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Adam Smith Institute Blog:

Taxing times

By Dr Madsen Pirie in: Tax & Economy •

I had a piece in the Telegraph business section on Wednesday, comparing Gordon Brown's tax policy with the maxims set down by his illustrious fellow-countryman, Adam Smith. Smith had said that people should pay taxes in proportion to income, that they should be certain rather than arbitrary, that they should fall due when they could conveniently be paid, and that they shouldn't cost too much to administer. I suggested that few would give the Chancellor four marks out of four, given his stealth taxes and his steady tax increases.

Much of my article was of steps which could be taken to simplify taxes in Britain, starting with the harmonization of income tax and national insurance. I also suggested that capital taxes could be harmonized, and put in line with income tax as well as with each other, absorbing the much-disliked death tax. The complex system of tax credits put in place by the Chancellor could and perhaps should be replaced by a simpler negative income tax. Out could go all the tax exemptions, allowances and tax credits accumulated over the years like junk in a store-room.

Yes, Smith himself had harsh words for taxes on labour (income taxes et al):

"In all cases, a direct tax upon the wages of labour must, in the long run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods, than would have followed from a proper assessment of a sum equal to the produce of the tax, [levied] partly upon the rent of land, and partly upon consumable comodities."

And similarly on capital taxes and profits. Yet he did favour one form of taxation more highly than any other:

"Both ground- rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land are, therefore, perhaps the species of revenue which can best bear to have a peculiar tax imposed upon them."

So why does the Adam Smith Institute continue to suggest tinkering with income and capital taxes to make them a little more fair, a little easier to collect, a little simpler to understand? Why not embrace Smith's idea, as developed by Henry George, in the "single tax". Get rid of most of these other taxes apart from perhaps behavioural taxes where there is a popular mandate to tinker with certain aspects of peoples' behaviour and instead insist that the only revenue a government can call on is the value of land within its borders.

It is simple, difficult to avoid - it doesn't matter whether you are domiciled here or not - if you own land you'll pay your tax or lose the land eventually - economically non-distorting, penalises a monopoly (anathema to the free markets AS and ASI espouse) and can set an absolute and market driven limit to the size of the state. A body like the Adam Smith Institute (seen as it is in many circles as a rabid right wing think tank) is in the ideal position to push the "Overton Window" on tax policy. So why is it so pedestrian and unimaginative on this, where their eponymous hero appeared much more certain? At least their counterpart in Australia is bolder (be prepared to turn your computer's sound down - the background music grates!)

Technorati Tags: Henry George, Adam Smith Institute, land value tax

Now, I understand the arguments in favour of a smoking ban on public and employee health ground but over at Freedom and Whisky in Only following orders David Farrar highlights that the smoking ban is also an erosion of private property rights.

You know by now that I can get Land Value Tax into almost any discussion! And here is an apt one for those that tell me that real estate is absolute property and therefore not something the state should tax. Yet in the smoking ban the government of Scotland (and the rest of us soon enough) is removing a property right - the right to decide who you allow onto your property and what they can do there.

So far as I am aware, smoking is not, yet anyway, illegal. Yet the powers that be are able to prevent you doing perfectly legal things in your own property. Real property is not absolute property, but a bundle of rights that can be altered, in modern times at least through democratic processes, which is at least better than for most of human history where they have most often changed by force or diktat.

In fact the only absolute property one has is, as John Locke pointed out, property in oneself. Assuming you are not a slave, the only thing you ultimately have which is absolutely yours is yourself. Indeed this is why slavery is itself such an horrific practice. This is one of the philosophical bases behind the argument that land tax is better than income tax. Income is the fruits of your labour, the efforts of the only thing you absolutely own, yourself. Land rights are utterly contingent on the society and jurisdiction of which it is a part, so the profits on land ownership are, as Adam Smith said, a better specie on which to base tax.

I've never been to party conference. The autumn one is always in our arrivals week at university. But I spent half a day at Harrogate in 2006 supposedly staffing the ALTER stand.

So, having received a nice letter the other day from an oldish chap with scary eyes and named after a newsagent chain, I've booked up to go to Harrogate in Spring 2007. I'm not a local party rep - I presume that's no problem. But what about accommodation? I have booked a room in the Holiday Inn on the conference site, but it's a tad expensive (though it is a twin so could probably share with someone if they could suffer me for a couple of nights). Where do any others of you stay when in Harrogate? The White Hart I like but it's already full that weekend it would seem, and so is the Crown, but there are plenty of other rooms still available nearby which are cheaper than the conference centre hotel and, being Harrogate, have probably got loads more character.

But does that matter? Is one likely to see one's hotel for more than a few minutes before falling asleep? Is the conference hotel a load of hassle (security and so on) to stay in? Or are there benefits in terms of bumping into important people on the way to the shared bathrooms...:) I thought the bar (downstairs by the entrance) I visited was a bit too much like an airport lounge on the day air traffic control go on strike.

My big four-oh is two days before conference so I might like to let my hair down a little more than usual, so I suppose I might want somewhere away from the conference centre for that.

...this is one reason that would give me pause. There has already been much written and said about David Davis's decision to stand for re-election to his own seat.  Lots still seems uncertain - whether he will stand as a Tory or an Independent and so on. His stance on the 42 days issue and what I would call our constitutional liberties is all very well and good, but I cannot see him as a truly classical liberal or libertarian. Indeed he has been quite the opposite on all sorts of touchstone issues for a libertarian - drugs and sexuality for two examples.

Maybe I've missed some subtle nuance of the man. In the fight for our constitutional liberties, in the face of this government especially, every voice is welcome, but it doesn't make every defender a libertarian. I hope, for the sake of the Libertarian Party, Davis politely declines their offer. I feel there will be better opportunities to make their mark than this one.

I absolutely endorse what DK says in his blog on the issue of the 42 days as a whole though.