Few people enjoy reading about taxes, and it’s probably true that even fewer people enjoy paying them. Many of us have good reasons for not wanting to pay taxes: More often than not, taxes take significant portions of the wealth that we’ve created through our own efforts. For many of us, taxes limit our ability to make our best contributions to society; they often seem to stifle our material and intellectual aspirations. Tax systems are essentially the mechanisms by which societies decide what people have to share with each other versus what they can keep for themselves, and societies enforce these mechanisms on billions of people every day. Since tax systems play such an important role in life, let’s look more closely at taxes and see what alternatives exist.

As we’ll discover in this chapter, societies that share in the gifts of nature don’t need to raise taxes. Contemporary societies are forced to tax people’s contributions to their local communities because the ownership of land makes people extract resources from society on an ongoing basis—social resources that need to be periodically replenished. If instead we shared the value of land with one another, we would no longer require taxes to replenish those social resources.

Let’s look at several traits that all public revenue systems need to embody in order to work harmoniously. In “The Ultimate Tax Reform: Public Revenue from Land Rents,” Foldvary recommends five such essential traits. According to Foldvary, sources of public revenue have to be:

In this light, let’s examine whether land contributions have the potential to replace conventional taxes and see if they can meet all five requirements.

MEDIA 9-1: THE ULTIMATE TAX REFORM: PUBLIC REVENUE FROM LAND RENT
In this paper, economist Fred Foldvary takes a closer look at land contributions and their implications for society.
http://unitism.co/ultimatereform

In order to be efficient (the first of our criteria), public revenue collection would affect production and consumption only minimally, if at all.[51] The terms deadweight loss and excess burden are used in economics to describe the negative effects that taxes create on production and consumption activities: Because production and consumption taxes (such as income, payroll, and sales taxes) increase the prices of goods and services, we have to produce more goods and services overall, yet are enjoying fewer of them. These taxes drain resources from where they’re most needed, but don’t use them as efficiently elsewhere.

The payroll tax, for example, punishes businesses and entrepreneurs for creating jobs for the economy, while consumption taxes such as sales taxes discourage access to perhaps much-needed goods; capital gains taxes deter investments, while property taxes on buildings discourage the creation of affordable housing and inhibit the beautification of neighborhoods. In short, our current tax system is in most respects a lose-lose proposition.

But what would happen if we shared land instead? Community land contributions are payments for the use of land. A system based on land contributions wouldn’t harm production or consumption because people would continue to use land to produce and consume, except that now they would use only as much land as they actually needed. Since land contributions encourage people to use land efficiently, they don’t decrease the profitability of productive enterprise as long as land is used well; land contributions don’t cause any deadweight loss and are therefore highly efficient.

Let’s pause for a moment to imagine a world in which you and I didn’t have to pay taxes and instead simply paid a community contribution for our use of land:

Do these points sound too good to be true? Of course they do. We’re so accustomed to our current reality that this potential reality sounds too unrealistic—but it only sounds that way because it doesn’t exist right now, not because it can’t be achieved. “It always seems impossible until it’s done,” Nelson Mandela once remarked. Right now, our economies are hugely inefficient and we’re destroying nature in the process, so the possibility of material abundance for everyone in a sustainable system sounds like a pipe dream. If, however, we stop treading water and allow constructive activities to occur in the proper context, our society can naturally experience this kind of abundance.

The excess burden that arises from our misallocation of resources created through our current tax system lies at the heart of many contemporary political debates; whenever people advocate for small government or a reformation of the tax system, the intent is usually to see a decrease in the economy’s deadweight loss in order to make the overall economy more efficient. The thinking goes that if government spends less, it won’t have to raise as much money through taxation, which, conventional experience tells us, tends to hold the economy back. And although a decrease in the economy’s deadweight loss can be achieved through a reduction in various taxes, it can be done far more effectively, at far higher gain and at much lower cost, through a simple shift away from taxes toward a system that allows us to share in the gifts of nature.

Foldvary recommends that land contributions make up about 80 percent of a land’s rental value; it’s generally good to leave some benefit to homeowners and other land users since this practice allows room for assessment errors and also allows the real-estate market to function more optimally. If a plot of land could be leased out for about $6,000 per year, the property would cost the land user about $4,800 per year to use ($4,800 is 80 percent of $6,000). The good news is that because this piece of land now has a cost of $4,800 per year, its sales price falls in relation to its leasing price. While the land might previously have sold for $150,000, it might now sell for only $40,000 (more information on how community land contributions influence property values will be provided in the Appendix). These land contributions apply only to land. Property taxes are not comparable to land contributions because a land contribution doesn’t apply to the total value of the property if the property has improvements such as buildings; it just applies to the value of the underlying land, which in this way is shared.[52]

Our second criterion is simplicity. Public revenue systems need to be simple if they’re to be beneficial. How can we expect people to live abundant lives when much of their time is spent preparing tax returns that eat into the time they may have set aside for work, family, and leisure activities? U.S. tax returns, for example, are anything but simple: The Taxpayer Advocate Service, a branch of the U.S. Internal Revenue Service (IRS), estimates in its 2010 Annual Report to Congress that U.S. taxpayers and businesses spend about 6.1 billion hours filing their taxes each year. If all of these hours were outsourced, it could provide year-round, full-time employment to about three million workers.[53] In addition, the cost of tax compliance in the U.S. is estimated at $163 billion, which is 11 percent of total income tax receipts.[54] If tax compliance were an industry, it would be one of the largest industries in the United States.[55] The IRS tax code itself has grown so long that its length can’t even be determined uniformly. In its 2010 Annual Report, the Taxpayer Advocate Service estimates that the tax code contains about 3.8 million words; if printed on U.S. letter-sized paper, it would require about 15,200 pages. Complexity in a tax system unnecessarily wastes wealth without providing any offsetting benefits to either the taxpayer or the government. Once more we realize that our present tax system falls woefully short: It is not only inefficient but also needlessly complex.

But what about community land contributions? Land contributions are relatively simple for the obvious reason that they’re somewhat fixed in value; they’re based on the market rental value of land, which ought to be assessed at least once a year. They also have no deductibles and little bureaucracy attached. In his work “The Ultimate Tax Reform,” Foldvary writes that with land contributions “there would no longer be any tax audits. There would be no record-keeping for taxes. You would instead get a monthly bill, like you get for utilities. You would simply pay the bill or have it automatically deducted from some financial account. At the same time, government would avoid the high cost of processing complex accounts and keeping individual tax records. It would only need to keep real estate records and assess the land values, both of which it already does for property tax purposes.”

Although critics sometimes claim that an accurate assessment of land values is difficult, there are several effective standard methods. Professional real-estate appraisers routinely separate land values from building values for fire-insurance purposes, among other reasons. In contrast to property tax assessments, where the assessor needs to enter the property to inspect the various buildings and determine their value, land-value assessments are non-intrusive since generally no on-the-ground inspection is necessary. Figures garnered from property sales—together with vacant-land sales data and commercial real-estate leasing figures—can be put into computerized models through which assessors can determine land values for each general location; contrary to property values, which are heavily influenced by the value of individual buildings, land values usually vary only slightly from one neighboring plot to another. Foldvary recommends that the computerized mapping service be implemented in such a way as to “emphasize long-term trends rather than year-by-year fluctuations in land values.”

MEDIA 9-2: A COMPUTERIZED MODEL OF LAND VALUES 
In this video, Gabriel Ahlfeldt, lecturer at the London School of Economics, presents a unique spatiotemporal dataset of Chicago’s historical land values, providing insights into changes in the spatial structure of the city.
http://unitism.co/landvalueassessment

Any effective public revenue system also needs to be transparent—our third criterion—in order to make it innately safe from abuse, corruption, and unwarranted government interference. Since income tax records reveal personal financial information, any income tax system can potentially lead to unwarranted public exposure or government abuse. Land deeds, on the other hand, don’t need to be hidden from public view since they don’t reveal any private financial information; land contributions will be based entirely on property records, which are already publicly available.

Furthermore, because land-value data will be publicly available, land users will be able to compare their land’s assessed rental value with the assessed rental values of their neighbors’; this practice effectively minimizes the potential for abuse and government corruption. Should land users feel that the assessed rental value of the land they use is too great, they can appeal to a local land-value assessment board, as property owners today can appeal their real-estate taxes to property tax assessment boards.

In addition to efficient, simple, and transparent, a public revenue system also needs to be fair in order to be truly effective. If the system isn’t innately fair and just, it will inevitably create a wide variety of problems that are difficult to address and cost society enormous amounts of wasted resources. One of the most prevalent forms of taxation in effect today is the so-called progressive income tax—a tax by which the wealthy are taxed on their income at a greater percentage rate than the less affluent. Although such a tax perhaps appears fair, especially from the perspective of those who live on a lower income, the progressive income tax isn’t a fair tax at all.

Public revenues pay for a wide variety of public services, including infrastructure, police and fire protection, and public schooling. Public services provide real and tangible benefits to society, benefits that are local to the areas that they service; in other words, many public services add value to neighborhoods, which is really just another way of saying that they add value to land. For example, realtors know that properties in neighborhoods with good public school systems and better public transportation options tend to be more expensive than properties in neighborhoods with lower-quality schools or that don’t have good access to public transportation. And since public revenues pay for these public services, they ultimately end up increasing land values and thus reward those who own property (the wealthy) to the detriment of those who do not (the less affluent). Any tax that pays for public services without obtaining revenue from resulting land-value increases is fundamentally unjust.

In 2006, Fred Harrison—the aforementioned economist who wrote about the eighteen-year real-estate cycle—claimed in his book Ricardo’s Law: House Prices and the Great Tax Clawback Scam that property owners (taken together as a whole) are generally able to recoup their cumulative income tax payments through gains made from land values, while renters are financially penalized through their income taxes.[56] Harrison goes on to claim that even the progressive income tax is therefore a great orchestrated tax scam by which the poor are effectively forced to subsidize the lifestyles of the rich.

Whether we consider our current income tax system to have been intentionally implemented to serve the interests of the wealthy at the expense of the poor, or whether we attribute our present-day situation to mere ignorance on part of those who institute and perpetuate the system, it’s clear that our current tax system is inherently unfair.

MEDIA 9-3: RICARDO’S LAW: HOUSE PRICES AND THE GREAT TAX CLAWBACK SCAM
Video introduction to the book Ricardo’s Law: House Prices and the Great Tax Clawback Scam by Fred Harrison. Ricardo’s Law points lawmakers, policy analysts, and social reformers toward a model of public finances that’s fair and able to deliver prosperity to everyone.
http://unitism.co/clawbackscam

‍Community land contributions are economically fair because they simply reclaim what never exclusively belonged to individuals to begin with. They’re based on the benefit principle, according to Foldvary, since they reimburse communities for the benefits land users receive from using land in certain locations. Since public services provide benefits over a given area, community land contributions in effect recycle the value of these benefits back into the public purse. In other words, with community land contributions we pay for what we receive.

Community land contributions have other benefits that make them a truly fair source of public revenue. In “The Ultimate Tax Reform,” Foldvary states that if land users can’t pay their land contributions in full for whatever reason, they can defer their land contributions by accumulating liens on the land until they die or transfer the property, as is commonly done today with real-estate taxes. Land contributions, furthermore, are also immune to the practice of tax evasion: Foldvary explains that “nobody would be sent to prison for tax evasion, because there would be no tax evasion. A nonpayer would lose title to his land or lose the protective services of government, depending on the local enforcement practice. Without audits, bank account seizures, and fear-inspiring letters from the IRS requesting information or additional payments or imposing interest and penalties, the opportunity for tyranny would greatly diminish, if not entirely disappear. Evasion being impossible, there would be no need or excuse for any inquisitive state investigators of fraud.” Unwarranted government intrusion is a danger to be reckoned with: Tax-collection agencies have the power to freeze bank accounts, garnish wages, and impose steep penalties and high interest rates (whether justified or not), among other powers. Due to their simplicity and transparency, community land contributions, on the other hand, don’t offer opportunities for unwarranted government intrusion upon civil liberties.

But most of all, community land contributions are both ethical and economically fair because they allow people to keep the fruits of their labor. Land contributions charge people for what they take away from other human beings, not for the value they provide through their labor and their provisioning of capital goods. Since land contributions pay for the benefits we receive from society, and since communities give land its value, revenues from land contributions are the most logical primary income stream for any community.

And finally, let’s consider whether land contributions provide sufficient revenue. Nature can abundantly provide for all of our needs. To realize this, we only need to observe the simple fact that all material wealth can only come about because of nature in the first place. The scarcity we’ve created only exists because we are monopolizing nature, and this scarcity requires governments to impose taxes.

The United States has a landmass of approximately 2.3 billion acres, of which nearly 60 percent, or 1.35 billion acres, is privately owned.[57] The sheer value of this land is nearly incomprehensible: Economist Mason Gaffney estimates the annual revenue that could be had from land in the United States at approximately $5.3 trillion dollars, which is what the United States collected in taxes in 2013.[58] And considering the inefficiencies that our current tax system creates, a shift away from taxes would increase revenues from land even more. If we also collected oil, gas, and mineral rents in addition to land values, these combined revenues could provide substantial, if not sufficient, revenue streams for the entire nation. Even if we begin by reclaiming greater amounts of land values while decreasing taxes on production and consumption, the efficiency gains of our economy could diminish, if not eliminate, our need for taxes altogether.