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RE: The Flat Tax Argument

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  • chris cook
    Dave It seems to me that the principle underlying the Single Tax could usefully be deployed elsewhere to wit: those who assert rights of exclusive use of a
    Message 1 of 7 , Sep 20, 2005
      Dave

      It seems to me that the principle underlying the Single Tax could usefully
      be deployed elsewhere to wit: those who assert rights of exclusive use of a
      Commons should compensate those they exclude.

      In particular I am thinking about Knowledge as a Commons.

      So I would advocate that in return for granting a Copyright or a Patent etc
      the recipients should pay a proportional share of their revenues to the
      public coffers..

      If they don't charge anything, then they don't pay anything. That is the
      principle behind the enterprise model I am putting forward for the Kendra
      initiative for a neutral generic music and video platform.

      www.kendra.org.uk

      I know that the Free Software Foundation have been looking at a similar
      model in respect of software: I discussed it with Richard Stallman (the
      GNU/GPL licence guy) a year or so ago in Norway.

      NB. The same ought to apply to those who have the benefit of Limited
      Liability ie they should contribute a proportion of revenues to a default
      fund.

      Regards

      Chris Cook









      >
      >
      >-----Original Message-----
      >
      >From: christensen tjn [mailto:christensen.tjn@...]
      >
      >Sent: Tuesday, September 20, 2005 2:20 PM
      >
      >To: Wetzel Dave
      >
      >Subject: RE: The Flat Tax Argument
      >
      >
      >
      >Dave
      >
      >We can agree on that. best wishes, John
      >
      >+++++++
      >
      >John Christensen FRSA, Coordinator, Tax Justice Network International
      >Secretariat
      >
      >
      >
      >From: Wetzel Dave [mailto:Davewetzel@...]
      >
      >Sent: Tue 20/09/2005 10:17
      >
      >To: christensen tjn; 'Carol Wilcox'; 'Richard Murphy'
      >
      >Cc: 'John Kay'; 'John Muellbauer'; 'Iain McLean'; 'Fred Harrison'
      >
      >Subject: RE: The Flat Tax Argument
      >
      >
      >
      >John,
      >
      >Your view is one I respect.
      >
      >Current practice in those few jurisdictions which already have some form of
      >
      >LVT is that they also collect other taxes. (But I would (and have when the
      >
      >opportunity has arisen) also suggested they could increase their LVT rate).
      >
      >And surely you and your colleagues are right - it is in all our interests
      >
      >that we try every endeavour to minimise tax lost through evasion, avoidance
      >
      >and fraud in the current system.
      >
      >Not only do such practices damage public services that are starved of funds
      >
      >but they also put honest traders in a disadvantageous competitive position.
      >
      >(eg having to charge higher prices in order to pay vat or incurring higher
      >
      >staff costs when they insist on NI numbers and pay full NI and PAYE).
      >
      >Personally, I advocate that LVT should be introduced at 10% of annual
      >rental
      >
      >value on all factors that generate economic rent, although I believe that
      >
      >ultimately a high rate of LVT (say 95%) would allow the abolition (or major
      >
      >reduction) of most other taxes. This would arise from improved efficiency
      >in
      >
      >the economy generated by LVT itself. (Idle derelict urban sites brought
      >into
      >
      >use thus making our towns and cities more efficient and avoiding urban
      >
      >sprawl).
      >
      >But I do not have the figures to prove this would be the case and until the
      >
      >universities do some serious studies or a government is prepared to try it
      >-
      >
      >the jury is still out.
      >
      >(Even some eminent land-taxers disagree with me and consider that LVT would
      >
      >only raise enough revenue to replace only all other property taxes).
      >
      >However, what does the crystal ball gazing achieve?
      >
      >If you and I (and others) can work together to minimise current tax loss
      >and
      >
      >advocate say, a 10% LVT in the UK and maybe even across the EU, then we
      >will
      >
      >have achieved a tremendous gain for the most needy in our society.
      >
      >Surely, a target worth working together for?
      >
      >
      >
      > Dave
      >
      >
      >
      >Dave Wetzel;
      >
      >
      >
      >-----Original Message-----
      >
      >From: christensen tjn [mailto:christensen.tjn@...]
      >
      >Sent: Tuesday, September 20, 2005 8:06 AM
      >
      >To: Carol Wilcox; Richard Murphy
      >
      >Cc: John Kay; Wetzel Dave; John Muellbauer; Iain McLean; Fred Harrison
      >
      >Subject: RE: The Flat Tax Argument
      >
      >
      >
      >Dear Carol
      >
      >
      >
      >I think that we are all agreed that LVT is a part of a good tax system, but
      >
      >I do not consider it to be more than one constituent of a regime that
      >
      >captures revenue from other sources, including incomes, profits, trades on
      >
      >capital movements, energy use and consumption of a variety of 'bads.' So I
      >
      >agree with Kay that the sum of economic rents is not sufficient to finance
      >
      >the needs of a modern state. Other revenue streams are vital.
      >
      >I do not share your fatalistic attitude towards avoidance. Its persistence
      >
      >is more an indication of state tolerance than of any particular impediment
      >
      >to tackling the problem.
      >
      >best wishes,
      >
      >John
      >
      >John Christensen FRSA
      >
      >
      >
      >
      >
      >
      >
      >From: Carol Wilcox [mailto:carol.wilcox@...]
      >
      >Sent: Sun 18/09/2005 16:07
      >
      >To: Richard Murphy; christensen tjn
      >
      >Cc: John Kay; Dave Wetzel; John Muellbauer; Iain McLean; Fred Harrison
      >
      >Subject: The Flat Tax Argument
      >
      >
      >
      >Richard, John
      >
      >Below is an article by John Kay which appeared in the FT earlier in the
      >
      >year. At the time I was collecting items on the flat tax debate for later
      >
      >analysis. Your own article on this subject comes to the same conclusion but
      >
      >for different reasons, I think.
      >
      >
      >
      >What frustrates me about John Kay's argument is that he totally ignores the
      >conclusions of the first edition of his and Mervyn King's 'The British Tax
      >System' that the only tax which meets all the criteria for a good tax is
      >land value taxation. I only have the fifth edition now which dropped the
      >comparison of taxes. I quote from 5th edition: '.. it is apparent that the
      >total of economic rents, of all kinds, is not now a sufficiently large
      >proportion of national income for this to be a practicable means of
      >
      >obtaining the resources needed to finance a modern State'. Perhaps Kay and
      >King's judgments were clouded by the property crash of the late 80s/early
      >90s (which could have been avoided by the implementation of LVT - see Fred
      >Harrison's latest 'Boom and Bust' and his earlier 'The Power in the Land',
      >which in 1983 accurately predicted the date of the later crash). Reading
      >below it doesn't sound like the latest edition of 'The British Tax System'
      >acknowledges that land values are an undeniably huge proportion of national
      >wealth.
      >
      >
      >
      >Carol
      >
      >The Financial Times, Feb 8, 2005 p19
      >
      >
      >
      >Why tax cannot be expressed on a postcard
      >
      >JOHN KAY.
      >
      >If only all reliefs and allowances were swept away, the tax code would be
      >much simpler and the government's requirements could be met from a single
      >low rate of tax on all income. British taxpayers have just completed their
      >annual returns and American taxpayers must soon start. But perhaps these
      >long forms are unnecessary. If you look up "flat tax" on the internet you
      >will discover several mock-ups of the one-page return a simplified levy
      >would require. Clint Eastwood is a passionate supporter of the flat tax
      >and, untroubled by political correctness, looks forward to the day when the
      >tax system can be administered by a little old lady with a personal
      >computer. But the appeal of the flat tax extends beyond millionaire film
      >stars. The latest revival of this perennial campaign is orchestrated by
      >rightwing think-tanks such as the Heritage Foundation and the Adam Smith
      >Institute, which believe the flat tax is responsible for the remarkable
      >economic success of Russia and Georgia (I am not kidding). But the notion
      >that an advanced economy can express the requirements of a fair and robust
      >tax system on a postcard is an impossible dream. Some complexity, as the
      >flat taxers have argued, is attributable to the accretion of allowances and
      >ad hoc reliefs. Members of Congress secure favours for constituents;
      >finance
      >ministers canvass their advisers for pieces of economic or social
      >engineering. Every few years, these measures need to be cleared away, like
      >the barnacles that adhere to the hull of a ship. Tax reformers in the 1980s
      >made a good job of this, but since then the concessions and the gimmicks
      >have been making their way back.
      >
      >But the main reason tax codes are so complex is that income is inherently
      >
      >a complex concept. The most widely cited definition of income is that of
      >Sir
      >John Hicks: income is what a man can spend and expect to be as well off at
      >the end of the period as at the beginning. You do not have to be a Nobel
      >prize-winning economist to recognise that translating that definition into
      >a
      >tax code or a set of generally accepted accounting principles is going to
      >be
      >difficult. Experience of tax legislation and the regulation of corporate
      >accounts has confirmed this. I remember a debate on principles of income
      >measurement. A revenue official and a tax practitioner, impatient with
      >academic argument, asked: "Why can't we just stick with the commonsense
      >definition of income?" The hundreds of pages of the tax code are the
      >product
      >of
      >
      >unsuccessful attempts to articulate the commonsense definition of income.
      >
      >Income tax works relatively well when the accrual of income corresponds to
      >the receipt of cash, as for wages and salaries or interest and dividends.
      >
      >Income tax does not work well when there is no such correspondence - when
      >there are benefits in kind, when income accrues but there is no
      >realisation,
      >or when it is not clear where or to whom income accrues when it arises.
      >Most
      >of our income tax legislation, and most of the avoidance opportunities that
      >arise from it, result from these problems. The more thoughtful flat tax
      >advocates understand these difficulties and urge a shift from an income
      >base
      >to a simpler consumption tax. They are also right to argue that elaborately
      >graduated rate structures add little to the progressivity of a tax system
      >but a lot to both opportunities and incentives for tax avoidance.
      >
      >Tax systems around the world have evolved in line with these principles. In
      >two decades, the number of income tax rates fell from 25 to six in the US
      >and from 13 to two in the UK (although the British figure has since crept
      >back up to six). Payroll taxes and sales taxes have been the main source of
      >revenue growth.
      >
      >When Hicks elaborated that definition of income, he went on to conclude
      >that
      >income was "a bad tool, which breaks in our hands". His Cambridge rival,
      >Dennis Robertson, also remarked that "the gaols and workhouses of the world
      >are full of people who gave up as a bad job the admittedly difficult task
      >of
      >distinguishing capital from income". Both were right. We find the idea of
      >income hard to apply, but we cannot
      >
      >do without it. When you surf for that postcard-sized tax return, it is easy
      >to come up instead with a list of results for flat earth campaigners.
      >
      >There is a similarity of tone. www.johnkay.com <http://www.johnkay.com/>
      >Article CJ128193048
      >
      >****************************************************************************
      >
      >
      >
      >***********************************************************************************
      >The contents of the e-mail and any transmitted files are confidential and
      >intended solely for the use of the individual or entity to whom they are
      >addressed. Transport for London hereby exclude any warranty and any
      >liability as to the quality or accuracy of the contents of this email and
      >any attached transmitted files. If you are not the intended recipient be
      >advised that you have received this email in error and that any use,
      >dissemination, forwarding, printing or copying of this email is strictly
      >prohibited.
      >
      >If you have received this email in error please notify
      >postmaster@....
      >
      >This footnote also confirms that this email message has been swept for the
      >presence of computer viruses.
      >***********************************************************************************
      >
    • Wetzel Dave
      ... From: Henry Law [mailto:henry_bn@talktalk.net] Sent: Tuesday, September 20, 2005 9:21 PM To: Wetzel Dave Subject: Re: The Flat Tax Argument As existing
      Message 2 of 7 , Sep 21, 2005

        -----Original Message-----
        From: Henry Law [mailto:henry_bn@...]
        Sent: Tuesday, September 20, 2005 9:21 PM
        To: Wetzel Dave
        Subject: Re: The Flat Tax Argument

         

        As existing taxes come off, land values rise. This is a benign cycle, as the reduction in taxes leads to an increase in the land value tax base. Another way of looking at this is that as existing taxes come off, sub-marginal sites become viable for economic activity, thus additional wealth is created. Since land value is the surplus above the margin, if the margin is pushed out to lower value sites, the value of sites already in use is  raised. Either way, we are simply talking about a tax shift. Of course with present taxes, LVT cannot raise sufficient revenue, because we are in a state of artificially depressed land values. This is why LVT must be a replacement, not an addtion to present taxes.

        Incidentally, present taxes result in vast amounts of churning. About 45% of the cost of running public services is actually tax, either Employers' NI or other taxes nominally paid by employees but which in reality fall on the employer. This is not seen due to the myth that employees pay PAYE income tax.

        Regards

        Henry

        Wetzel Dave wrote:

         

        -----Original Message-----

        From: christensen tjn [mailto:christensen.tjn@...]

        Sent: Tuesday, September 20, 2005 2:20 PM

        To: Wetzel Dave

        Subject: RE: The Flat Tax Argument

         

        Dave

        We can agree on that.  best wishes, John

        +++++++

        John Christensen FRSA, Coordinator,  Tax Justice Network International Secretariat

         

         


        ***********************************************************************************
        The contents of the e-mail and any transmitted files are confidential and intended solely for the use of the individual or entity to whom they are addressed. Transport for London hereby exclude any warranty and any liability as to the quality or accuracy of the contents of this email and any attached transmitted files. If you are not the intended recipient be advised that you have received this email in error and that any use, dissemination, forwarding, printing or copying of this email is strictly prohibited.

        If you have received this email in error please notify postmaster@....

        This footnote also confirms that this email message has been swept for the presence of computer viruses.
        ***********************************************************************************
      • Jon Mendel
        Chris, I d broadly agree with you on this, and the open source model of software development - along with other ideas springing from it - seem to offer
        Message 3 of 7 , Sep 21, 2005
          Chris,

          I'd broadly agree with you on this, and the open source model of software development - along with other ideas springing from it - seem to offer positive ways of approaching the issue of copyright.  With apologies for the self-promotion, I'm also tempted point towards an article I wrote for the Land & Liberty journal which made a similar argument re. genetic patents - see http://www.landandliberty.net/modules.php?name=News&file=article&sid=29

          All the best,

          Jon

          chris cook wrote:
          Dave

          It seems to me that the principle underlying the Single Tax could usefully
          be deployed elsewhere to wit:  those who assert rights of exclusive use of a
          Commons should compensate those they exclude.

          In particular I am thinking about Knowledge as a Commons.

          So I would advocate that in return for granting a Copyright or a Patent etc
          the recipients should pay a proportional share of their revenues to the
          public coffers..

          If they don't charge anything, then they don't pay anything.  That is the
          principle behind the enterprise model I am putting forward for the Kendra
          initiative for a neutral generic music and video platform.

          www.kendra.org.uk

          I know that the Free Software Foundation have been looking at a similar
          model in respect of software: I discussed it with Richard Stallman (the
          GNU/GPL licence guy) a year or so ago in Norway.

          NB. The same ought to apply to those who have the benefit of Limited
          Liability ie they should contribute a proportion of revenues to a default
          fund.

          Regards

          Chris Cook









          >
          >
          >-----Original Message-----
          >
          >From: christensen tjn [mailto:christensen.tjn@...]
          >
          >Sent: Tuesday, September 20, 2005 2:20 PM
          >
          >To: Wetzel Dave
          >
          >Subject: RE: The Flat Tax Argument
          >
          >
          >
          >Dave
          >
          >We can agree on that.  best wishes, John
          >
          >+++++++
          >
          >John Christensen FRSA, Coordinator,  Tax Justice Network International
          >Secretariat
          >
          >
          >
          >From: Wetzel Dave [mailto:Davewetzel@...]
          >
          >Sent: Tue 20/09/2005 10:17
          >
          >To: christensen tjn; 'Carol Wilcox'; 'Richard Murphy'
          >
          >Cc: 'John Kay'; 'John Muellbauer'; 'Iain McLean'; 'Fred Harrison'
          >
          >Subject: RE: The Flat Tax Argument
          >
          >
          >
          >John,
          >
          >Your view is one I respect.
          >
          >Current practice in those few jurisdictions which already have some form of
          >
          >LVT is that they also collect other taxes. (But I would (and have when the
          >
          >opportunity has arisen) also suggested they could increase their LVT rate).
          >
          >And surely you and your colleagues are right - it is in all our interests
          >
          >that we try every endeavour to minimise tax lost through evasion, avoidance
          >
          >and fraud in the current system.
          >
          >Not only do such practices damage public services that are starved of funds
          >
          >but they also put honest traders in a disadvantageous competitive position.
          >
          >(eg having to charge higher prices in order to pay vat or incurring higher
          >
          >staff costs when they insist on NI numbers and pay full NI and PAYE).
          >
          >Personally, I advocate that LVT should be introduced at 10% of annual
          >rental
          >
          >value on all factors that generate economic rent, although I believe that
          >
          >ultimately a high rate of LVT (say 95%) would allow the abolition (or major
          >
          >reduction) of most other taxes. This would arise from improved efficiency
          >in
          >
          >the economy generated by LVT itself. (Idle derelict urban sites brought
          >into
          >
          >use thus making our towns and cities more efficient and avoiding urban
          >
          >sprawl).
          >
          >But I do not have the figures to prove this would be the case and until the
          >
          >universities do some serious studies or a government is prepared to try it
          >-
          >
          >the jury is still out.
          >
          >(Even some eminent land-taxers disagree with me and consider that LVT would
          >
          >only raise enough revenue to replace only all other property taxes).
          >
          >However, what does the crystal ball gazing achieve?
          >
          >If you and I (and others) can work together to minimise current tax loss
          >and
          >
          >advocate say, a 10% LVT in the UK and maybe even across the EU, then we
          >will
          >
          >have achieved a tremendous gain for the most needy in our society.
          >
          >Surely, a target worth working together for?
          >
          >
          >
          >  Dave
          >
          >
          >
          >Dave Wetzel;
          >
          >
          >
          >-----Original Message-----
          >
          >From: christensen tjn [mailto:christensen.tjn@...]
          >
          >Sent: Tuesday, September 20, 2005 8:06 AM
          >
          >To: Carol Wilcox; Richard Murphy
          >
          >Cc: John Kay; Wetzel Dave; John Muellbauer; Iain McLean; Fred Harrison
          >
          >Subject: RE: The Flat Tax Argument
          >
          >
          >
          >Dear Carol
          >
          >
          >
          >I think that we are all agreed that LVT is a part of a good tax system, but
          >
          >I do not consider it to be more than one constituent of a regime that
          >
          >captures revenue from other sources, including incomes, profits, trades on
          >
          >capital movements, energy use and consumption of a variety of 'bads.'  So I
          >
          >agree with Kay that the sum of economic rents is not sufficient to finance
          >
          >the needs of a modern state.  Other revenue streams are vital.
          >
          >I do not share your fatalistic attitude towards avoidance.  Its persistence
          >
          >is more an indication of state tolerance than of any particular impediment
          >
          >to tackling the problem.
          >
          >best wishes,
          >
          >John
          >
          >John Christensen FRSA
          >
          >
          >
          >
          >
          >
          >
          >From: Carol Wilcox [mailto:carol.wilcox@...]
          >
          >Sent: Sun 18/09/2005 16:07
          >
          >To: Richard Murphy; christensen tjn
          >
          >Cc: John Kay; Dave Wetzel; John Muellbauer; Iain McLean; Fred Harrison
          >
          >Subject: The Flat Tax Argument
          >
          >
          >
          >Richard, John
          >
          >Below is an article by John Kay which appeared in the FT earlier in the
          >
          >year. At the time I was collecting items on the flat tax debate for later
          >
          >analysis. Your own article on this subject comes to the same conclusion but
          >
          >for different reasons, I think.
          >
          >
          >
          >What frustrates me about John Kay's argument is that he totally ignores the
          >conclusions of the first edition of his and Mervyn King's 'The British Tax
          >System' that the only tax which meets all the criteria for a good tax is
          >land value taxation. I only have the fifth edition now which dropped the
          >comparison of taxes. I quote from 5th edition: '.. it is apparent that the
          >total of economic rents, of all kinds, is not now a sufficiently large
          >proportion of national income for this to be a practicable means of
          >
          >obtaining the resources needed to finance a modern State'. Perhaps Kay and
          >King's judgments were clouded by the property crash of the late 80s/early
          >90s (which could have been avoided by the implementation of LVT - see Fred
          >Harrison's latest 'Boom and Bust' and his earlier 'The Power in the Land',
          >which in 1983 accurately predicted the date of the later crash). Reading
          >below it doesn't sound like the latest edition of 'The British Tax System'
          >acknowledges that land values are an undeniably huge proportion of national
          >wealth.
          >
          >
          >
          >Carol
          >
          >The Financial Times, Feb 8, 2005 p19
          >
          >
          >
          >Why tax cannot be expressed on a postcard
          >
          >JOHN KAY.
          >
          >If only all reliefs and allowances were swept away, the tax code would be
          >much simpler and the government's requirements could be met from a single
          >low rate of tax on all income. British taxpayers have just completed their
          >annual returns and  American taxpayers must soon start. But perhaps these
          >long forms are unnecessary. If you look up "flat tax" on the internet you
          >will discover several mock-ups of the one-page return a simplified levy
          >would require.  Clint Eastwood is a passionate supporter of the flat tax
          >and, untroubled by political correctness, looks forward to the day when the
          >tax system can be administered by a little old lady with a personal
          >computer. But the appeal of the flat tax extends beyond millionaire film
          >stars. The latest revival of this perennial campaign is orchestrated by
          >rightwing think-tanks such as the Heritage Foundation and the Adam Smith
          >Institute, which believe the flat tax is responsible for the remarkable
          >economic success of Russia and Georgia (I am not kidding). But the notion
          >that an advanced economy can express the requirements of a fair and robust
          >tax system on a postcard is an impossible dream. Some complexity, as the
          >flat taxers have argued, is attributable to the accretion of allowances and
          >ad hoc reliefs. Members of Congress secure favours for constituents;
          >finance
          >ministers canvass their advisers for pieces of economic or social
          >engineering. Every few years, these measures need to be cleared away, like
          >the barnacles that adhere to the hull of a ship. Tax reformers in the 1980s
          >made a good job of this, but since then the concessions and the gimmicks
          >have been making their way back.
          >
          >But the main reason tax codes are so complex is that income is inherently
          >
          >a complex concept. The most widely cited definition of income is that of
          >Sir
          >John Hicks: income is what a man can spend and expect to be as well off at
          >the end of the period as at the beginning. You do not have to be a Nobel
          >prize-winning economist to recognise that translating that definition into
          >a
          >tax code or a set of generally accepted accounting principles is going to
          >be
          >difficult. Experience of tax legislation and the regulation of corporate
          >accounts has confirmed this. I remember a debate on principles of income
          >measurement. A revenue official and a tax practitioner, impatient with
          >academic argument, asked: "Why can't we just stick with the commonsense
          >definition of income?" The hundreds of pages of the tax code are the
          >product
          >of
          >
          >unsuccessful attempts to articulate the commonsense definition of income.
          >
          >Income tax works relatively well when the accrual of income corresponds to
          >the receipt of cash, as for wages and salaries or interest and dividends.
          >
          >Income tax does not work well when there is no such correspondence - when
          >there are benefits in kind, when income accrues but there is no
          >realisation,
          >or when it is not clear where or to whom income accrues when it arises.
          >Most
          >of our income tax legislation, and most of the avoidance opportunities that
          >arise from it, result from these problems.  The more thoughtful flat tax
          >advocates understand these difficulties and urge a shift from an income
          >base
          >to a simpler consumption tax. They are also right to argue that elaborately
          >graduated rate structures add little to the progressivity of a tax system
          >but a lot to both opportunities and incentives for tax avoidance.
          >
          >Tax systems around the world have evolved in line with these principles. In
          >two decades, the number of income tax rates fell from 25 to six in the US
          >and from 13 to two in the UK (although the British figure has since crept
          >back up to six). Payroll taxes and sales taxes have been the main source of
          >revenue growth.
          >
          >When Hicks elaborated that definition of income, he went on to conclude
          >that
          >income was "a bad tool, which breaks in our hands". His Cambridge rival,
          >Dennis Robertson, also remarked that "the gaols and workhouses of the world
          >are full of people who gave up as a bad job the admittedly difficult task
          >of
          >distinguishing capital from income".  Both were right. We find the idea of
          >income hard to apply, but we cannot
          >
          >do without it. When you surf for that postcard-sized tax return, it is easy
          >to come up instead with a list of results for flat earth campaigners.
          >
          >There is a similarity of tone. www.johnkay.com <http://www.johnkay.com/>
          >Article CJ128193048
          >
          >****************************************************************************
          >
          >
          >
          >***********************************************************************************
          >The contents of the e-mail and any transmitted files are confidential and
          >intended solely for the use of the individual or entity to whom they are
          >addressed. Transport for London hereby exclude any warranty and any
          >liability as to the quality or accuracy of the contents of this email and
          >any attached transmitted files. If you are not the intended recipient be
          >advised that you have received this email in error and that any use,
          >dissemination, forwarding, printing or copying of this email is strictly
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        • Jock Coats
          Absolutely agree with this. I have been looking at creative commons and similar for a while now too. Who knows, one could maybe provide free higher
          Message 4 of 7 , Sep 21, 2005
            Absolutely agree with this. I have been looking at "creative
            commons" and similar for a while now too.

            Who knows, one could maybe provide free higher education if the
            "knowledge transfer" were managed by the common wealth...:)

            Jock


            On 20 Sep 2005, at 19:33, chris cook wrote:

            > Dave
            >
            > It seems to me that the principle underlying the Single Tax could
            > usefully
            > be deployed elsewhere to wit: those who assert rights of exclusive
            > use of a
            > Commons should compensate those they exclude.
            >
            > In particular I am thinking about Knowledge as a Commons.
            >
            > So I would advocate that in return for granting a Copyright or a
            > Patent etc
            > the recipients should pay a proportional share of their revenues to
            > the
            > public coffers..
            >
            > If they don't charge anything, then they don't pay anything. That
            > is the
            > principle behind the enterprise model I am putting forward for the
            > Kendra
            > initiative for a neutral generic music and video platform.
            >
            > www.kendra.org.uk
            >
            > I know that the Free Software Foundation have been looking at a
            > similar
            > model in respect of software: I discussed it with Richard Stallman
            > (the
            > GNU/GPL licence guy) a year or so ago in Norway.
            >
            > NB. The same ought to apply to those who have the benefit of Limited
            > Liability ie they should contribute a proportion of revenues to a
            > default
            > fund.
            >
            > Regards
            >
            > Chris Cook
            >
            >
            >
            >
            >
            >
            >
            >
            >
            >
            >>
            >>
            >> -----Original Message-----
            >>
            >> From: christensen tjn [mailto:christensen.tjn@...]
            >>
            >> Sent: Tuesday, September 20, 2005 2:20 PM
            >>
            >> To: Wetzel Dave
            >>
            >> Subject: RE: The Flat Tax Argument
            >>
            >>
            >>
            >> Dave
            >>
            >> We can agree on that. best wishes, John
            >>
            >> +++++++
            >>
            >> John Christensen FRSA, Coordinator, Tax Justice Network
            >> International
            >> Secretariat
            >>
            >>
            >>
            >> From: Wetzel Dave [mailto:Davewetzel@...]
            >>
            >> Sent: Tue 20/09/2005 10:17
            >>
            >> To: christensen tjn; 'Carol Wilcox'; 'Richard Murphy'
            >>
            >> Cc: 'John Kay'; 'John Muellbauer'; 'Iain McLean'; 'Fred Harrison'
            >>
            >> Subject: RE: The Flat Tax Argument
            >>
            >>
            >>
            >> John,
            >>
            >> Your view is one I respect.
            >>
            >> Current practice in those few jurisdictions which already have
            >> some form of
            >>
            >> LVT is that they also collect other taxes. (But I would (and have
            >> when the
            >>
            >> opportunity has arisen) also suggested they could increase their
            >> LVT rate).
            >>
            >> And surely you and your colleagues are right - it is in all our
            >> interests
            >>
            >> that we try every endeavour to minimise tax lost through evasion,
            >> avoidance
            >>
            >> and fraud in the current system.
            >>
            >> Not only do such practices damage public services that are starved
            >> of funds
            >>
            >> but they also put honest traders in a disadvantageous competitive
            >> position.
            >>
            >> (eg having to charge higher prices in order to pay vat or
            >> incurring higher
            >>
            >> staff costs when they insist on NI numbers and pay full NI and PAYE).
            >>
            >> Personally, I advocate that LVT should be introduced at 10% of annual
            >> rental
            >>
            >> value on all factors that generate economic rent, although I
            >> believe that
            >>
            >> ultimately a high rate of LVT (say 95%) would allow the abolition
            >> (or major
            >>
            >> reduction) of most other taxes. This would arise from improved
            >> efficiency
            >> in
            >>
            >> the economy generated by LVT itself. (Idle derelict urban sites
            >> brought
            >> into
            >>
            >> use thus making our towns and cities more efficient and avoiding
            >> urban
            >>
            >> sprawl).
            >>
            >> But I do not have the figures to prove this would be the case and
            >> until the
            >>
            >> universities do some serious studies or a government is prepared
            >> to try it
            >> -
            >>
            >> the jury is still out.
            >>
            >> (Even some eminent land-taxers disagree with me and consider that
            >> LVT would
            >>
            >> only raise enough revenue to replace only all other property taxes).
            >>
            >> However, what does the crystal ball gazing achieve?
            >>
            >> If you and I (and others) can work together to minimise current
            >> tax loss
            >> and
            >>
            >> advocate say, a 10% LVT in the UK and maybe even across the EU,
            >> then we
            >> will
            >>
            >> have achieved a tremendous gain for the most needy in our society.
            >>
            >> Surely, a target worth working together for?
            >>
            >>
            >>
            >> Dave
            >>
            >>
            >>
            >> Dave Wetzel;
            >>
            >>
            >>
            >> -----Original Message-----
            >>
            >> From: christensen tjn [mailto:christensen.tjn@...]
            >>
            >> Sent: Tuesday, September 20, 2005 8:06 AM
            >>
            >> To: Carol Wilcox; Richard Murphy
            >>
            >> Cc: John Kay; Wetzel Dave; John Muellbauer; Iain McLean; Fred
            >> Harrison
            >>
            >> Subject: RE: The Flat Tax Argument
            >>
            >>
            >>
            >> Dear Carol
            >>
            >>
            >>
            >> I think that we are all agreed that LVT is a part of a good tax
            >> system, but
            >>
            >> I do not consider it to be more than one constituent of a regime that
            >>
            >> captures revenue from other sources, including incomes, profits,
            >> trades on
            >>
            >> capital movements, energy use and consumption of a variety of
            >> 'bads.' So I
            >>
            >> agree with Kay that the sum of economic rents is not sufficient to
            >> finance
            >>
            >> the needs of a modern state. Other revenue streams are vital.
            >>
            >> I do not share your fatalistic attitude towards avoidance. Its
            >> persistence
            >>
            >> is more an indication of state tolerance than of any particular
            >> impediment
            >>
            >> to tackling the problem.
            >>
            >> best wishes,
            >>
            >> John
            >>
            >> John Christensen FRSA
            >>
            >>
            >>
            >>
            >>
            >>
            >>
            >> From: Carol Wilcox [mailto:carol.wilcox@...]
            >>
            >> Sent: Sun 18/09/2005 16:07
            >>
            >> To: Richard Murphy; christensen tjn
            >>
            >> Cc: John Kay; Dave Wetzel; John Muellbauer; Iain McLean; Fred
            >> Harrison
            >>
            >> Subject: The Flat Tax Argument
            >>
            >>
            >>
            >> Richard, John
            >>
            >> Below is an article by John Kay which appeared in the FT earlier
            >> in the
            >>
            >> year. At the time I was collecting items on the flat tax debate
            >> for later
            >>
            >> analysis. Your own article on this subject comes to the same
            >> conclusion but
            >>
            >> for different reasons, I think.
            >>
            >>
            >>
            >> What frustrates me about John Kay's argument is that he totally
            >> ignores the
            >> conclusions of the first edition of his and Mervyn King's 'The
            >> British Tax
            >> System' that the only tax which meets all the criteria for a good
            >> tax is
            >> land value taxation. I only have the fifth edition now which
            >> dropped the
            >> comparison of taxes. I quote from 5th edition: '.. it is apparent
            >> that the
            >> total of economic rents, of all kinds, is not now a sufficiently
            >> large
            >> proportion of national income for this to be a practicable means of
            >>
            >> obtaining the resources needed to finance a modern State'. Perhaps
            >> Kay and
            >> King's judgments were clouded by the property crash of the late
            >> 80s/early
            >> 90s (which could have been avoided by the implementation of LVT -
            >> see Fred
            >> Harrison's latest 'Boom and Bust' and his earlier 'The Power in
            >> the Land',
            >> which in 1983 accurately predicted the date of the later crash).
            >> Reading
            >> below it doesn't sound like the latest edition of 'The British Tax
            >> System'
            >> acknowledges that land values are an undeniably huge proportion of
            >> national
            >> wealth.
            >>
            >>
            >>
            >> Carol
            >>
            >> The Financial Times, Feb 8, 2005 p19
            >>
            >>
            >>
            >> Why tax cannot be expressed on a postcard
            >>
            >> JOHN KAY.
            >>
            >> If only all reliefs and allowances were swept away, the tax code
            >> would be
            >> much simpler and the government's requirements could be met from a
            >> single
            >> low rate of tax on all income. British taxpayers have just
            >> completed their
            >> annual returns and American taxpayers must soon start. But
            >> perhaps these
            >> long forms are unnecessary. If you look up "flat tax" on the
            >> internet you
            >> will discover several mock-ups of the one-page return a simplified
            >> levy
            >> would require. Clint Eastwood is a passionate supporter of the
            >> flat tax
            >> and, untroubled by political correctness, looks forward to the day
            >> when the
            >> tax system can be administered by a little old lady with a personal
            >> computer. But the appeal of the flat tax extends beyond
            >> millionaire film
            >> stars. The latest revival of this perennial campaign is
            >> orchestrated by
            >> rightwing think-tanks such as the Heritage Foundation and the Adam
            >> Smith
            >> Institute, which believe the flat tax is responsible for the
            >> remarkable
            >> economic success of Russia and Georgia (I am not kidding). But the
            >> notion
            >> that an advanced economy can express the requirements of a fair
            >> and robust
            >> tax system on a postcard is an impossible dream. Some complexity,
            >> as the
            >> flat taxers have argued, is attributable to the accretion of
            >> allowances and
            >> ad hoc reliefs. Members of Congress secure favours for constituents;
            >> finance
            >> ministers canvass their advisers for pieces of economic or social
            >> engineering. Every few years, these measures need to be cleared
            >> away, like
            >> the barnacles that adhere to the hull of a ship. Tax reformers in
            >> the 1980s
            >> made a good job of this, but since then the concessions and the
            >> gimmicks
            >> have been making their way back.
            >>
            >> But the main reason tax codes are so complex is that income is
            >> inherently
            >>
            >> a complex concept. The most widely cited definition of income is
            >> that of
            >> Sir
            >> John Hicks: income is what a man can spend and expect to be as
            >> well off at
            >> the end of the period as at the beginning. You do not have to be a
            >> Nobel
            >> prize-winning economist to recognise that translating that
            >> definition into
            >> a
            >> tax code or a set of generally accepted accounting principles is
            >> going to
            >> be
            >> difficult. Experience of tax legislation and the regulation of
            >> corporate
            >> accounts has confirmed this. I remember a debate on principles of
            >> income
            >> measurement. A revenue official and a tax practitioner, impatient
            >> with
            >> academic argument, asked: "Why can't we just stick with the
            >> commonsense
            >> definition of income?" The hundreds of pages of the tax code are the
            >> product
            >> of
            >>
            >> unsuccessful attempts to articulate the commonsense definition of
            >> income.
            >>
            >> Income tax works relatively well when the accrual of income
            >> corresponds to
            >> the receipt of cash, as for wages and salaries or interest and
            >> dividends.
            >>
            >> Income tax does not work well when there is no such correspondence
            >> - when
            >> there are benefits in kind, when income accrues but there is no
            >> realisation,
            >> or when it is not clear where or to whom income accrues when it
            >> arises.
            >> Most
            >> of our income tax legislation, and most of the avoidance
            >> opportunities that
            >> arise from it, result from these problems. The more thoughtful
            >> flat tax
            >> advocates understand these difficulties and urge a shift from an
            >> income
            >> base
            >> to a simpler consumption tax. They are also right to argue that
            >> elaborately
            >> graduated rate structures add little to the progressivity of a tax
            >> system
            >> but a lot to both opportunities and incentives for tax avoidance.
            >>
            >> Tax systems around the world have evolved in line with these
            >> principles. In
            >> two decades, the number of income tax rates fell from 25 to six in
            >> the US
            >> and from 13 to two in the UK (although the British figure has
            >> since crept
            >> back up to six). Payroll taxes and sales taxes have been the main
            >> source of
            >> revenue growth.
            >>
            >> When Hicks elaborated that definition of income, he went on to
            >> conclude
            >> that
            >> income was "a bad tool, which breaks in our hands". His Cambridge
            >> rival,
            >> Dennis Robertson, also remarked that "the gaols and workhouses of
            >> the world
            >> are full of people who gave up as a bad job the admittedly
            >> difficult task
            >> of
            >> distinguishing capital from income". Both were right. We find the
            >> idea of
            >> income hard to apply, but we cannot
            >>
            >> do without it. When you surf for that postcard-sized tax return,
            >> it is easy
            >> to come up instead with a list of results for flat earth campaigners.
            >>
            >> There is a similarity of tone. www.johnkay.com <http://
            >> www.johnkay.com/>
            >> Article CJ128193048
            >>
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          • Wetzel Dave
            ... From: Henry Law [mailto:henry_bn@talktalk.net] Sent: Friday, September 23, 2005 9:46 AM To: Richard Murphy Cc: Wetzel Dave Subject: Re: The Flat Tax
            Message 5 of 7 , Sep 23, 2005
              -----Original Message-----
              From: Henry Law [mailto:henry_bn@...]
              Sent: Friday, September 23, 2005 9:46 AM
              To: Richard Murphy
              Cc: Wetzel Dave
              Subject: Re: The Flat Tax Argument

              Richard Murphy wrote:
              > Dear Mr Law
              > I regret that your understanding of taxation appears limited, as does
              > your understanding of the poverty trap, motivation and causes of
              > bankruptcy.
              > In which case debate seems to be of little point
              > Regards
              > Richard Murphy
              >
              Please clarify?

              I suspect we are not using the same definitions and concepts.

              If you are referring to the formal incidence of taxes ie as
              viewed in accountancy/book-keeping/legal terms, then I would not
              disagree with you.

              However, there is a difference between the formal
              incidence of a tax and the point at which the burden eventually falls;
              some taxes are passed forwards in higher prices, others are passed
              backwards. There is a view that all taxes are ultimately at the expense
              of the rental value of land ie they are passed backwards and fall on
              landowners. This is far from being a new idea.

              One of the difficulties in economics is that, as was pointed out by
              Wynne Godley, professor of economics at Cambridge in the 1980s, there
              are no fixed concepts or universally agreed definitions, in contrast to
              the physical sciences. This makes coherent analysis of the system very
              difficult, as it obscures and fails to model the underlying reality of
              raw materials being worked on by the exertion of human labour to create
              wealth - products that satisfy human desires.

              On this pictures, a business can be characterised as an operation in
              which three inputs are used to add value to raw materials or partially
              completed goods: land (a site), capital (buildings and machinery) and
              labour. Note that capital and land can be distinguished, capital being
              wealth (the product of human labour, and including buildings) set aside
              for the production of more wealth, whilst land is an area of the surface
              of the earth and therefore not the product of human labour.

              The value added by the enterprise is distributed into four streams.

              "Rent" - the return to the owner of the site.
              "Interest" - strictly speaking, the return to the owner of the machinery
              and plant.
              "Wages" - the return to the workers (including the wages of supervision).
              Tax - government's share.

              I have put "Rent", "Interest" and "Wages" in inverted commas as they are
              used here in a sense that differs somewhat from what is usually meant by
              these term. But it shows that "Tax", however it is formally labelled, is
              a claim on the value added by the enterprise.

              "Profit", a book-keeping/accountancy term, is generally a mix of all three.

              This gives a better picture of what is going on, and using this analysis
              I enabled a friend of mine to retire at 35, as what he thought was
              "Profit" was actually "Rent", and when he realised this, he closed his
              business and rented out the property for a lot more than his own
              business was making.


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            • Wetzel Dave
              Many thanks to Steven Cord for making us think about these issues. I agree with Mason that we should keep LVT simple: However, 1. On its own does not address
              Message 6 of 7 , Nov 24, 2006
                Many thanks to Steven Cord for making us think about these issues.

                I agree with Mason that we should keep LVT simple:
                However, 1. On its own does not address how the tax authority replaces the immediate lost income nor the problem that LVT payers normally face a single bill, once a year, rather than deductions through their pay slip.

                So I agree with:

                1. Deferral

                3. Collection through Pay As You Earn.

                5. Borrowings to cover immediate lost income from 1. but the loans plus their interest should be repaid
                when the estate sold.

                9. A home or homestead allowance.


                I disagree with:

                2. The increase cap.

                Setting the poundage or millage rate ie the amount to be collected, is a political decision.

                4. The circuit breaker.

                I do not fully understand this but presumably would be unnecessary if 2, the increased cap, were not adopted.

                6. Percentage tax rebate.

                I 'd prefer a flat-rate land dividend paid to all citizens than a percentage tax rebate which would refund more to high tax payers and could not be collected by poor people or unemployed who only pay sales taxes.

                7. Purchase-and-demolition (P.A.D.) reimbursement.

                This would provide a huge, unnecessary windfall for developers. If the land under the current system has any encumbrance such as a derelict building or pollution then the cost of demolition or remedial action is already deducted from today's market value of the land.

                8. Provide building-assessment abatements.

                This would be dealt with by 9. - a home or homestead allowance.

                10. Establish a Property-Tax Alleviation Board.

                An unnecessary complication.

                Finally, I agree with Steven's comment that a gradual introduction easier transition.
                However, we don't want to get caught in a rut of low LVT and therefore need a clear declaration that it will increase over time. This is why I personally call for an LVT of 10% on rental land value immediately and regular increases to 40% over 12 years.



                Dave

                Dave Wetzel,
                Vice-Chair, TfL
                020 7126 4200


                -----Original Message-----
                From: Mason Gaffney [mailto:m.gaffney@...]

                Subject: Re: The Flat Tax Argument

                Your #1 by itself should be enough. It is already in place in some jurisdictions.

                The more such abatements and palliations there are, the more loopholes for scams we create. Fake "farming" is one of the greatest, already. Add to that, timber culture. As for "homeowners", why treat them better than renters?

                There are now one million single family detached residences in the U.S. valued at more than $1 million each. Several people own more than one of them, e.g. Mel Gibson who tried to pull a fake farming deal on Ted Gwartney in Greenwich. Mel also owns two pads in Malibu at over $20 million each, and who knows how much elsewhere.

                Mason

                Mason
                ----- Original Message -----
                From: Steven Cord <mailto:stevecord@...>


                Dear All,
                I would appreciate comments from anyone about what is appended herein:
                =======================Sincerely, Steven Cord
                Ten Alleviations

                Here are 10 ways to alleviate hardships caused by land rent taxation (LRT):
                1. Defer all or part of the tax to the time of sale or inheritance for the elderly, low-income, and temporarily unemployed. This deferral could apply to either the whole amount of the property tax, or just to the property tax on buildings, or just to the excess payment that might result from the introduction of LRT.
                2. Provide a cap (or limit) on annual property-tax increases due to increased rates (but not to increased assessments) of 2% plus the inflation rate for homeowners or 5% plus the inflation rate for commercial owners.
                For example, if the inflation rate is 2½%/yr., a homeowner paying $10,000 in property tax this year need pay no more than $10,450 next year ($10,000 + $10,000 x [.02 + .025]), assuming no change in assessment. If the inflation rate is 3% in the second year, then the property owner need pay no more than $10,972.50 ($10,450 + [$10,450 x [.02 + .03]), again assuming no change in assessment.
                The inflation rate could be the official BLS estimate for the previous year as usually announced in February, or it could be the ten-month estimate for the previous year, announced earlier than February.
                3. Provide salary-withholding for the LRT. If the mortgage holder isn't paying the tax bill, it could be payable quarterly by the employer (à la the income tax) so that the property-tax bill doesn't come once a year in an undesirable lump sum.
                4. Other taxes (state or local) can pay the extra property tax of those who pay more with LRT (or perhaps just for the elderly, poor or temporarily unemployed). This is already done in some states for the current property tax on both land and buildings and is called a "circuit-breaker."
                5. Provide a government loan fund to pay the property tax of those who are hardshipped by LRT (or just for the elderly, poor, or temporarily unemployed).
                6. Provide a land value tax rebate - a land-tax payment receipt can be used to obtain a 50% or 100% rebate on other local taxes; such receipts can be used only by farmers, homeowners, the poor, or temporarily unemployed.
                7. Provide a purchase-and-demolition (P.A.D.) reimbursement - The local government could reimburse a building owner for the appraised value of his improvement if it is demolished and replaced within a year (the old building must be at least 12 years old).
                This is more protection than building owners have now and would protect them from an unexpected veering of urban development in their direction. This protection would be less needed if the LRT introduction were gradual.
                8. Provide building-assessment abatements (perhaps $500 or so) for special groups such as farmers, homeowners, the elderly, poor, or temporarily unemployed. Or perhaps a percentage of the building assessment could be abated.
                9. Exempt the first $1,000 of the property tax on building assessments. In particular, this would help the poor, elderly or temporarily unemployed. Of course, this requires an increase in the property tax rate to make up for the revenue lost by this exemption.
                10. Establish a Property-Tax Alleviation Board - This board (either national, state or local) could provide pre-determined hardship reductions in the property tax.

                The gradual implementation of LRT is itself an alleviation by giving landowners time to adjust. Experience shows that LRT causes only a very small minority to pay substantially more (mostly they are absentee landowners who are damaging the local economy).
                The voters are more likely to support a land-tax rate increase if the extra revenue is dedicated to such popular projects as parks, playgrounds, and highways; also deficits.




                _____

                From: "Godfrey Dunkley" <landtax@...>
                To: <olefmann@...>,"'Mason Gaffney'" <m.gaffney@...>,"'Steven Cord'" <stevecord@...>
                CC: <DaveWetzel@...>,<carol@...>,<pma@...>,<john.digney@...>,<svenddinsen@...>,<jmfisher@...>,<madrid@...>,<neil@...>,<metaman@...>,<earthrts@...>,<j.himmelstein@...>,<takasec@...>,<fpeddle@...>,<chbs13@...>,<terpaller@...>,<gibb@...>,<georgelcoll@...>,<marynixon@...>,<lindy@...>,<fjauld@...>
                Subject: Re: The Flat Tax Argument
                Date: Wed, 19 Oct 2005 23:18:48 +0200
                Dear Ole and Mason,

                You raise some important and interseting discussions on rent vs. land value.

                The point of view and necessary strategy will be totally different if you are in Manila, Hong Kong, USA or South Africa. From what I learnt in Hong Kong in 1993, they do not sell land but lease it with an up-front payment and an annual rental amount fixed for say twenty years. The land value over the lease period could be ten times the value of the building constructed on it and all reverts back to the state at the end of the lease. Their thinking would not include a speculative value of what it would be worth at the end of the twenty year lease because it would be zero.

                The above is totally different to conditions here in RSA. The only leasing of land to build on it, that I know of, was oil companies with a twenty year lease of a currently strategic site for building a service station which had little improvement value and reverted back to the land owner at the end of the lease. Without a functioning service station the land normally had little residual value. Other than that, no one leases a site to build on. The public as a whole never think in terms of rental value. You could just as well try talking Chinese to them and that includes the professional valuers.

                It is not possible to use the same methods for both Hong Kong and RSA. All other countries would most likely fall somewhere in between. I am willing to bet that Manila has a totally different mindset to RSA. Their thinking and your thinking is not a suitable role model for RSA and possibly the same applies to USA. Thus I must fully support Mason, but not as a single model for all countries and cultures.

                It is essential that we think in terms of market value in order to soften the impact of speculative and unrealistic pricing of unproductive land. We need to hit the speculators and hit them hard. Let them dig holes for themselves to fall into.

                Agricultural land values have not been officially regestered in the past but now come under a municipality and must be registeered. I am fully in favour of Self Assessment in order to speed up the process but the assessment must become an offer to sell to government if required, at that price but with say a 10% compensation for inconvenience. To that value must be added the depreciated value of any buildings and other improvements, taking into account functionality or obsolescence
                and goodwill if an operating business. In the case of agricultural land these latter aspects would normally be low in relation to the land value.

                This self assessment should be registered and made public, giving the owner an opportunity to compare his values with other similar properties and affording an opportunity to amend before becoming official. The registered values would then become official until the next update of the Valuation Roll. LVT would be based on this value.

                Any offers to purchase should be registered against the property and wheather accepted or rejected should become the new official value. It would be in the interest of potential purchasers to register offers as this would improve their chance of the offer being accepted.

                Regards

                Godfrey Dunkley
                ----- Original Message -----
                From: Ole <mailto:olefmann@...> Lefmann
                To: 'Mason Gaffney' <mailto:m.gaffney@...> ; 'Steven Cord' <mailto:stevecord@...> ; landtax@...
                Sent: Sunday, October 16, 2005 12:00 PM
                Subject: RE: The Flat Tax Argument

                Dear Mason,

                Thank you for your prompt reply.

                However, I am still not sure what you mean when writing that for land in USA prices are high above capitalized rent? You mentioned that it is so because of expectation of conversion of the restrictions to allow for a higher use of land, and because of amenity values.
                You also wrote that
                - Rent refers to all kinds of rent including "imputed" rent;
                - "Imputed" rent is not directly "visible" until they are inferred from sales.
                - Sales prices are capitalised from "service flow" and current increment to prices.
                - Reasons for preferring market price valuation are:
                - Increment is an unearned income
                - Un used and underused land will be taxed
                - It avoids sudden rise of taxes
                - Makes landtax more progressive
                - Etc.

                I cannot see why it should be impossible for assessors to include the values of speculation, natural amenities, and the available service flow when assessing the rent of land, when these quantities will be included in the assessed market values? And also the advantages of collecting unearned values, and incremental values of unused or underused land, together with other advantages you mention above, will be captured for the public cheat by public collection of the rent of land as soon as the rent of land is correctly assessed by local skilled and experienced experts.

                As Tony Payne, Manila, has emphasized: Landowners will always know how high to set the rent they ask their tenants to pay; and that is true whether the land is allowed for productive or residential or any other use. Landlords, State agents, Mortgage lenders, Entrepreneurs operating in Building and Construction, are estimating the rent every day (How much will people be willing to pay annually for taking over the right to use the property in question?)

                I am convinced that if we ask assessors with skill and experience to do the same regarding the values of land (How much will people be willing to pay annually for the right to use this land?), whatever any manmade values have been applied to the land or not, they will do so. And these annual amounts (the assessed rent of land) will include values of speculation, amenities, available service flow, "imputed" rent of owner-occupied land, as well as anything else that could be mentioned in that connection - EVERYTHING! It will also take into consideration negative values such as noise, smell, and other pollutions, crimes, anti social behaviour, risk of flooding, lacking of or lagging services available, etc.

                It may take some time, but not long, before a useful assessment practice will be in place, but that should not prevent us from recommending DIRECT assessment of rent of land instead of assessment of market prices of land to be used for calculation of a land value tax that may or may not be the right size of the rent of land.

                I wonder why you think that assessors are less qualified for assessing how much people are willing to pay annually for the right to us a certain site, than landlords, mortgage lenders, entrepreneurs, state agents are.

                Kind regards
                Ole


                _____

                From: Mason Gaffney [mailto:m.gaffney@...]
                Sent: 10 October 2005 15:50
                To: olefmann@...; 'Steven Cord'; landtax@...
                Cc: Subject: Re: The Flat Tax Argument

                Dear Ole,

                Thank you for your comments. My responses are in italics below.

                Subject: RE: The Flat Tax Argument


                Dear Mason

                Thanks for your reply.

                Initially, to the last two passages of my mail of October 6th you declare that you are of a different opinion concerning whether the tax base should be the "current rent" instead of "the market value". Therefore I expected to find the reason for this attitude in the next following passages on your mail; but I could not.

                You describe how to tax landowners' no-rent-generating land in New Orleans for renewal of the city; and you describe that generally in USA market prices of land are high above the capitalized current rent. The latter makes me ask: Does "current rent" here mean LVT publicly collected today, or does it mean rent paid by landowners' tenants today, or what kind of rent does it mean?

                It refers to all kinds of rent, including the "imputed" rent of owner-occupied lands. Imputed rent is not directly visible, and must be inferred from sales prices and interpolation on maps from sales of vacant land, and old buildings on the eve of demolition. Theory and algebra tell us, though, that sales prices are capitalized from the sum of current "service flow" and current increment to price. So if we tax market value we are taxing the sum of current service flow (simple "rent," in your meaning) and current increment.

                More simply, on vacant land there is no current service flow to observe and record. Again, though, theory and algebra tell us that the land is rising in value by a % equal to the rate of interest. A tax on market value, then, is proportional to the current increment.

                Next you write about the unearned increment that accrues each year, and conclude that by taxing land values (= market values) we will be able to tax also the unearned increment - without waiting for a sale to happen, which may not happen at all.

                I cannot see this being a reason for preferring the tax base to be market values of land instead of being directly assessed rent of land, for which Steven Cord and I argue.

                Some reasons are: 1, The increment is an unearned income; 2, The tax raises revenue from unused and underused lands, which are the majority of lands; 3, The tax avoids a sudden rise of taxes when land is put to use; 4, The increment tax makes the land tax more progressive, since lands that are rising in value are more closely held than other lands; 5, Etc.

                We all believe that estate agents, mortgage lenders and building entrepreneurs have the best possible skill and experience for estimating the present price of a site considering the advantages obtainable from it including a possible speculation profit. They use to estimate a price in cash because that is normal practice; but if we make it normal practice that a landowner, instead of paying cash once and for all, should pay annually the amount the highest of serious bidders would offer to pay annually for taking over the exclusive right to use the site in question, then no doubt the assessors would be able to estimate this annual amount. It will be very near to the correct rent; and that is what the society should ideally collect from the landowners.

                In a perfect world, 100% of current rent would be taxed and market values would be zero - PROVIDED all buyers and holders of land expected the perfect world to continue forever. Experience has shown, though, that there are always some speculators who hang on to land even when taxes are pretty high. They hope taxes will fall, and they have been right many times. Meantime, let's collect revenues from them.

                In the case of financing the renewal of New Orleans I believe that collection of the rightfully assessed annual rent of land would be able to pay for the loans needed for the needed construction works, instead of cash payments once and for all for the sites.

                With my best regards
                Ole



                _____

                From: Mason Gaffney [mailto:m.gaffney@...]
                Sent: 07 October 2005 03:25
                To: olefmann@...; 'Steven Cord'; landtax@...
                Cc:
                : Re: The Flat Tax Argument

                Thank you, Ole and Steve, for the boost(s).

                I am respectfully of a different opinion, however, concerning whether current rent or market value should be the tax base.

                For example, currently in New Orleans there is little current rent being generated. Yet, speculators are roaring in to buy the titles to land under the ruins, at good prices. There is your tax base, to renew the city.

                More generally, half or more of the land in the U.S.A. is bought and sold and held at prices high above the capitalized current rent. That is because of expectation of conversion to higher uses, plus a lot of other factors like amenity value. The unearned increment that accrues each year is approximately proportional to the market value. A tax on land value is exactly proportional to the market value, and therefore to the accruing unearned increment. That is how you tax the unearned increment, without waiting for a sale (which may never come).

                Mason


                ----- Original Message -----
                From: Ole <mailto:olefmann@...> Lefmann
                To: 'Steven Cord' <mailto:stevecord@...> ;
                Subject: RE: The Flat Tax Argument

                Hi Steven and everyone,

                Of course the Land VALUE Rent can be a single tax! I don't say it should, but Professor Mason Gaffney, California, has minutely explained in the latest issue No.103 of The Georgist Journal (GJ is sent to subscribing members of "The International Georgist Union [IU]" of "Council of Georgist Organisations [CGO]" and of "Henry George Institute [HGI]") that "All Taxes Come Out of Rent".

                Henry George came to the same conclusion and explained it in "Protection and Free Trade", Chapter 25, as referred to below in my e-mail of 4th October (the brown text).

                That means, when taxes are replaced by the revenue of publicly collected rent of land, the total of rent will increase with that amount that disappeared when the taxes were collected. Therefore all taxes can be replaced by public collection of the rent of land!

                However, I think we will have to collect some behaviour taxes such as Congestion Charges that shall keep too many vehicles away from narrow city centres, and Environment Charges on goods and services the production and use of which will provoke expenses to cleaning up and restoration of the environment. Maybe also some taxes on intoxicating drugs, smokes and beverage. Therefore I would not call LVT for a Single Tax.

                I agree that we may expect further increase in the rent of land when the bad habit of private withholding of the publicly created rent of land is a thing of the past.

                In reply to your last question: Unfortunately Danes continue to assess the market prices of land and collect a certain percentage of it, which they call rent of land. That has the effects I mentioned below in mail 4th October (the green text).

                I strongly support the DIRECT assessment of the rent of a site instead of assessment of the value on which you then calculate a LandValueTax.
                By DIRECT assessment you will make the character of the Georgist idea better understood, and avoid several problems, such as: which value, and how big a percentage shall we collect.

                As far as I know it is not more complicated or difficult for local and competent people with skill and experience to assess DIRECTLY the rent people would like to pay annually for taking over or keeping the exclusive right to use a certain piece of land, than it is to assess the cash amount people are ready to pay once and for all for the same right. Both have to do with the money people are able to provide and the advantages they as the landowner will be or is able to enjoy on or from the site in question.

                Best regards
                Ole

                _____

                From: Steven Cord [mailto:stevecord@...]
                Sent: 04 October 2005 21:38
                To: olefmann@...; landtax@...
                Cc: DaveWetzel@...; carol@...; pma@...; Subject: RE: The Flat Tax Argument

                Dear Ole,
                Can the land rent tax BE a Single Tax? I guess not, but adequate figures do not exist in America to substantiate any more than a guess because in some states land & buildings are assessed together(!); your Danish figures (more accurate) indicate that they can't be. But we can logically prove beyond a shadow of a doubt that a land rent tax can BECOME a Single Tax - see pp. 76-79 in my recently published book, The Golden Key to Continuous Prosperity.
                Briefly, the argument is this: a land rent tax must be gradually imposed (for political reasons). Such a tax will increase the GDP, which in turn will increase land values, which when taxed more, will further increase the GDP, which will further increase taxable land values, and so forth ad infinitum, eventually inundating the govt. with revenue! and making possible Jeff Smith's aptly named Citizen's Dividend (CD).
                Note this is a logical argument; the issue is not subject to empirical analysis because the relevant factors will be empirically changed by the tax itself. Nevertheless, I have printed Mason Gaffney's interesting article on the subject for later reading (thanks for sending it to me). You agree?
                One more important point: eventually land values should be assessed on annual income rather than on selling price (isn't that the custom in England and in Denmark?) in order to avoid the problem of a huge land value tax rate on a diminishing land price assessment (in fact, we would then be highly taxing zero-price land price!). Right? (for more on this, see pp. 8 of GKCP).
                ============================All best wishes, Steven Cord

                _____

                From: "Ole Lefmann" <olefmann@...>

                Subject: RE: The Flat Tax Argument
                Date: Tue, 4 Oct 2005 20:33:33 +0100
                Dear Godfrey,

                The question about the size of rent of land has been my passion for many decades.

                Recently, 21Sep'05, I sent some lines to Dave Wetzel and Carol Wilcox about it:

                Because the Danish Statistics are very reliable as to their registration of publicly assessed land values and of publicly collected LVT (based on the market prices of land), it is possible to find out the Size of the collectable Rent of Land in Denmark by de-capitalizing the total of Danish land values and adding this amount to the already collected LVT.

                I have the statistics up to 1997 and they show that the Rent of Land in Denmark in the 1990's was less than 5% of the Danish GDP and less than 10% of the total of all taxes collected from the Danes.

                On this background Danes take you for insane when you assert that all existing taxes can be replaced by the collection of all the rent of land.

                However, it is generally accepted that higher taxes reduce the rent of land and vice versa reduction of taxes will increase the rent of land. Therefore the probability verging on certainty is that by using the revenue for reduction of other taxes it will be possible to AT LEAST reduce all other taxes.
                _

                Professor Mason Gaffney, California spoke about the size of the rent of land at the CGO conference 2004. See attached paper of Mason Gaffney.

                Another thing that has supported the idea that the rent is not sufficient to replace all other taxes is the following:

                Because the Danish Inland Revenue levies LVT (in Danish called Grundskyld = Ground Duty) on the assessed market prices of land, the common understanding is that the Size of Rent of land in Denmark is a certain percentage of the market prices of all land in Denmark.

                As it is also understood that increased LVT will reduce the market price of land, many people find that the Georgist idea of increasing LVT is crazy (or at least unintelligible) because in doing so the market price will go down and bring up a peculiar situation where incredible Georgists want to levy a very high percentage of zero land values.

                I never say that rent of land is a percentage of market values of land. I say that Georgists want the Inland Revenue to collect the Annual Rental Value of land which is the annual amount that the highest bidder wants to pay for taking over or keeping the exclusive right to use the site in question. By doing so the market price of land may be zero or almost zero, but only as long as the IR collects the total annual rental value whatever it increases or decreases in accordance with the development of the surrounding society.

                A third thing to remember is that

                Henry George wrote in his Protection or Free Trade Chapter 25 that the rent of land is what is left by other capturers who take from the market of production by force without giving the producers anything in return. Such capturers are tax collectors, criminal offenders against property rights, and holders of other privileges than the exclusive rights to use of land.

                In Chapter 25 of Protection or Free Trade Henry George called the landowners for "the big robber" and other capturers "the small robbers". Unfortunately the development since then has caused that today "the small robbers" have become so overwhelmingly many and some grown so extremely much that together they capture a share - of what originally would have been called Rent of Land - that may well be much larger that the share that is today left to the landowners to suck up as what we today call "rent of land".
                It is a pity that the Statisticians don't register these figures.

                Best regards
                Ole



                _____

                From: Godfrey Dunkley [mailto:landtax@...]
                Sent: 02 October 2005 21:01
                To: Ole Lefmann; Steven Cord
                Subject: Fw: The Flat Tax Argument

                Dear Ole and Steven,

                I am not sure if you were included in the original posting so am sending to you now.

                Regards

                Godfrey Dunkley
                ----- Original Message -----
                From: Godfrey Dunkley <mailto:landtax@...>


                Dear Dave,

                Some interesting discussions. However a number of people have at times deliberately distorted the concept of a Single Tax from what it was originally intended, namely a tax on land values only or the collection of the annual rent of land, to a few negative single taxes, ie.:-

                1 Collect all revenue from Value Added Taxes; a sure recipe for rampent unemployment!

                2 Collect all revenue from a turnover tax: slows down business, hits the poor hardest,
                necessitates higher wages, increases the cost of labour and leads to unemployment!

                3 A Polltax or head-tax, the same for everyone both rich and poor.
                A valid reason for overthrowing a government; ash Mrs Thatcher.

                3 Collect all revenue from Income Tax at a constant percentage;
                a grand way to rob the poor and give to the rich!

                These have exactly the opposite effect to the Single Tax on Land Values only. This collects the revenue from those who gain the most unearned income or benefits from land ownership, land speculation and the withholding of land from use by others who would put it to best use.
                LVT encourages production and the subsequent repeal of existing taxes reduces the cost of labour and encourages full employment.

                It is strange that there is still doubt that LVT would produce sufficient revenue to allow all other taxes to be discontinued. This is possibly because economists look at the present aggregate annual value of land which would only produce about a third of the present revenue requirement. What is overlooked is that land values are governed by the excess of Economic Rent remaining after taxes are deducted from the Natural or Ricardian Rent, then capitalised over about twenty years. When present taxes are discontinued and the annual Rent restored to the full Natural Rent then it would increase to approximately 135% of the annual budget. It would only be necessary to collect 75% of the annual Rent to achieve the same budget.

                Naturally land prices will change as the tax structure is altered. As the land tax increases the market price of land will reduce, but, on the other hand, as existing taxes are abolished land prices will increase again. When the market starts to settle down it will suffice to collect one fifth or 20% of the market price in order to collect about 80% of the annual Rent, i.e. more than the existing budget.

                The above calculations are based on an interest rate of 5% p/a. Changes in interest rates will have an effect on the calculations.

                Increasing the percentage of annual Rent collected can be achieved by a simple formula as follows. Let the purchase price of land be two years of Rent collected, or conversely, let the annual tax on land be 50% of the market value. This will collect approximately 91% of the annual Rent, influenced partly by changes in interest rates.

                Needless to say the resultant improvement in employment and reduction in poverty will brind about significant improvements in quality of life and restore human dignity.

                John, a land tax should not be thought of as a small part of a desirable tax system, it should become the foundation of a sustainable system. It should only be necessary to have small taxes on undesirable behavior or sin-taxes. The most undesirable condition of speculation in land and land monopoly will already be dealt a mortal blow by the land tax. Most other monopolies will also be brought under control if the definition of land is broadened to include all gifts of nature.

                Regards,

                Godfrey Dunkley
                Cape Town, RSA
                ----- Original Message -----
                From: Wetzel Dave <mailto:Davewetzel@...>

                Subject: RE: The Flat Tax Argument


                -----Original Message-----
                From: christensen tjn [mailto:christensen.tjn@...]
                Sent: Tuesday, September 20, 2005 2:20 PM
                To: Wetzel Dave
                Subject: RE: The Flat Tax Argument

                Dave
                We can agree on that. best wishes, John
                +++++++
                John Christensen FRSA, Coordinator, Tax Justice Network International Secretariat

                From: Wetzel Dave [mailto:Davewetzel@...]
                Sent: Tue 20/09/2005 10:17
                To: christensen tjn; 'Carol Wilcox'; 'Richard Murphy'
                Cc: 'John Kay'; 'John Muellbauer'; 'Iain McLean'; 'Fred Harrison'
                Subject: RE: The Flat Tax Argument

                John,
                Your view is one I respect.
                Current practice in those few jurisdictions which already have some form of
                LVT is that they also collect other taxes. (But I would (and have when the
                opportunity has arisen) also suggested they could increase their LVT rate).
                And surely you and your colleagues are right - it is in all our interests
                that we try every endeavour to minimise tax lost through evasion, avoidance
                and fraud in the current system.
                Not only do such practices damage public services that are starved of funds
                but they also put honest traders in a disadvantageous competitive position.
                (eg having to charge higher prices in order to pay vat or incurring higher
                staff costs when they insist on NI numbers and pay full NI and PAYE).
                Personally, I advocate that LVT should be introduced at 10% of annual rental
                value on all factors that generate economic rent, although I believe that
                ultimately a high rate of LVT (say 95%) would allow the abolition (or major
                reduction) of most other taxes. This would arise from improved efficiency in
                the economy generated by LVT itself. (Idle derelict urban sites brought into
                use thus making our towns and cities more efficient and avoiding urban
                sprawl).
                But I do not have the figures to prove this would be the case and until the
                universities do some serious studies or a government is prepared to try it -
                the jury is still out.
                (Even some eminent land-taxers disagree with me and consider that LVT would
                only raise enough revenue to replace only all other property taxes).
                However, what does the crystal ball gazing achieve?
                If you and I (and others) can work together to minimise current tax loss and
                advocate say, a 10% LVT in the UK and maybe even across the EU, then we will
                have achieved a tremendous gain for the most needy in our society.
                Surely, a target worth working together for?

                Dave

                Dave Wetzel;

                -----Original Message-----
                From: christensen tjn [mailto:christensen.tjn@...]
                Sent: Tuesday, September 20, 2005 8:06 AM
                To: Carol Wilcox; Richard Murphy
                Cc: John Kay; Wetzel Dave; John Muellbauer; Iain McLean; Fred Harrison
                Subject: RE: The Flat Tax Argument

                Dear Carol

                I think that we are all agreed that LVT is a part of a good tax system, but
                I do not consider it to be more than one constituent of a regime that
                captures revenue from other sources, including incomes, profits, trades on
                capital movements, energy use and consumption of a variety of 'bads.' So I
                agree with Kay that the sum of economic rents is not sufficient to finance
                the needs of a modern state. Other revenue streams are vital.
                I do not share your fatalistic attitude towards avoidance. Its persistence
                is more an indication of state tolerance than of any particular impediment
                to tackling the problem.
                best wishes,
                John
                John Christensen FRSA



                From: Carol Wilcox [mailto:carol.wilcox@...]
                Sent: Sun 18/09/2005 16:07
                To: Richard Murphy; christensen tjn
                Cc: John Kay; Dave Wetzel; John Muellbauer; Iain McLean; Fred Harrison
                Subject: The Flat Tax Argument

                Richard, John
                Below is an article by John Kay which appeared in the FT earlier in the
                year. At the time I was collecting items on the flat tax debate for later
                analysis. Your own article on this subject comes to the same conclusion but
                for different reasons, I think.

                What frustrates me about John Kay's argument is that he totally ignores the conclusions of the first edition of his and Mervyn King's 'The British Tax System' that the only tax which meets all the criteria for a good tax is land value taxation. I only have the fifth edition now which dropped the comparison of taxes. I quote from 5th edition: '.. it is apparent that the total of economic rents, of all kinds, is not now a sufficiently large proportion of national income for this to be a practicable means of
                obtaining the resources needed to finance a modern State'. Perhaps Kay and King's judgments were clouded by the property crash of the late 80s/early 90s (which could have been avoided by the implementation of LVT - see Fred Harrison's latest 'Boom and Bust' and his earlier 'The Power in the Land', which in 1983 accurately predicted the date of the later crash). Reading below it doesn't sound like the latest edition of 'The British Tax System' acknowledges that land values are an undeniably huge proportion of national wealth.

                Carol
                The Financial Times, Feb 8, 2005 p19

                Why tax cannot be expressed on a postcard
                JOHN KAY.
                If only all reliefs and allowances were swept away, the tax code would be much simpler and the government's requirements could be met from a single low rate of tax on all income. British taxpayers have just completed their annual returns and American taxpayers must soon start. But perhaps these long forms are unnecessary. If you look up "flat tax" on the internet you will discover several mock-ups of the one-page return a simplified levy would require. Clint Eastwood is a passionate supporter of the flat tax and, untroubled by political correctness, looks forward to the day when the tax system can be administered by a little old lady with a personal computer. But the appeal of the flat tax extends beyond millionaire film stars. The latest revival of this perennial campaign is orchestrated by rightwing think-tanks such as the Heritage Foundation and the Adam Smith Institute, which believe the flat tax is responsible for the remarkable economic success of Russia and Georgia (I am not kidding). But the notion that an advanced economy can express the requirements of a fair and robust tax system on a postcard is an impossible dream. Some complexity, as the flat taxers have argued, is attributable to the accretion of allowances and ad hoc reliefs. Members of Congress secure favours for constituents; finance ministers canvass their advisers for pieces of economic or social engineering. Every few years, these measures need to be cleared away, like the barnacles that adhere to the hull of a ship. Tax reformers in the 1980s made a good job of this, but since then the concessions and the gimmicks have been making their way back.
                But the main reason tax codes are so complex is that income is inherently
                a complex concept. The most widely cited definition of income is that of Sir John Hicks: income is what a man can spend and expect to be as well off at the end of the period as at the beginning. You do not have to be a Nobel prize-winning economist to recognise that translating that definition into a tax code or a set of generally accepted accounting principles is going to be difficult. Experience of tax legislation and the regulation of corporate accounts has confirmed this. I remember a debate on principles of income measurement. A revenue official and a tax practitioner, impatient with academic argument, asked: "Why can't we just stick with the commonsense definition of income?" The hundreds of pages of the tax code are the product of
                unsuccessful attempts to articulate the commonsense definition of income.
                Income tax works relatively well when the accrual of income corresponds to the receipt of cash, as for wages and salaries or interest and dividends.
                Income tax does not work well when there is no such correspondence - when there are benefits in kind, when income accrues but there is no realisation, or when it is not clear where or to whom income accrues when it arises. Most of our income tax legislation, and most of the avoidance opportunities that arise from it, result from these problems. The more thoughtful flat tax advocates understand these difficulties and urge a shift from an income base to a simpler consumption tax. They are also right to argue that elaborately graduated rate structures add little to the progressivity of a tax system but a lot to both opportunities and incentives for tax avoidance.
                Tax systems around the world have evolved in line with these principles. In two decades, the number of income tax rates fell from 25 to six in the US and from 13 to two in the UK (although the British figure has since crept back up to six). Payroll taxes and sales taxes have been the main source of revenue growth.
                When Hicks elaborated that definition of income, he went on to conclude that income was "a bad tool, which breaks in our hands". His Cambridge rival, Dennis Robertson, also remarked that "the gaols and workhouses of the world are full of people who gave up as a bad job the admittedly difficult task of distinguishing capital from income". Both were right. We find the idea of income hard to apply, but we cannot
                do without it. When you surf for that postcard-sized tax return, it is easy to come up instead with a list of results for flat earth campaigners.
                There is a similarity of tone. www.johnkay.com <http://www.johnkay.com/> Article CJ128193048
                ****************************************************************************
              • Roy Langston
                John Kay wrote, in the Financial Times: But the main reason tax codes are so complex is that income is inherently a complex concept. Wrong. The main and
                Message 7 of 7 , Nov 26, 2006
                  John Kay wrote, in the Financial Times:
                   
                  "But the main reason tax codes are so complex is that income is inherently a complex concept."
                   
                  Wrong.  The main and only real reason income tax codes are so complex is that income is inherently The Wrong Thing To Tax. Income tax codes must be made complex in order to alleviate (or more often, merely to conceal) the pernicious effects of stealing people's rightful earnings.
                   
                  So why do governments tax earned incomes (i.e., what the recipients contribute to the wealth of society) rather than economic rents (i.e., what society contributes to the wealth of the recipients)? Mr. Kay provides the answer:
                   
                  "The most widely cited definition of income is that of Sir John Hicks: income is what a man can spend and expect to be as well off at the end of the period as at the beginning."
                   
                  IOW, by taxing away as much income -- and ONLY income -- as possible, government ensures that the poor will continue to be just as poor no matter how much they contribute through their productive efforts, and likewise that the idle rich will continue to be just as rich no matter how little they might contribute in the way of productive effort, or how little of their unearned incomes they might invest productively. The advocates of income taxation are therefore serving the interests of no one but the rich, who have little need of their incomes because they are already as well off as anyone can reasonably expect to be.
                   
                  -- Roy Langston


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