tax models

Francois-Rene Rideau
Tue, 30 May 2000 17:59:02 +0200

> There is no "Political Economics". There are various schools of thought
I believe it if you say so.

> Some schools and
> individual economists agree with the physiocrats that using rent for
> public finance has the least excess burden on the economy.  I have never
> read any argument against this proposition; every attempt to rebut it has
> distorted the theory or the facts.  The Ramsey principle of using
> inelastic sources for public revenue is well established theory.
Do you have some reference to a relevant article on the net,
to ponder the arguments?

> But Turgot favored the physiocratic public finance policy.
Yes, I was trying to identify the turnover when the physiocratic ideas
were replaced by better theories with respect to value theory.

>> I think that Bastiat's chapter of the Economic Harmonies on Value
>> is great, as it shows that Value is born in human work,
>> and that gift of natures count nothing in it,
>> except as an initial reward for people discovering new techniques.
> It's great, but incorrect.
Is Bastiat wrong, or am I misrepresenting his ideas?

>> my main contention
>> about the physiocratic conception of riches
>> is that it is impossible for an external observer to separate
>> the part of nature from the part of men, in a way that be both
>> just and applicable through law.
> It is indeed impossible in theory, but is done in practice.
It isn't done _by law_. Note that I said "applicable through law".

> This shows
> the power of the market in being able to do what is theoretically
> impossible. Insurance companies, for example, routinely assess [...]
What is impossible _to law_.

> Human action is superior to our theories.
Human action _is_ theory.

I contend that taxes, that are determined by law,
cannot take such things into account, least they only create
an incentive to build opaque economic constructs to evade misclassification.

>> For instance, If I find out in the nature a diamond (or a lost piece of
>> art);  should I be taxed according to its market value?
> Yes, a tax on natural resources is based on the market value.  A piece of
> art is, however, not a natural resource.
What about the diamond? Where is the fundamental difference?
Will you tax the miner more than the artist?
How is that more just or more economically efficient?

>> If I create it? If I buy it from the one who created it?
> Human creations are not a natural resource.  Why do you mention these?
I _also_ mentionned the diamond. And I said that the piece of art was
found in nature (e.g. through archeology; or maybe just an exceptional
specimen of sea animal).

>> If I inherit it? What if everyone thought it was a very valuable item,
>> but actually it was not worth much? What in the contrary case?
> Then the market value would be low.
Will you reimburse the tax that was levied when the market value was higher?
Or will you re-tax when the market value increases?
Whom will you reimburse (resp. re-tax)? The former owner or the new one?

>> In each case, how much did "nature" bring into the riches,
>> and how much are you going to tax whom?
> The title holder gets taxed, in some proportion to market value.
The market value accounts for the part of human work as well as
for the part of nature. Some same-sized chunks of land may be worth
one because of its rich soil, the other one because of the mansion built
on part of its surface.

> One good feature of taxing land is that the title holder may be anonymous.
> So long as the rent tax is paid, the government would not concern itself
> with the identity of the owner.  There are no tax audits.
You still need tax audits, to determine if declared soil value
is actual market value (and for some spots of land, the market is not
fluid enough to allow for easy evaluation of market value;
e.g. no offer for ten years, but a huge one once in a while;
or every own his house in this district, and there is no rent,
so you can't evaluate the rent market).

>> And if something was found in the nature, then who are you to tax it?
> "You" is the government.  If you want to get rid of government, I have no
> quarrel with you.  But that still leaves open the issue of financing
> collective goods.
So you mean that government is to be paid on natural ressources.
Now what if one country (e.g. Russia) has plentiful of them,
while the other (some random rock in the pacific) has little,
yet both have a lot of inhabitants, and accordingly much government spending?
Will you have huge taxes for the population

>> And who was the owner to claim ownership?
> When land rent is taxed, the morality behind it is that the title holder
> has rights of possession conditional on paying the rent to some community,
> the community having the moral right to the rent.  The government is a
> a collection agent and possibly the provider of collective goods.
Why would the community have a particular right on land?

>> Yes, they do punish people, like all taxes (= the cost of governement).
> What is your argument?
That all taxes hurt. The question is not _whether_ they hurt,
but whether the way they hurt is _just_ or isn't.

>> Which is why taxes in general they should be kept as low as possible.
> The issue at hand is the best source of taxes, not the amount.
My point. Although I'm not sure "best" according to
which point of view you mean.

> My view is that the best amount of taxes is zero, but this conversation
> is not about that, but on which taxes are least worst.
I don't buy this excuse. In your zero-tax system,
who'd pay how much for the services provided by government?
THAT, and nothing else, is the criterion according to which
you should consider taxes ought to be levied.

>> The fact that this transaction, being officially recognized by government,
>> covers expected governmental expenses to protect such transaction against
>> potential fraud, etc.
> I prefer that my transactions be my private affair and not monitored or
> supervised and taxed by government.  I can buy insurance and other
> protection from fraud (that's what courts are for).
Courts only deal with one voluntary party.
If you require willingness to be sued, there will be no justice.
And if you have courts paid only by the plaintiffs,
then what impartial authority will they have to prosecute the defendant?

> Why should
> transaction taxes cover government expenses that have nothing to do with
> that particular transaction?
Because government protects each of your transactions and their results.
I'd like a system when you only "pay once" for a given rich, but can't
imagine how law can do it gracefully.

>> Moreover, what else is there to tax upon without being iniquitous?
> Pollution and land rent.
I don't think tax is the good reply to pollution;
it only gives a legal way to do something evil.
Property rights, forbiddance of vandalism, etc, are better replies.

As for land rent, what makes this particular transaction so magic?
I'd understand it much better if you made it a tax on land itself.

Interested, but not convinced, Yours freely,

[ François-René ÐVB Rideau | Reflection&Cybernethics | ]
[  TUNES project for a Free Reflective Computing System  |  ]
Knowledge and Technology are the byproduct of Science as it progresses,
just like slime is the byproduct of the snail as it moves on.