Should we tax water?

If you ever read Henry George’s Progress and Poverty, you may already be familiar with his ideas on taxation.  If not, (I haven’t read it) he basically says this: just tax land.  Makes sense? Well, when trying to find money for a health care system, this article outlines it nicely:

Land, to George, was the resource for earning money, or just living: Only hoboes could get by without renting a slice of it. Land was not just natural but limited, so it belonged, in the truest sense, to the nation. Other taxes put an undue burden on human activity: Income tax weighed on productivity (wages and profits); a sales tax put a burden on trade; a “property tax,” which involves not just land but the structures on top of it, burdened development. To George, it was simple logic that a government should raise taxes from the value of land.

So, the benefits are obvious. The article then moves towards the idea of taxing water. And why not?

“The biggest thing is water,” Gaffney says. “In an arid state, water is worth more than land, or at least as much. But it’s totally exempt from taxation. It’s an enormous source of revenue that’s not being taxed at all. In fact, it wouldn’t even have to be a tax because, legally speaking, the state [of California] owns all the water. … So the state should simply charge a rental for the use of its water. But not only does it not charge for people taking water out — it subsidizes them by paying for the works that are necessary to store and distribute the water.”

I think the relevant term is “ass-backwards.” Meanwhile, Americans argue about their income tax and whether some of it should help complete strangers cover their medical costs.

So, tax land AND water, and the emotional component of state spending is unequivocally taken out of the equation.

I like this. I like this so much that we should go even further. Not only should we completely banish all sales and income taxes – minus sin and other special excise taxes – we should add to the list taxes for environmental hazard, degradation and other externality costs. (within reason of course) Therefore, society nets a triple benefit – increased incomes, internalized externality costs (both from private or public land value AND the true cost against third parties) and public revenue from a true progressive tax structure. One could only dream…



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