From Galbraith to Goldwater: Remarks on the Proposed Expenditures
Robert V. Andelson
[Reprinted from the Henry George News, March,
INCREASING dissatisfaction with the federal income tax has given
rise to a spate of alternative proposals, usually laudable in intent
but not always grounded in sound moral or economic theory. Typical is
the advocacy of a system of taxation based on personal expenditures,
set forth by Matthew J. Kust in the January 16th issue of The New
"This is how it would work. Each individual would be required to
report his liquid assets at the beginning of the taxable year, add to
it his net receipts in money or money's worth during the year and
subtract from that sum his liquid assets at the end of the year. The
difference would be his personal expenditures during the year on which
he would be taxed at progressive rates."
It might seem as if such a tax, by encouraging savings and
investment, would represent a radical reversal of the Keynesian "spend-yourself-rich"
philosophy which has had such a ruinous influence in government
circles over the last three decades. And it is true that Mr. Kust
anticipates opposition from the Keynesians towards his plan. But he
hastens to reassure them that within his system ways can be found to
prevent "excessive" private savings, suggesting with obvious
relish the imposition of a radically confiscatory estate tax.
Lest he be accused of promoting anything so old-fashioned as
frugality, Mr. Kust is quick to point out that he would only curtail
private spending. Echoing the much-publicized opinions of
Professor John Kenneth Galbraith, he asserts: "It may be more
important to reorient consumption and investment patterns through
public expenditures while overcapacity in the private sector persists,
before stimulating additional savings in the private corporate sector."
There is no question but that the federal income tax is long overdue
for replacement. Mr. Kust is absolutely right in saying that "politics
and equity together point to the need for fundamental reform."
But a significant reform, especially in terms of equity, would have to
be a great deal more fundamental than that which he proposes. It would
have to substitute for the "ability to pay principle" the
principle of payment for benefits received.
Something of this insight is to be found in Senator Barry Gold
water's forthright little book, The Conscience of a Conservative,
which calls for the abolition of the graduated features of our tax
laws. According to Senator Gold water, "it is immoral to deny to
the man whose labor has produced more abundant fruit than that of his
neighbor the opportunity of enjoying the abundance he has created."
Well said! But on the preceding page he defends the equity of excise
and sales taxes, and would therefore presumably have no objection in
principle to what Mr. Kust proposes.
The fact is that a man should be no more penalized for spending than
for earning. As long as a relatively untapped publicly-created source
of revenue exists, taxes upon income and spending alike, whether
graduated or not, are an affront to justice. As long as private
monopolists continue to appropriate with impunity the unearned,
community-created increment of land, the government has no right to
claim the barest fraction of any producer's wealth.
One cannot but be distressed to read such a statement as the
following, taken from the Senator's column in the San Diego Union of
January 26th: "If you tax only property, the cost of rent or
ownership goes up. Tax what you like, every penny confiscated must be
subtracted from the earnings of producers. ..."
Somebody should tell Senator Gold-water that a tax on site-values
does not touch the earnings of producers and cannot be passed on to
renters or consumers. We would commend to his attention the words of
one of his fellow-conservatives and erstwhile colleagues. Speaking in
Burbank in 1958, with reference to the Irrigation District Act (which
establishes site-value taxation as the revenue basis of California's
irrigation districts), William F. Knowland declared: "The state
law that sparked the California success story has been a powerful
engine for the creation of wealth. It has been more important to the
growth of California than the discovery of gold a century ago. This
remarkable law works as a tool instead of a weapon. It taxes people
into instead of out of business."