Taxation and Housing
Charles B. Fillebrown
[Reprinted from the book, Natural Taxation,
Part I / The Authorities / Chapter 11]
The housing problem is one aspect of the problem of the distribution
of wealth. Howsoever deep the motive which impels the housing
movement, its success can be achieved only through the operation of
cold unfeeling economic law which shall govern and effect a more just
distribution of wealth. Only by its aid can capital, through improved
planning and reduced cost of building, bring suitable housing within
reach of labor's ability to pay.
The solution of the housing problem is bound up with the conciliation
of labor in its alleged conflict with capital, a condition which
cannot come about until the distribution of current wealth shall be
between the two factors labor and capital, per se, instead of as now
between these and a third factor, privilege, that is, capital allied
with monopoly. In this way only can the fangs of privilege be drawn.
Capital of itself has no fangs.
The burden of our contention is that privilege is the bane of the
social situation, and that its abatement and gradual abolition should
be sought. In proportion as the perquisites of privilege are
transferred to the wage fund, in that proportion will the housing
perplexity cease to perplex, and there is no point upon which it is
more important that the public mind should be clearer than upon this.
The Century Dictionary defines privilege as "a special
and exclusive power conferred by law on particular persons, or classes
of persons, and ordinarily in derogation of the common right."
The popular conception of privilege is that it is the law-given power
of one man to profit at another man's expense.
The principal form of privilege is the appropriation by individuals
or by public service corporations, without adequate payment therefor,
of all or a large share of the economic rent of land, which rent is
created by the growth, activity, and expenditures of the community.
After this major privilege, come the minor ones connected with
patents, tariff, and the issue of currency.
"But," you will ask, "how can the treatment of
privilege contribute to the solution of the housing problem?" And
we answer, "By the gradual abatement or abolition of privilege
through taxation." A tax upon privilege has everything in its
favor, since it is conceded that such a tax can never be a burden upon
industry, nor can it never operate to reduce the wages of labor toward
increased prices to the consumer.
The immediate tendency of the taxation of privilege would be to
transfer to wages that portion of the current wealth which now flows
to privilege. In other words, it would widen and deepen the channel of
wages by enlarging opportunities for labor, while increasing the
purchasing power of nominal wages through reduction of prices. On the
other hand, it would abate privilege by requiring the man who has a
privilege to pay for it, the fair interference being that so far as
privilege is paid for, it ceases to be a privilege. A betterment of
wage necessarily follows the taxation of privilege. An estimate of 50
per cent would be a conservative one of the betterment to wages which
might be secured in this way.
The main approach to a fair distribution of wealth lies along the
lines of fair wages and fair prices. But what are fair wages and fair
prices? Practically and substantially fair prices are prices
unenhanced by privilege, and fair wages are wages undiminished by
taxation. Under such a regime wealth that now goes to privilege will
be gradually diverted to the wage fund so that eventually instead of
the two or channels of distribution, wages (counting interest as the
wages of capital per se) and privilege, current wealth, that is wealth
as it is created, will finally flow into the one channel of wages --
wages of capital, of hand, and of brain.
Above and beyond the value of franchise privilege, which in a final
analysis is itself a land value, there is one thing, viz., the private
appropriation of the net rent of land (total ground rent less taxes)
which constitutes the bulk of privilege and wages of gigantic
proportions. Various careful estimates agree that out of the total
wealth of the United States much more than fifty billions of values
are socially created but privately appropriated. On a 5 per cent basis
this would amount annually to $25 per capita, or an average of $125
per family of five, which of itself explains the constant increase in
the cost of living. In large cities where reliable statistics are
available, these figures run far higher. The people of the city of
Boston pay for the use of Boston land more than $50 million annually.
The city now takes of this amount more than ten millions in taxation,
leaving about forty millions net rent to be privately appropriated,
every dollar of which represents labor value. This would amount to say
$60 per capita, or the very considerable sum of $300 per family of
So much for the thing to be done, but how about a modus operandi?
Not only have presidents spoken in written freely on the abridgement
of privilege, but many proposed government measures have been aimed at
its accomplishment. Without invading the field politics, we may note
that republican Wall Street and democratic Tammany, the chief
exponents of non-partisan privilege, were simply evicted from the
Baltimore Convention, and many administrative achievements so far have
been in keeping with that initial action.
Congressional Trust bills have sought not to curb business but to
curb privilege. The fall of New York, New Haven and Hartford from 279
to 43 in the Wall Streets of the country means little to the traffic
or travel of the people who use the road. The railroad still remains
and its legitimate business remains. It does mean everything to the
stock market, the dealers in privilege, to speculators in and
forestallers of labor and skill and brains. Administrators keep right
on "running the road," however many of the millions that may
have been filched from widows and orphans, or however many
manipulators of privilege, posers as benevolent patrons of enterprise,
may go to the wall. Every curb to privilege means relief to labor from
payment of dividends on water. Every abridgement of privilege means
just so much carried to the credit side of the wage account, and this
it is that has immediate lady to do with the housing problem.
The record of the national administration so far affords striking
endorsement of the Jeffersonian principle of "equal opportunities
for all, special privileges to none." This is what states and
statesman ought to mean by "equality before the law."
Without this, equality before the law is the juggling phrase. Only so
far as privilege is expunged from the statute can there be any
approach to our vaunted "equality before the law."
People are awakening to the fact that for enormity of proportions,
for unconscious, unintentional but aggravating injustice, the private
appropriation of ground rent is more devastating than all other
privileges put together, and is "against public policy."
Think for a moment what have been the extensions, accelerated
exploitations, ramifications, and encroachments of privilege in the
brief period of 50 years; how it has battened upon the fruits of labor
which ought in justice to have gone to the nourishment of labor. What
is needed is a distinct change of tendency. Agitation in this
direction has been under way for some years, and during the twelve
months passed it has penetrated or inoculated almost every business
field, up to the dead line at which every reform halts, viz., the
land, which seems to be the sacred stopping place in the advance upon
every social enemy. The significance of this fact appears to have
escaped the attention even of non-privilege presidents. When people
outgrow the pagan fetish that the rent of land should go to the few
instead of to all, when they realize that, taking Boston for example,
the worship of this fetish costs its people annually not less than
$300 or $400 per family -- five or ten times more than the worship of
the true God -- than monopoly's a line of battle will vanish like
Under the tax laws of today every Boston man as occupier bears in
equal yearly tax burden on the house he lives in at the rates of $18
per thousand. Why should not the owner of Boston's land bear the same
burden at the same rate of $18 per thousand upon his investment now
confessedly free of the burden, thus putting the house man in the land
man on the same basis, that is to say, proportionately reducing the
income of each? To the above extent taxation may be applied for the
solution of your housing problem at once, and without a shadow of
injustice to the landowner. Such impartial rate on house-owner and
land-owner, of which a generation of even limited foresight might
easily have given us today full realization, would mean $12 million
more of economic rent (or say $80 per family) to the good of the
people Boston. Fifteen or twenty years would be ample for the gradual
accomplishment of the rectification of things, and landowners,
especially considering the exemption of their improvements, would
scarcely be aware of the change.
Let it be borne in mind that we have been speaking of the ultimate
possibilities of the taxation of economic rent, "the taking by
the community for the use of the community of that which is the
creation of the community." It is claimed for this process that
it will gradually effect the lockout of privilege while unlocking to
labor the doors of opportunity. Reflect for a moment upon what it
would mean to labor if Boston should make an intelligent and ernest
start to renew the imperfect housing even of its business, to say
nothing of its people. We are trying to present to your prophetic eye
the final beneficent results which a just tax system can be trusted to
work out without any overturn to person or institution or society. No
sudden shock is contemplated, but rather respect for the feelings of
the landowners, from hold as a class a full share of health may be
counted up upon. This general plan, if adopted, will, it is believed,
directly set in motion to tendencies: (1) the reduction of harmful
monopoly to a point of innocuous privilege, (2) the enlargement of the
wage fund to a point of fair proportional distribution. Just at what
point these opposing tendencies will meet in stable equilibrium only
time can tell. The vital thing is to lose no time in beginning. There
is no reasonable excuse while start should not be made directly in
this year 1916. A generation ought to work wonders. We are sometimes
met, however, by the sober question, "Where is the housing
capital to come from?" Naturally it should come out of a
superabundance of its own by which it would be self-constrained to
broaden and extend its field of investment to include the humblest of
housing. As fast and as far as capital's field of investment is
narrowed through the restraint of privilege, just so far will it have
to find a way, or, what is more in keeping with its responsibilities,
make a way to occupy itself in the very necessary dividend-paying but
now neglected work of housing the millions, the easy accomplishment of
a generation or two. We may confidently look to a new incidence of
taxation to enable the millions to pay the actual ground rent of the
land and interest on their houses. Today they are not able to bear
monopoly charges and needless taxes upon houses.
The habits and limitations of capital are patent even to the casual
observer. Its first preference is for land speculation, including
natural resources, franchises that are addicted to extra dividends,
and the watering of stocks. Already an oleaginous hand of the capital
octopus is plainly apparent in business consolidations. The first
direct attention of capital to the housing problem is of comparatively
recent date and has resulted, in Boston, in this seemingly complete
solution of the problem of "office" housing -- in a complete
hegira of tenants from chambers and garrets that were out of date even
in ante-bellum days, to quarters of perfect modern comfort and
utility. But at this stage capital seems to have halted for rest in
refreshment. Here, again, Boston has a ready explanation in that
office buildings offer a tempting rent roll at comparatively small
Up to now, capital, it may be said, has had little to do in the way
of looking around for jobs. Individuals have had to do the searching.
When the New York, New Haven and Hartford Railroad and many other
wide-open doors to big investments and big profits began to shop by
legislative compress, then capital, by pressure of its own
accumulation, may, after the housing of general business, turn to the
humbler employment of the housing of its artisans and laborers. The
increased taxation of land will operate as a double incentive. It will
invite capital to a sound investment at a fair rate of interest; it
will also constrain it to make improvements in order to secure income
from the land out of which to pay the land taxes.
The housing of Boston's general business, which requires
comparatively less capital but still more brains, is just now
beginning to receive attention. Chicago has one model department
store, Marshall Field's, model because it has room. There are but few
notable model department stores in the cities of the United States
because room cannot be had except at exaction prices in dealing with
one or twenty estates. Nine-tenths of Boston's mercantile business is
still literally fighting for room to expand.
Much of Boston's business is still housed behind, as it were, portable
or shifting galvanized outsides.
In the apartment and tenement housing is found a parallel to the
housing of business.
After providing the well-to-do apartment house (without children) and
the moderate tenements, capital shies at working down to the foot of
the list, but leaves the finishing stroke, the housing of the humblest
laborer, as a problem for society and the social worker to solve.
There is one rule that capital may be trusted to follow, viz., that
while it can get a double or treble rate on its present investments,
it will lack the incentive to supply a new housing which demands a
double investment at half the rate.
For the satisfactory solution of this problem, the housing of the
millions, there is required the same kind of money, but still more
brains, coupled with the public spirit and civic pride which, by the
gentle compulsion of a rectified self-interest will force capital into
the role of a model landlord in providing for tenants at lowest
possible price the best accommodations and facilities appropriate to
the situation that money can buy, example of which is found in the
hotels of the D. O. Mills foundation in the city of New York. In this
consummation, the landlord will find in taxation of valuable ally
since, with purchase prices of land reduced by the increased taxation,
he can do a larger business on the same amount of capital.
The proposal of a method of just, scientific, and natural taxation is
so simple and unpretending, that eager social reformers cannot believe
it possible that it contains within itself but fewer for the evils of
our time. They point to the unequal distribution of wealth, the growth
in power of monopolies, the watered stocks and bonds, the bribe-bought
franchises, the usurped privileges, the stolen lands, the wholesale
appropriation of public property to private use; and they ask how it
can be possible that "a mere fiscal reform" can bring relief
from all these evils. Nevertheless, we have tried to show that it can.
A liberal contribution to the solution of the housing problem may be
looked for in the reclamation of the people's rights to their
alienated public lands. The public domain has now been practically
absorbed into private hands. The Supreme Court has just confirmed a
railroad's title to three or four billions of dollars' worth of
California land, but no Supreme Court can exempt such land from equal
taxation under any general system. Taxation is the wide-open avenue to
the recovery of a nation's or a state's squandered natural resources.
Within an anti-privilege president on the congressional bridge, and
the National Housing Association at the wheel, the Ship of State may
beat steadily into the coveted haven of every nation's destiny -- the
welfare of its millions.
- Paper read at the Fourth
National Conference on Housing in America, at Minneapolis,
Minnesota, October 7, 1915.
- The A B C of Taxation, p. 148.
- The A B C of Taxation, p. 18.
- The A B C of Taxation, p. 150.
- The A B C of Taxation, pp.
- The A B C of Taxation, pp. 58,
59, 60, 70, 77.
- Natural Taxation,