From the New Physiocratic League (TNPL)

The burden of taxation in most countries falls very heavily on labor (in the form of income tax), in addition to capital. This directly cuts net incomes, and also reduces the incentive to produce, meaning the incentives to raise gross incomes are also impacted.

The average worker in the US last year paid 23.8% of their income in taxes, while the OECD on average paid 25.5%, and some countries (e.g. Belgium and Germany) paid 40%. If you include hidden income taxes (payroll taxes paid by employers), those rates rise to 29.6%, 36.2%, and 53% respectively.

If we want to see a serious increase in living standards, and increase the economic clout of our countries in the face of powerful competitors, this burden must be eliminated. However, doing so doesn’t go far enough to increase real incomes, and doesn’t address a shortfall in tax revenues; even with significantly lower expenditures or by exploding already ballooning fiscal deficits.

Incentives are currently skewed toward gaining income through methods detrimental to national purchasing power, such as capturing land price gains, monopolization under the cover of regulation, and overzealous licensing. This results in significantly higher prices for consumers, reducing the purchasing power of already overburdened incomes. Distorted labor markets from misguided policies and a rigid education model then create underutilized workers, who have little ability to consume any gains that may arise from a greater productive capacity.

Finally, the weaponization of trade has created a disincentive to produce goods in some countries, and has caused a distortion of consumer markets. Strategic industries have withered away along with price signal mechanisms, particularly due to Chinese subsidies, both explicit and hidden.

This multi-pronged attack on real incomes and economic power can be reversed immediately and decisively. Here’s how:

Tax land value instead of of labor.

A land value tax (LVT) is not a property tax, as it only taxes the underlying land, not the structure built on it. A well-implemented LVT would dramatically increase the number of housing units on the market. Rent prices in some cities worldwide have been out of control, including a 21% rise in Berlin last year. Housing costs have been one of the biggest assaults on purchasing power, and freeing the market from supply constraints could already boost real incomes noticeably. A decrease in housing costs from 1000 per month to 500, where net incomes are 3000 per month, would mean another 16.7% boost in real income.

LVT has been advocated by economists across the political spectrum, from Joseph Stiglitz to Milton Friedman as the only major source of taxation that does not harm economic efficiency, and even increases it.

The argument for LVT is rooted in justice as a means of separating products of nature vs products of labor.

Henry George Theorem demonstrates how land values rise at a greater rate than the cost of the infrastructure around it. This allows infrastructure to pay for itself and eliminate deficits.

2. Reverse income tax rates from a positive rate of taxation (on labor/capital) to a negative one.

3. Provide a citizens’ dividend.

2 & 3 alone would raise average net incomes for workers by around 50% immediately, compared to current OECD average tax rates. See TNPL platform.

In addition, these direct cash transfers would allow for the removal of artificial wage floors, a dismantling of inefficient & ineffective welfare bureaucracy, dramatically reduced expenses for employers, and would enable the labor market to clear to full employment.

By removing the tax burden on productive enterprise, it can once again become competitive in world markets, even in the face of unfair competition and weaponized trade.

A dividend could be provided by collecting rents on any remaining economic rents that could not be eliminated, and as a percentage of fiscal surplus (as an investor wold receive in a corporation).

4. Minimize licensing and state-issued economic privileges.

This includes occupational licensing and barriers to entry in the financial sector. In the few areas where it cannot be eliminated or streamlined, ensure that these rents can be collected towards the citizens’ dividend.

TNPL policy advocates for a removal of monopoly privilege. This includes land/location/natural resources, but also includes state-sanctioned privileges, consistent with its philosophy.

The cost of services in these protected sectors are artificially high due to a constraint on the number of permits and licenses issued. There are many areas in the economy where competition and efficiency gains could be made, but licensing reform could have the most immediate effect on consumer prices / real incomes.

5. To the extent that other taxes may be needed, limit them to consumption (aside from food and shelter).

By shifting the remaining burden of taxation onto consumption, we can reverse the distortions of trade weaponization.

The artificial propensity for consumption over investment (due to global currency distortions and export subsidies) can be rebalanced

Allowing credit flows to return back to areas such as homebuilding (where rising prices indicate a need) instead of consumer credit would return economic composition to equilibrium.

See the whole TNPL platform at https://newphysiocrats.org/