A crazy tax idea

[Massacure]

What if the U.S. constitution was amended so that the federal government could tax only corporations, states could only tax personal income, counties could only charge sales taxes and cities could only charge property taxes?

I just woke up from a nap, and this is what I dreamed of. It's kind of crazy when I think about it. >_<

[MrMonk]

1. Then each level of government would devote itself to pushing its costs

onto the others.

[dcfirefighter]

4. Much like today's system?

Though I see the current system as more of a 'race to the bottom' with each state & locality competing with the next for lowest income / sales / property taxes.

A fix, one that I've been a fan of for a while (after a gradual adoption, if you prefer):
Localities charge a tax that is very nearly the rental value of locations for parcels within their boundaries: this would generally be equivalent to 5-10% of today's land value. For example, a $300,000 home may sit on a $100,000 lot: under my system, said 'owner' would pay $7,500 a year for exclusive access to that lot, regardless of what he built on it. Successful localities would raise much much more money than they do now, especially as they eliminate sales and wage taxes. As localities improve services: public safety, transit, schools, etc., their values increase, increasing their revenue. I have no doubt that any municipality that collected anywhere near full rental value for their lands would have a surplus - such a surplus should be returned per capita. While such a shift would pull the equity out of many homes, it would only take that value that was derived from the community: that value accrued to the building itself, and due to the owner, would remain. Furthermore, some 80-90% of the population, even if homeowners, would gain - the fraction that wouldn't is either extremely wealthy, or retired: I doubt that there wouldn't be any programs to protect the retired. A gradual application would eliminate this problem. A rough estimate of revenue would be on the order of $10,000 per capita. For comparison, Washington DC, which spends far more per capita than any other city (if only because its also, sort of, 'a state'), spends roughly $8,000 per capita.

States (and groups of states, through bio?regional agreements) would charge for access to resources such as water and oil; certain pollution charges; as well as many user fees (including corporate charters), tolls, and congestion charges, including landing fees at airports. The states may petition the localities for additional funds. A rough estimate of revenue would be $5,000 per capita.

The federal government would earn revenue from the seignorage of money; the rent derived from patents; as well as tolls / congestion charges related to federal highways, (newly federalized) railways, waterways; immigration charges; air pollution charges; extraction from federal lands and waters; and environmental tarriffs. The nation could petition the states for additional funds if necessary. A rough estimate of revenue would be $2,500 per capita.

You'd wind up with compact, dense communities competing with each other for residents by improving on each other's services, opportunities, and surpluses.

You'd wind up with a state level government that didn't do too much. (maybe they'd regulate a swiss style insurance system)

You'd wind up with a federal level government that didn't do too much but perhaps share surpluses.

You'd wind up with individuals, who's income would be untaxed, and who's labor would be in high demand due to capital being untaxed, who would enjoy very near full employment, and high, untaxed wages, as well as a likely shared public surplus.

[IronLionZion]

5. What about people who own land but don't have much money?

You're land tax idea sounds very interesting. But what happens to people who don't have much income, but own some land that's been in their family for generations? Do they have to move if they can't pay the tax?

And what happens to stuff that is there only because the land is affordable? Like parks or open spaces of green? A lot of city parks may be destroyed to make way for more revenue-generating buildings if the land is taxed.

[dcfirefighter]

6. Point-by-Point

People without income, but with 'old' wealth, would likely have to part with some of their wealth to generate income. Likely, such a shift in taxes would make it easier for individuals to earn income - though retired persons caught in the shift could be hurt, they should probably be protected by some means. Consider the alternative in today's world: what do people without much income, and no 'old wealth' do for housing?

As for parks and open spaces: parks in 'high rent' areas raise more public revenue than they forgo - a one acre park would raise the values of the surrounding parcels more than would be earned by developing the park. This of course has it's limits, though I've seen people claim that under a LVT, manhattan revenue could be increased by EXPANDING central park.

As for suburban open space - much current suburban open space isn't public, but rather private lands that have restrictive zoning laws. Enacting significant LVT in nearby urban areas should reduce teh demand for suburban and exurban development, but in any case, doesn't necessarily change the zoning laws. If suburban open space is public parklands, the above paragraph applies.

Note on farmlands: 'old money' farms could be hurt, but such a system would enable upstart farmers to compete against inefficient established farms. Generally, smaller, intensively operated farms are more efficient on a per-acre basis than larger corporate farms. Additionally, 'family owned' farms typically have a higher proportion of their value in improvements (house, barn, coop, shed, etc.) than corporate farms (one barn per many many acres), and therefore benefit more from an LVT where taxes on improvements are reduced.

[mike923]

7. "part with some of their wealth to generate income"

I guess that would most likely mean selling part of their farm so it could be developed for housing.

I don't like it.

[dcfirefighter]

8. I guess you already own a home

Those who don't own a home might rather have a home than a local cornfield. OTOH, most housing needs would be met in town, rather than in the country - valuable urban real estate would be intensely developed. IOW, this sort of tax discourages sprawl, perhaps better than any of the existing prescriptive legislation, because it does it by making housing affordable, rather than the opposite.

Conversely, if the existing prohibitions against development remain, the farmer with land but no income would have to either sell his land or increase his productivity. If the prohibitions are strong, his land value would be depressed by the prohibitions. If the land can only be used for farming, he'd have to increase his productivity - perhaps by converting to a nursery, or a niche market farm, or some such thing rather than simply farming corn, soy, and wheat.

I do not beleive that 'first come - first served' and 'Eff you, I got mine' are progressive attitudes. Yet these are exactly the attitudes supported by allodial ownership of land.

[yellowdogmi]

2. I think there might be some merit in the idea.

First of all I like the idea of the feds taxing corporations. It would prevent companies from tax break shopping and harming our communities. Of course would they also be responsible for property taxes in the communities where they are located. Those are the questions that come immediately to mind. Like I said it is an interesting idea. I will have to think on it some more.

[Sammy Pepys]

3. You wouldn't necessarily have to amend the Constitution to do that...

...just get the right policyprescriptions in place and I guess it could work.

I only wonder though if you could even amend the Consitution in that way to begin with, though. I don't think the Constitution can be used to set local tax policies like that...or even state ones.

[ReaderSushi]

9. I doubt it would work.

If the federal government could only tax corporations then given the present climate there would be no corporate tax.
States only taxing personal income would be a disaster for low income states with low population densities but a boon for the coasts.
Cities only charging property taxes would be horrendus for cities but who have a large portion of their land owned by churches, nonprofits, school and mueseums.

[Greyhound]

10. KISS.

I know it has been ridiculed by nearly everybody on both sides, but I think a flat, no exceptions, no loopholes tax, that starts at the poverty level with no upper limit for every citizen, real or corporate, regardless of where the entity comes from, is the way to go.

[dcfirefighter]

11. In that case, you are still taxing productivity

as well as privelege.

You can directly tax privilege, improving both justice and economic efficiency.

KISS:
1) annual auctions of government-granted privilege
2) equal shares of surplus revenue for everyone