Taxes Kill Jobs

by Mike Curtis

Mike, ever the persevering Georgist educator, has been emailing think-pieces like this one every few weeks, asking recipients to forward to their inboxes, if the message rings true.

“Taxes kill jobs!” is the message of political candidates. The American economic system causes unemployment and recessions, that is true — but without revenue and the role of government, the US would surely be a third-world country.

There is only one tax system that actually creates jobs. It’s not based on the socialistic principle of “Ability to Pay” like most of our taxes. It’s based on the value of the “Benefits Received” by the taxpayer. It’s doesn’t confiscate a percentage of income, taking more from those who make more. It doesn’t tax wages, which are the earned income of labor; it doesn’t tax buildings, machines, or inventories. It doesn’t tax sales — why penalize job-creating commerce? And it doesn’t tax consumption, which is the reason we produce things in the first place.

The only tax system that actually creates jobs is a tax on the value of land. It is the only revenue source that can be taxed at 100% without adding to the cost of production. It doesn’t add to the value of land or to the price of things produced on the land. It simply collects what would otherwise go to the holders of land as an unearned income. It cannot be evaded, because the land cannot be hidden. It insures that the government has ample revenue for the legitimate needs of society, yet limits the government to values which are socially created. The value of land is not created by the landholder, but by the community as a whole.

When new technologies increase the results of labor, why don’t wages rise? It is because people have no independent way to employ themselves. If you’re among the least skilled workers, no matter how much your productivity increases, you have to bid against other people who want the same job; the result is that wages tend to a bare minimum — a tendency that is only partially superseded by the legal Minimum Wage.

Even workers with superior skills and knowledge still have to compete against each other. It is simply a matter of supply and demand. As higher pay stimulates others to acquire similar skills and knowledge, more workers will seek to acquire them. As their supply increases, their price (wage) falls. Remember when computer programers earned twice what they do now? They still make more than the average worker, because it’s not so easy to learn computer programing. But, supply increased — and their wages went down.

Yet, despite what you may have heard, it’s not a natural law that wages will always tend downward. The United States has 700,000 square miles of arable land. That is less than 450 people per square mile. France has more than 850. The UK has more than 2,500 and Japan has more than 7,500 people per square mile. All production takes place on land. The reason why more workers are looking for employment than employers are looking for workers is that an enormous portion of the land in America is unused or grossly underused.

Suppose cities were developed to their full potential. Slums were redeveloped; surface parking lots were replaced with multistory parking garages; the grossly underdeveloped sites in the high-rise business districts were put to their highest and best use. Suppose the suburbs were carefully planned and developed with wooded and open parkland instead of relying on land speculators posing as farmers to provide open space; suppose we eliminated suburban sprawl — not by top-down zoning and regulation, but by economic incentives! What would happen if the huge amount of unused and underused land was put to good use? Wouldn’t it generate vastly increased demand for labor?

What is required is a shift from confiscatory taxation to a revenue system based on the value of land (which includes surface rights, mineral rights, and all other natural opportunities — like the electromagnetic spectrum used for communications).

Under this proposal, the rental value has to be paid whether the land is used or not. The payment of rent is a payment for a benefit received. For those who leave their land idle, it becomes a penalty — and that insures an ample supply of land for all who need or want to use it.

It also insures that all workers and the owners of productive capital get to keep everything they produce — no more job-killing taxes!

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