Draft:EBCOR
Excess Burden Comes Out of Rent (EBCOR) is a concept of deadweight loss, unique in theory with the heterodox Georgist school of political economy. The complementary function to EBCOR is the Henry George theorem popularized by Joseph Stiglitz, and the function that is a corollary is ATCOR: All Taxes Come Out of Rent. The acronym of EBCOR was first introduced by Mason Gaffney in 2009, who summarized the concept as being:
[The] gains to rent from removing excess burdens [from taxation].[1]
Excess burdens from taxation based on the production and consumption of wealth[a] cause a reduction in expected rental yields, compared to if there were no such taxes in place.[2] EBCOR on its own does not involve the assumption that these economic rents would be taxed themselves but implies that such sources of rent (e.g. land-value) can be taxed at a rate does not discourage investments into the production or consumption of wealth.
History of theory
[edit]John Locke
[edit]In the third part of his 1691 letter, Some Considerations of the Consequences of the Lowering of Interest and the Raising the Value of Money, John Locke (1632-1704) originates a simple proof of the concept,[3][4] that which Georgists in the 21st century would later label EBCOR:
A Tax laid upon Land seems hard to the Landholder, because it is so much Money going visibly out of his Pocket: And therefore as an ease to himself, the Landholder is always forward to lay it upon Commodities. But if he will throughly consider it, and examine the Effects, he will find he Buys this seeming Ease at a very dear rate: And though he pays not this Tax immediately out ofhis own Purse, yet his Purse will find it by a greater want of Money there at the end of the year, than that comes to, with the lessening of his Rents to boot; which is a settled and lasting evil, that will stick upon him beyond the present Payment.[5]
The physiocrats
[edit]The 18th century French physiocrats not only believed that all taxes were ultimately defrayed out of rent, but that taxes on production and trade ultimately diminishes rental earnings. The main argument of the physiocrats was that, because all taxes on production must ultimately be shifted onto the source of surplus value—which they believed to be agricultural rent, since all labor and capital costs are costs of production.[4] François Quesnay (1694-1774) and Turgot (1727-1781), both leading members of the physiocratic school, believed that because taxes on production diminished returns towards the latter's management, it also therefore ultimately diminished the agricultural surplus from land.[6][7]
Adam Smith
[edit]Adam Smith (1723-1790) in his 1776 magnum opus The Wealth of Nations, developed further Locke and the physiocrats' theories of tax incidence:[3]
A tax upon the rent of land which varies with every variation of the rent, or which rises and falls according to the improvement or neglect of cultivation, is recommended by that sect of men of letters in France, who call themselves the œconomists, as the most equitable of all taxes. All taxes, they pretend, fall ultimately upon the rent of land, and ought therefore to be imposed equally upon the fund which must finally pay them. That all taxes ought to fall as equally as possible upon the fund which must finally pay them, is certainly true. But without entering into the disagreeable discussion of the metaphysical arguments by which they support their very ingenious theory, it will sufficiently appear from the following review, what are the taxes which fall finally upon the rent of the land, and what are those which fall finally upon some other fund.[8]
Mason Gaffney
[edit]Terence Dwyer
[edit]Reception
[edit]Appraisal
[edit]James and John Stuart Mill
[edit]In his 1821 work Elements of Political Economy, James Mill (1773-1836) stated that there was “a peculiar advantage in reserving the rent of land as a fund for supplying the exigencies of the state”[9]—referencing land's unique properties related to tax incidence—and proposed a single tax on the increased increment in land-value.[3] John Stuart Mill (1806-1873) likewise held the same view as his father, and campaigned fanatically against "parasitical" landlordism during the Victorian era throughout his lifetime.[10]
Henry George
[edit]Henry George (1839-1897) was as evenly inspired by Locke's special theory of tax incidence, then he was by the Ricardian law of rent.[3][11] In his 1879 seminal work Progress and Poverty, Henry George pushed backed against his British forebearers who were skeptical of Locke's special theory of tax incidence, and argued that the logical conclusion of Ricardian economics was a single tax on land:[3]
In fact, that rent should, both on grounds of expediency and justice, be the peculiar subject of taxation, is involved in the accepted doctrine of rent, and may be found in embryo in the works of all economists who have accepted the law of Ricardo. That these principles have not been pushed to their necessary conclusions, as I have pushed them, evidently arises from the indisposition to endanger or offend the enormous interest involved in private ownership in land, and from the false theories in regard to wages and the cause of poverty which have dominated economic thought.[12]
Criticism
[edit]David Hume
[edit]Sir James Steuart
[edit]Thomas Malthus
[edit]David Ricardo
[edit]John Bates Clark
[edit]Notes
[edit]- ^ According to Georgist theory, wealth is any material good that is a product of man-made efforts; items existing in nature without human intervention are classed as land.
References
[edit]- ^ Gaffney, Mason (2009). "The Hidden Taxable Capacity of Land: Enough and to Spare". International Journal of Social Economics. 36 (4): 328–411 – via Emerald Insight.
- ^ Löhr, Dirk (2023). "Impacts of Property Taxes on Planning and Settlement Development—Germany as a Living Lab". Modern Economy. 14: 237–242 – via www.researchgate.net.
- ^ a b c d e Dome, Takuo (2000). "Escape from Locke: British Political Economists on Tax Incidence" (PDF). Graduate School/School of Economics, Osaka University. Retrieved 2023-03-17.
- ^ a b Dwyer, Terence (2014). "Taxation: The Lost History". The American Journal of Economics and Sociology. 73 (4): 791–802 – via JSTOR.
- ^ Locke, John (1691). Some Considerations of the Consequences of the Lowering of Interest and the Raising the Value of Money: Part 3. Marxists Internet Archive.
- ^ Quesnay, François (1759). Kuczynski, Marguerite; Meek, Ronald L. (eds.). Quesnay’s Tableau Èconomique. London: Macmillan Publishers (published 1972). pp. 1–5.
- ^ Groenewegen, P.D. (1977). The Economics of A.R.J. Turgot. The Hague: Martinus Nijhoff. pp. 100–105.
- ^ Smith, Adam (1776). Campbell, H.A.; Skinner, A.S.; Todd, B. (eds.). An Inquiry into the Nature and Causes of the Wealth of Nations. Oxford: Oxford University Press (published 1976). p. 830.
- ^ Mill, James (1844). Elements of Political Economy (3rd ed.). London: Routledge (published 1992). p. 249.
- ^ Blaug, Mark (1958). Ricardian Economics. New Haven: Yale University Press. p. 224.
- ^ Petrella, Frank (1988). "Henry George and the Classical Scientific Research Program: The Economics of Republican Millennialism". The American Journal of Economics and Sociology. 47 (2): 246 – via JSTOR.
- ^ George, Henry (1881). Progress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth: The Remedy (5th ed.). New York: D. Appleton & Company. p. 380.