Iraqi constitution
In today's news, the Sunnis refuse to take part in making Iraq's new constitution. One of the reasons is the exclusion of ex-Baath party members (i.e. all Sunnis with any experience of politics). The other is that the other guys (Kurds in north, Shias in south) have all the oil. Land rent would solve the second problem.
Under land rent, valuable land (such as land with oil) is taxed more, and other land is taxed less. As a result, there is no economic benefit in owning oil-rich land, beyond the profit you can make from your own hard work in fair competition with everyone else. So one result is an end to conflict over land, and another is that the land is used as efficiently as possible, because everyone has a fair chance to compete . Sounds like it's exactly what Iraq needs.
posted by Chris Tolworthy at 8:01 AM
4 Comments:
This sounds more and more like property tax that we have here, I fix my place up and I pay more taxes. Not always an incentive to fix up a place. If a company puts in a big plant, the comapny is assesed with higher taxes. If someone doesn't pay their taxes, the goverment comes along and takes it away.
No taxation without representation! It is not an accident that the rule of law and democracy are the result of conflicts over taxation.
The only thing worse than taxes is no taxes. Of all the oil rich countries only Norway is a democracy. The reason is that political leaders who do not need to tax their population can do as they please. If government finances depend on taxes rather than mining then it is in the interest of the powerful to allow and facilitate conditions that benefit their citizens.
When it comes to natural resources I like the Alaska model. Every resident gets a share of the oil proceeds. That way it does not matter where the oil is. In Iraq I would go a step further than in Alaska and wouldn't let government keep any of the oil money. Iraqis will be a lot better off if their rulers have to negotiate taxation with them.
Reply to trail seeker: that is exactly why land rent is such a good idea. You pay zero tax on improvements, you only pay for the unimproved land. This encourages everyone to work hard and improve their houses, build more plants, and so on.
The clever part is that everyone benefits: better houses make a neighborhood more desirable, more plants mean more jobs. This in turn increases the bare land values, and that is where government revenue comes from.
So you pay zero tax for improving YOUR property, you only pay for choosing to live in such a beautiful, job-rich neighborhood. And if it isn't beautiful or job-rich, land values and hence land rent are near zero, so either way you cannot lose.
Reply to Helmut: That is a good point that I had not thought of. But I see two problems with it. First, although land rent is not tax, it is still money paid to the government, and so people would still demand something in return.
Second, Russia (the world's number two producer), is a democracy, so is the USA (number 3), Mexico (number 5), Norway (number 7), Canada (number 8), Venezuela (number 9), etc., etc. We could argue about the quality of each democracy, and the proportion of oil revenue, but we cannot say that democracy and oil don't mix.
Other interesting examples are tax havens like Monaco and Andorra - they have low (or zero) income tax yet are democratic. We could argue that tiny micro-states do not follow the same rules, so I would also note that Britain and Ireland charge zero tax on money earned overseas, yet the government always listens to incoming tax exiles because of the wealth they create. See http://www.nationmaster.com/encyclopedia/Tax-haven
However, these are just my off-the-cuff comments. You may still be right. I will have to give that more thought. Thanks.
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