A Catechism of Natural Taxation
Charles B. Fillebrown
[Reprinted from the book, Natural Taxation,
published 1917.
Part I / The Authorities / Chapter 15]
Some years ago when President of the Massachusetts Single Tax League
I started a correspondence and series of conferences with a large
number of students of political economy including more than 100
professors in the leading colleges and universities of the country.
The purpose was to ascertain whether it might be possible to secure
agreement of recognized authorities concerning the fundamental
economic principles on which the science of taxation must rest. The
project met with such cordial approval at the hands of the economists,
and proved so interesting and profitable that it finally resulted in a
round-table conference at the Annual Meeting of the American Economic
Association held at Madison, Wisconsin, in December 1907. The final
canvass of opinions showed an overwhelming lead majority agreed upon
three propositions stated in the following Catechism, No. 39.
"Largely out of the correspondence elicited by The ABC of
Taxation this Single-Tax Catechism has grown," As described by an
economist not in sympathy with single tax:
It simplifies the method of treatment, supplies needed
definitions and explanations, and meets the objections naturally
raised by honest seekers after the truth. In fundamental doctrine no
change has been required either in general principles or their
practical application. Thirteen editions of the Catechism have been
privately printed and circulated. They have given opportunity to
make such changes as has seemed desirable after considering the
hundreds of criticisms and suggestions received from critics,
friendly as well as otherwise disposed. From correspondents and
other friends, indeed, so great assistance has been derived that the
Catechism has really become a joint product of scores of
collaborators.
CATECHISM
1. Q. What is a tax?
A. A tax is a compulsory rate contribution of individual product or
the value of such product toward the needs of government.
2. Q. What is meant by the single tax?
A. The payment of all public expenses from economic rent, the normal
revenue, thus eventually abolishing all taxes.
3. Q. What is meant by economic rent?
A. Gross ground rent -- the annual site value of land -- what land,
including any quality or content of the land itself, is worth annually
for use -- what the land does or would command for use per annum if
offered in open market -- the annual value of the exclusive use in
control of a given area of land, involving the enjoyment of those "rights
and privileges thereto pertaining" which are stipulated in every
title deed, and which, enumerated specifically, are as follows: right
and ease of access to water, and health inspection, sewerage, fire
protection, police, schools, libraries, museums, parks, playgrounds,
steam and electric railway service, gas and electric lighting,
telegraph and telephone service, subways, ferries, churches, public
schools, private schools, colleges, universities, public buildings --
utilities which depend for their eficiency and economy on the
character of the government; which collectively constitute the
economic and social advantages of the land which are due to the
presence and activity of population, and are inseparable therefrom,
including the benefit of proximity to, and command of, facilities for
commerce and communication with the world -- an artificial value
created primarily through public expenditure of taxes. For the sake of
brevity, the substance of this definition may be conveniently
expressed as the value of "proximity." It is ordinarily
measured by interest on investment plus taxes.
4. Q. What is the ethical basis of the single tax?
A. The common right of all citizens to profit by site values of land
which are a creation of the community.
5. Q. What is meant by equal right to land?
A. The right of access upon equal terms -- preference to be secured
only upon payment of a premium that will extinguish the equal rights
of all other men.
6. Q. What is meant by a joint or common right to land?
A. A joint or common right to the rent of land -- a right such as
heirs-at-law have to share the income of or rent of an estate.
7. Q. What is meant by land value?
A. Its site value -- its selling or market value -- its net value to
the purchaser -- the capitalization of its net rent -- the value
supposed to be adopted by the assessors as the basis of taxation.
8. Q. How about fertility value?
A. On the surface of the globe are countless varieties of exhaustible
fertility, i.e. chemical constituency, differing in kind and degree,
from the nitrogen, hydrogen, oxygen, and carbon of the soil to the
carbon of the coal, the gold, and the diamond. Fertility as an
attribute need not be predicated of agricultural land alone. Economic
fertility belongs equally to any other land which yields to labor its
product whether in food, mineral, or metal. Land may be fertile in
wheat, corn, and potatoes. It may be fertile in cotton, in tobacco, or
in rice. It may be fertile in diamonds, in gold, silver, copper, lead,
or iron. It may be fertile in oil, coal, or natural gas, in a water
power or water front. The value of artificial fertility is an
improvement value. The value of natural fertility of any kind is a
site value.
9. Q.. Does not the single tax mean the nationalization of land?
A. No; as Henry George has said, "the primary error of the
advocates of land nationalization is in their confusion of equal
rights with joint rights. In truth, the right to the use of land is
not a joint or common right, but an equal right; a joint or common
right is to rent." It means rather the socialization of economic
rent. It simply proposes gradually to divert an increasing share of
ground rent into the public treasury.
10. Q. What is the distinction between the taxation of land and the
taxation of rent?
A. Taxing land means, in the ordinary use of the words, to tax the
land upon its capital value, or selling value, at a given rate per
$100 or $1,000 of that value. Taxing rent means taxing the annual
value, or ground rent, at a given percentage of that rent. It is in
one case a tax on rent; and the other is a tax on capitalized rent.
11. Q.. Does not the common right to rent involve common ownership of
land?
A. Not in the least. When the economic rent is appropriated by the
community for common purposes, individual ownership of land could and
should continue. Such ownership would carry all the present rights of
the landowner to use, control, and dispose of land, so that nothing
like common ownership of land would be necessary.
12. Q.. Did not Henry George believed in the abolition of private
property in land?
A. Assuredly not. If he did, why was it that he suggested no
modification whatever of present land tenure or estate in land? If he
did, how could he have said that the sole sovereign and sufficient
remedy for the wrongs of private property in land was "to
appropriate rent by taxation"?
13. Q. What is meant by the right of property?
A. As to the grain a man raises, or the house that he builds, it
means ownership full and complete. As to land, it means legal title,
tenure, "estate in land," perpetual right of exclusive
possession, a right not absolute, but superior to that of any other
man.
14. Q. what is meant by the right of possession?
A. As to land, if permanent and exclusive, as on perpetual lease, it
means the right to "buy and sell," "bequeath and
devise," to "give, grant, bargain, sell, and convey"
together with the rights and privileges thereto pertaining, in short,
the same definition for possession that the law applies to property.
15. Q. What should be the limit of revenue under the single tax?
A. The same as under any other system of taxation, the cost of
government economically administered.
16. Q. Did not Henry George hold that the full ground rent of land
should be taken in taxation?
A. No! Not only did he concede a margin of rent to the landlord, but
as a matter of fact, as Thomas G. Shearman said, "not all the
power of all governments" could collect in taxation all of ground
rent.
17. Q. You would not say that land is a product of industry?
A. No; but the annual site value of land is a product of the growth
and industry of the community.
18. Q. You would not say that the supply of land can be increased?
A. No; but fresh demand is constantly requiring not only an increase
in the public equipment of land already in use, but also the constant
extension of such equipment to new area.
19. Q. Why should buildings and all other improvements and personal
property in capital be exempt from taxes?
A. Because a tax on them falls upon industry, and so increases the
cost of living, while continuing the invidious exemption of the
present net land value.
20. Q. Why should stocks and bonds be exempt?
A. Stocks, because they are only paper certificates of property which
itself has been taxed once already. Bonds, if legitimate, because a
tax on borrowed money is paid after all by the borrower and so becomes
an added factor in cost of production, and consequently in the cost of
living.
21. Q. What is meant by an "old tax" or a "new tax"?
A. By the term "old tax" is intended the taxing force at
last change of ownership; by a "new tax," one the imposed
since then.
22. Q. What is privilege?
A. Strictly defined, privilege is, according to the Century
Dictionary, "a special and exclusive power conferred by law on
particular persons or classes of persons and ordinarily in derogation
of the common right."
23. Q. What is today the popular conception of privilege?
A. That it is the law-given power of one man to profit had another
man's expense.
24. Q. What other principal forms of privilege?
A. The appropriation by individuals, or by public service
corporations, of the net rent of land created by the growth and
activity of the community without payment for the same. Also, the less
important privileges connected with patents, tariff, and the currency.
25. Q. Where in does privilege differ from capital?
A. Capital is a material thing, a product of labor, stored-up wages;
an instrument of production paid for in human labor, and destined to
wear out. Capital is the natural ally of labor, and is harmless except
as allied to privilege. Privilege is none of these, but is an
intangible statutory power, and unpaid-for and perpetual lien upon the
future labor of this and succeeding generations. Capital is paid for
and ephemeral. Privilege is unpaid for an eternal. A man accumulated
in his profession $5,000 capital, which he invested in land in Canada.
Ten years later he sold the same land for $200,000. Here is an
instance of $5,000 capital allied with $195,000 privilege. This
illustrates that privilege and not capital is the real enemy of labor.
26. Q. How may franchises be treated?
A. Franchise privileges may be abated, or gradually abolished by
lower rates, or by taxation, or by both, in the interest of the
community.
27. Q. Why should privilege be especially taxed?
A. Because such payment is fairly due from grantee to the grantor of
privilege and also because a tax upon privilege can never be a burden
upon industry or commerce, nor can it ever operate to reduce the wages
of labor or increase prices to the consumer.
28. Q. How are landlord's privileged?
A. Because, insofar as their land tax is an "old" tax, is a
burdenless tax, and because their buildings' tax is shifted upon their
tenants; most landlords who let land and also the tenement houses and
business blocks thereon avoid all share in the tax burden.
29. Q. How does privilege affect the distribution of wealth?
A. Wealth as produced is now distributed substantially in by two
channels, privilege and wages. The abolition of privilege would leave
but the one proper channel, viz., wages of capital, and hand, and
brain.
30. Q. How would the single tax increase wages?
A. By gradually transferring to wages that portion of the current
wealth that now flows to privilege. In other words, it would widen and
deep in the channel of wages by enlarging opportunities for labor, and
by increasing the purchasing power of nominal wages through reduction
of prices. On the other hand, and it would narrow the channel of
privilege by making the man who has a privilege pay for it.
31. Q. How can this transfer or be affected?
A. By the taxation of privilege.
32. Q. How much ultimately may wages be thus increased?
A. Fifty percent would be a low estimate.
33. Q. What are fair prices and fair wages?
A. Prices unenhanced by privilege, and wages undiminished by
taxation.
34. Q. Why does not an increasing ground rent tend to causing
increase in prices?
A. Usually sales increase faster proportionately than rent, thus
reducing the ratio of rent to sales. The larger the product, the lower
the individual costs. The larger the gross sales, the lower the
competitive prices.
35. Q. Why should land be singled out to bear the bulk of the burden
of taxation?
A. Because in the private appropriation of the net rent of land is
found the bulk of privilege.
36. Q. How much does this particular form of privilege amount to?
A. It amounted for 1914 to approximately $40 million for Boston and
more than $200 million for Greater New York.
37. Q. Does the single tax imply or involve the municipalization of
public utilities?
A. No. A public franchise value is a land value which the single tax
would assess at the same rate as other land values. The
municipalization of the public utilities themselves is a different
question, and is no necessary part of the single tax.
38. Q. what are the three legs of the tripos, the threefold support
upon which the single tax rests?
A. They are:
(1) The social origin of ground rent -- that the sight value of land
is a creation of the community, a public or social value.
(2) Than non-shiftability of a land tax -- that no tax, new or old,
on the sight value of land can be recovered from the tenant or user by
raising his rent.
(3) The ultimate burdenlessness of a land tax -- that the selling
value overland, reduced as it is by the capitalized tax that is
imposed upon it, is an untaxed value. Whenever lowers the income from
land lowers proportionately its selling price, so that whether the
established tax upon it has been light or heavy, it is no burden upon
the new purchaser, who buys it at its net value and thus escapes all
part in the tax burden which he should in justice share with those who
now bear it all.
39. Q. Is not land peculiar in that it is a gift of the Creator, and
is not a product of labor?
A. Yes, that is true of land itself, but not of the value of land.
40. Q. What is meant by capitalized tax?
8. It is a sum, the interest of which would pay the tax.
41. Q. Why would the single tax be an improvement upon present
systems of taxation?
A. Because: (1) The taking for public uses of that value which justly
belongs to the public is not a tax; (2) it would relieve all workers
and capitalists of those taxes by which they are now unjustly
burdened, and (3) it would make unprofitable the holding of land idle.
42. Q. Should not all people paid taxes for the protection of their
property?
A. Yes, and that is what they are doing when they pay their ground
rent. To tax them again, as is now done, is double taxation.
43. Q. Do all people, then, they ground rent?
A. Yes, and in proportion as they are users overland having any
value.
44. Q. Why, on similar lots of land, should one man with a $10,000
building be taxed as much as another with a $100,000 building?
A. Because the value of the privilege of occupancy and use is the
same in both cases.
45. Q. Why tax $1,000 invested in a vacant lot while exempting $1,000
invested in New York Central stock?
A. Because: (1) the land is made worth $1,000 and so maintained at
public expense without any contribution from the owner; (2) the $1,000
New York's Central stock adds nothing to the public expense, but a tax
upon it, and if collected at the source, falls directly on the road
and thence upon the public, and so adds to the cost of living.
46. Q. Would it not the confiscation so to increase the tax on land?
A. What would be confiscated? No land would be taken, no right of
occupancy, or use, or improvement, or sale, or devise; nothing would
be taken that is conveyed or guaranteed by the title deed.
47. Q. What is the distinction between taxation and confiscation?
A. The sovereign state may appropriate private property of its
citizens in two ways: (1) by confiscation; (2) by taxation. When one
particular man by treason or otherwise has forfeited his rights as a
citizen, the land and houses and personalty of this one man may all be
"forfeit to the crown," while the validity and sanctity of
9,999 other men's rights are in no way infringed. This is
confiscation. On the other hand, when the state, in order to obtain
the revenue to meet the expenses of government, levies tribute upon
its 10,000 citizens impartially, this is taxation.
48. Q. But would it not be an injustice to the landowner?
8. If it be an injustice to tax hard-earned incomes (wages) to
maintain an unearned income (net economic rent) that bears no tax
burden, how can it be an injustice to stop doing so? There can be no
injustice in taking for the benefit of the community the value that is
created by the community.
49. Q. What is the lesson of the inevitable "capitalization"
of the land tax?
8. It is that an unfair discrimination in favor of the landowner can
never be overcome until all taxes are paid out of ground rent; then
all men will enjoy total exemption equally with the landowner.
50. Q. How could the landowner escape the alleged burden of an
increase in his land tax?
A. Simply by assuming the legitimate role of a model landlord, by
putting his land to suitable use, in providing for tenants at lowest
possible price the best accommodations and facilities appropriate to
the situation that money can buy.
51. Q. Does not a land tax increase house rent or store rent?
A. The landlord, as a rule, exacts the full ground rent for the use
of his land. Neither by taking three dollars nor $30 per thousand in
taxation can land to be made worth anymore for use.
52. Q. In old cities, it is not nearly all the land in use?
A. About one-half the area of New York and Chicago is classed by the
assessor as vacant. In Boston the proportion is: occupied, 45 percent;
vacant, 43 percent; marsh, 12 percent.
53. Q. How would the single tax effect the farmer?
A. It would greatly reduce his taxes. His buildings, stock, and crops
would be exempt. His land is at present assessed at nearly twice its
proper unimproved the value, while town and city land is often valued
at less than one-half its actual value, thus subjecting him to a more
than fourfold disadvantage.
54. Q. What relief could it bring to strictly agricultural towns,
where the unimproved land values are very small?
8. However poor the town or heavy the taxes, it would at least tend
the equalize their present tax burden. The assessed value of land in
the three smallest towns of Massachusetts, Alford, Holland, and Peru,
is $282,335, or more than three times that of the buildings. Allowing
one-half of the assessed valuation of land to be improvement value,
the unimproved basis for taxation would be $141,168, or 60 percent
more than the buildings. Thus an apportionment according to unimproved
land values, increasing ever so slowly, would seem to be fairer than
one according to improvements, which require constant renewal.
55. Q. How would the single tax effect the tenant?
A. It would neither increase nor decrease his land rent. It would
reduce his house rent by the amount of the house tax.
56. Q. How would affect the man who owns the house he lives in?
A. In nearly every case he would reduce his taxes. Roughly speaking,
his taxes will be less or greater in proportion as his house is worth
more or less than his land.
57. Q. Would the single tax yield sufficient revenue for all
government purposes, local, state, and national?
A. Careful estimates by Mr. Thomas G. Shearman indicate that all
present taxes amount to not much more than one-half of the annual site
value of the land. But he said:
The honest needs of public government grow faster than
population and fully as fast as wealth itself. Local taxation will
increase rapidly; and it ought to do so..... This does not imply
that ground rent will not be sufficient to supply many, possibly
all, of those additions to human happiness which Henry George has
pictured in such glowing words. But such extensions of the sphere of
government must take place gradually; or they will be ruinous
failures, simply because the state cannot at once furnished the
necessary machinery for their successful operation.
58. Q. What expected result of the single tax needs studious
emphasis?
A. That it would unlock the land to labor at its present value for
use, instead of locking out labor from the land by a prohibitive price
based upon the future value for use.
59. Q. Is it correct to say that "land" is one thing, and
the "rent of land" another a quite different thing, and that
to take in taxation the rent of land it is not necessary to take the
land itself?
A. Ninety-one professors of political economy have answered "Yes."
Twenty-three have answered "No."
60. Q. Do you believe that economic rent ought to furnish a larger
proportion of public revenue than it does now?
A. One hundred nineteen professors of political economy have answered
"Yes." Eight have answered "No."
61. Q. Do you think there would be any injustice in taking by
taxation that future increment in the value of land?
A. Fifteen professors of political economy have answered "Yes."
Ninety-four have answered "No."
62. Q. Would it be wise to take gradually in taxation, say, 1/4,
one-half, 3/4 of the future increase in economic rent?
A One hundred one professors of political economy have answered "Yes."
Twenty-nine have answered "No."
63. Q. How could the single tax be put into operation?
A. By gradually transferring to land all taxes not already on it.
64. Q. How might such a plan be worked out?
A. If fifty cents per thousand should be deducted yearly for 30 years
from the rate on all property other than land, the reduction would
finally amount to $15 per thousand, and it would then be practically
exempt from all taxation.
65. Q. But how could it be worked out in case of the land?
A. Recognizing that a right thing may be done in a wrong way, it is
insisted that a right way ought to be found to do a thing that ought
to be done. The following is presented as a natural and convenient
unit of calculation: To be exact, an average of about 20 percent of
the gross ground rent of land is now taken in taxation, for instance,
in Boston, as well as for the whole state of Massachusetts. If an
additional one percent should be taken each year for 30 years, it
would amount at the end of that period to 30 percent, which, added to
20 percent, would make 50 percent, or one-half, which is about the
average proportion that present taxes levied on all property bear to
gross ground rent. Meantime few landowners would feel the change, much
less be prejudiced by it.
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