Criteria for a Rational Tax System

Abstract

A NUMBER OF ENTHUSIASTIC-perhaps some would call them fanaticalsingle-taxers insist that any tax other than a tax on the rental value of land is per se morally objectionable. The state has no right, under any circumstances, to levy on the earnings of labor and capital, they argue. The rent of land should suffice for all legitimate governmental expenditures, they believe, and any governmental services which cannot be financed without drawing on other sources should be forgone. I do not hold any view so extreme. The services of gevernment are important to all of us, except, possibly, criminals. All of us benefit from the existence of government, though perhaps in varying degrees which cannot be precisely measured. The so-called earnings of labor and capital are secured by their recipients, and can be so secured, only when there is the order and protection which government provides. The maintenance of settled government and, if this government is democratic, of the social and cultural conditions essential to the well-being of the citizens may be of supreme importance, therefore, to all of those who receive interest on capital and to most or all of those who receive only wages. If no better and adequate source of revenue is available, it may be proper, therefore, to demand substantial contributions from both capital and labor. Indeed, even though a more desirable source of revenue is available but is not used because popular ignorance and misunderstanding prevent its taxation, it would be better for capital and labor to support government wholly from these earnings, however hard and fairly won, than to be deprived of governmental services. A system of taxation which is very bad and which is relatively unfair between individuals and classes may yet be immensely better than no system at all. I