Monday, November 9, 2015

Evil Effect of Robot, Rent and Taxation

Again with the damned robots. When it comes to robots, etymology matters. Czech playwright Karel Čapek's brother suggested the name to him, based on a word for forced labour. For example:
The system of rent by robot or forced labour -- that is, so many days' labour without any specification of the quantity of work to be performed -- is a direct premium on idleness. A landlord wishes a field of corn to be cut; his steward sends out, by means of his Haiduks, information to the peasants to meet at such a field at such an hour with their sickles.
Note that this robot in question isn't just any old forced labor but a payment of rent by obligatory labor. It is the price the peasants must pay for access to the parcel of land from which they get their subsistence.

The question of "robot" is thus inseparable from the question of rent. In the case of the electro-mechanical devices that have nowadays acquired the name, robot, the rents in question are the royalties due on the patents -- the intellectual property -- embodied by the machine.

What is rent? An anarchist pamphlet from 1892 stated, boldly, "Rent is taxation; taxation, rent..." A Georgist book from a few years later by Thomas Shearman, Natural Taxation: An Inquiry Into the Practicability, Justice and Effects of a Scientific and Natural Method of Taxation, elaborated on that seemingly circular definition:
To state the case is to demonstrate the justice of the tax. For what is here proposed is simply this: To tax the proceeds of taxation, and nothing else. 
For ground rent is taxation, and nothing else. The power to collect ground rent is a delegated power of taxation. 
Can anything be more just than for the State to draw its revenue from the proceeds of such taxation and from nothing else? Privilege of collection implies duty of payment. The duty of providing for the whole support of government is indissolubly attached to the right of collecting ground rent. The landlord, as the only natural tax-gatherer, is also the only natural revenue-provider. Every man who buys the privilege of taxation assumes, by the very act, a proportionate share of the burden of government expenses. No lapse of time, no misconception of the situation, no unwise or excessive payment for the privilege can ever relieve him from this inherent obligation.
Curiously. though, those who have benefited most from the powers of taxation granted to them by government are most vociferous in their objection to their "private property" being taxed, as Shearman observes, a few pages later:
It will be said, of course, that this method of taxation is mere "confiscation"; and, to the minds of many, this will be a conclusive objection. It is to be regretted that the brilliant author of Progress and Poverty should have even once used this word; thus seeming to identify the cause of equal taxation with apparent robbery and to confound justice with injustice. Although such may not have been its original meaning, yet by long usage "confiscation" is understood to mean a punishment for crime or moral incapacity. We are not at liberty to confiscate, in this sense, either land or its rent.  
But no question of confiscation arises in the case. If all the land belongs to all the people, if past generations had no power to alienate it from the control of the present, if its rent is now wrongfully withheld from the people, their taking the whole of it would be merely a just resumption of their own, not confiscation. And this is all which Henry George ever meant; as page after page of his book clearly shows. It is not necessary, however, to discuss that question here. We are not inquiring into the wrongs of the past or even into the general rights of the people in the present. We are considering only the proper method of raising necessary revenue.  
Class legislation 
The only pretence for charging that this method is a measure of confiscation is founded upon the allegation that it is unjust to put the whole burden of taxation upon a single class. In the light of past history, during which the owners of land have used all their powers, with immense success, to get rid of all taxes upon themselves and to cast the whole burden upon the landless poor, their present remonstrances, sometimes pathetic, sometimes ferocious, against a reversal of their methods, are highly entertaining. Every tariff duty, every excise tax, every indirect tax bears witness to the persistent ingenuity with which the collectors of rent, the natural tax, have shifted the burdens of public taxation upon other shoulders. Not one dollar of our vast federal revenue is collected from rent. Nine tenths of it is collected from the comparatively poor. Great Britain has been hitherto governed by large landlords: America by small ones. Both alike have evaded the taxation of rent as much as possible. Both alike have never hesitated to ruin vast numbers of their fellow citizens, by sudden, arbitrary and disastrous changes in methods of taxation. Both alike have never dreamed of allowing the smallest compensation to the victims of their caprice. But, as only great landlords can make a profit out of such methods, British landlords have made themselves wealthy in this way; while the mass of American land-owners have plundered themselves for the benefit of a few.  
There is no precedent for the doctrine that taxation must be spread over the whole community, and still less for the novel claim that the State is bound to compensate taxpayers for the payment of taxes. When will any congress compensate Americans whose property was destroyed by changes in the tariff?  
Originally, all land was granted by the State upon the express or clearly implied condition that the grantee should provide for all the expenses of government. The land-owners gradually shifted the burden off their own shoulders, by new taxes on the non-voting population. But even they had not the audacity to make a perpetual covenant between themselves and the government which they controlled, for exemption from taxation. The plea of their successors is that, by long failure on the part of the people to demand their rights and the performance of the conditions upon which the land was granted, landlords have been led to believe that such a demand would never be made; that many of them have paid large prices for the privilege of charging rent, in the belief that rent would never be taxed; and that it is unjust for the State to change its policy in this respect, without giving to them as much with one hand as it takes from them with the other.  
The argument is just as valid in favor of kings and nobles; and it has been urged upon their behalf with equal sincerity. Down to 1788 French nobles were exempt from most taxes. Many men (like Beaumarchais) bought a title, partly for the sake of this exemption. The French Revolution swept away all these privileges, without a shred of compensation; and all the world now says that this was perfectly right. But to an army of tax-eaters in those days it seemed monstrously wrong. The parallel is complete.  
Compensation for vested rights
The concentration of all taxes upon ground rents, if enacted at the foundation of a state, would obviously be simple justice. Why is it not equally just at any later period? "Because," it is said, "there have been many changes of ownership: vested rights have sprung up: new men have bought the land from the original owners, paying a much larger price than they would have paid if it had been understood that rent would be taxed. Heavy taxation will destroy the market value of the land; and this would be robbery under the forms of law."  
What is this land value, which is so sacred that it must not be heavily taxed? Nothing in the world except the value of a power, conferred upon individuals, to tax other individuals for the privilege of standing upon the earth. It is the only kind of property which cost the original owner nothing, in either wealth or labor. Every other form of property was called into being by honest human skill and labor, and was therefore fully paid for. Property in ground rents was, in every instance, originally acquired either by undertaking to bear the cost of government, as in feudal times, or by gift or theft, just as we have seen it acquired in Oklahoma. No doubt, thousands sacrificed much, in the pursuit of Oklahoma land, by hanging on the borders of the territory for weeks, waiting for the day upon which the gift was to be made. But by doing so they no more gave value for the land, than beggars give value for what they get, by standing hat in hand all day long.  
It is true that this power to levy taxes upon other men has been sold, over and over again, at increasing prices, and is now generally held by men who paid something of value for it. But what of that? The State never pledged itself to exempt this privilege from taxation, or to limit the amount to which it will be taken for public purposes; and no legislature has any moral right to do so. The present owners of the taxing power have bought upon a speculation, and must take all the chances of speculation. Among those chances is the possibility that the State may call for no part of the tax collected under the name of rent, and, on the other hand, the possibility that it may call for nearly the whole of it. All other forms of property are bought on a similar speculation.  
Iron, steel, glass, crockery, tin plates, buttons, laces, whisky, apples, eggs, horses, cattle, mortgage bonds, bank stocks, railway shares, and hundreds of other things are bought and sold, with full knowledge that there may be sudden and vast changes in the rates of taxation upon them, made without notice, without the slightest scruple, and without even a thought of compensation to the many who suffer thereby. The tax on whisky was suddenly raised to 50 cents, then to $1, then to $2, then reduced to 50 cents, then raised again to 90, and all without the slightest compensation to anybody. The tariff taxes were suddenly increased 50 per cent, all around, in 1864, in one night, without notice and without a dream of compensation.  
Why, then, this amazing and unexampled tenderness for speculators in the privilege of taxing their fellow men? The answer is easy. Most of the losses arising from increase in other forms of taxation fall upon the masses of comparatively poor, because the burden of such taxes is shifted upon them. None of the loss arising from an increase of taxation upon ground rents would fall upon the poor; because that burden cannot be shifted upon anybody. It is the old, old story. The right of the rich to plunder the poor is a vested right, sacred, even in the eyes of the poor themselves, through long training in abject servility.


Thornton Hall said...

The rentier I know best, my father, would cite the intelligence of those who chose to stand waiting at the Oklahoma boarder rather than begging on the streets of an Eastern City.

This is not a moral failing of my father, but a cognitive bias. And it is similar bias that confuses Mankiw, et al.

Our tactics should recognize this and therefore recognize the limitations of rational arguments grounded in facts, including moral facts.

Sandwichman said...


I fully acknowledge the limitations of rational arguments grounded in facts. One of those limitations is that those of us who attempt to persuade with rational arguments grounded in facts continue to do so in spite of being aware of the limitations of rational arguments grounded in facts. ;-)