Henry George
Charles B. Fillebrown
[Reprinted from the book, Natural Taxation,
published 1917.
Part I / The Authorities / Chapter 6]
Were we asked to state in a word what was Henry George's chief
contribution to the movement which is the subject of our inquiry, we
should answer that it was he who gave it a breath of life. His
predecessors, Smith, Mill, Dove, Burgess, and Macdonnell, had already
elucidated the general principles involved in the taxation of land
values. But whereas before his time the question was one of little
more than academic interest, since his time it has become with
thousands of ardent men and women almost a religion. His followers
have preached his gospel with missionary zeal and the so?called single
tax and the name of Henry George have become known to the remotest
corners of the globe. When the contributions of all the pioneers in
this movement have been finally assessed, Henry George will be
remembered as the profit, the reformer, the man with a mission.
His life was well calculated to develop the qualities of courage and
self?reliance called for by such a career. He was born in Philadelphia
in 1839. His formal school training terminated with a few months in
the high school when he was less than 14 years old. He had, however,
acquired taste for reading so that his real education suffered no
interruption. Perhaps more important for the work he was to do than
any book learning, was his education in the school of life. From the
time he left the high school until his death in 1897 experiences were
crowded into a span of years which might easily make him a hero of
romance. They included a boy's realized dream of going to sea on a
long voyage to India, learning the printer's trade, working his
passage to California as a ship's steward on a lighthouse steamer, a
runaway marriage with the lady of his heart, being without money and
without prospects, and a struggle against poverty leading him at one
time to the verge of desperation.
Then from the obscurity and privation of a journeyman printer and
editor of a struggling radical paper, he emerges into the limelight of
publicity. He beholds a vision, and conceives himself to have received
to divine call to preach the new gospel. In his own words:
Like a flash it came upon me that there was the reason
of advancing poverty with advancing wealth. With the growth of
population land grows in value, and the men who work it must pay
more for the privilege. I turned back amidst quiet thought to the
perceptions that then came to me and has been with me ever since.
Thus he describes his vision, and later, in these words, the
consciousness of a divine call:
On the night in which I finished the final chapter of
Progress and Poverty I felt that the talent entrusted to me
had been accounted for. I felt more fully satisfied, more deeply
grateful than if all the kingdoms of the earth had been laid at my
feet.
His vision is first crystallized into Our Land and Land Policy,
and later amplified and systematized in Progress and Poverty.
The sale of the latter book (completed after one year in seven months
of intense labor, and at first refused by all publishers) swells into
the millions of copies. It is translated into all the principal
languages of the globe. He becomes a mighty leader of the people whose
eloquence holds multitudes spellbound, and he dies in the midst of a
whirlwind campaign for mayor of the greatest city on the continent.
His parents were devoted church people and he himself, though he had
said that he cared nothing for creeds, was of an intensely religious
temperament. Some chapters of Progress and Poverty were
written in a spirit of almost apocalyptic fervor, and it was this that
gave it its wide currency. It was of a beatific vision to the
outclassed and disinherited. Its title indicates the main thought.
Science, discovery, invention, all that goes by the name of progress
were advancing by leaps and bounds, yet the men who toil the hardest
had small share in it. Poverty was their lot as it had then the lot of
their ancestors before there had been any talk of progress. Why was
it? Here was a man who had seen a vision and pointed away to
deliverance. So the people read his works and joined in the new
crusade against unjust power and privilege. And in their leader there
was no pretense. He believed implicitly in himself and in his gospel.
All these facts must be understood in order to appreciate Progress
and Poverty. It is, in a sense, a theological work as well as an
economic textbook. It is on the one hand an attempt to reconcile the
concept of a beneficent deity with the poverty and misery of mankind,
and, on the other hand, to analyze the causes of this same poverty and
misery by a coldly intellectual process, and to find the remedy
therefor. It is to show that the cause lies not in the lack of God's
bounty, but in man's blindness to natural law.
The proposition which is the subject of this volume is so closely
associated with the name of Henry George that the average man never
thinks of Henry George without thinking of the single tax and never
thinks of the single tax without thinking of Henry George. Yet the
doctrine of economic rent and the propriety of recognizing it as the
normal revenue of every form of government has been taught before his
time and often by much the same line of reasoning. Nevertheless it is
by no accident that the honor of discovery is popularly attributed to
Henry George. He it was who made the single tax a living issue. By the
force of his logic, by his courage, and his eloquence, and above all,
by the absolute sincerity of his conviction that he had made a
discovery not only of a just and natural system of taxation but also
of a system which was to usher in a social and economic millennium, he
aroused and in different world and compelled it to listen to his
message. His doctrine had come to him as a vision and he preached it
with the absolute self?confidence of one of the Hebrew profits for
telling the new Jerusalem. It was this that gave him his immense
popularity with the masses. He held out to them the promise of
deliverance from poverty.
The subjoined extracts from Henry George's work cover the purpose of
this book. "Rent and the law of rent" is its text in
essence. Those from Our Land and Land Policy, which was a
distinct forerunner of Progress and Poverty mark the date of
his real entrance into the economic arena as 1871 instead of us 1879.
The chapters, "The Remedy" and "The Canons of Taxation,"
are those for which he is best known in the taxation field.
OUR LAND AND LAND POLICY[1]
SOMETHING RADICAL NEEDED
What we want is something which shall destroy the
tendency to the aggregation of land, which shall break out present
monopolization, and which shall prevent (by doing away with the
temptation) future monopolization. And as arbitrary and restrictive
laws are always difficult to enforce, we want a measure which shall
be equal, uniform, and constant in its operation; a measure which
will not restrict enterprise, which will not curtailed production,
and which will not offend the natural sense of justice.
When our forty millions of people have to raise $800 million per
year for public purposes we cannot have any difficulty in
discovering such a remedy in the adjustment of taxation.
TAXATION OF LAND FALLS ONLY ON ITS OWNER
There is only one peculiarity in a land tax. With a few
trifling exceptions of no practical importance, it is the only tax
which must be paid by the holder of the thing being taxed. If we
impose a tax upon money loaned, the lender will charge it to the
borrower and the borrower must pay it, otherwise the money will be
sent out of the country for investment, and if the borrower uses it
in his business he, in his turn, must charged to his customers, or
his business becomes unprofitable. If we impose a tax upon
buildings, those who use them must pay it, as otherwise the erection
of buildings becomes unprofitable and will cease until rents become
a high enough to pay the regular profit on the cost of the building
and the tax besides. But not so with land. Land is not an article of
production. Its quantity is fixed. No matter how little you tax
there will be no more of it; no matter how much you tax there will
be no less. It can neither be removed nor made scarce by cessation
of production. There is no possible way in which boulders of land
can shift the tax upon the user.
And so while the effects of taxation upon all other things is to
increase their value, and thus to make the consumer pay the tax --
the effect of a tax upon land is to reduce its value -- that is,
it's selling price, as it reduces the profit of its ownership
without reducing its supply. It will not, however, reduce its
renting price. The same amount of rent will be paid; but a portion
of it will now go to the state instead of to the landlord. And were
we to impose upon land a tax equal to the whole annual profit of its
ownership, land would be worth nothing and might in many cases be
abandoned by its owners. But the users would still have to pay as
much as before -- paying in taxes what they formerly paid as rent.
And reversely, if we were to reduce or take off the taxes on land,
the owner, not the user, would get the benefits. Rents would be no
higher, but would leave more profit and the value of land would be
more.
OF THE JUSTICE OF TAXING LAND
Here is a lot in the central part of San Francisco,
which, irrespective of the buildings on upon it, is worth $100,000.
What gives that value? Not what the owner has done, but the fact
that 150,000 people have settled around it. This lot yields its
owner $10,000 annually. Where does this $10,000, from? Evidently
from the earnings of the workers of the community, for it can come
from nowhere else.
Here is a lot on the outskirts. It is in the same condition in
which nature left it. Intrinsically it is worth no more than when
there were but 100 people at Yerba Buena Cove. Then it was worth
nothing. Now that there are 150,000 people here and more coming, it
is worth $3,000. That is, its owner can command $3000 worth of the
labor or the wealth all of the community. What does he give for
this? Nothing. The land was there before he was. Suppose a community
like that of San Francisco, in which land, though in individual
hands as now, has no value. Suppose, then, that all at once the land
was given a value of, say, $150 million, which is about the present
value of land in San Francisco. What would be the effect? That a
tax, of which $150,000,000 is the capitalized value, would be levied
upon the whole community for the benefit of a portion. There would
be no more in the community than before, and no greater means of
producing wealth. But of that wealth, beyond the share which they
formerly had, the landowners would now command $150 million. That
is, there would be $150 million less for other people who were not
landholders.
And does not this consideration of the nature in effective land
values go far to explain the puzzling fact that notwithstanding all
the economies in production and distribution which a dense
population admits, just as a community increases in population and
wealth, so does the reward of the labor or decrease in poverty
deepen?
One hundred men settle in a new place. Land has at first little or
no value. The net result of their labor is divided pretty equally
between them. Each one gets pretty nearly the full value of its
contribution to the general stock. The community becomes 100,000.
Land has become valuable, it's value perhaps aggregating as much as
the value of all other property. The production of the community may
now be more per capita for each individual who works, but before the
division is made, one?half of the product must go to the
landholders. How, then, can the laborer get so much as he could in
the small community?
Now in this view of the matter -- considering land values as an
indication of the appropriation (though doubtless the necessary
appropriation) of the wealth of all; considering land rentals as a
tax upon the labor of the community, is not a tax upon land values
the most just and the most equal tax that can be levied. Should we
not take that which rightfully belongs to the whole before we take
that which rightfully belongs to the individual?
THE EFFECTS OF SUCH A CHANGE
Consider the effects of the adoption of such a system:
The mere holder of land would be called on to pay just as much
taxes as the user of land. The owner of a vacant city lot would have
to pay as much for the privilege of keeping other people off its
till he wanted to use it, as his neighbor who has a fine house upon
his lot, and is the either using or deriving rent from it. The
monopolizer of agricultural land would be taxed as much as though
his land were covered with improvements, with crops, and with stock.
Land prices would fall; land speculation would receive its death
blow; land monopolization would no longer pay. Millions and millions
of acres from which settlers are now shut out would be abandoned by
their present owners, or sold to settlers on nominal terms. It is
only in rare cases that it would pay anyone to get land before he
wanted to use it, so that those who really wanted to use land would
find it easy to get.
RENT AND THE LAW OF RENT[2]
The term rent, in its economic sense -- that is, when
used, as I am using it, to distinguish that part of the produce
which accrues to the owners of land or other natural capabilities by
virtue of their ownership -- differs in meaning from the word rent
as commonly used. In some respects this economic meaning is narrower
than the common meaning; in other respects it is wider.
It is narrower in this: In common speech, we apply the word rent to
payments for the use of buildings, machinery, fixtures, etc., as
well as to payments for the use of land or other natural
capabilities; and in speaking of the rent of a house or the rent of
a farm, we do not separate the price for the use of the improvements
from the price for the use of the bare land. But in the economic
meaning of rent, payments for the use of any of the products of
human exertion are excluded, and of the lumped payments for the use
of houses, farms, etc., only that part is rent which constitutes the
consideration for the use of the land -- that part paid for the use
of buildings or other improvements being properly interest, as it is
a consideration for the use of capital.
It is wider in this: In common speech we speak of rent only when
owner and user are distinct persons. But in the economic sense there
is also rent where the same person is both owner and user. Where
owner and user are thus the same person, whatever part of his income
he might obtain by letting the land to another is rent, while the
return for his labor and capital are that part of his income which
they would yield him did he hire instead of owning the land. Rent is
also expressed in a selling price. When land is purchased, the
payment which is made for the ownership, or right to perpetual use,
is rent commuted or capitalized. If I buy land for a small price and
hold it until I can sell it for a large price, I have become rich,
not by wages for my labor or by interest upon my capital, but by the
increase of rent. Rent, in short, is the share in the wealth
produced which the exclusive right to the use of natural
capabilities gives to the owner. Wherever land has an exchange value
there is rent in the economic meaning of the term. Wherever land
having a value is used, either by owner or hirer there is rent
actual; wherever it is not used, but still has a value, there is
rent potential. It is this capacity of yielding rent which gives
value to land. Until its ownership will confer some advantage, land
has no value.[3]
Thus rent or land value does not arise from the productiveness or
utility of land. It in no wise represents any help or advantage
given to production, but simply the power of securing a part of the
results of production. No matter what are its capabilities, land can
yield no rent and have no value until some one is willing to give
labor or the results of labor for the privilege of using it; and
what any one will thus give depends not upon the capacity of the
land, but upon its capacity as compared with that of land that can
be had for nothing. I may have very rich land, but it will yield no
rent and have no value so long as there is other land as good to be
had without cost. But when this other land is appropriated, and the
best land to be had for nothing is inferior, either in fertility,
situation, or other quality, my land will begin to have a value and
yield rent. And though the productiveness of my land may decrease,
yet if the productiveness of the land to be had without charge
decreases in greater proportion, the rent I can get, and
consequently the value of my land, will steadily increase. Rent, in
short, is the price of monopoly, arising from the reduction to
individual ownership of natural elements which human exertion can
neither produce nor increase.
If one man owned all the land accessible to any community, he
could, of course, demand any price or condition for its use that he
saw fit; and, as long as his ownership was acknowledged, the other
members of the community would have but death or emigration as the
alternative to submission to his terms. This has been the case in
many communities; but in the modern form of society, the land,
though generally reduced to individual ownership, is in the hands of
too many different persons to permit the price which can be obtained
for its use to be fixed by mere caprice or desire. While each
individual owner tries to get all he can, there is a limit to what
he can get, which constitutes the market price or market rent of the
land, and which varies with different lands and at different times.
The law, or relation, which, under these circumstances of free
competition among all parties (the condition which in tracing out
the principles of political economy is always to be assumed),
determines what rent or price can be got by the owner, is styled the
law of rent. This fixed with certainty, we have more than a starting
point from which the laws which regulate wages and interest may be
traced. For, as the distribution of wealth is a division, in
ascertaining what fixes the share of the produce which goes as rent,
we also ascertain what fixes the share which is left for wages,
where there is no co-operation of capital; and what fixes the joint
share left for wages. and interest, where capital does co-operate in
production.
Fortunately, as to the law of rent there is no necessity for
discussion. Authority here coincides with common sense,[4]
and the accepted dictum of the current political
economy has the self?evident character of a geometric axiom. This
accepted law of rent, which John Stuart Mill denominates the pons
asinorum of political economy, is sometimes styled "Ricardo's
law of rent," from the fact that, although not the first to
announce it, he first brought it prominently into notice.[5]
It is:
The rent of land is determined by the excess of its produce over
that which the same application can secure from the least productive
land in use.
This law, which of course applies to land used for other purposes
than agriculture, and to all natural agencies, such as mines,
fisheries, etc., has been exhaustively explained and illustrated by
all the leading economists since Ricardo. But its mere statement has
all the force of a self-evident proposition, for it is clear that
the effect of competition is to make the lowest reward for which
labor and capital will engage in production, the highest that they
can claim; and hence to enable the owner of more productive land to
appropriate in rent all the return above that required to recompense
labor and capital at the ordinary rate ?? that is to say, what they
can obtain upon the least productive land in use, or at the least
productive point, where, of course, no rent is paid.
Perhaps it may conduce to a fuller understanding of the law of rent
to put it in this form: The ownership of a natural agent of
production will give the power of appropriating so much of the
wealth produced by the exertion of labor and capital upon it as
exceeds the return which the same application of labor and capital
could secure in the least productive occupation in which they freely
engage.
This, however, amounts to precisely the same thing, for there is no
occupation in which labor and capital can engage which does not
require the use of land; and, furthermore, the cultivation or other
use of land will always be carried to as low a point of
remuneration, all things considered, as is freely accepted in any
other pursuit. Suppose, for instance, a community in which part of
the labor and capital is devoted to agriculture and part to
manufactures. The poorest land cultivated yields an average return
which we will call 20, and 20 therefore will be the average return
to labor and capital, as well in manufactures as in agriculture.
Suppose that from some permanent cause the return in manufactures is
now reduced to 15. Clearly, the labor and capital engaged in
manufactures will turn to agriculture; and the process will not stop
until, either by the extension of cultivation to inferior lands or
to inferior points on the same land, or by an increase in the
relative value of manufactured products, owing to the diminution of
production -- or, as a matter of fact, by both processes -- the
yield to labor and capital in both pursuits has, all things
considered, been brought again to the same level, so that whatever
be the final point of productiveness at which manufactures are still
carried on, whether it be 18 or 17 or 16, cultivation will also be
extended to that point. And, thus, to say that rent will be the
excess in productiveness over the yield at the margin, or lowest
point, of cultivation, is the same thing as to say that it will be
the excess of produce over what the same amount of labor and capital
obtains in the least remunerative occupation.
The law of rent is, in fact, but a deduction from the law of
competition, and amounts simply to the assertion that as wages and
interest tend to a common level, all that part of the general
production of wealth which exceeds what the labor and capital
employed could have secured for themselves, if applied to the
poorest natural agent in use, will go to landowners in the shape of
rent. It rests, in the last analysis, upon the fundamental
principle, which is to political economy what the attraction of
gravitation is to physics -- that men will seek to gratify their
desires with the least exertion.
This, then, is the law of rent. Although many standard treatises
follow too much the example of Ricardo, who seems to view it merely
in its relation to agriculture, and in several places speaks of
manufactures yielding no rent (when, in truth, manufactures and
exchange yield the highest rents, as is evinced by the greater value
of land in manufacturing and commercial cities), thus hiding the
full importance of the law, yet, ever since the time of Ricardo, the
law itself has been clearly apprehended and fully recognized. But
not so its corollaries. Plain as they are, the accepted doctrine of
wages (backed and fortified not only as has been hitherto explained,
but by considerations whose enormous weight will be seen when the
logical conclusion toward which we are tending is reached) has
hitherto prevented their recognition. Yet, is it not as plain as the
simplest geometrical demonstration, that the corollary of the law
of rent is the law of wages, where the division of the produce is
simply between rent and wages; or the law of wages and interest
taken together, where the division is into rent, wages, and
interest? Stated reversely, the law of rent is necessarily the law
of wages and interest taken together, for it is the assertion, that
no matter what the production which results from the application of
labor and capital, these two factors will receive in wages and
interest only such part of the produce as they could have produced
on land free to them without the payment of rent -- that is, the
least productive land or point in use. For, if, of the produce, all
over the amount which labor and capital could secure from land for
which no rent is paid must go to land owners as rent, then all that
can be claimed by labor and capital as wages and interest is the
amount which they could have secured from land yielding no rent.
Or to put it in algebraic form:
As Produce = Rent + Wages + Interest,
Therefore, Produce ? Rent = Wages + Interest.
Thus wages and interest do not depend upon the produce of labor and
capital, but upon what is left after rent is taken out; or, upon the
produce which they could obtain without paying rent -- that is, from
the poorest land in use. And hence, no matter what be the increase
in productive power, if the increase in rent keeps pace with it,
neither wages nor interest can increase.
The moment this simple relation is recognized, a flood of light
streams in upon what was before inexplicable, and seemingly
discordant facts range themselves under an obvious law. The increase
of rent which goes on in progressive countries is at once seen to be
the key which explains why wages and interest fail to increase with
increase of productive power. For the wealth produced in every
community is divided into two parts by what may be called the rent
line, which is fixed by the margin of cultivation, or the return
which labor and capital could obtain from such natural opportunities
as are free to them without the payment of rent. From the part of
the produce below this line wages and interest must be paid. All
that is above goes to the owners of land. Thus, where the value of
land is low, there may be a small production of wealth, and yet a
high rate of wages and interest, as we see in new countries. And,
where the value of land is high, there may be a very large
production of wealth, and yet a low rate of wages and interest, as
we see in old countries. And, where productive power increases, as
it is increasing in all progressive countries, wages and interest
will be affected, not by the increase, but by the manner in which
rent is affected. If the value of land increases proportionately,
all the increased production will be swallowed up by rent, and wages
and interest will remain as before. If the value of land increases
in greater ratio than productive power, rent will swallow up even
more than the increase; and while the produce of labor and capital
will be much larger, wages and interest will fall. It is only when
the value of land fails to increase as rapidly as productive power,
that wages and interest can increase with the increase of productive
power. All this is exemplified in actual fact.
HOW EQUAL RIGHTS TO THE LAND MAY BE ASSERTED AND SECURED[7]
We have traced the want and suffering that everywhere
prevail among the working classes, the recurring paroxysms of
industrial depression, the scarcity of employment, the stagnation of
capital, the tendency of wages to the starvation point, that exhibit
themselves more and more strongly as material progress goes on, to
the fact that the land on which and from which all must live is made
the exclusive property of some.
We have seen that there is no possible remedy for these evils but
the abolition of their cause; we have seen that private property in
land has no warrant in justice, but stands condemned as the denial
of natural right -- a subversion of the law of nature that as social
development goes on must condemn the masses of men to a slavery the
hardest and most degrading.
We have weighed every objection, and seen that neither on the
ground of equity or expediency is there anything to deter us from
making land common property by confiscating rent.
But a question of method remains. How shall we do it?
We should satisfy the law of justice, we should meet all economic
requirements, by at one stroke abolishing all private titles,
declaring all land public property, and letting it out to the
highest bidders in lots to suit, under such conditions as would
sacredly guard the private right to improvements.
Thus we should secure, in a more complex state of society, the same
equality of rights that in a ruder state were secured by equal
partitions of the soil, and by giving the use of the land to whoever
could procure the most from it, we should secure the greatest
production.
Such a plan, instead of being a wild, impracticable vagary, has
(with the exception that he suggests compensation to the present
holders of land -- undoubtedly a careless concession which he upon
reflection would reconsider) been indorsed by no less eminent a
thinker than Herbert Spencer, who (Social Statics, Chap. IX,
Sec. 8) says of it:
"Such a doctrine is consistent with the highest state of
civilization; may be carried out without involving a community of
goods, and need cause no very serious revolution in existing
arrangements. The change required would simply be a change of
landlords. Separate ownership would merge into the joint-stock
ownership of the public. Instead of being in the possession of
individuals, the country would be held by the great corporate body
-- society. Instead of leasing his acres from an isolated
proprietor, the farmer would lease them from the nation. Instead of
paying his rent to the agent of Sir John or his Grace, he would pay
it to an agent or deputy agent of the community. Stewards would be
public officials instead of private ones, and tenancy the only land
tenure. A state of things so ordered would be in perfect harmony
with the moral law. Under it all men would be equally landlords, all
men would be alike free to become tenants.... Clearly, therefore, on
such a system, the earth might be enclosed, occupied and cultivated,
in entire subordination to the law of equal freedom."
But such a plan, though perfectly feasible, does not seem to me the
best. Or rather I propose to accomplish the same thing in a simpler,
easier, and quieter way, than that of formally confiscating all the
land and formally letting it out to the highest bidders.
To do that would involve a needless shock to present customs and
habits of thought -- which is to be avoided.
To do that would involve a needless extension of governmental
machinery -- which is to be avoided. It is an axiom of
statesmanship, which the successful founders of tyranny have
understood and acted upon that great changes can best be brought
about under old forms. We, who would free men, should heed the same
truth. It is the natural method. When nature would make a higher
type, she takes a lower one and develops it. This, also, is the law
of social growth. Let us work by it. With the current we may glide
fast and far. Against it, it is hard pulling and slow progress.
I do not propose either to purchase or to confiscate private
property in land. The first would be unjust; the second, needless.
Let the individuals who now hold it still retain, if they want to,
possession of what they are pleased to call their land. Let them
continue to call it their land. Let them buy and sell, and bequeath
and devise it. We may safely leave them the shell, if we take the
kernel. It is not necessary to confiscate land; it is only
necessary to confiscate rent.
Nor to take rent for public uses is it necessary that the State
should bother with the letting of lands, and assume the chances of
the favoritism, collusion, and corruption this might involve. It is
not necessary that any new machinery should be created. The
machinery already exists. Instead of extending it, all we have to do
is to simplify and reduce it. By leaving to landowners a percentage
of rent which would probably be much less than the cost and loss
involved in attempting to rent lands through State agency, and by
making use of this existing machinery, we may, without jar or shock,
assert the common right to land by taking rent for public uses.
We already take some rent in taxation. We have only to make some
changes in our modes of taxation to take it all.
What I, therefore, propose, as the simple yet sovereign remedy,
which will raise wages, increase the earnings of capital, extirpate
pauperism, abolish poverty, give remunerative employment to whoever
wishes it, afford free scope to human powers, lessen crime, elevate
morals, and taste, and intelligence, purify government and carry
civilization to yet nobler heights, is -- to appropriate rent by
taxation.
In this way the State may become the universal landlord without
calling herself so, and without assuming a single new function. In
form, the ownership of land would remain just as now. No owner of
land need be dispossessed, and no restriction need be placed upon
the amount of land any one could hold. For, rent being taken by the
State in taxes, land, no matter in whose name it stood, or in what
parcels it was held, would be really common property, and every
member of the community would participate in the advantages of its
ownership.
Now, insomuch as the taxation of rent, or land values, must
necessarily be increased just as we abolish other taxes, we may put
the proposition into practical form by proposing
--
To abolish all taxation save that upon land values.
As we have seen, the value of land is at the beginning of society
nothing, but as society develops by the increase of population and
the advance of the arts, it becomes greater and greater. In every
civilized country, even the newest, the value of the land taken as a
whole is sufficient to bear the entire expenses of government. In
the better developed countries it is much more than sufficient.
Hence it will not be enough merely to place all taxes upon the value
of land. It will be necessary, where rent exceeds the present
governmental revenues, commensurately to increase the amount
demanded in taxation, and to continue this increase as society
progresses and rent advances. But this is so natural and easy a
matter, that it may be considered as involved, or at least
understood, in the proposition to put all taxes on the value of
land. That is the first step upon which the practical struggle must
be made. When the hare is once caught and killed, cooking him will
follow as a matter of course. When the common right to land is so
far appreciated that all taxes are abolished save those which fall
upon rent, there is no danger of much more than is necessary to
induce them to collect the public revenues being left to individual
landholders.
Experience has taught me (for I have been for some years
endeavoring to popularize this proposition) that wherever the idea
of concentrating all taxation upon land values finds lodgment
sufficient to induce consideration, it invariably makes way, but
there are few of the classes most to be benefited by it, who at
first, or even for a long time afterward, see its full significance
and power. It is difficult for workingmen to get over the idea that
there is a real antagonism between capital and labor. It is
difficult for small farmers and homestead owners to get over the
idea that to put all taxes on the value of land would be unduly to
tax them. It is difficult for both classes to get over the idea that
to exempt capital from taxation would be to make the rich richer,
and the poor poorer. These ideas spring from confused thought. But
behind ignorance and prejudice there is a powerful interest, which
has hitherto dominated literature, education, and opinion. A great
wrong always dies hard, and the great wrong which in every civilized
country condemns the masses of men to poverty and want, will not die
without a bitter struggle.
I do not think the ideas of which I speak can be entertained by the
reader who has followed me thus far; but inasmuch as any popular
discussion must deal with the concrete, rather than the abstract,
let me ask him to follow me somewhat further, that we may try the
remedy I have proposed by the accepted canons of taxation. In doing
so, many incidental bearings may be seen that otherwise might escape
notice.
THE PROPOSITION TRIED BY THE CANONS OF TAXATION[8]
The best tax by which public revenues can be raised is
evidently that which will closest conform to the following
conditions:
(1) That it bear as lightly as possible upon production -- so as
least to check the increase of the general fund from which taxes
must be paid and the community maintained.
(2) That it be easily and cheaply collected, and fall as directly
as may be upon the ultimate payers -- so as to take from the people
as little as possible in addition to what it yields the government.
(3) That it be certain -- so as to give the least opportunity for
tyranny or corruption on the part of officials, and the least
temptation to lawbreaking and evasion on the part of the taxpayers.
(4) That it bear equally -- so as to give no citizen an advantage
or put any at a disadvantage, as compared with others.
Let us consider what form of taxation best accords with these
conditions. Whatever it be, that evidently will be the best mode in
which the public revenues can be raised.
I. THE EFFECT OF TAXES UPON PRODUCTION
All taxes must evidently come from the produce of land
and labor, since there is no other source of wealth than the union
of human exertion with the material and forces of nature. But the
manner in which equal amounts of taxation may be imposed may very
differently affect the production of wealth. Taxation which lessens
the reward of the producer necessarily lessens the incentive to
production; taxation which is conditioned upon the act of
production, or the use of any of the three factors of production,
necessarily discourages production. Thus taxation which diminishes
the earnings of the laborer or the returns of the capitalist tends
to render the one less industrious and intelligent, the other less
disposed to save and invest. Taxation which falls upon the processes
of production interposes an artificial obstacle to the creation of
wealth. Taxation which falls upon labor as it is exerted, wealth as
it is used as capital, land as it is cultivated, will manifestly
tend to discourage production much more powerfully than taxation to
the same amount levied upon laborers, whether they work or play,
upon wealth whether used productively or unproductively, or upon
land whether cultivated or left waste.
The mode of taxation is, in fact, quite as important as the amount.
As a small burden badly placed may distress a horse that could carry
with ease a much larger one properly adjusted, so a people may be
impoverished and their power of producing wealth destroyed by
taxation, which, if levied in another way, could be borne with ease.
A tax on date trees, imposed by Mohammed Ali, caused the Egyptian
fellahs to cut down their trees; but a tax of twice the amount
imposed on the land produced no such result. The tax of ten per
cent. on all sales, imposed by the Duke of Alva in the Netherlands,
would, had it been maintained, have all but stopped exchange while
yielding but little revenue.
But we need not go abroad for illustrations. The production of
wealth in the United States is largely lessened by taxation which
bears upon its processes. Shipbuilding, in which we excelled, has
been all but destroyed, so far as the foreign trade is concerned,
and many branches of production and exchange seriously crippled, by
taxes which divert industry from more to less productive forms.
This checking of production is in greater or less degree
characteristic of most of the taxes by which the revenues of modern
governments are raised. All taxes upon manufactures, all taxes upon
commerce, all taxes upon capital, all taxes upon improvements, are
of this kind. Their tendency is the same as that of Mohammed Ali's
tax on date trees, though their effect may not be so clearly seen.
All such taxes have a tendency to reduce the production of wealth,
and should, therefore, never be resorted to when it is possible to
raise money by taxes which do not check production. This becomes
possible as society develops and wealth accumulates. Taxes which
fall upon ostentation would simply turn into the public treasury
what otherwise would be wasted in vain show for the sake of show;
and taxes upon wills and devises of the rich would probably have
little effect in checking the desire for accumulation, which, after
it has fairly got hold of a man, becomes a blind passion. But the
great class of taxes from which revenue may be derived without
interference with production are taxes upon monopolies -- for the
profit of monopoly is in itself a tax levied upon production, and to
tax it is simply to divert into the public coffers what production
must in any event pay.
FOOTNOTES:
- The Works of Henry George,
Vol. IX, chap. V, extracts from pp.101 to 112. Doubleday, Page &
Co., 1898.
- George, Henry, Progress
and Poverty, Book III, chap. II, Doubleday, Page & Co.,
1912.
- In speaking of the value of
land I use and shall use the words as referring to the value of
the bare land. When I wish to speak of the value of land and
improvements I shall use those words.
- I do not mean to say that the
accepted law of rent has never been disputed. In all the nonsense
that in the present disjointed condition of the science has been
printed as political economy, it would be hard to find anything
tht has not been disputed. But I mean to say that it has the
sanction of all economic writes who are really to be regarded as
authority. As John Stuart Mill says (Book II, Chap. XVI), "there
are few persons who have refused teir assent to it, except from
not having thoroughly understood it. The loose and inaccurate way
in which it is often apprehended by those who affect to refute it
is very remarkable." An observation which has received many
later exemplicatins.
- According to McCulloch the law
of rent was first state din a pamphlet by Dr. James Anderson of
Edinburgh in 1777, and simultaneously in the beginning of this
century by Sir Edward West, Mr. Malthus, and Mr. Ricardo.
- Buckle (Chap. 11, History
of Civilization) recognizes the necessary relation between
rent, interest, and wages, but evidently never worked it out.
- Progress and Poverty,
Book VII. Chap. II.
- Progress and Poverty,
Book VIII, Chap. III.
|