Economic Theory must Learn to Value Land, Labor, and Money

Abstract: Externalities to the supply and demand curve—land, money, and labor—are not properly accounted for in contemporary economic theory. This lacuna leads to a failure to understand and critique the problems of economic rent that creates consolidated wealth without work at the expense of those who work and deserve the fruits of their labor. The solution, then, is to reverse the theories of taxation that taxes capital and work, and tax economic rent instead.

Toward a Truly Free Market: A Distributist Perspective on the Role of Government, Taxes, Health Care, Deficits, and More by John C. Medaille (ISI Books, Wilmington, Delaware, 2010) is a genuine contribution to the discussion of how to fix the United States economy.

Toward a Truly Free Market Recommends Values in Modern Economic Theory

The value of this book is its insight into economic reasons for the impending bankruptcy of the United States economic system and the inability of either classical economics or Keynesian government intrusiveness to create a sustainable economic system. He explains how these theories inevitably lead to unsustainable debt and inflation, and how they lead to the creation of a servile society.

Madaille shows how externalities to the supply and demand curve—land, money, and labor—are not properly accounted for in contemporary economic theory. This lacuna leads to a failure to understand and critique the problems of economic rent that creates consolidated wealth without work at the expense of those who work and deserve the fruits of their labor. The solution, then, is to reverse the theories of taxation that taxes capital and work, and rather tax economic rent.

The author is a Catholic economist who has arrived at many of the same conclusions that I developed last year in Life, Liberty, and the Pursuit of Happiness, Version 4.0, particularly the necessity of repealing the federal income tax and structuring society around the principle of subsidiarity. It was very refreshing to read this independent scholarship based on genuine economic research rather than the failed economic theories promoted by large corporations, political parties, and other special interest groups.

Here are some policy suggestions for tax reform that take into account labor, land, and money:

  • Eliminate Federal Income Tax on all wages less than $250,000 per year. Individuals earning under this amount should not even be required to fill out tax forms.
  • Eliminate Corporate Income Taxes.
  • Counties and Municipalities should tax land at a higher rate, but not tax buildings or improvements on the land.
  • The Federal Reserve, which should be more of a central bank,  should provide funds to the government without interest, as this adds to federal debt through the enrichment of wealthy individuals.
  • Put all entitlement programs under the states, and fund them with state sales taxes rather than income taxes.
  • Gradually replace Social Security with private retirement insurance (annuities) that will pay out at a rate as high or higher than the government plan. Only forcibly tax and provide a government plan to those people who do not have adequate retirement insurance policies.

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