Two Taxes that Aren't Theft
Here, I argued that taxation is theft:
https://www.libertarianism.org/columns/is-taxation-theft
https://www.youtube.com/watch?v=qYp5HrDinUg
And that’s true about most taxes, including income tax, sales tax, value added taxes, tariffs, excise taxes, etc. But wait – maybe not all taxation is a form of theft. Two forms of taxation appear less theft-like than others.
1. Pigouvian Taxes
Sometimes, people do stuff that harms other people, and the people who are harmed don’t consent to the harm. I.e., people “produce negative externalities”, as the economists say. (Usually, people say there’s a negative externality when the agent fails to compensate the person who is harmed. But for ethical purposes, I think lack of consent is the more relevant point, so I’m just going to define it in terms of that.)
Example: Pollution. Whenever you drive your car, you release a little bit of pollution into the air, which imposes a tiny expected harm on a huge number of other people and animals, including future generations. I bet you don’t get their consent, either.
On some absolute deontological views, you always need consent before imposing (certain kinds of) harm on others. But that’s impractical. You can’t get the consent of everyone in the world, including the future generations who will be affected by your pollution. So we’d have to say either
(a) “You can’t pollute at all.” This requires shutting down modern civilization. Or
(b) “Pollution isn’t the right kind of harm” (it’s not aggressive, people don’t have rights against pollution, or something like that). But this would mean that it would be fine to completely destroy the atmosphere with pollution (if someone had the ability to do that).
(a) and (b) are both bad. We shouldn’t completely prohibit all pollution, nor should we take no action at all against pollution. While complete destruction of the atmosphere may not be on the table (yet), we would surely have too much pollution if we didn’t do anything at all to polluters.
This point of course applies to other kinds of externalities. If people get to impose negative externalities for free, there will be too many negative externalities. Lots of activities will get done that impose greater total costs than their total benefits. And almost everyone is going to lose out overall from all the negative externalities.
Solution: Pigouvian taxes. These are taxes on externality-producing activities. They’re supposed to be set so that the tax is about equal to the amount of external harm produced by the activity. This deters people from doing the activity, if and only if the total cost created by it exceeds the total benefit. Example: A carbon tax that would approximate to the amount of harm caused by greenhouse gas emissions. This would deter the least economically valuable carbon-emitting activities, while still allowing the most valuable ones.
So that’s my first example of a tax that isn’t theft.
Wait -- you can see what the utilitarian rationale is for Pigouvian taxes, but why isn’t it still theft (even if a beneficial theft)? My thinking is that the person creating the negative externality actually owes compensation for doing so. Extracting owed compensation from someone isn’t theft. So this form of taxation isn’t theft. But note that the government would be obligated to use the money collected to actually compensate the people who are harmed by the taxed activity.
2. Georgist Land Taxes
This one is more interesting and controversial. I think Henry George may be right. Henry George thought that (a) everyone is entitled to the value that they themselves produce, but (b) they’re not entitled in the same way to value produced by nature. If you happen to be the first person to claim some valuable natural object, that doesn’t really give you a greater claim to its value than other people who arrived later.
So when you build a building on some land, you should own the value that you added via your labor. But you don’t have any special claim to the value that the land had prior to your arrival. Instead, George thought, everyone should get an equal portion of the value of all land & natural resources. (We can simplify this to just “land”, since natural resources are generally part of the land.)
Obviously, we don’t want to stop people from using land – that would be equivalent to destroying all that value just to stop some people from getting more of it than others. The most practical social rule is one that allows the first person who finds some natural resource to exploit it.
Solution: A land tax. The first person to find some unused land gets to claim it, but also, the person who owns a particular piece of land at any given time has to pay a tax approximately equal to the intrinsic value of that land (the value not due to human labor). The tax money should then be distributed evenly among society. This implements the idea that everyone should get an equal portion of the unimproved value of land and natural resources. Unlike other taxes, it doesn’t discourage productive activity, but it does discourage inefficient uses of land.
(The tax would presumably be taken periodically, e.g., maybe every year, rather than being taken just once when the land is first acquired. So the annual tax would be equal to the value of the land for a year, i.e., the fair market rent on that land, if it had no improvements on it.)
This, by the way, is a kosher libertarian way of arriving at a universal basic income.
3. What About Anarchy?
If these are legitimate taxes, is there some way they could be implemented under anarchy (esp., anarcho-capitalism)? If not, is that a problem for anarchism?
I think these sorts of taxes are unlikely to occur under anarchy, mostly because I can’t think how they would be implemented without a central authority figure, even if most people agreed that they would be desirable. That is a problem with anarchy. But I don’t think it’s a big enough problem to justify government. In other words, if you already have a government which you can’t get rid of, then it would be okay for that government to adopt these kinds of taxes (I guess – the Pigouvian tax is definitely okay, and maybe the land tax also). But it wouldn’t be worth having a government just to have these taxes.
To explain: First, although a government can implement these desirable kinds of taxes, it can, for the same reason, also implement lots of undesirable taxes. There is no reason to think that a government would create only the justified taxes. There’s lots of evidence that they will create a million times more unjustified taxes. (Note: “a million” is not intended as a quantitatively accurate estimate.)
Second, they’re not even guaranteed to actually create the desirable taxes. E.g., it’s far from a foregone conclusion that a government -- even a relatively healthy, democratic government -- will actually create taxes to penalize polluters for their negative externalities. It’s equally plausible that the polluters will instead lobby the government to get extra subsidies for themselves.
Third, I don’t think the proper land tax would be a large amount. Because it would be a very small amount (and therefore the basic income it would support would be very small), the failure to collect it is no big deal. Examples:
Here is a nice house for sale in a good location in Denver: https://www.redfin.com/CO/Denver/2605-18th-St-80211/home/160485594
Asking price: $5,500,000. Lot size: 4,200 sq. ft. Price per square foot of land: $1300.
And here is a nice empty lot, in the middle of nowhere: https://www.redfin.com/CO/Yoder/Parcel-8-E-Jones-Rd-80864/home/175224487
Asking price: $49,900. Lot size: 1,742,400 sq. ft. Price per square foot: $0.029.
So in this example, the value of a piece of real estate in the city, with excellent improvements, is 46,000 times greater than the value of an equal-sized piece of land with similar climate out in nature. The people who own that $5.5 million house are probably going to pay about $30,000 in property taxes per year. However, if they only had to pay the value of the rent on a completely unimproved plot of land of the same size out in nature, they’d probably instead pay closer to $7 a year. (Assumptions: land valued at $0.029/sq.ft., price-to-rent ratio of 18, which is pretty normal in real estate.)
That $7 could then be used to help provide a basic income to Colorado’s citizens! But it would be such a piddling basic income that it really wouldn’t be a big deal if it didn’t get provided because we were living in an anarchist society with no central authority to collect the land taxes. If we didn’t have a government, we shouldn’t establish one with the ability (and likelihood) to collect thousands of times as much unjustified taxes, just to ensure that we collect that bit of justified taxes.
Note: Obviously, the above isn’t a quantitatively accurate estimate, since I just picked two properties that aren’t necessarily representative, etc. But I still think this gives you a sense of the basic point: The justified land tax would be very small in comparison with the value of a typical piece of real estate, and very small compared to the amount of taxes that governments typically take.
Other note: Actually, the 0.029 is probably an overestimate of pure land value. For a better estimate, we’d have to look at a plot of land way out in the wilderness, with no road access.
Question
I’m not sure about the preceding argument, though, because I’m not sure what one should count as the rents on land. A large part of the value of land in a city (and hence a large part of the total value of land in the country) is due to the general benefits of living near other people. It’s not the value of the physical improvements that were built on that land, like the building and the plumbing system. Or even the physical improvements in the surrounding area. It’s the proximity of people. So, does a Georgist land tax try to collect that value too? Or does it only (as I assumed above) collect the pure natural resource value?