Adam Smith
Charles B. Fillebrown
[Reprinted from the book, Natural Taxation,
published 1917.
Part I / The Authorities / Chapter 1]
ADAM SMITH, to whom is usually assigned the honor of raising
political economy to the dignity of a science, was born at Kirkcaldy,
in Scotland in 1723. He was educated at Glasgow and Oxford and was for
years a professor in the University of Glasgow. He spent two years in
travel on the continent as tutor to the young Duke of Buccleuch.
During these travels his mind received perceptible stimulus from the
physiocrats, with whom he came much in contact. The ten years
following he spent in studious retirement at Kirkcaldy reflecting upon
the economic problems to which his mind had been directed during his
travels. At the end of this period his epoch-making work, an Inquiry
into the Nature and Causes of the Wealth of Nations, appeared, and a
work which even after the lapse of nearly a century and a half still
forms the groundwork of economic theory.
In this great work we find most of the broad economic laws which
characterize the science of today either fully elaborated or hinted
at, and the whole arranged in a scheme of orderly development, showing
the power of his mind for connected and comprehensive grasp of
principle. The prevailing "mercantile system" was attacked
and its fallacy revealed. The wealth of a country was shown to depend
upon the skill with which its labor is applied and not upon the gold
and silver within its borders. The gains from the division of labor
were explained and the true nature of money was elucidated. The laws
of price and value were discussed, and the nature and function of
capital. The laws of the distribution of social income in wages,
profits, and rent were also developed.
In regard to rent, the honor of fully developing its nature in law is
usually assigned to Ricardo. While Smith hinted at the true revelation
between rent and price he yet believed that ground rent formed a part
of price. Although he fell but little short of a complete
understanding of the nature of rent, he was in fact more than 100
years ahead and his contemporaries, while in perceiving the fitness of
rent as a source of revenue to the government he anticipated Henry
George by a century. The passage containing his plea for the taxation
of ground rent is in every way so forceful and admirable that it
deserves to be reproduced in full.
Ground rents are a still more proper subject of taxation than the
rent of houses. A tax upon ground rents would not raise the rents of
houses. It would fall altogether upon the owner of the ground rent,
who acts always as a monopolist, and exacts the greatest rent to which
can be docked for the use of his ground. More or less can be docked
for it accordingly as the competitors happened to be richer or poorer,
or can afford to gratify their fancy for a particular spot of ground
at a greater or smaller expense. In every country the greatest number
of rich competitors is in the capital, and it is there accordingly
that the highest ground rents are always to be found. As the wealth of
those competitors would in no respect be increased by a tax upon
ground rents, they would not probably be disposed to pay more for the
use of the ground. Whether the tax was to be advanced by the
inhabitant, or by the owner of the ground, would be a little
importance. The more the inhabited was obliged to pay for the tax, the
less he would incline to pay for the ground; so that the final payment
of the tax would fall altogether upon the owner of the ground rent.
The ground rents of uninhabited houses ought to pay no tax.
Both ground rents and the ordinary rent of land are a species of
revenue which the owner, in many cases enjoys without any care or
attention of his own. Though all part of this revenue should be taken
from him in order to defray the expenses of the state, no
discouragement will thereby be given to any sort of industry. To the
annual produce of the land and labor of the society, the real wealth
than revenue of the great body of the people, might be the same after
such taxes before. Ground rents and the ordinary rent of land are,
therefore, perhaps, the species of revenue which can best bear to have
a particular tax imposed upon them.
Ground rents seem, in this respect of more proper subject them
peculiar taxation than even the ordinary rent of land. The ordinary
rent of land is, in many cases, owing partly at least to the attention
and good management of the landlord. A very heavy tax might discourage
too much this attention and good management. Ground rents, so far as
they exceed the ordinary rent of land, are altogether owing to the
good government of this sovereign, which, by protecting the industry
either of the whole people, or of the inhabitants of some big
particular place, enables them to pay so much more than its real value
for the ground which they build their houses upon; or to make to its
owners so much more than compensation for the loss which he might
sustain by this use of it. Nothing can be more reasonable than that a
fund which always its existence to the good government of the state
should be taxed peculiarly, or should contribute something more than
the greater part of other funds, toward the support of that
government.[1]
It will be seen that in this quotation are in body of all the
essential elements of the modern doctrine of the "single tax."
"Ground rents are a still more proper subject of taxation than
the rent of houses." "A tax upon ground rents would not
raise the rent of houses. It would fall altogether upon the owner of
the ground rent." They are a species of revenue "which the
owner in many cases enjoys without any care or attention of his own."
A discrimination is made between ground rents and ordinary rents, as
the superior fitness of the former as a subject of taxation is pointed
out: "The ordinary rent of land is, in many cases, owing partly
at least to the attention and good management of the landlord. A very
heavy tax might discourage too much this attention and good
management." Finally the true nature of ground rent as a social
product, and hence the perfect propriety of taxing it for the benefit
of the whole people, is clearly pointed out: "Ground rents, so
far as they exceed the ordinary rent of land, are altogether owing to
the good government of the sovereign."
When we consider that the Wealth of Nations appeared in 1776 and that
the work of Henry George did not appear till about a century later, it
seems just that advocates of natural taxation should place on the same
scroll side-by-side with the names of Henry George the name of Adam
Smith as one of the founders of their great reform.
FOOTNOTES
- Smith, Adam, The Wealth of Nations (1776), Book V,
Chap. II, Part I, article I.
|
