David D. Friedman, in his reply to Matt Zwolinski, says that the solution to the conflict between individual freedom and property rights lies with distinguishing between ownership rights over uncreated property, such as land, and ownership over created property, such as a crop of wheat (or a railroad train):
….You wish to stand on a certain piece of common property. I am there already. You have the same right as I do to stand there, but you do not have a right to move or injure me, hence you cannot exercise your right to stand there without acting unjustly. I have not appropriated the land I am standing on in the usual sense of the term, but I have “de facto” appropriated it for as long as I stand there, not by altering the nature of your right to the land but by making it impractical for you to exercise it without violating other rights.
…..I plant wheat in a field. You come and want to plant wheat in the same field. I point out to you that the field is common property which you are welcome to use, but the wheat I have planted is my property (the result of my labor in gathering seeds, watering them so they would sprout, etc.) and you do not have the right to disturb it. Any way you can figure out to exercise your right to the field without violating my right to the wheat is fine with me.
Taking the last example, a problem arises if one individual plants the entire common area with wheat, preventing anyone else from doing so and causing them to starve. There have to be conventions in the use of common property — which have evolved over time into property rights.
Read more at Getting the Property Problem Wrong | David D. Friedman | Libertarianism.org.
Friedman and Zwolinski are revisiting issues that have already been thoroughly covered.
eg Ambrose Bierce 1842-1913 “The Devil’s Dictionary”:
“LAND, n. A part of the earth’s surface, considered as property. The theory that land is property subject to private ownership and control is the foundation of modern society, and is eminently worthy of the superstructure. Carried to its logical conclusion, it means that some have the right to prevent others from living; for the right to own implies the right exclusively to occupy; and in fact laws of trespass are enacted wherever property in land is recognized. It follows that if the whole area of terra firma is owned by A, B and C, there will be no place for D, E, F and G to be born, or, born as trespassers, to exist.”
and Henry George 1839-1897
“The equal right of all men to the use of land is as clear as their equal right to breathe the air–it is a right proclaimed by the fact of their existence. For we cannot suppose that some men have a right to be in this world, and others no right.”
Source: Progress and Poverty (bk. VII, ch. I)
and how to reconcile the problem of one man’s wheat crop on the common land:-
Thomas Paine (1737-1809):
Men did not make the earth…. It is the value of the improvements only, and not the earth itself, that is individual property…. Every proprietor owes to the community a ground rent for the land which he holds
and Paul Samuelson 1915-2009 (1970):
Pure land rent is in the nature of a “surplus” which can be taxed heavily without distorting production incentives or efficiency. A land value tax can be called “the useful tax on measured land surplus”.
and Fred Foldvary The Progress Report “Pure Geoism” 4/2/13
Complete and equal self-ownership implies that each person fully owns his body, life, and time. Self-ownership therefore implies that a person owns his labor and therefore the wage of his labor and the products of labor. Any tax on wages and goods violates self-ownership. Moreover, when a worker saves some of his wage, and loans that portion of wages to someone else, the interest obtained is fully owned by the worker lender, and when a worker borrows funds and pays the interest from his wage, that interest payment is also wages, and all such wages should be non-taxed. Also, if a worker chooses to give some of his wage to another person, that fund is still a wage, and should not be taxed as a gift or inheritance. Hence, all further transactions of the original wage, and gains from lending or investing the wage, have to be free of taxation.
That all the above is not self-evident to the authors can be summed up by:-
Macaulay (1800-1859):
Had the Law of Gravitation affected vested interests, it would have remained undiscovered
Hi Alex,
Although a land tax has imperfections, they are far less than those of the income tax, company tax and FBT. What would the pros and cons be of scrapping the three and replacing them with a combination of land tax, sales tax and excise duties (alcohol, petrol, etc.)?
Regards, Colin
Hi Colin,
I only just saw your reply.
From a purist point of view I believe Geolibertarianism is the moral philosophy that should guide taxation:-
http://en.wikipedia.org/wiki/Geolibertarianism
“Geolibertarians are advocates of geoism, which is the position that all natural resources – most importantly land – are common assets to which all individuals have an equal right to access; therefore, individuals must pay rent to the community if they claim land as their private property. Rent need not be paid for the mere use of land, but only for the right to exclude others from that land, and for the protection of one’s title by government. They simultaneously agree with the libertarian position that each individual has an exclusive right to the fruits of his or her labor as their private property, as opposed to this product being owned collectively by society or the community, and that “one’s labor, wages, and the products of labor” should not be taxed.”
In reality though it is about what is practically possible. The Henry review aimed for four bases – personal income, business income, consumption and economic rents of natural resources and land. At present land tax has a much smaller role than the other three.
Any change to increase the proportion of total taxation from LVT can only be achieved slowly and with much opposition. The ACT proposal to change existing property taxes and stamp duty to an annual LVT is the best start one can hope for. The plan is such that if a landowner really wants to keep stamp duty instead of an annual fee they can virtually do so. There was an article in The Drum about it:-
http://www.abc.net.au/news/2013-02-01/janda-stamping-out-inefficient-duties/4496356
I believe GST is more efficient than income tax and in that context may be better. However if, as geonomics asserts, the main contributor to unemployment is that land is priced out of reach, increasing the GST and broadening the base without a broad-based LVT as well, would not abolish unemployment and so would increase hardship for the very poor.
Thanks Alex,
Years ago I worked in structured finance for an investment bank. That left me with the lasting impression that income taxes are inefficient — both in terms of equity and collection — and should be levied at low flat rates if they cannot be avoided altogether.
Any tax acts as a disincentive. GST acts as a mild disincentive on consumption, while income tax — because of the progressive rates — acts as a massive disincentive on production. If there was no income tax, we would all be encouraged to work harder. Doctors might not play golf on Wednesdays, but the average worker would also seek more overtime because they aren’t giving half of their extra income back to the tax man. This would give a significant boost to GDP. Interest would also not be taxed, creating an incentive to increase savings.
The problem with all taxes is they tend to increase over time. Flat rate taxes such as GST are the exception because of the political fall-out from a rate increase. It is too easy, with progressive taxes like income tax, for politicians to disguise an increase or even just allow bracket creep from inflation to increase tax rates over time.
Land taxes would be levied at relatively low flat rates and would act as a mild, largely unnoticeable, disincentive on land ownership. For that reason they offer distinct advantages over income taxes.
Taxes on usage of other common property, whether extraction of resources, pollution of the air or harvesting fish from the sea can also be justified. This goes back to the Tragedy of the Commons, where resources owned by the entire community are exploited by the few at a cost to everyone.