Sep 22 2005, 03:17 AM
I am not a staunch advocate of this concept. I just want to solicit some feedback on this idea:
While the FairTax (National Sales Tax) concept might be a step in the right direction in reducing the complexity of paying taxes, perhaps it is worth exploring the idea that a property tax be used to replace income tax (and possibly sales tax and other taxes).
Should the federal income tax be replaced by a federal property tax?
Here is a possible straw man for this concept:
- Eliminate the IRS
- Rely on County Tax Assessor records to determine how much land an individual, corporation, or trust owns
- Tax the total amount of land owned at an increasing rate (possibly considering land use as well as quantity).
- Land purchased or sold during the tax period would be counted proportionally to the amount of time the land was held by each party.
My rational is this:
- There is no known legal or social basis for private ownership of land. Therefore, those parties who do own land enjoy a privilege that those who do not cannot enjoy, such as the rents earned from use of that land. Those who enjoy these benefits would pay more tax than those who do not, or those who own less land and therefore benefit less.
- The more land one owns, the greater their income (assuming the owner uses the land wisely), and thus, the greater their tax rate. I am suggesting that this is analogous to the supposedly progressive income tax rate we have currently.
- Someone who owns a small piece of land for a small house and garden for their own necessity use should not pay the same rate as someone owning many acres of land for non-personal necessity uses, such as farming or industrial improvements.
- Likewise, a small family farmer should not pay the same rate of tax as, say, a McDonalds farm.
- This is a very, very simple system, even simpler than sales tax. As opposed to FairTax, some sales tax may be uncollectible, or otherwise difficult to accurately calculate. Sales tax payments rely largely on honesty and recordkeeping as well as people's proclivity to make honest errors. Property taxes rely solely on an easily-obtained, public and measurable legal record.
Some issues that I immediately recognize are:
- Should such a tax be based solely on the amount of property owned? What about the land use? Certainly residential, heavy industrial, and commercial uses have different returns and earnings, as well as certain other financial responsibilities (such as environmental cleanup charges, e.g.). Should these be taken into consideration or not? How would this impact the simplicity of the proposal?
- Direct federal collection of property tax might be inefficient unless states, and in turn, the counties, have a cooperative agreement of some kind. Would this present 10th amendment issues with regards to states rights?
What do you think? Again, I am not advocating this idea; I want to find out what might be wrong with it as well before I jump into it full force. Thanks, and I look forward to your feedback!
Just Leave me Alone!
Sep 22 2005, 03:26 PM
What do you think of replacing the income tax with a federal property tax?
First, lets do the numbers. America has 9.1 million square kilometers of land mass, the equivalent of 2.2 billion acres. Federal land and other useless land account for just over a quarter
of that land. That leaves us with just under 1.7 billion acres of taxable land. The federal budget is @$2.3 trillion. All things being equal, for every acre of land you own, you pay $1,380 in federal tax per year. On your quarter acre suburban lot, that is $345 a year. That's a pretty cheap price to avoid federal taxes across the board, both personal and corporate. Should such a tax be based solely on the amount of property owned or should land use be taken into consideration?
I do not see how else you could do it. I think that trying to determine land use would cost the taypayer more than they would save on some incentive.
Sep 23 2005, 01:31 PM
Should the federal income tax be replaced by a federal property tax?[/mod]
Sep 23 2005, 04:27 PM
Well, I look at it this way:
From accounting terms, there are five basic categories you can tax:
Assets (Property Tax)
Liabilities (Taxes on loans, haven't seen this at all, except in the form of deductions against other taxes)
Capital (basically Assets - Liabilities, haven't seen this either)
Revenue (Income Tax, Tariffs)
Expenses (sales tax)
Taxpayers are going to shy away from that which you tax, and go for that which you don't tax.
So, if you want to generally create wealth (i.e. production exceeds consumption) while still funding government activities, then you want to tax consumption, and avoid taxing production and wealth.
If we switch to only a property tax, with the size of the U.S. budget, you will see property ownership become a hard thing to bear. At least with the income tax system, you still get a little bit more money for every dollar you earn. With heavy property taxes, you will be wanting to put every square inch of your property to profitable use, and who knows what effect that would have generally?
Sep 24 2005, 07:07 AM
QUOTE(jaellon @ Sep 23 2005, 09:27 AM)
If we switch to only a property tax, with the size of the U.S. budget, you will see property ownership become a hard thing to bear.
The proposal includes a progressive tax rate on land. So property ownership (I assume you mean a house to live in) would not necessarily be any more difficult than present. Admittedly, I have not run the numbers, so I cannot say for sure. But you might look at Just Leave Me Alone's analysis above and compare.
QUOTE(jaellon @ Sep 23 2005, 09:27 AM)
With heavy property taxes, you will be wanting to put every square inch of your property to profitable use, and who knows what effect that would have generally?
I believe you may have hit upon a flaw of the proposal. One thing I left out of the list of talking points in the original post was environmental impacts. It has in fact occured to me that there could be a negative effect in this regard. But perhaps someone out there has a remedy to this problem?