Intellectual Property Tax

Intellectual property should be taxed on the same basis as land and other real estate.

The legislation regulating intellectual property is changing. As well as increasing the scope of what is intellectual property and the time during which property rights are assigned to individuals, the rights themselves are being changed to make the property more rivalrous and excludable - to make intellectual property more like land and real estate.

In agrarian society, land is the essential asset of value. There are other assets of value, but ownership or at least the right to use land is essential to survival and the ability to produce wealth. Everything else is secondary.

In the modern "Information Age" the importance of information is recognized. It is not that information was not important in earlier ages, but the ability to gather, produce, manipulate, control and extract value from information is greater now than ever before.

The importance of intellectual property is increased both by the increasing ability to produce and use it and by changes to legislation which increase the proprietary rights to intellectual property which are granted to the deemed owners of the property.

An increasing portion of society's wealth and resources is now invested in the creation, acquisition and control of information and intellectual property. While it was, historically, somewhat incidental to the key elements of the economy, wealth and power, it is increasingly central and essential to them. Information and intellectual property are becoming more important than land, real-estate and other physical property.

The burden of government is distributed by the means of taxes and fees on income, consumption and properties. How this burden is distributed is rife with tension, conflict and contradiction. On the one hand, the burden is expected to be on those who benefit. On the other hand, the burden is expected to be on those able to bear it. While everyone might agree that the distribution should be fair, it is difficult to find two or more people who agree as what is fair or even what the basis of fair is.

As well as distributing the burden of government, taxes and fees are also used to influence behavior. Relative decreases or increases of taxes and fees can encourage or discourage particular behaviors.

Intellectual property should be taxed now as land and real estate have long been taxed, for the same reasons that land and real estate have been taxed. Just as land and real estate were the principle assets in agrarian society, intellectual property is the key asset in our modern information based society. Along with the privileges and benefits of owning these key assets come the responsibility of assuming a greater portion of the burden of government.

Yet there is an important difference between intellectual property and real estate. Real estate cannot be reproduced and distributed like information can. Intellectual property is rivalrous and exclusive only because of regulations, not because of its essential nature. Thus while granting intellectual property rights increases the value to the property owner it significantly decreases the total value of that intellectual property to society as a whole by excluding many from benefiting from it. Compare this with the value of a field - it can be used to grow only one crop at a time and it cannot grow more or less depending on which farmer owns it.

Given that the value of intellectual property can be maximized by allowing it to be reproduced and used freely, why are intellectual property right granted in the first place? A common argument for intellectual property rights is that they produce a market for intellectual property and this market provides incentive for the production of intellectual property and a means for allocating scarce resources to produce intellectual property and that these benefits outweigh the loss of utility of the intellectual property produced.

But excessive prolongation of intellectual property rights does little or noting to increase incentive to produce intellectual property while it continues to decrease utility and utilization.

Intellectual property tax can provide a reasonable disincentive to excessive prolongation of intellectual property rights that responds to market conditions. If the owners of intellectual property were required to pay property tax but could avoid the tax by turning the property over to the public domain, then there would be an incentive to put intellectual property into the public domain. The benefit is that information in the public domain can have higher utility and utilization that proprietary intellectual property.

Intellectual property tax would also put an end to the copyright black hole, whereby many copyrighted works are no longer available because the copyright owner is unknown or unavailable to approve and be paid for the right to produce and sell copies of the work. If tax was due, the works could be seized and put into the public domain if the taxes are not paid.