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15 Tax Mag. 451 (1937)
Who Should Pay the Taxes

handle is hein.journals/taxtm15 and id is 451 raw text is: Who Should Pay the Taxes? A discussion of a heavy single tax on econom- ic rent versus lighter taxes on all surpluses By LYLE 0 WEN* VERYBODY but the anarchist admits that we need a government, but nobody likes to pay for it. Hence the question as to who shall bear the burden of taxes is a continuously live one. The Single Tax on Economic Rent TN THE 1880's great interest was aroused by the argument of Henry George for the abolition of all taxes save one, which was to be the Single Tax on economic rent. Economic rent was defined as the income from land as such, the income from all improvements in or on the land being excluded. It is said that George's book, Progress and Poverty, (which, by the way, had great difficulty in finding a publisher) sold more copies than any book save the Bible. Whether or not this statement is true, there is no question that tremendous interest and feeling were aroused by his proposal. Most people then felt, however, and they still feel, that while it is just that land or income from land should be taxed, it is not just that other forms of wealth and income should be wholly exempt. In the minds of most people this common objection is not at all well thought out. None the less, it has in it a clue to the real objection, which is that the Single Tax, while rightly proposing the taxing of one economic surplus, overlooks the existence of other economic surpluses which ought also to bear their shares of the burden of government. Objections to the Single Tax T HE objections to the Single Tax, like those to any other tax, may be classified as either theoretical or administrative. The first has to do with such funda- mental questions as whether a tax is unjust and * Department of Economics, Carnegie Institute of Technology, Pittsburgh, Pennsylvania. Editor's note: A companion article, Who Pays the Taxes?, by the same author appeared in the February. 1937, issue of The Tax Magazine. repressive on individuals and enterprise, and the administrative questions have to do with problems such as whether a tax can be levied and collected without unreasonable evasion and avoidance. For 1o matter how sound a tax may be fundamentally, If it cannot be administered it must be rejected. Here we shall not be concerned with adminis- trative questions regarding taxes, but with the fundamental theory as to who should pay them. There is no doubt that the Single Tax would bring with it many grave administrative problems, notably that of accurately separating land values from the values of the improvements on and in the land. But this administrative argument cannot be a conclusive one for the simple reason that any important tax- and by important tax is meant any levy which, like the income tax, the general property tax, or the sales tax, is capable of yielding large revenue- inevitably raises many difficult administrative prob- lems. A weakness which is true of each of several alternatives cannot be used to dispose of any one of them. In fiscal matters as elsewhere it is important to guard against what has been called the fallacy of objections-the error of objecting to a proposal on grounds which are equally true of the alternatives. It is not, therefore, that administrative troubles are small, but that they are better under- stood and less fundamental than theoretical ones, that leads to their omission here. The most fundamental ground for objecting to the Single Tax proposal, as well as to most of our existing taxes, is not administrative, therefore, but because of innate injustice and repressiveness. With the exception of a very few ascetics, every- body grants the desirability of the production of large amounts of commodities and services. It is obvious that before this desired production can come about, certain materials have to be supplied and certain acts performed. Economists generally agree that the necessary functions to be performed are the supplying of land (including natural resources), the creating of capital, the supplying of initiative or enterprise, and working. Income results from pro- duction, or, in other words, from the performing of the functions mentioned. But it should be noticed that the income actually received by an individual may be more than enough to persuade him to do his part towards production. Necessary and Surplus Incomes N RECENT years, the federal income tax has made a distinction between earned and unearned in- come, the former being defined as income from per- sonal services, and unearned income being defined as that from property. But a more satisfactory dis- tinction would hinge upon whether or not a socially valuable service was returned for the income re- ceived. Then earned or necessary incomes would be those necessary to induce the performance of some socially worthwhile function essential to pro- duction. All other incomes, or those above the amounts necessary to induce such supplying of

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