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Part I
THE AUTHORITIES
Chapter 1 |
ADAM SMITH, to whom is usually assigned the honor of raising
political economy to the dignity of a science, was born at Kirkcaldy, in
Scotland in 1723. He was educated at Glasgow and Oxford and was for
years a professor in the University of Glasgow. He spent two years in
travel on the continent as tutor to the young Duke of Buccleuch. During
these travels his mind received perceptible stimulus from the
physiocrats, with whom he came much in contact. The ten years following
he spent in studious retirement at Kirkcaldy reflecting upon the
economic problems to which his mind had been directed during his
travels. At the end of this period his epoch-making work, an Inquiry
into the Nature and Causes of the Wealth of Nations, appeared, and a
work which even after the lapse of nearly a century and a half still
forms the groundwork of economic theory.
In this great work we find most of the broad economic laws which
characterize the science of today either fully elaborated or hinted at,
and the whole arranged in a scheme of orderly development, showing the
power of his mind for connected and comprehensive grasp of principle.
The prevailing "mercantile system" was attacked and its
fallacy revealed. The wealth of a country was shown to depend upon the
skill with which its labor is applied and not upon the gold and silver
within its borders. The gains from the division of labor were explained
and the true nature of money was elucidated. The laws of price and value
were discussed, and the nature and function of capital. The laws of the
distribution of social income in wages, profits, and rent were also
developed.
In regard to rent, the honor of fully developing its nature in law is
usually assigned to Ricardo. While Smith hinted at the true revelation
between rent and price he yet believed that ground rent formed a part of
price. Although he fell but little short of a complete understanding of
the nature of rent, he was in fact more than 100 years ahead and his
contemporaries, while in perceiving the fitness of rent as a source of
revenue to the government he anticipated Henry George by a century. The
passage containing his plea for the taxation of ground rent is in every
way so forceful and admirable that it deserves to be reproduced in full.
Ground rents are a still more proper subject of taxation than the rent
of houses. A tax upon ground rents would not raise the rents of houses.
It would fall altogether upon the owner of the ground rent, who acts
always as a monopolist, and exacts the greatest rent to which can be
docked for the use of his ground. More or less can be docked for it
accordingly as the competitors happened to be richer or poorer, or can
afford to gratify their fancy for a particular spot of ground at a
greater or smaller expense. In every country the greatest number of rich
competitors is in the capital, and it is there accordingly that the
highest ground rents are always to be found. As the wealth of those
competitors would in no respect be increased by a tax upon ground rents,
they would not probably be disposed to pay more for the use of the
ground. Whether the tax was to be advanced by the inhabitant, or by the
owner of the ground, would be a little importance. The more the
inhabited was obliged to pay for the tax, the less he would incline to
pay for the ground; so that the final payment of the tax would fall
altogether upon the owner of the ground rent. The ground rents of
uninhabited houses ought to pay no tax.
Both ground rents and the ordinary rent of land are a species of
revenue which the owner, in many cases enjoys without any care or
attention of his own. Though all part of this revenue should be taken
from him in order to defray the expenses of the state, no discouragement
will thereby be given to any sort of industry. To the annual produce of
the land and labor of the society, the real wealth than revenue of the
great body of the people, might be the same after such taxes before.
Ground rents and the ordinary rent of land are, therefore, perhaps, the
species of revenue which can best bear to have a particular tax imposed
upon them.
Ground rents seem, in this respect of more proper subject them peculiar
taxation than even the ordinary rent of land. The ordinary rent of land
is, in many cases, owing partly at least to the attention and good
management of the landlord. A very heavy tax might discourage too much
this attention and good management. Ground rents, so far as they exceed
the ordinary rent of land, are altogether owing to the good government
of this sovereign, which, by protecting the industry either of the
whole people, or of the inhabitants of some big particular place,
enables them to pay so much more than its real value for the ground
which they build their houses upon; or to make to its owners so much
more than compensation for the loss which he might sustain by this use
of it. Nothing can be more reasonable than that a fund which always its
existence to the good government of the state should be taxed
peculiarly, or should contribute something more than the greater part of
other funds, toward the support of that government.[1]
It will be seen that in this quotation are in body of all the essential
elements of the modern doctrine of the "single tax." "Ground
rents are a still more proper subject of taxation than the rent of
houses." "A tax upon ground rents would not raise the rent of
houses. It would fall altogether upon the owner of the ground rent."
They are a species of revenue "which the owner in many cases enjoys
without any care or attention of his own." A discrimination is made
between ground rents and ordinary rents, as the superior fitness of the
former as a subject of taxation is pointed out: "The ordinary rent
of land is, in many cases, owing partly at least to the attention and
good management of the landlord. A very heavy tax might discourage too
much this attention and good management." Finally the true nature
of ground rent as a social product, and hence the perfect propriety of
taxing it for the benefit of the whole people, is clearly pointed out: "Ground
rents, so far as they exceed the ordinary rent of land, are altogether
owing to the good government of the sovereign."
When we consider that the Wealth of Nations appeared in 1776 and that
the work of Henry George did not appear till about a century later, it
seems just that advocates of natural taxation should place on the same
scroll side-by-side with the names of Henry George the name of Adam
Smith as one of the founders of their great reform.
FOOTNOTES
[1] Smith, Adam, The Wealth of Nations (1776), Book V,
Chap. II, Part I, article I.
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