Libertarians tent to think that taxation is theft. Taking someone’s private property by force can hardly be called anything else, right? And yet, most people seem to find this argument rather unconvincing. Many probably have never thought about this issue very deeply and just accept taxation as normal and unavoidable and therefore legitimate.
But there are people who have thought about it and have tried to answer the libertarian theft claim. One popular argument they have come up with is that it is the state that enables the existence of private property. Without the state we would not have it. From this point of view, it is then easy to argue that the state does not really steal anything through taxes but merely withholds its own property, the property of society, instead. This argument however is little convincing. There are too many examples of non state societies that had some concept of property. In fact, I am not aware that there have ever been societies that did not know any type of private property.
Because this argument seems easily debunked, the advocates of taxation are increasingly moving towards a more subtle argument. Yes, they concede, there are very legitimate forms of property. If someone produces something with his own labour, it is hard to argue that this should not be his to keep. However, they also argue that there is one type of private property which seems difficult to justify and makes all other private property questionable. The property in question is private land ownership.
Land exists independent of human beings. With what right does someone claim sole usage of such a scarce resource? There have been, and still are, plenty of societies to whom the concept of individual land ownership is alien. Land clearly has to belong to everyone equally.
The most common libertarian answer to this objection comes from the philosopher David Hume. Hume argued that land can be legitimately, privately owned, if someone mixes his labour with it. He called this concept homesteading. Some of the extra value of this homesteaded land is now due to a person’s labour. So not letting him own that land means to free-load on that labour and therefore exploit him.
This is not a bad argument. However, I never found it entirely convincing either. It looks a bit like a fudge. It seems, the argument is used to somehow, almost forcefully, justify land ownership, a conclusion that really stands before the argument. In other words, land ownership does not seem to follow from the cheer force of the argument.
There are multiple convincing ways to attack homesteading. Firstly, one could argue, fine, the homesteader can keep the extra value he has created. But every land still has some value beyond this added labour value. For example, an import part of the value of land is location, location, location. It clearly matters, whether I build a house in the middle of flyover land or in the middle of Manhattan. Why would I alone be able to keep the full value? If the location is valuable to a lot of people, and I have not created that value, would it not be correct to argue that I still owe the others some compensation for my sole usage? This could be a good argument for taxation of land.
Another extra value the landowner might get is natural resources. I own some land because I have mixed my labour with it. Beneath that land is a lot of oil. Do I now have the sole right to exploit that oil, even though I did not create any of it? Again, would it not be at least fair to tax someone for the exploitation of natural resources?
The most obvious flaw with the homesteading argument however is that this is not how most land got into private ownership. Historically, the most common form of acquiring land was through conquest. Some government just took it and distributed it among its followers. In England for example, there is still a lot of land which is owned by royals. Most of the other land in private ownership was at some point acquired from royals. There is not much homesteading by the owners here, just a violent take over. Clearly that cannot be right. As a result, an increasingly popular argument for taxation in general is to say that, even though there might be a legitimate form of property, this does not apply to a lot of property today. Ownership of land and resources was historically almost universally acquired in not legitimate ways. Therefore, current property owners owe society compensation for the usage of this illegitimately acquired property.
Why the historical injustice argument does not work
This is not a bad argument and it deserves a detailed answer. In my view there are several flaws in it. The first is that it is automatically assumed that there is such an object like ‘society’ with a common will and interests. The existence of such a society seems necessary in order to argue for taxation on the basis of historical injustice. But such a society does not exist. Instead taxes are being paid to the state. The state however is a very different beast. It cannot solve the problem of scarcity, which is at the heart of this problem. Instead, the state runs into the exact same problem as the land owner.
Let us assume we could figure out exactly how much of the Manhattan house value is due to labour and how much to location. Of course, such an assessment is impossible. Valuations are inherently subjective and too many factors need to be considered. But for the sake of the argument let us assume we could obtain objective information. The taxes the house owner pays as compensation for the location would not go to benefit every other person on the planet. Instead the money is distributed towards specific groups of people.
So the question arrises, why do only these groups of people get that money and not everyone else? If we do give it to a group of people and not everyone equally, then the argument does not resolve the special interest at the centre of the problem. Instead of the Manhattan house owner getting the full benefit, we just have decided to use a different mechanism to distribute this special interest. But it is not clear why this is supposed to be more just. And even if it were just equally just, is it really a better, as in easier, solution to be preferred to private property? Given that we cannot even figure out how much of the value is exactly due to his labour, this solution looks in fact more arbitrary and vulnerable to abuse. In no way is this a justification for allowing a government to raise taxes and distribute them as it see fit. The idea that taxes benefit a society as a whole is simply factually false. Whenever people talk about society, they are trying to disguise special interests.
Still, the libertarian claim that taxation is always theft assumes legitimate property. And libertarians do not argue that property which is acquired by conquest is legitimate. Yet that is how most land ownership was acquired historically. Is property really legitimate when it stands in a tradition of illegitimate property claims? It looks to me like the answer is, it depends. But homesteading is probably not a good, or at least not a sufficient argument for land ownership today. We have to come up with something better.
Libertarians argue for a maximum of individual liberty. That means they argue that everyone should be left alone, by other people, to live their lives as they please. That is not to say that libertarians argue in favour of everyone being a lone wolf. Of course, everyone is free to interact with other people if that is what they choose to do with their lives. But ideally no one should proactively interfere with other people’s projects in life.
Since we live in a scarce world, absolute individual liberty unfortunately seems impossible. Sometimes we will have to involuntarily get into each other’s hair. But libertarians try to come up with rules that keep these involuntary interactions at a minimum. Private property is an example of such a rule. We need to respect certain types of ownership for it to become possible to leave people alone in a scarce world.
A scarce, desirable resource, by its nature, cannot be used by everyone. For example, if I burn this litre of petrol in my car, you cannot also burn it in yours. And we certainly cannot burn it for society as a whole. That means that collective ownership, as advocated by a lot of socialists, does not solve this problem. Nature forces us to come up with some form of special usage rights for desirable scarce resources.
I would argue that if we want to maximise liberty, that means if we want to minimise involuntary interferences of people with each other’s life projects, private property on these scarce resources looks like the best solution. Why is that?
Well, what would be the alternative? It seems the only alternative is either some form of collective ownership, or no ownership and the right of the strongest, or a rule that no one uses the recourse at all. I am not going to spend much time arguing why the last two solutions are bad, as that seems pretty obvious. In both cases, people would have massive interferences with their projects in life, either by not being able to use resources at all, or by constantly having to fear for the future of their projects.
But collective ownership also seems like a worse solution to private property. As we have seen above, collective ownership cannot mean that everyone enjoys the benefits of a resource or product equally. It is merely a different way of deciding, which individuals can use it. This could come in various forms. It could be decided democratically, in which case the minority never gets to engage in their projects in life. It could be by throwing a dice and let luck decide, in which case only the lucky get to engage in their favourite projects. Or it could be a rotation system, in which case everyone can occasionally realise their favourite project, but most of the time, we would be condemned to help others fulfilling theirs.
Private property seems superior to all of these solutions to maximise liberty. With private property, everyone can do what they like with their belongings. That way they can just pursue their projects as they like with at least some resources. That, on its own, makes it the clear liberty maximising solution out of all the other known solutions.
But there are extra benefits. The beauty of this solution is that no one is stuck with the property they already have. If you require a resource that is important to a project of yours, you can make the current owner an offer for that resource. The more important the project is for you, the more you are likely to bit for the resource you need. And the more you bit, the more likely you are to obtain ownership of it.
That way, markets have a tendency to get resources into the hands of people that have the most use for them. Consequently, these resources get used most effectively. In addition to that, private property also offers incentives to come up with solutions to make desirable resources and products less scarce. As a result, a side effect of private property is that it actually reduces the scarcity, which is at the centre of why we have this problem in the first place. No other solution has this extra benefit. It is these extra benefits which even make people support the libertarian solution who are not primarily interested in liberty.
What does this mean to our initial question, whether historical injustice justifies redistribution of wealth, or in other words taxation? It seems clear to me that if an individual can show a historic claim on a concrete property, then that needs to be respected.
Short of that however, what we want is that people have access to the resources they require for their important projects in life. Over time, free markets tend towards that solution. This is true independent of how resources came into private ownership. To put it differently, even if there is non libertarian property at the start, as in the example of royals owning land, over time, the right people are going to become the owners of the resources they need. Markets are great in solving problems, and they even solve the problem of illegitimate property over time.
The recent history of Zimbabwe is a good example of the relevance of this insight. It would be hard to argue that the white farm owners, who were owning most of the land in the country until not too long ago, acquired their farms with legitimate means. They indeed stole it from the locals. Because of the historical injustice, the Mugabe government started to randomly, meaning without any concrete individual historical claims, to redistribute these farms among their supporters. Did this make these new owners rich and happy? Not really. Few of them had any idea about farming. If they had had better farming skills than the white owners, they could have made the latter a very attractive offer to take over the farms on the market. But farming was not really any of their projects in life. The result is that the land changed ownership from people who had use for it to people who had no use for it. Zimbabwe went from being a big food exporter to starvation as a result. Everyone’s projects in life, except maybe for a small group of ruling class members, were disrupted.
Contrary to the myth, private property does not protect a class of wealthy people and their interests. It is a tool that serves everyone to pursue their interests in life. In the process, we can constantly see poor people becoming wealthy and wealthy people becoming poor. That means that property changes hands from people who cannot handle it to people who can. Even though, some people might go from wealthy to poor, overall everyone gets richer. Within this process, people actually have a very good chance of pursuing their most important projects in life. That means that private property on scarce, desired resources advances the cause of individual liberty better than any other known mechanism of distributing usage rights on these resources. It is unclear, what taxes have to add to all of this. They are no solution to the underlying problem of scarcity. In fact they make it worse.
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I find the idea of fixing historic injustice with new ones is unappealing, and let’s be clear that over time the owner of a given plot is decreasingly likely to have any blood on his hands, and – as you say – increasingly likely to be a worthy meritorious owner. Also, the wronged party is going to be decreasingly available and have a weaker and weaker claim as each generation finds better things to do than fight old wars. This is to say that any dispute over land older than a few generations is unlikely to be solved by stealing the land back again so we’re really talking about futile transfers like Zibabwe as the main type of outcome, besides nakedly confiscatory taxes.
No aspect of the above really changes the fundamental position that taking an innocent landowner’s land or money from them violates their personal autonomy. I am merely providing reasons why such a crime is much more likely to be the crime that it is, and much more purely and simply criminal than many seem to imagine.
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It is of course not David Hume that made the homesteading argument but John Locke. Stupid mistake of mine.
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The argument (as most arguments over the last couple of thousand years do) to an interpretation of the Bible.
According to the Book of Genesis God gave the world to humans – but what does that mean?
Does it mean that humans sail so, say, Iceland and then claim the unoccupied land? No said many thinkers – it mans that God gave the world to human “in common” (although the words “in common” are no where to be found in the text).
This convinced many (although certainly not all) Catholic thinkers so they felt that private ownership of land had to be “justified”, and well known Protestant thinkers such as Samuel Pufendorf and John Locke (yes John Locke).
Like some Catholic thinkers both Pufendorf and Locke held that private ownership of land deprived the poor of land they might have had – this did not mean that these thinkers supported communal farming – they were not insane. However, they did think that as “as much and as good” (to use the words of John Locke) had not been left for others, the landowners should pay taxes (either to the Church or to the state) to provide for the poor.
A compulsory tithe to the Church is actually older in most modern Western lands than regular taxes to the state.
Does the Biblical argument hold water even if one is a Christian?
I would say “no” – it is reading into the text of Genesis a whole bunch of stuff that is just not there. This Hugo Grotius and other lawyer-theologians pointed out centuries ago – land starts off UNOWNED (not owned by “the poor” or humanity “in common”) then someone claims a bit of land, and starts to farm it.
As for historical injustices……
Often they are actually over stressed or just made up.
For example most land in Britain is not owned by Norman barons – and the Normans intermarried with Anglo Saxon land holding families anyway.
This includes the Royal family – Henry Ist (who had nothing to do with the atrocities of his father William) married a direct descendent of Alfred the Great. Therefore talking about the Norman Conquest of 1066 is saying nothing that is relevant today.
Similarly we hear a lot about “enclosures” – but that was about land USE not land OWNERSHIP (pr “Free Holding” if one wants to get technical).
And large areas had, basically, no enclosures by Act of Parliament anyway.
For example Dr Sean Gabb’s one county of Kent – to talk of the injustices of enclosure (and it is far from clear that enclosure was unjust) in the case of Kent would clearly be absurd – as there was very little (if any) enclosure by Act of Parliament there (or in many other counties). Indeed Kent still had Anglo Saxon land law till the 1920s – yes the 20th century. This made no difference if there was a written will – but did make a difference if there was no will, it meant the land got divided up among the children (rather than all going to the eldest son).
In the case of the United States – it is fashionable to talk of a vast population of “native Americans” robbed by Europeans.
Actually there was a very small population of indian tribes – engaged in inter tribal warfare.
In much of the United States settlers did not even see indians let alone rob them – and in some other areas intermarriage (especially in the early days) was a lot more common than was once thought.
When one talks of the “American Eagle Look” of such Americans as the former Governor of Texas Rick Perry – one is not saying their ancestors married actual eagles (birds) – these “Europeans” are not genetically “pure European” at all
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But leave all that aside …….
Let us say that it could be proved that the grandfather of Mr A stole land from the grandfather of Mr B. – would it be just for the grandchildren of Mr B to take the land from the grandchildren of Mr A.
Nico’s answer is two fold (and he will correct me if I am wrong).
Firstly a simple “no” – the endless “confiscations and counter confiscations” were the ruination of IRELAND – with generations always seeking revenge for the “land theft” of previous generations, and then fresh generations seeking to reverse that (and on and on).
To come to someone’s home and say “your grandfather took this land from my grandfather – therefore I am taking it from you” is not justice, it is injustice. As both Roman Law and Common Law understand.
And (and here is Nico’s ,main point) the state does NOT do this anyway.
The state does not go to Mr A and say “your grandfather stole this land from Mr B – so we are giving the land to the grandchildren of Mr B.”.
What the state actually says is……
“We are taxing you, taking money off you, to finance welfare payments for the poor and to finance other stuff…..”
That is not justified by talking about land not being “justly acquired” – the “justly acquired” stuff is clearly an EXCUSE for what the state wants to do anyway (take money off people).
Nor is this inevitable.
After all most of Scotland did not have a compulsory “Poor Rate” till 1845.
And in France it was even later – and there was no tithe either.
Of course there was taxation in France (mainly to finance the army – and we can argue about that another time) – but the fact remains that in the mid 19th century there was no Poor Law tax in France and no tithe either.
Was France known for its dire poverty?
No it was not.
Did France have vast numbers of people leaving?
No it did not.
That (terrible poverty and vast numbers of people trying to leave) was far more true of Ireland – and other lands that had both a Poor Law tax and a Church tithe.
“Ah but in France the peasants owned their own land”.
Not everyone in France owned land – indeed vast numbers of people did not.
And the landowners in France were not taxed (by Church or State) in the mid 19th century to finance these landless people.
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‘Some of the extra value of this homesteaded land is now due to a person’s labour.’
I agree Nico, this is a bit of a fudge and rather unsatisfactory. After all, ‘mixing labour’ as a way of adding value implies exchange value, whereas a lonely homesteader might not be in a position to sell, and moreover, what if he cocks it up and devalues (so far as he can) his land, e.g. chopping down say good fruit trees for firewood and losing topsoil? It seems to import the Labour Theory of Value.
Is it not just ‘Finders, Keepers’ which is at least a staring point? Call it a starting point and say “what else is there?”, whatever the disgusting John Ball might have meant with ‘When Adam delved and Eve span, Who was then the gentleman?’. It had to start somehow.
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Yes, valuations are subjective. But if the land ends up having no value to you then you wouldn’t keep it anyway. But the argument is not necessarily a utilitarian argument. The product of your labour is yours, good or bad. If it is good, then you can keep it. If you end up hurting people or creating a big mess, then you are responsible for that too.
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This topic is probably one where I am more classically liberal than libertarian. History old and new shows us that much dispute, much poverty and much wealth is tied to land ownership. It seems unbalanced that the fruit of my mind or labour is a fairer source of taxation than an asset tax on land value.
I would subscribe to a Georgist and possibly Consequentialist view that a bit more land value tax, and a lot less income and VAT like taxes, would put more competitive pressure on land and would probably help those in work more than those who own assets. And it is those in work without assets who are actively assaulted by government monetary policy driving money into asset inflation.
I’m well aware my view is not a strict moral philosophy though, but perhaps one that might be worth leaning towards in this busy, crowded, complex world.
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Another thought – would Zimbabwe be a productive economy if property ownership was maintained but land value taxes were present? The non productive farms would be taken over by organisations and individuals that could create wealth under this competitive pressure.
There is also an issue with land giving power to regimes that are illiberal and against freedom. I would include some of the oil rich kingdoms of the Middle East in this.
None of this means I want more tax but, if there is to be any tax at all, should some of it be on land rather than on ideas or labour?
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> It seems unbalanced that the fruit of my mind or labour is a fairer source of taxation than an asset tax on land value.
Oh, I am not arguing for that kind of tax either. It is difficult to argue that taxing the direct product of your labour is not exploitation and therefore theft. Let me be clear, I am arguing for the libertarian claim that taxation is theft. It is theft, period. There is no justification for it. Property on land is properly the most clever attempt to justify taxation. But as I argue here, that one fails as well.
It is difficult to to make a case for this or that kind of taxation when taxation is illegitimate overall. But if you want to ignore morality and just argue for the least disruptive tax, it is probably a tax on consumption, particularly luxury goods. Those taxes disrupt the production of wealth the least. Taxing land seems hugely disruptive, as land is involved in almost every type of production. It would make a lot of small businesses immediately unproductive. It is similarly stupid like business rates.
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Taxing land at its unimproved value does not affect the supply of land for economic use. It might make land itself less of an asset worth holding for investment purposes. If so perhaps those who value holding land as one’s space to be free and left alone would be more able to afford this.
The Randian idea of leaving society to make an intentional community relies on land being available and I suspect makes more sense in the American frontier than built up Europe. There are still strong lessons in terms of leaving failing political systems and organisations as route to change, and the internet means virtual communities can thrive, but I’m still not convinced the issue of scarce land use is adequately resolved in any political philosophy.
As I said before, I’m weak on this issue so can be persuaded.
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> Taxing land at its unimproved value does not affect the supply of land for economic use.
Of course it does. You are taxing, that means increasing the price of a resource that is needed for production. Any company needs some land to work on. You are taxing these companies before they have even produced anything, let alone made a profit. That can mean the difference between a company surviving or going bust. Taxing productivity itself is the worst form of taxation.
If you thing taxes are inevitable, and the only question is how to tax, it seem that the best tax is a tax on consumption rather than production. In particular a tax on items that no one has to buy like luxury goods, expensive cars, jewellery, mansions etc. Those products are not needed for production, they can be avoided and therefore these taxes are only paid by people who really can afford them.
That is not to say that they are good. The money taxed is money that is not there to be used for investments of these rich people. So with every tax you are destroying some wealth creating. But this seems to be the least wealth destroying form of taxation, meaning it has the least negativ effect on the standard of living of people.
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Friedman thought land value tax was the least bad tax. Note it would apply to land owners not renters. If the supply is broadly fixed, or at least inelastic for land itself, and land owners are already maximising profit, then it would reduce the demand to own land as the profit would fall, not end up as an extra tax for those who wish to use land.
The net result would be investment money going into other sectors, such as investment in businesses.
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Milton Friedman is a double edged sword. He is a good on some things but really bad on a lot of important stuff. In particular he was in favour of the welfare state.
If you tax land, you are taxing production. It does not matter whether you own it or rent it. The taxes are passed on to the renters. Owners will certainly not give it away as a gift.
As you say, a land tax reduces the demand for land. But it reduces the demand for land beyond its necessity. We want people to use land. Prices on the market reflect already supply and demand. There is already a cost involved with owning land but not using it. You would need to actively reject offers from people who want to use it, so you are missing out.
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Then I’ll have a go at applying some moral philosophy to persuade you. This is an expression of something that has been bubbling in my head for some time, and it will probably continue to be worked on.
Property is yours because you have employed your mind and your time to shape, select or fairly acquire it. Property is the natural consequence of having lived and acted for some number of hours. Taking property away would nullify a part of your life that you already lived and this cannot be reversed or repaired. There is very little, in my view, to distinguish nullifying hours in the middle of a life, through taxation, and murdering very old people – taking hours from the end of their lives. There is no necessary difference of degree or principle.
So, taxation and confiscation are NOT ONLY theft, they are partial murder (arguably all theft is partial murder, but legal murder is somehow more deserving of the description).
Land is something people invest in over very long periods of time, so taking it away is a partial murder of a large degree (associated with a high number of hours, indeed, of decades) so land confiscation is particularly criminal, but there is nothing else special about land. If you are taxing land then you reduce the fraction of a life murdered, but it is no less evil.
So, LVT is just another kind of mini-murder and deserves to be condemned absolutely. The only thing that can make an unequal transfer of labour-value legitimate is consent (and consent does so absolutely since it creates a new natural consequence of a new hour of your life).
I don’t think the above captures all of the problem for tax advocates, but is a major issue for any tax advocate to overcome, in my view (for the little that is worth).
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I think your moral argument is correct.
I still have some niggling concerns as there are negative consequences of concentration of land ownership, particularly as, once aquired, land is uniquely subject to much less competitive pressures than, for example, a business. Over generations an estate could be poorly run, with collateral damage or negative externatilies to tenants, by the fecless descendants of a gifted entrepreneur whose invention provided the wealth to buy the land. This can be divisive and impinge on the liberty of those who don’t own land.
I’m fortunate enough to own a property but am well aware that half a generation younger than me is a significant wealth gap due to the incentives around land, property, taxes and money creation that will be net negative if it pushes demand for anti market politics or drives people into unproductive endevours.
I suppose trying to correct the faults of an imperfect system by bringing in counterbalancing bad policies and taxes is a poor answer though, and ultimately leads to statism.
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Zach, you have put yourself into the role of running the economy. Follow the sentiment of your last paragraph.
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‘Zach, you have put yourself into the role of running the economy. Follow the sentiment of your last paragraph.’
Simon you are right of course. I feel rather dirty.
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I think that the term ‘partial murder’ is unlikely to be helpful, as it could be confusing and seen as embellishing matters; might not it be better to say ‘parasitism’?
A well-adjusted parasite does not kill its host.
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It strikes me that the notion that ‘mixing labour with land’ and ‘adding value’ to it is a rather weak attempt at finding a root to title. After all, how is ‘adding value’ determined or evidenced? What if one is a rubbish farmer and devalues his land, e,g. by grubbing up a fine orchard and going in for Lysenkoist agriculture? And is this notion not a nod to the labour theory of value?
Is it not better to say ‘Finders, keepers’ and ‘we have to start somewhere’, and be done with it?
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I drew the same equivalence with labour theory of value above. On reflection, it should be something like “mixing your life with the land”, with no requirement to add value.
The interesting edge case is someone who claims some land, where the natural consequence is that he gets to keep it, but then he does not use it, clear it, attempt but fail to use it, walk around it or take any other action for <LONG PERIOD>. If there is a dispute or a second claim is made why should the tax payer foot the bill for protecting the first claim?
Administrative discretion / incentives would seem to apply quite legitimately. One reason, as good as others, would be to keep the system simple. Another might be – while I am not in the business of running economies – that a “use it or lose it” doctrine might encourage good outcomes.
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