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| John Stuart
Mill, 1806-1873 |
Part I
THE AUTHORITIES
Chapter 2 |
John Stuart Mill was born in London in 1806 and died in Avignon in
1873. He was educated by his father and as a child displayed a most
precocious intellect. Beginning the study of Greek at the age of 3, he
had read the most important works of Greek and Latin authors by the time
he was 12. He began the systematic study of political economy at the age
of 14, and His Essays on Political Economy, showing mature
thought, were written when he was 24. The keen, intellectual vigor which
he displayed as a child he retained through life. He wrote copiously on
many subjects, and every field which he touched he illuminated. His
best-known works are his Logic, Unsettled Questions of Political
Economy, Principles of Political Economy, Essays on Liberty,
Utilitarianism, Examination of Sir William Hamilton's Philosophy, The
Subjection of Women. He was for many years in the service of the
East India House in London, rising to the position of chief examiner. He
was elected to Parliament in 1865 and there championed the cause of
equal suffrage for women and the taxation of the future increment of
economic rent.
In 1873 he wrote his autobiography, and from that we catch glimpses of
an inner life no less remarkable than were its outward intellectual
manifestations. He retained from early manhood to his death a passion
for justice and human liberty and an intense sympathy for all whom he
considered oppressed by unwise laws or unjust social customs. He was
ever ready to champion their cause. His sympathies for the laboring
classes can be read between the lines of his Political Economy;
and for the rights of women, in his essay on the "Subjection of
Women" and in his work for equal suffrage while in parliament. The
chief joy of his life was in the effort to transform the social order
into one in which human nature might display itself on a freer and
happier plane. For his philosophy was utilitarian, and human happiness
the aim and end.
Taking the theory of rent as it came to him from his predecessors, Mill
even more than they urged the necessity of taxing it. It was largely for
the purpose of pressing this reform that he entered Parliament. His
argument as given in his Principles of Political Economy (1848),
Book V, chap. II secs. 5 and 6, for clear and convincing the logic, has
not been surpassed:
Before leaving the subject to the quality of taxation,
I must remark that there are cases in which exceptions may be made to
it, consistently with that equal justice which is the groundwork of
the rule. Suppose that there is a kind of income which constantly
tends to increase, without any exertion or sacrifice on the part of
the owners: those owners constituting a class in the community, whom
the natural course of things progressively enriches, consistently
with complete passiveness on their own part. In such a case it would
be no violation of the principles on which private property is
grounded, if the state should appropriate this increase of wealth, or
part of it, as it arises. This would not properly be taking anything
from anybody; it would merely be applying an accession of wealth,
created by circumstances, to the benefit of society, instead of
allowing it to become an unearned appendage to the riches of a
particular class.
Now this is actually the case with rent. The ordinary progress of a
society which increases in wealth is at all times tending to augment
the incomes of landlords; to give them both a greater amount and a
greater proportion of the wealth of the community, independently of
any trouble or outlay incurred by themselves. They grow richer, as it
were in their sleep, without working, risking or economizing. What
claim have they, on the general principle of social justice, to this
accession of riches? In what would they have been wronged if society
had, from the beginning, reserve the right of taxing the spontaneous
increase of rent, to the highest amount required by financial
exigencies? I admit that it would be unjust to come upon each
individual estate, and lay hold of the increase which might be found
to have taken place in its rental; because there would be no means of
distinguishing in individual cases, between an increase owing solely
to the general circumstances of society, and one which was the effect
of skill and expenditure on the part of the proprietor. The only
admissible mode of proceeding would be by a general measure. The first
step should be an evaluation of all land in the country. The present
value of all land should be exempt from the tax; but after an interval
had elapsed during which society had increased in population and
capital, a rough estimate might be made of the spontaneous increase
which had accrued to rent since the valuation was made. Of this the
average price of produce would be some criterion; if that had risen,
it would be certain that rents had increased, and (as already shown)
even in a greater ratio than the rise of price. On this and other
data, an approximate estimate might be made, how much value had been
added to the land of the country by natural causes; and in laying on a
general land tax, which for fear of miscalculation should be
considerably within the amount loss indicated, there would be an
assurance of it not touching any increase of income which might be the
result of capital expended or industry exerted by the proprietor.
But though there could be no question as to the justice of taxing the
increase of rent, if society had avowedly reserved the right, has not
society waived that right, by not exercising it. In England, for
example, have not all who bought land for the last century or more,
given value not only for the existing income, but for the prospects of
increase, under an any implied assurance of being only taxed in the
same proportion with other incomes. This objection, insofar as valid,
has a different degree of validity in different countries; depending
on the degree of desuetude into which society has allowed a right to
fall, which, no one can doubt, and it once fully possessed. In
countries of Europe, the right to take by taxation, as exigency might
require, and indefinite portion of the rent of land, has never been
allowed to slumber. In several parts of the Continent the land tax
forms a large proportion of the public revenues, and has always been
confessedly liable to be raised or lowered without reference to other
taxes. In these countries no one can pretend to have become the owner
of land on the faith of never being called upon to pay an increased
land tax. In England to the land tax has not varied since the early
part of the last century. The last act of the Legislature in relation
to its amount was to diminish it; and though the subsequent increase
in the rental of the country has been immense, not only from
agriculture, but from the growth of towns and the increase of
buildings, the ascendancy of landholders in the Legislature has
prevented any tax from being imposed, as it so justly might have been,
upon the very large portion of this increase which was unearned, and,
as it were accidental. For the expectations thus raised, it appears to
me that an amply sufficient allowance is made, if the whole increase
of income which has accrued during this long from a mere natural law,
without exertion or sacrifice, is held sacred from any peculiar
taxation. From the present date, or any subsequent time at which the
Legislature may think fit to assert the principle, I see no objection
to declaring that the future increment of rent should be liable to
special taxation; in doing which all injustice to the landlords would
be obviated, if the present market price of their land were secured to
them, since that includes the present value of all future
expectations. With reference to such a tax, perhaps a safer criterion
would be either a rise of rents or a rise of the price of corn would
be a general rise in the price of land. It would be easy to keep the
tax within the amount which would reduce the market value of land
below the original valuation: and up to that point, whatever the
amount of tax might be, no injustice would be done to the proprietors.
6. But whatever may be thought of the legitimacy of making the State
a sharer in all future increase of rent from natural causes, the
existing land tax (which in this country unfortunately is very small)
ought not to be regarded as a tax, but as a rent charge in favor of
the public; all portion of the rent, reserved from the beginning by
the State, which has never belonged to or formed part of the income of
the landlords, and should not therefore be counted to them as part of
their taxation, so as to exempt them from their fair share of every
other tax. As well might the tithe be regarded as a tax on the
landlords: as well, in Bengal, where the State, though entitled to the
whole rent of the land, gave away one-tenth of it to individuals,
retaining the other nine-tenths, might those nine- tenths considered
as an unequal and unjust tax on the grantees of the tenth. That a
person owns part of the rent does not make the rest of it his just
right, injuriously withheld from him. The landlords originally held
their estates subject to feudal burdens, for which the present land
tax is an exceedingly small equivalent, and for their relief from
which they should have been required to pay a much higher price. All
who have bought land since the tax existed have bought it subject to
the tax. There is not the smallest pretense for looking upon it as a
payment exacted from the existing race of the landlords.
The legislative program by which Mill sought to realize the principals
laid down in the above quotation may be found in a pamphlet which he
prepared for the Land Tenure Reform Association for the popularization
of these ideas. "It is proposed, we read," (sec. 4):
To claim for the benefit of this state the
interception by taxation of the future unearned increase of the rent
of land (so far as the same can be ascertained) or a great part of the
increase, which is continually taking place without any effort or
outlay by the proprietors merely through the growth of population and
wealth; reserving to owners the option of relinquishing their property
to the state at the market value which it may have acquired at the
time when this principle may be adopted by the Legislature.
In explaining and defending the program of the association, he argues
that --
in allowing the land to become private property, the
state ought to have reserved to itself this accession of the income,
and that lapse of time does not extinguish this right, whatever claim
to compensation it may establish in favor of the landowner. The land
is the original inheritance of mankind. The usual, and by far the best
argument for its appropriation by individuals is that private
ownership gives the strongest motive for making the so loyal yield
the greatest possible produce. But this argument is only valid for
leaving to the owner the full enjoyment of whatever value he adds to
the land by his own exertions and expenditure. There is no similar
reason for allowing him to appropriate and increase the value to which
he has contributed nothing, but which accrues to him from the general
growth of society; that is to say, not from his own labor and
expenditure but from that of other people -- of the community at
large.
From the foregoing quotations it is clear that in Mill recognizes the
principle the land is the original inheritance of mankind, that is, the
principle of the equal right to land. But he does not emphasize this
point as a reason for the taxation of economic rent. Rather, he finds
the justification of its appropriation by the state in the fact that it
is an income due, not to labor and investment on the part of the
landlord, but to the general social growth in population and wealth. He,
however, recognizes the force of the "vested rights" argument.
It would have been entirely consonant with justice had the state
appropriated this entire "unearned increment" from the start.
Private ownership should only have been permitted on these terms. But
this was not done. Men had become landed proprietors with the
understanding that the rent of their lands was to become their private
income. This income had increased, and transfers of investments and real
estate had been made in good faith on the strength of this increase up
to the present time. Very well, let bygones be bygones. But for the
future let no such unearned increment be allowed. Moreover, the state is
to reserve from private ownership such lands as are still at its
disposal.
From the nature of this very conservative proposal it is evident that
the revenue from economic rent could not, in his opinion, be a single
tax -- it would be insufficient. It was to be only part of a general
system of taxation whose merits are discussed in other chapters of his
book.
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