tax code.
Some
of the more conservative members of the Libertarian Party might
criticize such proposals as advocating “redistribution”,
“bleeding-heart” policies, or “leftism”. But given our belief
that most taxation resembles theft, and the fact that the First
Amendment recognizes the natural right to petition the government for
a redress of grievances, Libertarians shouldn't rule-out all
proposals that would put cash directly in the hands of the people.
We
the People have no duty to forgive the federal government for the
self-defeating, unjustly punitive tax policies which it has
administered since the Founding. Government and its cronies should be
found guilty of legitimized unconstitutional mass-scale theft of
wealth and property rights; and the rewards should go to every
resident under federal jurisdiction.
That's
why we should continue to consider sales tax prebates, negative
income tax payouts, basic income proposals, the citizens' dividend,
and the sovereign wealth fund; that's because any one of
these proposals could result in
payouts that are parts of a long-overdue civil settlement
between the people and their government.
Many
L.P. members and Georgists would probably agree that the federal
government should pay compensatory damages to its victims (We the
People). We might argue about how much we can trust the states on
land issues, and about whether people should have a choice between
receiving land and money. But what is clear is that, if all “social
welfare programs” keep people in poverty, then none of the
reforms mentioned herein are social welfare programs.
11. Conclusion
A new synthesis is
emerging. It is a synthesis that wants decentralized community
control over land, environment, and tax policy; that wants to
simplify the tax code and avoid deterring economic growth; and that
recognizes that government largesse has enriched its cronies with
taxpayer funds through artificially limiting the ability to buy and
afford land, and that due to the injustice which maintaining these
institutional, market-distorting privileges perpetuates, residents
are owed reparations: reparations in the form of increased personal
liberty, more localized control, and choice between free land and
free money.
Libertarians would do
well to draw inspiration from Paine, Friedman, and George, in order
to formulate new, innovative proposals of sweeping reforms to (and
overhauls and simplifications of) the existing tax code. They must be
proposals that face modern economic realities, and plan to do
something about the artificial scarcity and artificially inflated
prices and taxes of landed property. Thus, followers of the teachings
of Henry George should remain forever welcome in the Libertarian
Party, and their advice and concerns on taxation and environmental
policies should always be heeded.
Given the attraction of
some Green Party members to Georgism and similar proposals,
convergence upon geo-libertarianism may even prove to be a strategy
for aligning many of the goals of the Libertarian Party and the Green
Party; and with them, Debbie Dooley's Green Tea Party, the Tea Party
movement of the American right, the Constitution Party, socialist
parties, and other independent parties and activist movements.
The Libertarian Party
must be careful to avoid embracing the capitalism and mercantilism of
the traditional American right, and instead embrace true free
enterprise, heterodox economics, and a critique of capitalism from a
position that values property rights. That's why Georgism, the ideas
of John Locke, and the influence of Proudhon, Friedman, Paine, and
many modern libertarian authors concerned about welfare matters (such
as Charles Murray) will and should remain important influences
on the party for generations to come.
We
should also keep our minds open to new
ways to put into full practice all of our principles on taxes; aiming
to craft a tax policy that is fair and equal, and one that affords as
much freedom to the taxpayer as possible. Most importantly, we must
craft a tax policy that holds government, and its largest polluting
and land-hoarding beneficiaries, responsible, for shouldering the
burden of funding government. We must levy fines that
punish crime,
not fees and taxes that deter people from working, trading, and
engaging in productive activities that harm nobody.
To
do the opposite is to continue to grow government; to enrich cronies;
to make land more expensive; and to keep the poor in poverty. It is
to continue down the same path that has given innumerable
unsustainable budget deals and irrational forms of taxation.
Without
access to land, and the ability to derive productive value through
the use of natural resources, productivity is difficult for most
people. As a result, trade, currency, and competition for resources,
are all prevalent, when they would most likely not exist if
each person were capable of sustaining himself. Poverty and
dependence go hand-in-hand; this is what libertarians, conservatives,
and Georgists all want to address.
That's
why the Libertarian Party should not shy away from making tentative
alliances with those slightly to the party's left, nor should the
L.P. shy away from the party of free land and free money.
Sources
1. "Libertarian
Outreach Successful" (about the Thomas Paine Caucus at the 1998
L.P. convention):
