Tax Reform

F. W. Blackman

[An article originally published in the Kansas City Star, 7 April 1912]

My notions of tax reforms are briefly as follows: First, that there is no automatic method of taxation which would be satisfactory to everybody, nor no tax system that would be a panacea for the ills of humanity. However, it is possible to make the system more just and equitable by changing our methods and improving the social conscience.

The present system is inadequate to meet the demands of our expanded industries. It violates the fundamental principle, that the basis of taxation should be the capacity of the individual to pay. It is unjust and inequitable because it permits double taxation and the shifting of taxes upon people who are least able to bear them. The general property tax under which we are working has been practically abandoned by every other civilized nation except the United States, and our present changes are working to that end.

Income Tax the Most Just

The capacity of the individual to pay is measured by his income, in fact, all taxes must be paid out of incomes if property is to be kept intact. An income tax, therefore, is the most just of all taxes. It is said to be the most difficult tax to collect, but if made a fundamental part of the system instead of an extra extortion, it would be found no more difficult to assess and collect than any other tax. The chief objectors to the income tax in the United States are men of large incomes who fear it will be too just for them. The ideal tax system, and the one toward which we seem to be working, is about as follows:

  • First - Abolish the general property tax by taking the tax off improvements and personal property.
  • Second - Put the tax on land values. Put the tax on economic rent or the earning capacity of land which is measured by its market value without improvements. In assessment, separate town lots from agricultural land. Estimate the tax of the former on site value and the latter on fertility, as these are the two most important elements that make the market value in each case. Tax the unimproved land the same as improved. Tax the incomes of the land shown by 6 per cent on its capitalized value.
  • Third - Divide all other incomes into categories such as salaries, public and private; manufacturers, mines and forests, agencies, banks and trust companies, trading and merchandising, corporations, public and private; rental of commercial buildings, incomes from securities such as notes, bonds, etc. Make subdivisions of these so that they can be thoroughly classified. Let the reports of each individual to the assessor represent the specific income from each category.

Justice Instead of Robbery

By improving the machinery of assessment the difficulties of collection would be reduced to a minimum. If such a tax should be generalized comparatively few people would object to it, as they do the personal property tax. For example, if a man is assessed on the 6 per cent $1,000 note at the rate of 3 per cent the state will take half of his income, $30. If, however, an income tax of 5 per cent is put on the $60 income he will pay $3.00. In the former case he will feel it a process of robbery, in the latter case he will discover it is a matter of justice. If all the incomes were assessed this way there would be a sufficient revenue to meet the modern demands of government.

In addition to the tax on land values and incomes, there should be a tax on franchises. This should be made in excess of any income tax, as it is a form of rent obtained for special privileges. Make the income tax on property progressive and there would be no need for the inheritance tax; indeed, an inheritance tax is a mild form of social robbery. It is not a tax at all, for, while the property which has already met the demands of taxation imposed by the government is passing from the hands of the dead to the living, the government reaches in and seizes a part of it by exercising its piratical powers.

Poll Tax "Badge of Liberty"

Excessive wealth should be reached by a graduated progressive income tax rather than by the inheritance tax. Poll taxes might be assessed as a badge of liberty. No one ought to vote unless he has a sense of financial responsibility in the government.

Taxes should be taken off all business except wherein it may be necessary, for police purposes, such as for the control of vice, crime and social maladjustment.

In making the above statement I realize the numerous difficulties that arise before this system can be made practical and just. The income tax should be a state tax, and not a federal tax, and, in order to make it successful, all states, or a large majority of them at least, would be obliged to adopt the same system.

Income Tax the Foundation

The main trouble with the income tax in the past has been that the tax was an independent and superfluous part of the system. As presented above it is the foundation of the whole system. As it is founded on justice, if persistently followed it could be made practical, just and equitable. It may take a long time to bring this about, but there will be no satisfactory tax reform until this is accomplished.

But an ideal of this kind does not preclude many practical things that may be done at present such as the separation of the county and state assessments; applying the revenue from franchises for the support of the state and the revenue from local taxes for local support; the assessment of property at its full value ; the assessment of land separate from improvements; the exemption of household furniture up to a certain limit; the development of a social consciousness which would realize that the tax is a social investment which yields a large return; the development of a social conscience, which makes people glad to pay, and finally an improved method of assessment conducted by experienced and trained assessors, etc., etc.