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Idaho's Weekly Journal of Local & National Commentary  Week 1614

 

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by Free Market Duck

Why we don't need property taxes
...Part II

Boise, ID – From a purely Economics perspective, taxation is its own worst enemy.

   Why?

   Taxation and governmental intervention into the market destroys the very mechanism that a market needs to survive: price formations that reflect true supply and demand.

   Think about it.  What is a price?  How does it come about?  Prices are qualitative exchange ratios created by individuals freely buying and selling in the market.  Each trader values that which he is about to receive higher than that which he is about to give up.  (Money is just another commodity for temporary storage of value.)  In fact, trades take place not because the commodities being exchanged are equal but precisely because the commodities are valued unequally by each trader.  Value does not reside within the commodity per se (or labor per se, sorry Karl Marx) but rather value resides in the expected service to be rendered by each recipient of the trade, the consumer.  (Economics Lesson 101A:  If a million men dig a million holes in the middle of the desert, they certainly will have expended tons of labor but rendered no service to anybody.  The value of their labor is a big fat zero.  If, however, the Rolling Stones spend 5 minutes to cut a CD such as “I Can’t Get No Satisfaction,” they expend very little labor and yet can sell their recordings for $50 million.  Value lies in perceived “service rendered” by the consumer.  Whether that “service rendered” is considered frivolous is simply somebody’s opinion and is of no concern to the functioning of free market price formations.  So much for the idea of equal pay for equal work and Karl Marx’s Labor Theory of Value.  Both are false economic ideas, and for the same reasons.)

   Therefore, when the government intervenes into a market with, say, property taxes and other regulations, it destroys the free market connection between true supply and demand.  Without this mechanism, markets start falling apart.  Capital cannot move toward shortages of supply because there are no real market prices to tell you that piece of economic information.  Or the other 70 trillion pieces of pricing information that the free market automatically provides on a daily basis minute by minute through qualitative bid and ask quotes.  There are no humans, computers, or bureaucracies in the world that are capable of performing these types of dynamic price formations that truly reflect supply and demand.  That’s why socialist nations and even the Managed Economy of the U.S. have fallen into dislocations, dysfunctions, recessions, and depressions.  (Never mind the Fed Reserve’s pretended management of a non-commodity money supply.)  In effect, we have unwittingly (well, some of us) destroyed our free market pricing mechanism.  One of the most stupid acknowledgments of this destruction is the Soviet Ministry of Prices in the USSR trying to use U.S. Sears Mail Order Catalogues to come up with commodity prices for the Soviet Union in the decades before its collapse.  Sounds stupid but they had no other means to determine prices since, by definition, the Politburo destroyed their free market pricing mechanism by outlawing capitalism.

   So, from both an empirical and an Economics Theory point of view, property taxes and governmental intervention in general are not clever ways to finance our common goals in society whether it’s for education, health care, or building highways.

   So why do we persist in levying property taxes and deceive ourselves into believing that we can bring about the common good through an obviously bankrupt idea?  Why, for example, is the Idaho House Committee for Taxation and Chairwoman Delores Crow wasting three days – and many more weeks -- of public meetings to discuss which property tax method is the best to beat ourselves over the head with?

   The simple answer is because we have not paid attention to history.  And most of us have not studied free market Economics.

   In summary, the real problem is not property taxes.  The real problem is government spending.  Spending based upon the false conclusions (empirical and philosophical) that the government, the state, can somehow achieve our stated common goals of providing services and commodities.  Empirical observation and economics (theory) prove this is not true and, yet, very few individuals will stop, take a giant step back, and re-examine our basic premises of why we are invoking taxation upon ourselves in the first place when we know that private enterprise and the free market always does a better job.

   The property tax is not the way to go and our children’s education is much too precious to leave in the hands of a huge state bureaucracy. – FM Duck

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