Land Taxation as an
Evasion-Proof Revenue Source
C. Lowell Harriss, Ph.D.
[A speech delivered at the 49th Congress of the
International Institute of Public Finance, Berlin, Germany, August
[1993?]. Reprinted from The American Journal of Economics and
Sociology, January 1994]
TAX EVASION weakens government treasuries. And, of course, escaping
taxes plays a major role in the origins of "irregular activities"--the
underground economy, unreported economic activity, the shadow economy,
whatever term one uses. The Congress will present evidence on the
size, the nature, and the results of hidden, off-the-books, economic
activity. Unquestionably, revenue loss is significant. Governments are
pressed to spend, to spend more than their revenues. They suffer from
tax evasion. (For present purposes, I refrain from bringing tax
avoidance--the use of legal methods to escape taxes--into the
discussion although much of what I shall say applies to some extent to
tax avoidance.)
Taxes based on income, on sales, on value added, on inheritance, and
on other bases are vulnerable to evasion. Tax rates at present levels
are high enough to provide incentives, often powerful incentives, to
evade. And as this Congress will reveal, what people do to evade taxes
will have adverse non-tax results. One tax base, however, is
essentially evasion proof - -land. Land cannot be hidden, nor moved to
other taxing jurisdictions to escape tax as can income and sales.
Governments can use the uniqueness of land's immobility as a
consideration in constructing a revenue system. An annual tax on land
value--price or capital value being preferable to rental value--would
be essentially evasion-proof. The physical characteristics of the land
surface cannot be concealed. Nor can the many non-tangible elements
affecting land values be hidden or distorted to any appreciable
extent. (Taxing structures, however can present problems, but this is
not the concern here.)
Land deserves a prominent place in a tax system for reasons
articulated long before tax evasion became a recognized problem. Henry
George in Progress and Poverty (1879) argued that land should be the
only tax base. Today the "single tax" would not finance all
government. But taxes on land values could raise far more revenues in
the United States and permit desirable reductions in other
taxes--notably those property taxes on buildings and machinery.
Land is a productive resource whose total quantity is not diminished
by the taxes imposed. The payment made for use does not go to reward
the producer (creator) of the resources as do our payments for labor
and man-made capital. Most of the value of land depends upon past and
present community developments, not upon the efforts of past and
present land owners (as distinguished from building owners). If the
tax is not paid, the government can take the land. Other reasons for
using land as a tax base cumulate into an impressive total -- to which
one adds the merits of uniqueness among revenue sources as being
evasion-proof.
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