Benefit Versus Ability to Pay

I wrote on the question of Taxation based on ability to Pay or Fee for Service in 2015. It laid out the role of Edwin R.A. Seligman (1861-1939) who was a young disciple of Henry George. This subject comes up again as the question of "Benefit versus ability to Pay" that is the subject of this piece. This piece is a follow on the last post on

Nature's Tax Collectors

Who I identify with Pirates

In that piece I noted that according to the author, taxes should be:

• Taxes are a duty of citizenship.
• Taxes should be proportionate to the "faculty" or ability to pay of taxpayers.

Nature's Tax Collectors or Oligarchs?

What I didn't completely understand when I wrote the previous post in 2015 was the role of rent seeking, privilege, or the privateering that goes into the income of the wealthy and connected. Fortunately a number of my friends and a great man and his disciples, Henry George, Edwin Seligman and Thomas G. Shearman captured the extreme peril of not taxing privilege.

If you don't regulate or tax unearned income from privilege, then you get corruption, bad economic outcomes and oligarchs.

The Benefit of Unearned Income

People have been conditioned into embracing bogus ideas. There is a strong effort to forget the former and embrace the following pseudo-principles, that aren't really as old as they are argued to be. "Classical Economics" never really taught them. And Neo-liberalism teaches them, but they are propaganda:

1. Those who benefit from a thing should pay for it.
2. No one should pay for another person's benefits.
3. A person earns whatever he gains, however he gains.
4. The exception is the poor, who never deserve to keep what they earn.
5. Taxation is the government stealing from the privileged.
6. Taxation should be a "fee for service," and no more.

But guess what, rent seeking means that:

1. The wealthy benefit from a well fed, healthy and prosperous customers, renters and employees.
2. Almost everyone is paying for the benefits of the wealthy.
3. Unearned income means unearned. Income derived from privileges and properties like land, corporate, contract or monopoly is only partly early earned. But for the most part is almost entirely unearned. Most great wealth earn money from money, debt or ownership instruments. Pirates and privateers don't always deserve to keep what they took.
4. The people who deserve to keep their income are those who labor, sell, and work for a living.
   And those who are poor, ill, young or aged, deserve our support.
5. Privateering rent seekers are essentially stealing from government. Hence me calling them pirates.
6. Taxation is about regulating excessive issues of private money and privilege not just a "fee for service."

Benefit Versus Ability to Pay or Taxing Unearned Income

Related to the tax shiftability concern [See Progressive Versus Regressive] is the debate over whether the Single Tax was based on the “benefit theory of taxation,” where one is taxed on the benefits received from holding a land parcel vs. the “faculty” or “ability to pay theory,” where a tax on land gains is only collected when the taxpayer can easily pay the tax (without losing his land or going into debt to pay the tax). But that question is resolved when sees this as a tax on privilege and for regulating money.

The tax needs to be based on ability to pay. And it has to provide enough revenue to prevent inflation and regulate the money supply [see Money Privilege and Loot] The 1890 Plank says:

"To carry out these principles we are in favor of raising all public revenues for national, state, county and municipal purposes by a single tax upon land values, irrespective of Improvements, and of the abolition of all forms of direct and Indirect taxation." [Georgist Constitution]

Although many Georgists believe the Single Tax to be a form of property taxation, Henry George objected to property taxes because they targeted both land use (i.e., labor) and land ownership (i.e., potential ground rents) at the same time. George was concerned that, because a property tax is a direct tax on all aspects of land use and ownership, and demands a tax whether or not the landowner has access to the gain and is able to pay, that the tax would end up being falling on labor/wages. Any tax that can be shifted to ordinary people is not very progressive or fair and just. Thus what George was talking about was:

"not a tax on land, and therefore would not fall on the use of land and become a tax on labor."

Not a tax on land but on the:

"premium which the user of land must pay to the owner, either in purchase money or rent, for permission to use valuable land."

Which means that it was intended as a tax on what we now call capital gains. Thus anyone arguing over ability to pay/facility" versus paying for benefits, is missing the point. Taxation is also for the sake of regulating privilege. And also for making sure that such taxes were not shifted to consumers, workers or rent payers. More importantly, that such taxes weren't grabbed by Tongue eating Trolls.

Sources and Further reading

https://www.cooperative-individualism.org/george-henry-page.htm

https://en.wikipedia.org/wiki/Pollock_v._Farmers%27_Loan_%26_Trust_Co.

For those with Facebook:

Rick's pages:

https://www.facebook.com/notes/common-wealth-tax/doc-120-the-1890-georgist-constitution/813168725462939/?hc_location=ufi

http://holtesthoughts.blogspot.com/2015/08/the-georgist-constitution.html

https://www.facebook.com/notes/common-wealth-tax/doc-161-poverty-is-caused-by-regressive-taxes-and-prevented-by-progressive-taxes/1498599096919895/

https://holtesthoughts.blogspot.com/2015/09/taxation-ability-to-pay-fee-or-taxing.html

Cooperative Individualism webpage [https://www.cooperative-individualism.org/george-henry-page.htm]]

Georgist Constitution

His copy is on facebook:

https://www.facebook.com/notes/common-wealth-tax/doc-120-the-1890-georgist-constitution/813168725462939/?hc_location=ufi

Where he explains the tax is on unearned economic rent:

https://www.facebook.com/notes/common-wealth-tax/doc-133-henry-georges-single-tax-a-tax-on-land-values-a-tax-on-economic-rent-a-t/918244508288693/