A Political Platform based upon Natural Law: (Part IV) The Natural Resource Tax

This is part IV of a series that deals with a Political Platform based upon Natural Law

In my previous monograph, "A Political Platform based upon Natural Law: (Part III) Why the Income Tax is Bad," the many and various disadvantages to having an income tax were discussed.  In this second part of the monograph, fair, just, and efficient alternatives to the income tax are given.

What kinds of taxes are just?

What kinds of taxes are fair and just? Fair and just taxes are those that pay for the use of a government-provided service; these are frequently called "user fees".

Actually, many of our current taxes are just.  The gasoline tax is a good example.  The government (federal, state or local) builds and maintains the majority of the roads.  It is fair and just that those who use the roads the most should pay the most for them.   A semi-truck that travels 100,000 miles a year should clearly pay more for the roads than Aunt Pearl who drives to church on Sunday in her Ford Taurus.  Since the amount of gasoline a vehicle uses is proportional to the weight of that vehicle and the distance it travels, gasoline taxes are a relatively fairer way to pay for the roads, (although a road tax based upon the weight of the vehicle and the miles driven would even be better).

The FAA (Federal Aviation Administration) provides another good example of a just tax.  The FAA exists mainly to monitor air traffic and ensure the safety of aircraft. Clearly, the people who fly are the ones who should pay for this.  And this is currently the case, because each airline ticket has attached a small federal tax on it to pay for the FAA.

How about taxing human-caused pollution? By definition, human-caused pollution consists of substances that harm either people or plants or animals. Thus, it would be fair and just to tax a polluter in proportion to the harm caused by the pollutant for which they are responsible. This also results in the beneficial side effect of encouraging less pollution, since creating less pollution means paying less pollution tax. And it so happens that those who are rich usually pollute more for the simple reason that they own more cars, homes, boats, jets, etc. Thus a pollution tax would naturally cost more for those who can most afford to pay it.

(As an aside, the EPA has recently defined carbon dioxide as a pollutant so that they can regulate its emissions.  This was a mistake, since carbon dioxide is essential to life, and is not harmful to humans, plants, or animals.  On the contrary, plants breathe in carbon dioxide, and would die without it, and we would shortly follow suit.  Of course, many think that it is a major contributor to global warming, but there is very little scientific evidence to back that hypothesis.  Having a CO2-cap-or-trading scheme will do nothing to prevent global warming, but it will harm the poor here and abroad, because it will increase the price of gasoline and electricity.  But this is the subject for a future blog.)

Each of the taxes mentioned above, I believe, would fit the definition of fairness of any five-year-old.

Reasons for Having a Natural-Resource Tax

However, there are some legitimate and constitutional functions of the government for which it is more difficult to assess how we can be fairly taxed to pay for them.  The military, foreign affairs, FBI, police, and fire departments fit into this category.  How can we fairly pay for them?  One way to think about this is to ask, "Who gets more protection from the military or the police or fire departments, Bill Gates or Aunt Pearl?"  While Aunt Pearl only has, say, a small apartment that benefits from military or police protection, Bill Gates gets quite a bit more protection because he owns many vehicles, buildings, and acres of land.  And he would suffer much more loss if we were to be successfully invaded by a foreign power.  The general principle is that those individuals or companies that own the most land or other natural resources should pay the most for these kinds of government services.  Thus, a natural-resource tax (NRT) would be a fair and just tax to be placed upon us.  Such natural resources include land, as well as coal, oil, minerals, etc.

Another principle concerning natural resources is that they are a product of nature (i.e., our Creator and His Helpers) and thus are not produced by man.  Therefore, the only just way to deal with natural resources is to treat them as the property of the people as a whole.  So, if government wishes to sell or lease land or sell the rights to a company so that it can extract a natural resource, it is appropriate to tax that resource as compensation to the people for allowing the use or extraction of that resource from the commonwealth.

For example, in Alaska, private companies are permitted to extract oil from the ground.  To compensate the people of Alaska for this, Alaska taxes each barrel of oil removed, and that money goes into Alaska's Permanent-Fund Dividend.  These funds are paid to the residents of Alaska each year.  In 2008, the dividend was over $1,000 per person.

For consumable natural resources, the fairest way to apply the NRT is to tax it once—paid for by the company that extracts the resource. In the case of land, only the land owner would be taxed, as a monthly land-rental fee. Those who lease/rent the land from the land owner would not be taxed directly.

As a specific example, consider a company that mines bauxite (from which we get aluminum). It would be taxed a certain amount per ton of bauxite extracted from the ground, as well as being taxed for the land it owns. Any buyers of the aluminum would not be taxed again for the same resource, but of course the cost of the tax paid by the company that extracted the aluminum would be indirectly passed on to the ultimate consumer.

Why the Natural-Resource Tax is Efficient

On the practical side, all local governments and some state governments have already established such taxes, usually called property taxes.  Thus, it would be fairly easy to have such a federal property/natural-resource tax as a replacement for the income tax (and sales tax and Social Security/Medicare taxes, as well).  Ownership of property and natural resources such as land, oil wells, coal mines, etc. are already publicly recorded, so there would be no additional intrusion into our lives as a result of this tax.  It would take no tax attorneys, accountants, tax software, or tax forms to do our taxes.  Individuals and companies that owned property or natural resources would be billed regularly, preferably monthly.  Furthermore, property valuations that have already been done at the state or local level could be used at the federal level, thus avoiding another bureaucracy.

Other Benefits to having a Natural-Resource Tax

There are many other benefits to a natural-resource tax.  For instance, today some of those who are wealthy can often live off tax-sheltered investments and pay virtually no tax.  With an NRT, those who are well-to-do would naturally pay more taxes than those who are not, because they would use more natural resources.  Own five homes?  No problem, but you'll be paying taxes on each lot that the homes are built upon.

It is important to reiterate that home owners (as well as owners of other buildings) would pay an NRT only on the land that their home sits upon and not upon the building itself.  Thus, in a given subdivision, all lots that are substantially the same would have the same taxable value and the tax assessors would not have to be concerned with the value of the home itself.  This would encourage people to build and maintain nice homes, since they don't have to worry about their taxes going up because of improvements they make.  (Even though the owners of a house or building would pay taxes only upon the land itself, they would be paying indirectly for the amount of material used to build their structure, because the companies who extracted the material would have paid an NRT, and some of that cost would be passed on to the home or building owner).

Also, it would be fair to tax farm land, residential lots, and commercial lots at different rates, given their various uses.

Life would be easier on farmers as well.  They would only be taxed on their land and not on their profit.  Thus they would be encouraged to make the best use of the land they have.  There would be no incentive to not grow crops as there is now in some cases.

Because people naturally want to minimize their taxes, a wonderful side effect of an NRT is that if people want to save on taxes, they only need to consume fewer natural resources.  This then encourages the use of more energy-efficient cars, homes, and buildings, and encourages recycling as well.

The Natural-Resource Tax Dividend

And finally, but importantly, just as with Alaska's Permanent-Fund Dividend given to the people of Alaska from oil companies, the federal government could give all citizens and legal residents an NRT Dividend to compensate them for others' use of natural resources.  This would be a fair and just thing to do, and it would be an equitable way to assist the poor (and everyone else).  If done right, this NRT Dividend could replace all other subsidies that the government gives out (except for the Health-Care Subsidy and Education Subsidy to be discussed in a future blog), saving the taxpayer money from the reduced bureaucracy of administering hundreds of different subsidies.  The amount of this subsidy can be debated, but I'd like for it to be around $500 per month per adult citizen or permanent resident of the U.S.  We could encourage the more prosperous among us to refuse this subsidy, which would help keep the price down.

Conclusion

In summary, let's replace the income tax, the sales tax and FICA taxes with user fees, taxes on pollution, and a natural-resource tax.  It is the fair and just thing to do, and will create a cleaner environment and a more prosperous nation.

If you are interested in more details about what is called a Natural-Resource Tax in this monograph, here are two sites that I would recommend (although I don't necessarily agree with everything in them):

The Geonomy Society
The Land Belongs to God

Part V of this series deals with national defense, border security, and immigration.
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 Tim Farage is a Senior Lecturer in the Computer Science Department at The University of Texas at Dallas. You are welcome to comment upon this blog entry and/or to contact him at tfarage@hotmail.com.
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