by Fred Foldvary
When something stinks, it’s unpleasant, harmful, disagreeable, disgusting, and foul. That describes taxes on wages, capital, spending, consumption, exchange and production. These are stinker taxes because they forcibly take what is properly ours. These stinky taxes raise prices and reduce production and investment. They misallocate resources. The economic waste caused by stinky taxes in the US is more than a trillion dollars per year. These taxes stink not only because of the force and waste, but also because such stinky taxes are unnecessary.
Stinker taxes do finance services we want, such as streets, security, and schools. But we can get the same goods with sweet-smelling revenues. Civilization is not an excuse for stinky taxes. We don’t need any stinking taxes!
A hotel does not ask what your income is, or the value of your personal possessions. It does not add a surcharge at the stores inside the hotel. These charges would violate privacy, and they would cause less business. The room is more valuable because of the collective services, so the guests are willing to pay for that added value.
A condominium likewise provides civic services such as security, recreation, parking, landscaping, and community meeting places. The co-owners pay assessments related to the value of their unit, but unrelated to their income, spending, or personal possessions. The assessments don’t stink, because they pay for wanted benefits, and there is no penalty for having more income, spending, or possessions.
Governments could eliminate stinking taxes if they just copied what private communities do. Instead of stinky taxes on sales, income, and buildings, they can charge an assessment based the value of the site. Homeowner associations and condominiums call these ‘assessments’ rather than taxes because in effect the members are paying a market rental, unlike a stinky arbitrary tax. If government calls this a property ‘tax’ or land-value ‘tax,’ it would still be in substance a benefit-based assessment with no economic burden.
Likewise, a pollution ‘tax’ is a tax in form but not in substance, because in reality, a pollution charge compensates for damages. What stinks is the pollution, not the compensation.
Ground rent doesn’t stink, because it is already and always there. Unlike arbitrary stinker taxes, that make production hide, shrink, or flee, tapping the rent does not make land disappear.
Taps on pollution and land rent are better than neutral. They smell sweet. Tapping polluters provides rightful restitution. Tapping landowners prevents landowners reaping where they did not sow. Tapping the rent prevents speculative real-estate bubbles. Sweet!
Why make a big stink with taxes, when we can tap sweetly? All the public revenue we need can be tapped from ground rent, user fees, and penalty payments. That’s why we don’t need any stinking taxes!