It is self-evident that the values created by the effort of the community as a whole should belong equally to all its members.
It is just as self-evident that the values created by the work effort of the individual and the values created by investing personal property in job creation, production and sale, should belong to the individual that contributed this effort or investment. In other words: every income or added value from production should be tax free.
When taxing the work effort and investment of individuals, each individual will have a lesser amount for reinvestment in consumption or production. Income taxation inhibits economic turnover. This happens even if you tax income progressively, by taxing smaller incomes less than higher incomes. It is the principle of income taxation, that is distorted in its nature.
It does not mean that we should give tax cuts to the rich. It means that we should find a source of taxation that does not suffer from the same distortions as income tax.
The biggest source of wealth is not income from work effort or profit from production. The greatest source is speculation in trading values. The primary source of speculation is the values created as a result of a developing society – the fruits of this development. These fruits are also called land value rent: the added value from the capital gained by the mere ownership, or rather control of, land. This capital gain increases as society improves the conditions for economic activity.
This capital gain is work free. It typically ends up in the hands of the real landowners; the mortgage lenders that provide debt when people need a place to live or to run their company. These mortgages covers more than the building; it covers the capitalized market value of the land, thereby increasing the capitalization rate. Access to this capital gain is denied the citizens: they should be given their equal share of this capital gain. But they are not; instead their income is taxed. The capital gain is used to distort the economy in a number of ways, to the benefit of the rich, but long-term disadvantage for all of us.
One of the greatest disadvantages are the reoccurring crises like the one in 2007/8 and onwards, caused by an imbalance between debt from mortgages and the true market values of properties. This happens because greed will always dominate the financial sector when quick work free profits are so easily obtained.
The land value rent should be redirected from the work free profits into the government treasury as a land value tax, seizing as close to 100% of the work free capital gain on land. This should replace all kinds of income tax as the revenue for public spending.
Tax on wages and profits from investments etc. should be removed. All that is produced by the work effort of people should be free of taxation; it is what nature has given us and the work free capital gain from exploiting this, that should be the target of taxation.
Each individual will have sole ownership of the revenue from his or her own work effort.
For more details on how to change from income taxation to land value taxation, read my book, especially chapter 4 and 5.