All the recent
talk about tax reform, good, better, and worst, has focused on the debate as to
which philosophy of taxation, and which specific tweaks to the existing system,
will best stimulate an acceptable rate of economic growth. Commentary has ranged from the sublime to the
ridiculous, with the usual barrage of inane and erudite remarks, interspersed
with more or less veiled attacks on the intelligence, motives, and fashion
sense of anyone on the other side, but no one has raised the real issue here:
What is the real
function of taxation?
One of the most
serious problems facing government today is understanding the proper role of
taxation. The Wall Street Journal has been running articles discussing what tax
reforms will best stimulate economic growth.
This actually avoids the real issue, which is, What is the purpose of
taxation?"
Is it to
stimulate or put a damper on economic growth?
No. The sole purpose of taxation
is to raise the money to run government.
That's all.
Unfortunately, as
ordinary people have lost the means of owning capital at the same time that
capital is replacing them from their jobs, the State has had to assume
increasing responsibilities for taking care of people.
What this really
means, as the solidarist labor economist Goetz Briefs pointed out in his 1937
book The Proletariat, is that the taxpayer has assumed the responsibility
. . . at the same time that taxpayers are less and less able to pay unless they
own capital!
In response, the
State starts creating money by emitting bills of credit. This finances government and redistributes
wealth with inflation instead of by direct taxation.
This also creates
a vicious circle that puts a greater and greater burden on the people who have
only wages or pensions on which to live.
At the same time, ironically, it spares the wealthy owners of capital whose
profits increase with inflation as they simply raise prices.
So, in the ideal
world where people gain income from both capital and labor, ALL income above a
level sufficient to meet ordinary living needs (including education and
healthcare) should be taxed at the same rate.
In the current state of society, however, it makes little sense to tax
wage income at a higher rate than property income, or even exempt property
income from taxation. That just means
that the people least able to pay are paying a heavier burden — which becomes
even greater when the government inflates the currency.
It makes more
sense, therefore, whether under Capital Homesteading or in the current state of
society not to tax property incomes (or any other income) at a greater rate than wage or "ordinary"
income. This has the added benefit of
encouraging financing investment out of future savings by means of which
everyone can become an owner, instead of past savings that restrict ownership
to the currently wealthy.
Once everyone has
the means to own capital and does own capital, of course, the tax system should
be reformed to levy the same tax rate on everybody. This is because everybody would then have an
equal ability to pay; one of Adam Smith's four principles of taxation is that
you only tax those who can afford to pay taxes(!). After all, why tax people who can't pay,
unless you're hoping for an excuse to put them in jail?
#30#
