.
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:
[1] The Works of Henry George, Vol. IX, chap. V, extracts
from pp.101 to 112. Doubleday, Page & Co., 1898.
[2] George, Henry, Progress and Poverty, Book III, chap. II,
Doubleday, Page & Co., 1912.
[3] 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.
[4] 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.
[5] 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. [6] Buckle (Chap. 11, History of Civilization)
recognizes the necessary relation between rent, interest, and wages, but
evidently never worked it out.
[7] Progress and Poverty, Book VII. Chap. II.
[8] Progress and Poverty, Book VIII, Chap. III.
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