The American Tax Heritage
and the Better Way
Noah D. Alper
[A paper delivered at the meeting of the Missouri
Economics Association, held 1 October, 1966, at the University of
Missouri, Columbia, Missouri.]
America has a wonderful heritage of political freedom and individual
liberty. The essence of this heritage is rule by law, not by man. Many
think freedom is on the decline today. But with ample power in the
hands of the people enough remains to correct our errors and to
achieve a far greater perfection of this heritage in the future.
Whether we do so depends on the ideas of economic science and social
justice we generate and publicize to assure such an accomplishment.
Economic errors lie at the root of most problems that concern us
today. The vast concentration of wealth and political power, the
persistence of poverty with its slums and other symptoms that go with
it, are politically hot issues and dominate political action. The view
that these evils result from Free Enterprise, with its admitted power
of productivity, is unreasonable; the view that errors in its
operation cause them is not.
In the early years of America and until the end of the 19th century,
an important physical fact had a vast and favorable influence on
economic conditions, on the number of jobs and the amount of wages
earned. An abundance of good free land existed. Economic exploitation
could not be effective with such a frontier of opportunity. Yet in
1857, Lord Macaulay wrote his famous letter to Henry S. Randall, the
biographer of Jefferson, which President Garfield said startled him "like
an alarm bell at night." "Your fate," Lord Macaulay
wrote, "I believe to be settled, though it is deferred by a
physical cause. As long as you have a boundless extent of fertile and
unoccupied land, your laboring population will be far more at ease
than is the laboring population of the old world, and while this is
the case the Jefferson politics may continue to exist without fatal
calamity. But the time will come
"; and he pictured very
well indeed what so many judge is happening today - the growth of the
power of the State and the decline of man's personal freedom.
Along with our heritage of political freedom came our heritage of a
tax system which was generally bad; and we have succeeded in making it
much worse over the years. The tax policies imposed on the people of
America by King George III were unpopular in the 1770's, not so much
as a matter of economics as of politics. The cry of "Taxation
without representation is unjust," and the resultant "Boston
Tea Party," sparked our great revolution for the freedom and
dignity of man. But one can imagine King George III rocking in his
grave with laughter were it possible for him to see today's tax system
achieved "with representation." It is difficult to believe
the King and his royal and aristocratic henchmen, who were in effect
the government - the law makers, administrators and judges of England,
being at all unhappy with the way we tax our people. Whether from
design or by its just happening, it favors the same classes of
privileged economic interests in the United States that tax policy has
long favored in England.
I will not be concerned in this paper with the merits or demerits of
particular kinds of classifications of taxes, or whether they are
progressive, regressive, or proportional; or if they accommodate to
such concepts as "ability to pay" and the like. Nor will I
be concerned with statistical details. I wish to relate the problem of
financing Federal, state and local governments to what is considered
to be the basic economic factors and principles to which we fail to
adjust.
First let us briefly consider the nature and history of our tax
structure in order to see how and why it became what it is. Next we
will consider what can be done to change it so as to eliminate much of
the harm it inflicts on our people and our government.
Originally, property plus tariffs on imports for many years provided
the tax base and major revenue for government - for Federal, state and
local government. Three events in recent times brought forth great tax
changes that seemed inevitable considering the tax education of our
people and the behavior capabilities of men who have special interests
in how we tax. One was the legalizing of the income tax, another form
of non-property taxation. A second was the invention of the automobile
which, in effect, -reduced time and space. This was and is still a
major force in imposing great changes in the relationship of the
Federal to state, and Federal and state to local governments. And
another was the collapse of property, real estate mortgages and common
stock values in the depression of 1929 to 1932. The latter caused
great financial distress to millions of individuals, greatly affecting
their tax paying ability. At the same time, it stimulated others whose
primary business was in real estate and land speculation to seek tax
relief and in this way to secure private gain out of the situation.
All this in turn caused a demand for, and assured political support
for, the use of more non-real estate taxes to support government.
Previously the local governments provided most of the revenue for
roads, schools and welfare. The advent of the automobile resulted in a
demand for better planned and better built roads for interstate and
continental use. It made possible larger and more centralized schools,
including colleges, and far more centralized and higher quality
welfare services and gave more prominence to state and less to county
and city services. Although the total amount of their spending has
increased as a percentage of income collected from the people it is
the spending by the Federal Government that has greatly increased,
with less being spent by the state and local governments.
The shift of the basis of taxation from real estate to non-real
estate taxes -income, payroll, earnings, use, sales, gasoline,
tobacco, liquor, excises and the like -increased the burden of support
of government on people: as workers, as providers of capital; and as
consumers. The Federal government uses non-real estate taxes
exclusively. A number of states have abolished state real estate
taxes, while others have reduced them to a point which means little in
terms of revenue produced. Missouri, for example, has only a 6 cents
tax per $100 valuation. Not only have the states shifted their tax
base from real estate to non-real estate taxation, but the local
governments - towns, cities, counties - have to a considerable extent
done the same with permission of their state governments. From this
background let us consider the meaning and effects of this amazing
trend of tax shifting called by some "The Great American Tax
Shift."
There is currently a great revival of interest in the property tax.
And this we must consider for two reasons; first, because of its
importance, especially to state and local governments; and second, for
its relation to the thesis of this paper. Two important new books and
numerous articles on the subject are stimulating this interest. The
books are: "The American Property .Tax: Its History,
Administration, and Economic Impact," by the staff of the Lincoln
School of Public Finance of Claremont Men's College, Claremont,
California, and "Economics of the Property Tax", by Dick
Netzer, Professor of Public Finance of the Graduate School of Public
Finance, New York University, published by Brookings Institution of
Washington, D.C.
But possibly a more important reason for the resurgence of interest
and concern about real estate taxes especially, is the massive problem
of slums and the near-slum deterioration of many square miles of
housing in our larger cities. The main cause of this problem has been
directly attributed to our real estate taxes. A considerable number of
articles appearing in magazines and newspapers have been on slums and
slum clearance. Much legislation has been enacted and billions of
dollars have been appropriated for this.
In the last few years the Public Revenue Education Council has
reproduced a number of important articles on. property taxation. One
is: "Are Property Taxes Obsolete?" This is from the March
1965 issue of Nation's Cities Magazine. It is a 16-page report
on a conference on state and local taxes held June 18-19, 1964, at
Claremont Men's College. Time, Life and Fortune
magazines "joined with the National League of Cities (then known
as the American Municipal Association), the Urban Land Institute, and
the National Council of Good Cities (ACTION) in helping the Lincoln
School of Public Finance sponsor a Round Table Conference of tax and
municipal experts from all over the country to see how far they could
agree on local tax reform policies and programs they could recommend
for adoption by the Council of State Governments and the National
League of Cities." The conference was unique in that it did not
approach the problem as so many government and citizens committees do
who seek to find out just how to raise the money. The guiding question
was "how to raise these taxes in a way that will help rather than
hinder the right kind of urban development - and redevelopment."
Other articles reproduced by the Council are: "The Differences
Between Real Estate and Other Commodities," by Roy Wenzlick
Research Corporation of Saint Louis; "Land Value Taxation, A
Staff Study," by the U.S. Conference of Mayors; "Our
Obsolete Real Estate Taxation," by the American Institute for
Economic Research, and "TAXES and the Death of Cities",
reprinted from the November 1965 issue of The Architectural Forum.
Because these articles, or some of them at least, might have escaped
the attention of many economists, the Public Revenue Education Council
mailed 8,095 cards offering them free of charge to economists in
colleges and junior colleges in all states. Their interest was
indicated by the receipt of over 1,770 requests for this material.
Because of the non-property trends of taxation and their effects, our
tax structure is highly anti-incentive to producers and production.
This is not altogether due to the quantity of income the taxes raise.
It is largely-due to the way the tax burden is placed on the backs of
the people and on industry and business. Hang a hundred pound sack of
flour on the head of a donkey and he will travel neither far nor fast;
place the load properly on his back and he will do well indeed. And so
it is with taxation: properly placed, we will need far less total
revenue than we seem to need now, and we can have a considerable
increase of production with the use of the same labor and capital.
Such considerations as these raise the question: Why do we retain a
tax system which is so complex, so costly and difficult to administer,
so wide-open to temptation and corruption of both tax collectors and
tax payers, and so likely to cause, and does cause, much harm that
could otherwise be avoided? In some part this is due to the political
and educational influence of a comparative few whose profits depend so
largely on the choice of taxes that are used to support government. To
the extent such people are dealers in land sites suitable for any
purpose as users or as speculators, they cannot profit at all unless
they keep taxes off of their particular and peculiar source of income.
Profit in land dealing also requires that land dealers favor and
engage in activities which cause public and private improvements to be
placed in advantageous position so as to add value to land locations
they control. Another reason for the existence of such a tax system is
that it encourages complexity and confusion which serves as a
smokescreen to conceal their special profit interest - and often a
conflict of interest - in how people are taxed. Yet there is another
more basic reason - faulty tax-education. Let us consider this last
reason next.
Today, taxation is taught in a way that resembles the case- study
system used in the study of law. However well such a method may work
in teaching law it fails as a method of teaching the economics of
public revenue. The confusion of our people - of even generally well
educated people, and of those who write and administer our laws of
taxation as well, is substantial proof of this. The latter may be
experts in knowing what the tax laws say, how they are to be
administered; they may have some knowledge of whether given taxes are
progressive, regressive, or in accordance with "ability to pay,"
which are so often taken as criteria as to what are good or bad taxes.
Their very interest in this type of tax-learning has practically
stopped their search for the more scientific and revealing facts. And
of this we can be certain; few of these people understand the truly
basic science factors and principles which form the structure of
economic science, and which must, therefore, also form the basis of
any proper understanding of taxation, and of how tax laws should be
written and serviced.
Tax-education today, as suggested before, is based on case-like
studies of tax laws enacted by legislative bodies. These taxes are
scholastically organized into classifications such as property, sales,
motor fuels, excises, profits and the like. Property taxes, for
-example, are listed as tangible, intangible, on improvements and on
land or real estate. Sales can be general or limited, placed on the
manufacturer or on the retailer. Income taxes can be personal or
corporate, gross or net. Excises are numerous and of various kinds.
Some attempt is made to evaluate all these taxes as to their
incidence - that is as to just who really pays the tax in the end. Is
it paid by the person or business first receiving the tax bill? Or, is
it shifted in higher prices and paid by the ultimate consumer of the
product or receiver of the service?
A tax may be progressive, regressive, proportional; or levied
according to "ability to pay" or on "benefits received,"
etc. Ability to pay is the best known and most popular idea today in
making value judgment of taxes, primarily due to its charitable or
religious or church-supporting connotation. This is the case
regardless of how morally wrong it may be as a way of supporting
government, a public and not a private institution.
Such social or ideological concepts or rules of taxation are most
certainly not formed of objective economic "cause and effect"
patterns. Yet these are most often remembered by students of economics
and social studies than are the more vital facts. Fortunately, the
latter are also found in textbooks even though they are seldom used to
project their finer implications for society and what our tax-actions
and tax laws ought to be.
Are we to judge from what is taught today as tax-education, or from
what may be called practical experience, that our present tax
structure is the best or the only way - the only practical way - to
raise revenue for government? Or is it a matter of going along with
things as they are because this may be the easiest way for most people
concerned? Of course it is not the only way, or the best way; and we
can be sure, judging by results, that it is far from being a truly
practical way. And we can also be sure of this as well; that what is
bad in our inherited customary and traditional ways of taxation can be
corrected by education of a scientific nature which shows a better
way. Let us consider this latter possibility.
The basic structure of economic science consists of two primary
factors and one derived or secondary factor. The two primary factors
are: Land - man's material universe exclusive of man and his products;
and, Labor - all human exertion, mental and physical, in the
production of wealth and services. Capital, a derived or secondary
factor, is all wealth used to produce more wealth for income or
exchange; it is wealth still in the course of exchange, wealth not yet
in the hands of the consumer.
To be wealth an object must have these four characteristics: 1) it
must be material; 2) exist in its present form or shape and location
because of labor; 3) must have in itself a capacity of satisfying
human desires; and 4) have value in exchange.
"Management" is a job classification and is here included
in and under the term Labor. "Government" is a
social-political institution which itself uses Land, Labor and
Capital. Here we will not consider Management or Government as factors
of production although some economists, in error we believe, so
classify and treat them.
In classical economics the theory is that the Product (wealth and
services) results from Labor, using Capital, working on Land and on
materials taken from Land. It is distributed as Wages to Labor, and
Interest to Capital; and RENT-of-land (Economic Rent) is a third
share. The latter is naturally attributed to land locations which, due
to its enrichment with natural resources (oils, minerals, etc.) and/or
to public improvements will produce an excess or surplus - a rent -
over that which it would produce on marginal or "break-even"
land. Marginal land is the poorest land in use - land which yields
only enough market determined rewards to labor and capital providers
to keep such land in production.
Practically all economists teach what is known as Ricardo's Law of
Rent. This law or principle indicates that RENT-of-land is an excess
or extra amount due to the use of better land - land which is more
productive than the "break-even" or "marginal"
land. This RENT-of-land can be collected by the title holder without
effort or provision of capital on his part. It is, however, a
proportionate part or percent of the total product. Wages and Interest
are what is left to labor and capital providers after RENT-of-land is
first deducted from the total product.
While the facts are obvious to any student of economic science, it
was left to an American economist. Henry George, to clarify the
problem of distribution and its laws. He asserted that if the Law of
Rent accounts for one share or segment of the total product,
complementary laws must exist to account for the remainder - for the
proportionate share going to Labor or capital providers. In a
scientific manner, and in language which accommodates to the Ricardian
expression, George made formal statements of the Laws of Wages and of
Interest taken together, or taken separately. Those wanting to know
more of the relationship of these laws in distribution - of the shares
to each other - -can refer to Henry George's book, Progress and
Poverty. I have ventured to bring this correlation of the Laws of
Distribution to your attention because it involves an important
concept about public revenue (taxation) which follow from
understanding Distribution and its three laws.
An important fact directly deductible from these Laws of Distribution
is this: The three distributive shares, RENT-of-land, Wages and
Interest, which together account for the total product, are also the
three basic sources of public revenue. Yet, while there are
technically three shares in distribution and therefore three sources
of public revenue, we can, because of the cooperative nature and
relationship of Labor and Capital (and capital providers) - and to
achieve simplicity and citizenship understanding as well - treat Wage
sand Interest as one joint fund - as one SOURCE. [*] This combined
source we here identify as REWARDS-of-human-effort. We can then say
that all taxes, and the public RENT-of-land charge - really not a tax
- draw income to government from one or the other, or from both of
these sources - RENT-of-land and REWARDS-of-human-effort. [1]
To illustrate and make this concept of source clear let us assume a
man has wages of $100 a week as his only income. Now consider how many
taxes, direct and indirect, such a man pays in any one year. What is
the source of his tax payments? Clearly, his labor, or to use a more
scientific expression, his wages. In the same manner, by assuming men
with incomes consisting only of Interest, or of RENT-of-land, which is
possible, we can see that these distributive shares can be isolated
and each can be used as a separate source of revenue to support
governments.
This reasoning, which dictates shares of the product of industry are
also the sources of public revenue, raises another question. This is:
if these distributive shares are sources of public revenue, what then
are taxes which so many economists and most law makers constantly, and
we believe erronously, refer to as sources?
Once thought about the answer to this question is quite clear. Taxes
relate to these different sources of public revenue as pumps relate to
the water they pump; as pumps relate to water in wells, rivers, lakes
or reservoirs. Taxes are like pumps; they are used to draw revenue for
the use of Federal, state and local governments from the sources -
RENT-of-land and the REWARDS-of-human-effort, or from both, depending
on the source or sources of peoples income, and the nature of the tax.
[2]
Recently, The Wall Street Journal headed an editorial about
the three income taxes citizens of the City of New York must pay in
this way: "Three Taxes - One Pocket." Perhaps we will one
day see an editorial in the Journal with this heading: "Many
Taxes - Two Sources." For it is indeed a serious and socially a
most important question we now raise. If there are only two basic
sources of public revenue why do we need so many taxes (pumps)? A city
could have a water pump for each precinct or ward -but it doesn't.
Cities generally have one pumping station. Water is budgeted or
distributed to the various areas according to need. Possibly
governments can do the same thing in collecting public revenue. The
idea of shared revenue is not new. But let us examine this concept.
In the "Special Report" in "Nation's Cities" to
which we have previously referred, we read: "The property tax is
not one tax but two taxes whose economic impacts are -directly
opposite." This statement means that land and improvements are
different classes of things; and that their price reaction to the
imposition of a tax is opposite - the price of land going down, the
price of improvements going up. If we substitute for the word
improvements the term wealth (all man-made things of value), we then
have a general, rather than a particular, principle of truly great
importance. We can then say that with the application of taxes, the
price of land goes down while the price of all things of value
produced by labor and capital providers .[3]
The principle of the non-shiftability of a tax which collects the
publicly earned RENT-of-land for public use i is well established in
today's economics. Yet few students think of or are concerned with
this knowledge after graduation. There is a reason for their neglect
of this vital and beneficial idea, if they learned it at all. This is
that the principle is not emphasized sufficiently; its social
significance is not made known to students or others.
As indicated above the public collection of the publicly earned
RENT-of-land source of public revenue actually is a payment for
benefits received by the holder of title to the land, and so, as noted
before, is not a tax. The use of this source of revenue does not
increase the price of either land or of products and services. In
fact, by using this location value land "tax" land
speculation is practically eliminated. This assures the use of better
land to Labor and capital providers - the kind of land speculators
always try to hold and to hold out of use. With the use of better land
productivity is increased and the prices of products and services are
lowered. On the other hand, as all economists agree, taxes levied on
improvements and all other human productions of economic concern, tend
to reduce supply and to increase the price of such things.
This economic science knowledge has great value to society. By its
use we can cause the prices of both land and of products and services
to be either higher or lower. Taxing land location values more and
taxing improvements and all other man-made capital or consumers wealth
less will lower both prices of land and improvements, and of other
products and services; taxing land location values - less and products
and services more will increase the prices of both land and of
improvements, and of other products and services.
This suggests a question: Which will make it easier for people to get
food, clothing and shelter and other desirable products and services,
and which will make it harder, high priced or low priced land and
products? The answer to this question will enable us to solve or
greatly reduce the size of the economic and social problems now
escaping fundamental solution. Unfortunately the political and social
remedies now being generally used are not based on the. economic
science principle of basic prevention. Today's type remedies, in the
main, allow our problems to recur over and over again. Economic
science offers the best single-type solution of these problems which
is to free the people of the shameful economic and social bind between
HIGH PRICED LAND and HIGH PRICED PRODUCTS AND SERVICES in which our
people are caught.
It is the lower price of land and of products and services, not
higher prices - which our non-scientific, anti-incentive, anti-Free
Enterprise tax structure more than anything else now causes, that will
allow the Free Enterprise system to work best to prevent, and so
eliminate or reduce the size of most of these problems. It is the
existence of lower prices for land and products that will assure
easier and less costly access to land and more and less costly use of
capital; that will assure quicker and more certain adjustments to
automation and all other cost reducing methods of production. It is
lower prices of products and services that will increase the standards
of living of all willing and able to work and of those dependent on
private or public charity, or on political-financial aid.
We must keep in mind that since human wants -- quantity, quality, and
variety of products and services considered - are unlimited and much
land space and resources exist unused or poorly used in the world,
there is little logic to the reasoning that we need fear the use of
automation or the principles of economic science to increase
production. The nature of man, the source of all wants and jobs, and
our free system - freed of its restricting tax chains, is such as to
assure employment to all who can or can be trained to add profitably
to production. We would not expect unemployment to be anything like
some of the mass unemployment periods we have known in the past. What
we may have could be corrected by monetary actions.
The question of making it easier to have access to land and to build
improvements was recognized in the matter of slum clearing and
providing housing in the Urban Renewal and Public Housing programs.
The essential fact of these programs was to lower the price of land
and to give tax reductions on improvements as incentives to
prospective builders. The most political and artificial tactics were
used. By use of the power of or threat of condemnation, land was
bought at speculatively high prices - what land might be worth 20 or
25 years from now - for use today. After clearing it at great cost to
the taxpayers, it was offered at prices specially, and possibly
politically, organized groups felt they could pay, and yet profit from
their activity. The companion incentive policy was to untax
improvements completely for ten years, and to tax them at 50 per cent
of their assessed value for an additional fifteen years. Public
Housing had its own price lowering arrangements.
While the program did put some contractors to work and physically
increase housing - much of it bad - it has many defects and caused
much injustice. It involved a mass removal of established communities
and the destruction of well established neighborhoods; it led to
over-crowding of other areas and the conversion of these into
slum-like neighborhoods if not actual slums. It caused unfairness of
competition to all other property owners who were given no such
special privileges. It, of course, solved no true problem in its
attempt to treat isolated and limited areas officially declared
blighted - although, in fact often not blighted. Urban Renewal was and
is a shamefully narrow-visioned and limited political concept of the
problem of development and redevelopment of housing and communities.
The problem demands total-type conditioning or environmental incentive
solutions; it demands general land value taxation to lower the price
of all land, and untaxed improvements to give natural incentives to
all to build and improve. These are certain lessons of economic
science. But economic science has much more to offer than to rid our
communities of slums, for the time being, by use of political tax
expedients which leave our tax system as it is to create new crops of
slums. In this case, Urban Renewal and Public Housing programs will
have to be re-created to relieve us of these in the future. Let us
consider what economic science really has to offer a free and
progressive people in this matter of the use of the proper source of
public revenue to support government.
Economic science reveals how we can end much of the tax confusion of
our people and greatly simplify our tax structure. Few think we can
support today's governments - whose problems are caused mainly by a
bad tax structure which are then, supposedly, to be relieved by more
bad taxation - by the exclusive use of the RENT-of-land source. We
could try collecting as much as 90 or 95 per cent of the publicly
earned RENT-of-land for public use to go as far as it can in
supporting government. This will produce a tremendous amount of
revenue based on free market determination of this income. Naturally
this income would be based on full cash value assessments of land with
rates of taxation sufficiently high to collect approximately the full
amount of the RENT-of-land. Such an approach will practically end all
destructive speculative influence in the use of land and would be a
very good beginning.
Any extra income to meet government expenditures over and above what
RENT-of-land provides will have to come from the other source -
REWARDS-of-human-effort. Three non-property taxes already in use could
provide this: 1) the Income Tax applied only to Wages and Interest; 2)
the Inheritance Tax; and 3) the Gasoline Tax (the latter has qualities
- as does the RENT-of-land source - of being in the nature of paying
for benefits received by the payers.) In addition to these, all
possible fees - direct charges - for particular services rendered to
owners and renters of homes, and apartments, and to users of
industrial, commercial, and other property should also be
substantially used.
All governments - Federal, state and local - should use these same
taxes on a sharing basis, the share to each being determined by the
functions allocated to each level of government to perform. Why would
the use of more kinds of taxes (pumps) be necessary? How would or can
the use of more kinds of taxes (pumps) benefit the people? Which is
more honest and best suited to a free and democratic - and most
generally moral - people, a few simple, above-board and direct taxes,
or the complex, compounding tax structure of direct and indirect taxes
imposed on our people today?
In time the public revenue collected by these non-land value taxes
could and should be reduced. (Possibly some can be abolished
altogether.) This is not so much of an impossibility as many may think
who are unaware of the quick benefits that will result from the use of
a direct, selective and simplified tax structure such as is here
suggested. The costs of land needed by government at all levels and
for all purposes will go down; the cost of materials and supplies for
government, being untaxed or taxed less, and subjected to increased
production otherwise, will go down; and the cost of welfare aid -
since more people can and will take care of themselves under the
better conditions established - will also go down.
A very great waste, one that greatly increases costs of both
governmental and privately provided public services, is our misuse of
land space because of land speculation and the urban and suburban
sprawl this causes. All private users of space know and avoid, as best
they can at all times and in all circumstances, the cost of wasteful
use of space they service in many ways. The notorious waster and cause
of misuse of space serviced in so many ways by government is
government itself. In this it is "egged on" and encouraged
by those who make it their business to deal in nature or land space,
serviced and made valuable by the community, as businessmen deal in
man-made products and services as a way of getting a living. The moral
and economic difference is observable and great. These costs appear in
the daily use of public and private transportation, in the day to day
cost of all public and privately provided utility services and die
needless higher cost of extension of these services. They are to
be-found in added costs- of our privately and publicly provided
schools and hospitals, and in our publicly provided police and fire
departments, parks, playgrounds; and in the privately provided stores
and places of industry as well. These costs which are in great part
avoidable, fall on all people, directly or indirectly.
As such waste and costs are reduced by use of a more just and helpful
tax structure, general production will tend to increase. The labor of
former, but now unneeded, government employees; of many now of relief;
and of many who formerly lived - and to die extent they lived - on
incomes of RENT-of-land, will now add to production. In time there
will be better use of services already established within the city.
Then there will begin a normal - non-leap-frog checkerboard -
extension of the community in solid - but closer in - areas. This
extension of the community, as all economists know, will tend to
increase the total RENT-of-land income available for the use of
government. Such added income can be used to provide more old or some
new public services the people might desire. And, as a bonus, the new
world-wide image which the Free Enterprise system will create will win
friends for Freedom and lose them for Communism and Socialism. Freed
of its land-dealers forged tax-chains, as it can and ought to be, the
Free Enterprise system can become so attractive to people everywhere
and in this way defeat the MARXIST type of economy, and in all
probability, in peace too.
In closing I would be amiss if I did not pay special tribute to Dr.
Harry Gunnison Brown, Professor Emeritis of Economics, and teacher of
this subject for many years at the University of Missouri. While Dr.
Brown did not teach what is sometimes called the "Single Tax",
he did teach thoroughly the difference between Land and man-made
Capital. He saw clearly that a tax system that punished incentive of
Labor and Capital providers, while encouraging the incentives of land
speculators, land hoarders and monopolists and those who held land
generally under-improved, would make it difficult for Free Enterprise
to produce the stability, and the steady progress in production and in
just distribution it is fully capable of producing. Dr. Brown
advocated theories of monetary policy to secure stability; but we can
be certain that he felt that under the improved conditions that could
be secured from untaxing Capital and capital providers, and by the use
of more land value taxation, monetary control would play a smaller,
yet more sensitive part than seems to be necessary today to secure
working stability.
NOTES
* A demand for labor is a demand for
capital, and vice versa; when wages tend high, interest tends high -
they tend to go up and down together, although not necessarily at the
same time. From this relationship we can deduct that the use of a
SOURCE good for Labor is also good for capital providers and vice
versa.
1. RENT-of-land collected by government is, in fact, a payment for
direct benefits received by the title holder as expressed by the
market price or rental value of the land held. It is in no real sense
a ''tax."
2. Whether general, as in the case of an income tax which collects
from all incomes, or as a direct tax on land value or on RENT-of-land
which does not fall on either Wages or (true) Interest. We could also
have a direct wages tax, as the earnings tax, and a direct tax on
interest.
3. You are invited to write for our educational bulletin entitled: "Why
Do We Ignore One of Economic Science's Most Important Principles?"
This explains why the use of the RENT-of-land source of public revenue
lowers rather than increases prices of products and services.
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