June 11, 2015 § 52 Comments
Lots of folks have suggested that fiat currencies and fractional reserve banking create fake economic value out of nothing and are therefore, if not usury strictly speaking, somewhere in the moral vicinity of usury. So far when this has come up in discussion it has turned out that critics of both don’t really understand either. The former are options issued by the government which allow the bearer to settle tax liabilities; the ‘created money’ in the latter are options against the balance sheets of banks, denominated in the former. There is nothing usurious going on and no creation of fake wealth except to the extent that the balance sheets of banks carry usurious (as opposed to nonrecourse) loans. This should be at least mildly familiar territory to anyone who has read and understood the Usury FAQ.
But there is one kind of government activity that does bear close resemblance to usury: the levying of property taxes.
Here is a (slightly modified) comment I left on Kristor’s Orthosphere post (which itself is less about property tax than it is a preamble to another subject, the beginning of what I hope will be a series of posts well worth following):
Another prudential reason to oppose property taxes is that they encourage treating all property as liquid and fungible, discouraging ownership of anything illiquid and making ownership of illiquid things into something less than real ownership.
Property taxes are like the sovereign’s version of usury: the sovereign demands a fixed percentage repeatedly every tax period until the owner is destitute, independent of the owner’s actual fortunes during the period. The sovereign qua publican doesn’t care about the owner’s fortunes a bit: he just demands his pound of flesh every year.
Transaction taxes (sales, income, VAT, etc) on the other hand are one-time levies directly tied to the activities and fortunes of the person taxed — including property owners, because property owners who work, invest, and buy goods and services in the inevitable struggle against entropy pay transaction taxes when they do those things.
Property tax in contrast is not merely a form of economic double-jeopardy: it is a form of economic infinite-jeopardy. If property were a bucket of water, transaction taxes represent taking a scoop of water every time the bucket changes hands in public commerce. Property taxes represent a hole in the bottom of the bucket, a limitless demand against property owners, in effect making the sovereign into the property owner and the notional “owners” into rent-paying tenants. (Some folks might like it that way — but they ought to be forthright about the fact that their preferred social arrangement involves de-facto abolishment of private property).
None of this excuses the property owner from his duty to steward his property well for the sake of the common good and those more directly in his care, of course — just as the sovereign’s authority does not excuse him from his duty to rule over his subjects well for the sake of the common good and those directly subject to him.
But it seems to me that deposing kings and stripping owners of all of their property (even when you rent it back to them) are serious matters requiring serious reasons, not to be undertaken in the ordinary course of things. The sovereign’s title to already-owned private property (as distinct from taking a share in public transactions) is like the poor man’s title to bread. I don’t think it is surprising that folks who are fond of democracy often tend to be fond of property taxes: they both reflect inherently brittle and cavalier modern attitudes about authority, where kingship and ownership are both forms of authority.