How the Federal Government Can Easily Reduce the Deficit

While Actually Reducing Taxes for Most Americans
& Promoting Economic Development

Steven Cord

[ GroundSwell, November 2011]

The Federal Deficit is huge and growing out of control, threatening the nation’s future, but fortunately two provisions of the original U.S. Constitution as well as the 16th Amendment offer an easy remedy. They permit the federal government to levy a land-assessment tax that can accomplish these three goals:

(1) Reduce the Deficit.

(2) Reduce taxes for most voters.

(3) Promote economic development

To begin with, there is Article 1, Section 9 of the Constitution: “No…direct tax shall be laid, unless in Proportion to the Census….” This authorizes a federal land-assessment tax since it is a direct tax and could be in proportion to the decennial census. As it happens, all other Deficit reduction taxes would impair the national economy.

Article 1, Section 2 of the U.S. Constitution reads: “…direct Taxes shall be apportioned among the several states…according to their respective numbers…” Congress can therefore provide that the states levy a land assessment tax because it is a direct tax apportionable according to the decennial census.

For example, Congress can raise $100 billion to reduce the national Deficit by requiring a state with 5% of the U.S. population to levy a tax on land values raising 5% of $100 billion, or $5 billion, and remit the proceeds to the U.S. Treasury Department.

A federal land tax could be adjusted to account for differences in state income level. Just be sure to increase the tax gradually. Congress might also recompense the states for the modest cost of levying this tax. The economy would grow since actual production would be taxed less and all land sites would be used productively.

The 16th Amendment also allows a federal land assessment tax. It states that “congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census of enumeration.” The phrase “from whatever source derived” was inserted to obtain the support land-value-tax congressmen.

Be it noted that Congress has four times levied a federal land tax, in 1798, 1811, 1813, and 1861, using local land assessments. Only by recourse to the U.S. Constitution can we prevent an eventual national default a la Greece.

For political reasons, farmland could be exempted wholly or partially; little revenue would be lost. Also exempt, in whole or in part, the land of the poor, elderly, veterans, temporarily unemployed, etc.

Only adherence to the Constitution can save us from a debilitating national default. Let us hope we are equal to the task.

How to Prevent Under-Assessment. In order to prevent localities from under-assessing land, the state or locality (or any public land-assessing district) shall be permitted to buy the land at its assessment plus 10% and charge up to 8% of the land assessment as annual rent.

The Proposal. In order to painlessly pay down the federal Deficit, a federal law should require each state to levy a statewide tax on land assessments only equal to its proportion of the U.S. population and remit the proceeds to the U.S. Treasury Dept. to be used solely for federal Deficit reduction.

(Steven Cord, Professor-Emeritus, I.U.P., is the Research Director of the Center for the Study of Economics.

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