Property Taxes are NOT the answer!

The no-longer-Budding Economist suggests that real property is what should be taxed. Like all taxes, the resultant problems are not minor, nor is it clear that anyone has any right to tax another. She writes:

I prefer real property taxes to other kinds of taxes for a variety of reasons:

1. You can't have property without government. I distinguish here between property and possession. Property is knowing that when you come home, your house is still your house. Possession is having to worry about armed thugs taking it over while you're out and not being able to do anything about it. I get into arguments with my anarchist friends about where property comes from, but as I've studied development economics and institutions its clear that the functions of property very much rest on the legal institutions created to define and support property rights.

It is not clear that anglosphere property rights institutions arose from government. In fact, Anglo-Saxon customary law seems to have been outside of the purview of anything we would associate with a government. Nor is property rights in Middle Ages Iceland dependent or derived from government - there was not anything we would recognize as a government in existence. Early American West settlements existed prior to the active managent of the U.S. government, and had a thorough set of property rights institutions independent of federal law. The Law Merchant developed in spite of the existence of governments. While the Law Merchant did not usually deal with real estate, I think it would be unwise to ignore it in context of institutions for protecting property rights.

Yes, many social institutions must exist in order to have any meaningful ownership of anything, but these institutions do not need to be provided by coercive monopoly, or provided for by taxes.

There are unintended and detrimental consequences with all taxes, and property taxes are no exception. In most states, real property is taxed according to assessed value. The assessment is done periodically based on sales of property in the area. Thus, if you buy a piece of land with a house for $100k, and some time in the future your neighbor sells his nearly identical house for $500k, you will be re-assessed and have to pay taxes on the new value - $500k. So what is the unintended consequence? Suppose you bought that property while you were young and working, have paid off the mortgage, and you have since retired with just enough to get by on. How do you pay these taxes? Between the ever increasing demands of government and the rise in property value, the tax bill is most likely more than the original mortgage.

This very thing has occurred frequently. In the Carolinas, the descendents of slaves, who had been given small plots of land during Reconstruction, lost their family homesteads because of large corporations developing on nearby land. These same corporations would then buy up the land at sherriff sale prices (i.e. just enough to pay the back taxes). Talk about concentrating land in the hands of the few at the expense of the many!

Too be fair, California changed their tax code to only tax at the value of the land and the time of purchase. But this creates other awkward incentives, leading to housing shortages and even higher prices. Even though the older couple no longer needs a four bedroom house and might prefer a smaller house, they may not be able to afford selling their existing house and moving into another. Existing landlords gain further competitive advantages over new landlords. Above all, the tax rates must be higher, leading to further disincentives.

The last example of why property taxes are bad: Iceland rejoined the Danes after 300 years of 'anarchy' because the Church's tithe ended up concentrating all the land into a few families. Property taxes can only be an answer to the question "what is a good way for a person to concentrate his power?"

Share this

Nope, wasn’t intended as

Nope, wasn’t intended as an appeal to emotion. I am known as the cold heartless bitch in most of my circles. It was a sincere request for information on how your system would work. I’ve had similar conversations on this topic with people who responded, “Yeah, if they can’t pay for their own protection, then fuck ‘em and good riddance.” I wanted to know if you were from the “fuck ‘em” school of thought or not, since if we have wildly different goals of what sort of results we’re trying to achieve it’s best to figure that out before we start discussing details on how to get there.

Fair enough. You won't find the "fuck 'em" attitude here. Both myself and my co-bloggers (though I don't necessarily speak for them) don't share it. Most of us have libertarian moral intuitions but we also want live in a peaceful, prosperous society in which the poor are not left behind to fend for themselves. We just think that the poor become disadvantaged with monopolistic government because changing laws is expensive and the rich can outbid the poor, and that a market for law and protection would result in the poor being better off. In the market economy, the poor are disadvantaged, but there is a *political economy* also, and in the political economy, the poor are even more disadvantaged.

Look, it's a bit of an unfair fight (what - 4 against 1?), and you've held your own admirably, but I hope you at least read some of the links to Friedman's work posted here. It sounds to me like you have pre-conceived notions of "anarchy" that don't really match with what we are defending. These are standard objections that people like David Friedman, Bryan Caplan, and Randy Barnett have given answers to. If after reading them, you are still skeptical, more power to you, but it sounds like you aren't really familiar with them and have already pre-judged them.

"So you’re claiming that I

"So you’re claiming that I could go to an inner city and begin systematically murdering every single resident there and the police and government would do absolutely nothing to stop me?

No, but ..."

I just want to point out that you have acknowledged that the government would indeed do something, so you concede my point that the government does provide at least some level of protection to everyone, rich or poor.

Whereas under a system of private protection, there are some people who would not be protected at all.

Given a choice between a system in which everyone has some protection (and the ability to buy more if they wish and can afford it) and system in which some people have no protection, I choose the former.

"Again, there is a link above that Scott posted where David Friedman explains all this. People who did not pay restitution were declared outlaws who had a set amount of time to leave Iceland. If they didn’t leave, they could be killed without remorse. Poor victims who couldn’t afford to chase after them sold their tort claims to others. These others had an incentives to seek restitution because of their own self-interest."

Wow! So under this system I could just declare myself to be an arbitator, start issuing deportation and death decrees, and if people carried them out that would be OK?

"The answer was nobody wants a reputation for disregarding verdicts–otherwise few would want to deal with them. Dishonesty is bad business."

Fine for civil law but what about criminal law? If someone is out there committing murder, rape, or theft, I'm guessing they're not that worried about their reputation.

"A government held women to

"A government held women to be lesser citizens. The laws and office holders have since changed, it is not the same government anymore."

If you are going to gauge the optimality of the government by simply looking at the good laws during the good times, you will be missing much of the picture.

"My interests these days are in the realm of the possible, ie, given that we will have taxes, which taxes should we have? Or, given that we will have social welfare programs, how to get the incentives right? Etc."

I don't see how that is in anyway a priori more possible that what we desire. When you decide what kind of taxes we should have, the government doesn't grind out a bill tomorrow changing taxes to that optimum amount. If you figure out the proper incentives for social welfare programs, that doesn't mean the government is going to modify them.

What you are doing is imagining what things would be like if laws were different. We are doing the same thing. It is true that our system is somewhat more removed from the mean than yours is, but that is only a matter of degree--it does not render one system a fantasy anymore than it renders the other one a dream.

I just want to point out

I just want to point out that you have acknowledged that the government would indeed do something, so you concede my point that the government does provide at least some level of protection to everyone, rich or poor.

Whereas under a system of private protection, there are some people who would not be protected at all.

I don't see where I have acknowledged that at all. I have repeated said that I think that there would be better protection under private protection and that monopolistic protection leaves the poor out to dry.

Wow! So under this system I could just declare myself to be an arbitator, start issuing deportation and death decrees, and if people carried them out that would be OK?

Do you seriously believe this is how it worked? I think I'm gonna have to sign off right here.

"I just want to point out

"I just want to point out that you have acknowledged that the government would indeed do something, so you concede my point that the government does provide at least some level of protection to everyone, rich or poor."

Yes, he conceded that under conditions of localized holocaust there would be some protection. Whether or not private enforcement firms would provide better or worse protection is still a question up in the air. If a person has a choice between a system where he does not receive protection until his entire neighborhood has been murdered, and a system where competitive firms provide protection at marginal cost, it is unclear from those facts which is preferable. Which is why anarchists debate minarchists--because the arguments are fruitful.

"Whereas under a system of private protection, there are some people who would not be protected at all."

That is by no means clear. Besides, under your hypothetical government, there were a fair amount who recieved no protection as well--those who were systematically murdered before the police arrived. Even the most destitute have some money, and barring that, private charity is prevalent. Under anarcho-capitalism, the prices of protection would be lower than they are today, and the quality higher. Whether or not that is preferable to a system that relies on political pull is still debated.

I can tell you haven't read the Iceland articles, so I'm not going to answer any more questions in reference to them. If you are truly curious, they are webbed.

“Why do you only extend

“Why do you only extend your argument to protection?”

"Everyone can simultaneously exercise their rights to life, liberty, and property, free from force and fraud. They can’t all simultaneously exercise a right to a personal jet."

Maybe not a personal jet, but what about a car? The U.S. government now spends $10,000 per citizen per year. You can get a decent used car for $10,000. The only reason why everyone can't have a personal jet is just because it would cost too much for a tax & spend scheme to work. However, there are a limitless number of other goods/services which fit your criteria of being able to simultaneously exercise their "rights to X, Y & Z" under any coercive tax & spend scheme you could think of (from fish aquariums to bubblegum).

"I don’t see taxing property as interfering in the right to property, since property would not exist without government. I distinguish between property and possession – property is knowing when you come home that your house is still your house, possession is worrying that you might come home to find that armed thugs have taken it over and there is nothing you can do about it. Government establishes and enforces property rights, without it all you have is possession."

Your claims are quite dubious. Why do we need some kind of special "third party" to declare who owns what? Millions of other social norms do not require "government." We do not need "government" to establish what language is and how it is spoken, we do not need "government" to standardize the layout of your keyboard that you are using right now, nor do we need "government" to define who owns what. Who owns what is a social norm, like language, that even small children seem to understand. Property is ultimately what society has agreed is yours, such an agreement does not need a "government," just as language is ultimately what society has agreed is language. How does setting up a "government" change this fact? "Government" would not be able to prevent armed thugs from taking over your house if society had suddenly decided that you did not own it. Furthermore, if armed thugs tried to take over my neighbor's house I would probably help them get it back, and other people in society would probably help also. If people are willing to pay for a "government" to protect other people's property then they should be willing to pitch in and help on their own accord without monopolizing the service. This is a case in which "government" is merely being redundant. We do not need an artificial institution to enforce social norms that are understood by just about everybody. Would the enforcement of these social norms change without this so-called "government" trying to monopolize this service? Absolutely. In fact, I would say that the enforcement of these social norms would become much more efficient and produce much more desirable outcomes for everyone.

“In any event, you can buy a cheap handgun for $100 or less.”

"I believe in a right to life that is based on more than whoever is the fastest draw."

So do I, right to life is ultimately what society deems it to be, but your original complaint was that poor people would not be able to afford any protection. This is empirically false.

"But you can’t have a

"But you can’t have a right to protection of your life, liberty, and property without taking away someone else’s right to life, liberty, and property. It is the right to that protection you seem to be in favor of, and hence, you are also in favor of violation of others’ rights, in order to provide such protection."

How does the protection of my rights take away the protection of anyone else's rights?

"Look, it’s a bit of an unfair fight (what - 4 against 1?), and you’ve held your own admirably, but I hope you at least read some of the links to Friedman’s work posted here. It sounds to me like you have pre-conceived notions of “anarchy” that don’t really match with what we are defending. These are standard objections that people like David Friedman, Bryan Caplan, and Randy Barnett have given answers to. If after reading them, you are still skeptical, more power to you, but it sounds like you aren’t really familiar with them and have already pre-judged them."

I did read up on anarchy a few years ago, including some stuff by David Friedman, thought I was an anarcho-capitalist for a while, and then got over it. So it's not like the ideas are new or unfamiliar to me, I just don't find them persuasive.

"Property is knowing that

"Property is knowing that when you come home, your house is still your house. Possession is having to worry about armed thugs taking it over while you’re out and not being able to do anything about it."

You mean like when you don't pay the property tax bill, and the state protects you by giving your house to someone else?

Jacqueline writes: I’m

Jacqueline writes:

I’m sure we share the same libertopian ideals. But I’m a pragmatist who has given up on ever seeing that libertopian world, and would rather work on making the real world we live in now better.

Libertopian ideals + pragmatism are exactly why I am interested in anarcho-capitalism and dynamic geography. They are the only two systems I have encountered which I deem to have the possibility of leading to stable libertopias.

It is far from clear that ancap would be stable, as David Friedman willing admits. But I think you should take seriously the fact that a number of very intelligent people, who understand law and economics quite well, have seriously considered the matter and think ancap has a chance.

Personally, I think dynamic geography is more likely to happen and more likely to be stable than ancap, but that may be because it was my idea :).

In terms of where you should devote your efforts, I believe in pragmatism utterly and fervently. But a small chance may still be worthwhile if it could lead to a huge change. I am uninterested in paths to libertopia with 0.00000% chances (ie the US LP), but paths with 5% chances (say, seasteading, or cryptoanarchy)...now that's quite another matter.

"You mean like when you

"You mean like when you don’t pay the property tax bill, and the state protects you by giving your house to someone else?"

You wouldn't have owned that house without the state defining and enforcing your property rights in the first place.

"In terms of where you should devote your efforts, I believe in pragmatism utterly and fervently. But a small chance may still be worthwhile if it could lead to a huge change. I am uninterested in paths to libertopia with 0.00000% chances (ie the US LP), but paths with 5% chances (say, seasteading, or cryptoanarchy)…now that’s quite another matter."

Yeah, frankly I've given up on the US and will be moving to Costa Rica after I graduate in August to work on the Movimiento Libertario's election efforts there.

OK boys it's been fun but I

OK boys it's been fun but I must get home and eat something now. It's like 9:30 here and I haven't had dinner yet!

"Then why are societies

"Then why are societies where people all agree on who owns what, but do not have government defined and enforced legal titles, so very poor? Why won’t banks lend to people on the basis of social norms saying they own something?

Since y’all want to give me reading assignments, yours is The Mystery of Capital by Hernando de Soto."

Are the banks worried that common criminals will steal the land, or that the state will grant a legal title to someone, other than the legitimate owner, with political influence, who can then use the full power of the state to take possession? Which do you think is more likely when people generally agree on who owns what?

"No, because tangible things

"No, because tangible things like fish and aquariums would have to be taken from someone.

I can exercise my right to life without denying anyone else the right to live.

I can exercise my liberty without denying anyone else his or her liberty.

I can exercise my right to own property without denying anyone else his or her right to own property."

Intangible things have costs too. I just used examples of goods. Property protection is a service, but this service does not cost nothing. What you are saying is that I should be forced to pay money or expend my resources to protect someone else's property. Hence, you cannot exercise the right to own property without denying someone else their right to own property, in the way that you define rights. Let's say I have an income and I'm living peacefully on my piece of land. Someone attacks your property. What you are saying is that I should be forced to give up a piece of my income in order to defend your property. I'm defending my property just fine, why should I be forced to give up a portion of my income to defend your property? Likewise, why should I be forced to give up a portion of my income to provide people with fish tanks or bubble gum?

"You guys are the ones arguing for Icelandic arbitrators to solve everything! They are third parties too."

Key word here is special. This isn't some third party that is voluntarily chosen, it is a third party that says it is the ultimate decision maker in all disputes.

"Then why are societies where people all agree on who owns what, but do not have government defined and enforced legal titles, so very poor? Why won’t banks lend to people on the basis of social norms saying they own something?"

The societies that you speak of have deep rooted cultural problems, which is nothing that a "government" can come in and magically make go away. If a civilized society can have a "government," then it can live without a "government" as well and live much better at that. The reason why is that contrary to popular belief, no society on the planet has ever escaped anarchy. We are always have been and always will be in a state of anarchy. The reason why is that these so-called "governments" are always in a state of anarchy towards themselves. Take for example the Supreme Court. The Supreme Court basically just one day decided it would grant itself the power to interpret the Constitution in a case called Marbury v. Madison. Hence, the "government" is making up the rules as it goes along. The fact that we have to be subjected to its arbitrary rule-making and rule-interpreting is one of the great tragedies of our time.

How do the different branches of the "government" keep from going to war with each other while it is in a state of anarchy? Very simple, the "government" has used David Friedman's solution.

From Friedman's "Anarchy and Efficient Law:"

"A still more attractive and more likely solution is advance contracting between the agencies. Under this scenario, any two agencies that faced a significant probability of such clashes would agree on an arbitration agency to settle them-a private court. Implicit or explicit in their agreement would be the legal rules under which such disputes were to be settled."

http://www.daviddfriedman.com/Academic/Anarchy_and_Eff_Law/Anarchy_and_Eff_Law.html

The DEA knows it could have a conflict with the FBI. So what does the DEA and the FBI do? They agree, as part of their membership in "government" to have disputes amongst themselves be settled by a third party court, by a third party judge, which just so happens to be a part of the same entity we call "government."

All market anarchists are saying is to do away with this folly we call "government" entirely and let these law enforcement institutions come about through natural bargaining processes in the free market. This would result in much better outcomes than our current political system, which when analyzed rationally is completely and utterly insane.

Right-wing anarchists??? I

Right-wing anarchists???
I always associated anarchism with the abolition of property, or at least the capitalist conception of property, as well as a strong opposition to capitalism itself. Emma Goldman would be the paradigm anarchist of this kind.

>Yeah, frankly I’ve given

>Yeah, frankly I’ve given up on the US and will be moving to Costa Rica >after I graduate in August to work on the Movimiento Libertario’s >election efforts there.

I see that you know little about Costa Rica. A libertarian movement has less chance of succeeding there than it does in the US. Enjoy your little fantasy!

"Right-wing anarchists??? I

"Right-wing anarchists???
I always associated anarchism with the abolition of property, or at least the capitalist conception of property, as well as a strong opposition to capitalism itself. Emma Goldman would be the paradigm anarchist of this kind."

Then I guess you haven't read Rothbard or Friedman. You are referring to the anarcho-communists, who believed that eliminating the government would bring about some kind of communist social system in which everyone shared property. Anarcho-capitalists believe the opposite would happen, that people would continue to claim private property and that a stateless system of managing rights to this property would emerge in the free market.

"I see that you know little

"I see that you know little about Costa Rica. A libertarian movement has less chance of succeeding there than it does in the US. Enjoy your little fantasy!"

If that's the case, then why does the ML control 10% of Congress (and pulled this feat off a mere 8 years after its founding), whereas the USLP has never elected anyone to national office in over 30 years?

Jacqueline writes: We could

Jacqueline writes:

We could also have detailed theoretical discussions about how the world would work if people were immortal or had telekinetic or telepathic powers or magic was real or whatever, but unless we’re working on the plot for a science fiction novel what’s the point?

Except how many libertarian economists do you know who think that magic is real, or people have supernatural powers? (I skip immortality, as it is not so unreasonable to consider that as a possibility for the near future).

Should you have to justify your position and have theoretical discussions about absolutely any topic? Of course not. But if we are going to narrow down in some rational manner the possibilities for what positions need justification, its not so clear to me that anarchy is a no-brainer to dismiss. Certainly not in the libertarian crowd, who respect most exactly those individuals who find anarchy most probable.

Given my belief in these

Given my belief in these rights, I think there is an optimum level of government that maximizes the protection of those rights that is greater than zero but significantly less than what we have now.

Personally, I think that's as much of a pipe-dream as you seem to think anarchism is. Please note that they both have the same number of examples of long-term stability - namely, zero. So where else do we have to turn but theory to figure out which is more likely to work?

I think the more serious

I think the more serious problem is that Jacqueline ascribes magical powers to the government. I don't know how else to characterise her argument when she talks about how the government creates property, solves public goods problems, creates order, stops crime, etc. in spite of millennia of evidence to show it does the opposite.

- Josh

"Except how many libertarian

"Except how many libertarian economists do you know who think that magic is real, or people have supernatural powers?"

I don't know about libertarian *economists*, but I do know a number of libertarians in the Art Bell tinfoil hat brigade who go on and on about "remote viewing" and things of that ilk.

Jacqueline wrote, regarding

Jacqueline wrote, regarding Movimiento Libertario in Costa Rica:

"If that’s the case, then why does the ML control 10% of Congress (and pulled this feat off a mere 8 years after its founding), whereas the USLP has never elected anyone to national office in over 30 years?"

The difference is that Costa Rica has a form of proportional representation. PR makes significant minority views (those over the minimum threshold) more visible.

As the U.S. does not have PR, it is harder to determine just how strong certain political ideologies are. The US could easily have a higher percentage of libertarian-minded voters than Costa Rica. It is not a valid method of comparing the political strength of different ideologies in different nations, to compare the different parties' successes at winning elections, if those elections are fought under very different rules.

An analogy. One person tries to lift a heavy weight but fails. A second person uses a lever to lift the weight. That does not prove that the second person is physically stronger, just that the second person had a better tool.

Law and order has a public

Law and order has a public goods aspect which ensures that even privately provided protection "is available to everyone" in much the same sense as government protection is now.

I want my house to look nice, because it pleases me and it pleases my friends when they come to visit. So I trim the lawn, plant flowers in the front yard, and repaint the front door. When I do this, there are positive externalities: I improve the view for everybody in the neighborhood. This is inescapable and does not constitute "a problem". Rather, it is a /wonderful coincidence/ that my interests and those of my neighbors are in agreement -- we all like my house to look nice.

Similarly, I want my neighborhood to be safe. I want to reduce my own likelihood of being mugged or robbed, so I subscribe to a police patrol service that "keeps an eye on things" in a several-block radius around my house. How can I do this without making my neighbors safer too? I can't. So my actions make them safer too, and that is wonderful.

But wait, it gets better: I don't want to wait until muggers mug /me/ or somebody I know -- that would be too late. I want to discourage mugging /generally/. I want muggers to get caught before they get around to mugging me or somebody I know. So, as people did in 18th century England, I subscribe to a service that promises to prosecute people caught mugging anywhere in my neigborhood. So long as a few people in my neighborhood care enough to pay for that sort of service, everybody in my neighborhood is protected against muggers.

The "free rider problem" is only a problem relative to some theoretically optimum - but impossible to achieve in practice - amount of protection that a bureaucrat-god with perfect information and perfect benevolence might provide. A "free rider" argument might show that protection is underprovided in comparison to utopia but that does not mean it isn't provided at all and doesn't mean it is provided at a lower level than the political market would provide if we leave the same service up to a (fallible, not staffed by bureaucrat-gods) traditional government.

Thus, being protected under anarchocaptalism does not simply depend on ability to pay and it is not necessarily the case that some people "get no protection at all" under such a system.

Jacqueline, My interests

Jacqueline,

My interests these days are in the realm of the possible, ie, given that we will have taxes, which taxes should we have?

Given that we will have robbery, how much robbery do you want to collaborate in? Given that we will have rape and murder, who should be raped and murdered?

John, That's probably your

John,
That's probably your cache. Hit reload.

Guys, you've apparently

Guys, you've apparently disabled hot-linking of images but I'm seeing your warning image all over your site even when I'm on catallarchy.net.

Jacqueline, Because

Jacqueline,

Because government exercises a monopoly on the legitimate use of force. Thus they will enforce a right to property, whereas without government we just have bands of armed thugs fighting over possession.

By what magic do you avoid classifying government as just such a band of armed thugs?

Jacqueline, So you think

Jacqueline,

So you think only people who can afford to pay for private protection deserve the right to life, liberty, and property?

Rights are negative, not positive. Protection is not a right. Your right to your property implies that no one has a right to be protected at your expense. Likewise your need is no mortgage against my life.

Wow, what a great discussion

Wow, what a great discussion here, too bad I just finished it. Kudos to Jacqueline for single handedly attempting to fend off what, 4 anarchists. I'm probably too late here, everyone is probably tired of discussing this, but here are my two cents:

Responses to Jacqueline

Private protection relies on ability to pay. Government protection is available, on some level at least, to everyone.

Doesn't property ownership also rely on someone's ability to pay for the property in the first place? I don't see why initial acquisition of property should be the result of private transactions yet subsequent enforcement there of is then a public responsibility.

Because government exercises a monopoly on the legitimate use of force. Thus they will enforce a right to property, whereas without government we just have bands of armed thugs fighting over possession.

Ok, I see you recognize that the government's ability to enforce property rights stems from the use of force, but then that use of force is only effective because they generally have the most force.
Second, you say that they exercise the monopoly on the legitimate use of force, but then what makes it so legitimate? Is it the fact that they are essentially stronger than other forces and that might makes right?

I just want to point out that you have acknowledged that the government would indeed do something, so you concede my point that the government does provide at least some level of protection to everyone, rich or poor.

By "the government" I suppose you mean a first world country's government. A lot of third world governments don't do jack shit for their citizens. Check out the movie City Of God, the cops essentially do nothing and if it is anyone enforcing any form of property rights it is the gangs.

Why did people listen to one person calling themself an arbitrator and not to another?

Because of the first person's reputation.

Jonathan wrote:

No, but if you got a bunch of your friends together with enough guns, you could take over the place. That’s what the bloods and crips do.

Aye, and how does the gang concept of "territory" severely differentiate from property?