Paying
Twice
The Self Sufficiency Standard studies, now in existence in about 30 states,
provide localized barebones cost-of-living figures for families of various
configurations:
- a single adult;
- a single adult with an infant;
- a single adult
with a preschooler
and a schoolage child;
- two adults with a preschooler and a schoolage child.
Component
by component, they calculate the cost of living: rented housing,
food, childcare, transportation, health care, miscellaneous. To that
they add the taxes a renter would pay on such an income and from it they
subtract
any tax credits for which they would be eligible. One of the observations
one
might make is that while the barebones budget is by no means a middle class
lifestyle,
taxes and housing represent a significant chunk of the costs. (One
would also note that in most counties in America, the amount one needs to
meet those
most simply defined needs is at least 200% of the Federal
Poverty Line for a family of each configuration, and in places more like
400% or more.)
Worse, one's sales and income taxes are used to provide the very amenities
that support "property values" which allow the landlord to charge
his tenant so much in the first place! That's paying twice. Where does
the money go? The rent on the land goes into the landlord's pocket
month by month, or in a lump sum into the portfolio of the fellow who is
retiring to Florida. It
represents a windfall for him, and increases the cost of living for our young
people.
What's wrong with this picture? It works wonderfully for the landlord and
the seller of land, but it certainly doesn't work at all for the tenant,
or for our
young
people, or for those whose wages are insufficient to pay the costs of
housing, which
are largely land costs, driven up by land monopoly. (Look at California,
post-Proposition 13.)
Henry George's ideas on taxing land values provide a viable alternative,
one that could remove this distortion from our economy and our society, and
produce a society in which we are all genuinely free and equal. The American
Dream, on a large scale.
Everett Gross Explaining Rent
I'm from Crete, Nebraska. It's a small town of 5,000 people.
Suppose a man comes to Crete, and he wants to start a business. He
needs a building, but first he needs a piece of ground to build this new
building on. So he looks up a real estate agent, describes what he wants,
and the real
estate agent shows him a parcel that's just right for his needs. The man
asks the agent, "All right, now how much money do you want for this land?" The agent
says, "It's worth $50,000." The man says, "Why is it worth $50,000?" And the
real estate agent points out that "The school is good, the roads are good,
the police department is good, the rescue crew is good and very fast, and
business is good here."
So the man says "Yeah, I believe that $50,0000 is a fair price. I'll
take it. How do I pay the $50,000 to the school people, and the road people,
and the police department? To whom do I pay the $50,000?" And the real estate
agent says, "Oh no. You don't pay it to them. You pay it to the person
who owned the land before."
The man says, "But who supports the schools, and the roads, and the police,
and the other good things?" And the real estate agent says, "If you
build, then you'll pay for them again."
The buyer then asks, "And what will the previous owner do for me for
my $50,000?" The real estate man answers, "Nothing! Nothing
at all!"
The Most Rev. Dr Thomas Nulty, Roman Catholic Bishop of Meath
(Ireland): Back
to the Land (1881)
Thus the appropriation of God's
gifts in the land led naturally,
and as a matter of course, to the appropriation of an enormous amount
of the wages and earnings of the nation, which, in the designs of
Providence, kept constantly dropping into the land, accumulating on
the land, and adding to the value of the land, not for the enrichment
of the landlords, but for the support of the public burdens of the
State.
Now a system of Land Tenure which
thus despoils the people of a
nation of a vast amount of their earnings, which transfers a valuable
property which they have created by patient, painful and selfdenying
efforts of their labour, to a class who do not labour at all, and
make no sacrifices whatever, can, I think, be fairly characterised as
a system of national spoliation. The hardworking, industrious
masses
of the nation are taxed twice, and for an enormous amount each time.
They are
taxed first for the benefit of the owners of the soil, to
supply them with all the comforts, enjoyments and luxuries which they
desire, and are taxed again to the amount of eighty millions annually
for the government and defence of the country. Read the whole letter
Louis Post: Outlines of Louis F. Post's
Lectures, with Illustrative Notes and Charts (1894)
II. THE SINGLE TAX AS A FISCAL REFORM
1. DIRECT AND INDIRECT TAXATION
Taxes are either direct or indirect; or, as they have been aptly described, "straight" or "crooked." Indirect
taxes are those that may be shifted by the first payer from himself to others;
direct taxes are those that cannot be shifted.5
5. "Taxes are either direct or indirect. A direct tax is one which
is demanded from the very persons who, it is intended or desired, should
pay it. Indirect taxes are those which are demanded from one person in the
expectation and intention that he shall indemnify himself at the expense
of another." — John Stuart Mill's Prin. of Pol. Ec., book
v, ch. iii, sec. I.
"Direct taxes are those which are levied on the very persons who it
is intended or desired should pay them, and which they cannot put off upon
others by raising the prices of the taxed article.. . . Indirect taxes on
the other hand are those which are levied on persons who expect to get back
the amount of the tax by raising the price of the taxed article." — Laughlin's
Elements, par. 249.
Taxes are direct "when the payment is made by the person who is intended
to bear the sacrifice." Indirect taxes are recovered from final purchasers. — Jevons's
Primer, sec. 96.
"Indirect taxes are so called because they are not paid into the treasury
by the person who really bears the burden. The payer adds the amount of the
tax to the price of the commodity taxed, and thus the taxation is concealed
under the increased price of some article of luxury or convenience." — Thompson's
Pol. Ec., sec. 175.
The shifting of indirect taxes is accomplished by means of their tendency
to increase the prices of commodities on which they fall. Their magnitude
and incidence 6 are thereby disguised. It was for this reason that a great
French economist of the last century denounced them as "a scheme for
so plucking geese as to get the most feathers with the least squawking."7
6. Jevons defines the incidence of a tax as "the manner in which it
falls upon different classes of the population." — Jevons's
Primer, sec. 96.
Sometimes called "repercussion," and refers "to the real as
opposed to the nominal payment of taxes." — Ely's Taxation,
p. 64.
7. Though his language was blunt, the sentiment does not
essentially differ from that of "statesmen" of our day who
meet all the moral and economic objections to indirect taxation with
the one reply that
the people
would not consent to pay enough or the support of government if public
revenues were collected from them directly. This means nothing but that
the people
are actually hoodwinked by indirect taxation into sustaining a government
that they would not support if they knew it was maintained at their expense;
and instead of being a reason for continuing indirect taxation, would,
if true, be one of the strongest of reasons for abolishing it. It is
consistent
neither with the plainest principles of democracy nor the simplest conceptions
of morality.
Indirect taxation costs the real tax-payers much more than the government
receives, partly because the middlemen through whose hands taxed commodities
pass are able to exact compound profits upon the tax,8 and partly on account
of extraordinary expenses of original collection;9 it favors corruption in
government by concealing from the people the fact that they contribute to
the support of government; and it tends, by obstructing production, to crush
legitimate industry and establish monopolies.10 The questions it raises are
of vastly more concern than is indicated by the sum total of public expenditures.
8. A tax upon shoes, paid in the first instance by shoe manufacturers, enters
into manufacturers' prices, and, together with the usual rate of profit upon
that amount of investment, is recovered from wholesalers. The tax and the
manufacturers' profit upon it then constitute part of the wholesale price
and are collected from retailers. The retailers in turn collect the tax with
all intermediate profits upon it, together with their :usual rate of profit
upon the whole, from final purchasers -- the consumers of shoes. Thus what
appears on the surface to be a tax upon shoe manufacturers proves upon examination
to be an indirect tax upon shoe consumers, who pay in an accumulation of
profits upon the tax considerably more than the government receives.
The effect would be the same if a tax upon their leather output were imposed
upon tanners. Tanners would add to the price of leather the amount of the
tax, plus their usual rate of profit upon a like investment, and collect
the whole, together with the cost of hides, of transportation, of tanning
and of selling, from shoe manufacturers, who would collect with their profit
from retailers, who would collect with their profit from shoe consumers.
The principle applies also when taxes are levied upon the stock or the sales
of merchants, or the money or credits of bankers; merchants add the tax with
the usual profit to the prices of their goods, and bankers add it to their
interest and discounts.
For example; a tax of $100,000 upon the output of manufacturers
or importers would, at 10 per cent as the manufacturing profit, cost
wholesalers $110,000;
at a profit of 10 per cent to wholesalers it would cost retailers $121,000,
and at 20 percent profit to retailers it would finally impose a tax burden
of $145,200 — being 45 per cent more than the government would
get. Upon most commodities the number of profits exceeds three, so that
indirect
taxes may frequently cost as much as 100 per cent, even when imposed
only upon what are commercially known as finished goods; when imposed
upon materials
also, the cost of collection might well run far above 200 percent in
addition to the first cost of maintaining the machinery of taxation.
It must not be supposed, however, that the recovery of indirect taxes from
the ultimate consumers of taxed goods is arbitrary. When shoe manufacturers,
or tanners, or merchants add taxes to prices, or bankers add them to interest,
it is not because they might do otherwise but choose to do this; it is because
the exigencies of trade compel them. Manufacturers, merchants, and other
tradesmen who carry on competitive businesses must on the average sell their
goods at cost plus the ordinary rate of profit, or go out of business. It
follows that any increase in cost of production tends to increase the price
of products. Now, a tax upon the output of business men, which they must
pay as a condition of doing their business, is as truly part of the cost
of their output as is the price of the materials they buy or the wages of
the men they hire. Therefore, such a tax upon business men tends to increase
the price of their products. And this tendency is more or less marked as
the tax is more or less great and competition more or less keen.
It is true that a moderate tax upon monopolized products,
such as trade-mark goods, proprietary medicines, patented articles and
copyright publications
is not necessarily shifted to consumers. The monopoly manufacturer whose
prices are not checked by cost of production, and are therefore as a
rule higher than competitive prices would be, may find it more profitable
to bear
the burden of a tax that leaves him some profit, by preserving his entire
custom, than to drive off part of his custom by adding the tax to his
usual prices. This is true also of a moderate import tax to the extent
it falls
upon goods that are more cheaply transported from the place of production
to a foreign market where the import tax is imposed than to a home market
where the goods would be free of such a tax — products, for instance,
of a farm in Canada near to a New York town, but far away from any Canadian
town. If the tax be less than the difference in the cost of transportation
the producer will bear the burden of it; otherwise he will not. The ultimate
effect would be a reduction in the value of the Canadian land. Examples which
may be cited in opposition to the principle that import taxes are indirect,
will upon examination prove to be of the character here described. Business
cannot be carried on at a loss — not for long.
9. "To collect taxes, to prevent and punish evasions, to check and
countercheck revenue drawn from so many distinct sources, now make up probably
three-fourths, perhaps seven-eighths, of the business of government outside
of the preservation of order, the maintenance of the military arm, and the
administration of justice." — Progress and Poverty, book iv,
ch: v
10. For a brief and thorough exposition of indirect taxation
read George's "Protection
or Free Trade," ch. viii, on " Tariffs for Revenue."
Whoever calmly reflects and candidly decides upon the merits of indirect
taxation must reject it in all its forms. But to do that is to make a great
stride toward accepting the single tax. For the single tax is a form of direct
taxation; it cannot be shifted.11
11. This is usually a stumbling block to those who, without much experience
in economic thought, consider the single tax for the first time. As soon
as they grasp the idea that taxes upon commodities shift to consumers they
jump to the conclusion that similarly taxes upon land values would shift
to the users. But this is a mistake, and the explanation is simple. Taxes
upon what men produce make production more difficult and so tend toward scarcity
in the supply, which stimulates prices; but taxes upon land, provided the
taxes be levied in proportion to value, tend toward plenty in supply (meaning
market supply of course), because they make it more difficult to hold valuable
land idle, and so depress prices.
"A tax on rent falls wholly on the landlord. There are no means by
which he can shift the burden upon anyone else. . . A tax on rent, therefore,
has no effect other than its obvious one. It merely takes so much from the
landlord and transfers it to the state." — John Stuart Mill's
Prin. of Pol. Ec., book v, ch. iii, sec. 1.
"A tax laid upon rent is borne solely by the owner of land." — Bascom's
Tr., p.159.
"Taxes which are levied on land . . . really fall on the owner of the
land." — Mrs. Fawcett's Pol. Ec. for Beginners, pp.209, 210.
"A land tax levied in proportion to the rent of land, and varying with
every variation of rents, . . . will fall wholly on the landlords." — Walker's
Pol. Ec., ed. of 1887, p. 413, quoting Ricardo.
"The power of transferring a tax from the person who actually pays
it to some other person varies with the object taxed. A tax on rents cannot
be transferred. A tax on commodities is always transferred to the consumer." — Thorold
Rogers's Pol. Ec., ch. xxi, 2d ed., p. 285.
"Though the landlord is in all cases the real contributor, the tax
is commonly advanced by the tenant, to whom the landlord is obliged to allow
it in payment of the rent." — Adam Smith's Wealth of Nations,
book v, ch. ii, part ii, art. i.
"The way taxes raise prices is by increasing the cost of production
and checking supply. But land is not a thing of human production, and taxes
upon rent cannot check supply. Therefore, though a tax upon rent compels
land-owners to pay more, it gives them no power to obtain more for the use
of their land, as it in no way tends to reduce the supply of land. On the
contrary, by compelling those who hold land on speculation to sell or let
for what they can get, a tax on land values tends to increase the competition
between owners, and thus to reduce the price of land." — Progress
and Poverty, book viii, ch. iii, subd. i.
Sometimes this point is raised as a question of shifting the tax in higher
rent to the tenant, and at others as a question of shifting it to the consumers
of goods in higher prices. The principle is the same. Merchants cannot charge
higher prices for goods than their competitors do, merely because they pay
higher ground rents. A country storekeeper whose business lot is worth but
few dollars charges as much for sugar, probably more, than a city grocer
whose lot is worth thousands. Quality for quality and quantity for quantity,
goods sell for about the same price everywhere. Differences in price are
altogether in favor of places where land has a high value. This is due to
the fact that the cost of getting goods to places of low land value, distant
villages for example, is greater than to centers, which are places of high
land value. Sometimes it is true that prices for some things are higher where
land values are high. Tiffany's goods, for instance, may be more expensive
than goods of the same quality at a store on a less expensive site. But that
is not due to the higher land value; it is because the dealer has a reputation
for technical knowledge and honesty (or has become a fad among rich people),
for which his customers are willing to pay whether his store is on a high
priced-lot or a low-priced one.
Though land value has no effect upon the price of good,
it is easier to sell goods in some locations than in others. Therefore,
though the price
and the profit of each sale be the same, or even less, in good locations
than in poorer ones, aggregate receipts and aggregate profits are much greater
at the good location. And it is out of his aggregate, and not out of each
profit, that rent is paid, For example: A cigar store on a thoroughfare supplies
a certain quality of cigar for fifteen cents. On a side street the same quality
of cigar can be bought no cheaper. Indeed, the cigars there are likely to
be poorer, and therefore really dearer. Yet ground rent on the thoroughfare
is very high compared with ground rent on the sidestreet. How, then, can
the first dealer, he who pays the high ground rent, afford to sell as good
or better cigars for fifteen cents than his competitor of the low priced
location? Simply because he is able to make so many more sales with a given
outlay of labor and capital in a given time that his aggregate profit is
greater. This is due to the advantage of his location, and for that advantage
he pays a premium in higher ground rent. But that premium is not charged
to smokers; the competing dealer of the side street protects them. It represents
the greater ease, the lower cost, of doing a given volume of business upon
the site for which it is paid; add if the state should take any of it, even
the whole of it, in taxation, the loss would be finally borne by the owner
of the advantage which attaches to that site — by the landlord. Any
attempt to shift it to tenant or buyer would be promptly checked by the competition
of neighboring but cheaper land.
"A land-tax, levied in proportion to the rent of land, and varying
with every variation of rent, is in effect a tax on rent; and as such a tax
will not apply to that land which yields no rent, nor to the produce of that
capital which is employed on the land with a view to profit merely, and which
never pays rent; it will not in any way affect the price of raw produce,
but will fall wholly on the landlords." — McCulloch's Ricardo
(3d ed.), p. 207
2. THE TWO KINDS OF DIRECT TAXATION
Direct taxes fall into two general classes: (1) Taxes that are levied upon
men in proportion to their ability to pay, and (2) taxes that are levied
in proportion to the benefits received by the tax-payer from the public.
Income taxes are the principal ones of the first class, though probate and
inheritance taxes would rank high. The single tax is the only important one
of the second class.
There should be no difficulty in choosing between the two. To tax in proportion
to ability to pay, regardless of benefits received, is in accord with no
principle of just government; it is a device of piracy. The single tax, therefore,
as the only important tax in proportion to benefits, is the ideal tax.
But here we encounter two plausible objections. One arises from the mistaken
but common notion that men are not taxed in proportion to benefits unless
they pay taxes upon every kind of property they own that comes under the
protection of government; the other is founded in the assumption that it
is impossible to measure the value of the public benefits that each individual
enjoys. Though the first of these objections ostensibly accepts the doctrine
of taxation according to benefits,12 yet, as it leads to attempts at taxation
in proportion to wealth, it, like the other, is really a plea for the piratical
doctrine of taxation according to ability to pay. The two objections stand
or fall together.
12. It is often said, for instance, by its advocates, that house owners
should in justice contribute to the support of the fire departments that
protect them and it is even gravely argued that houses are more appropriate
subjects of taxation than land; because they need protection, whereas land
needs none. Read note 8.
Let it once be perceived that the value of the service which government
renders to each individual would be justly measured by the single tax, and
neither objection would any longer have weight. We should then no more think
of taxing people in proportion to their wealth or ability to pay, regardless
of the benefits they receive from government than an honest merchant would
think of charging his customers in proportion to their wealth or ability
to pay, regardless of the value of the goods they bought of him." 13
13. Following is an interesting computation of the cost
and loss to the city of Boston of the present mixed system of taxation
as compared with the single tax; The computation was made by James
R. Carret, Esq., the leading conveyancer of Boston:
Valuation of Boston, May 1, 1892
Land... ... . .. ... .. ... .. $399,170,175
Buildings ... ... ... ... ..$281,109,700
Total assessed value of real estate $680,279,875
Assessed value of personal estate $213,695,829
.... .... ... ... ... ... ... ... .... .... .... ...
.... ... $893,975,704
Rate of taxation, $12.90 per $1000
Total tax levy, May 1, 1892 $11,805,036
Amount of taxes levied in respect of the different subjects
of taxation and percentages of the same:
Land .... .... .... .... $5,149,295 43.62%
Buildings .... .... .. $3,626,295 30.72%
Personal estate .. $2,756,676 23.35%
Polls ... .... ... .... .... ...272,750 2.31%
But to ascertain the total cost to the people of Boston
of the present system of taxation for the taxable year, beginning May
1, 1892, there should be added to the taxes assessed upon them what
it cost them to pay the owners of the land of Boston for the use of
the land, being the net ground rent, which I estimate at four per cent
on the land value.
Total tax levy, May 1, 1892 ... ... ... ... .... ....
.... .... .... ..... .... .... .... .... .... .... ..$11,805,036
Net ground rent, four percent, on the land value
($399,170,175)..... ... ... ...$15,966,807
Total cost of the present system to the people
of Boston for that year ... $27,771,843
To contrast this with what the single tax system would
have cost the people of Boston for that year, take the gross ground
rent, found by adding to the net ground rent the taxation on land values
for that year, being $12.90 per $1000, or 1.29 per cent added to 4
per cent = 5.29 per cent.
Total cost of present system as above .. .... .... ....
.... .... .... .... .... ....$27,771,843
Single tax, or gross ground rent, 5.29 per cent
on $399,170,175 ... ..$21,116,102
Excess cost of present system, which is the sum
of
taxes in respect of buildings, personal property,
and polls .... ...... .. $6,655,741
But the present system not only costs the people more
than the single tax would, but produces less revenue:
Proceeds of single tax ... ... ... ... ..... .... ....
..... .... .... .... ..... ..... .... $21,116,102
Present tax levy ... ... ... ... ... .... ....
.... ..... .... .... .... .... .... .... .... ....$11,805,036
Loss to public treasury by present system ...
.... .... .... .... .. ..... ..$9,311,066
This, however, is not a complete contrast between the
present system and the single tax, for large amounts of real estate
are exempt from taxation, being held by the United States, the Commonwealth,
by the city itself, by religious societies and corporations, and by
charitable, literary, and scientific institutions. The total amount
of the value of land so held as returned by the assessors for the year
1892 is $60,626,171.
Reasons can be given why all lands within the city should
be assessed for taxation to secure a just distribution of the public
burdens, which I cannot take the space to enter into here. There is
good reason to believe also that lands in the city of Boston are assessed
to quite an appreciable extent below their fair market value. As an
indication of this see an editorial in the Boston Daily Advertiser for
October 3, 1893, under the title, "Their Own Figures."
The vacant lands, marsh lands, and flats in Boston were
valued by the assessors in 1892 (page 3 of their annual report) at
$52,712,600. I believe that this represents not more than fifty per
cent of their true market value.
Taking this and the undervaluation of improved property
and the exemptions above mentioned into consideration, I think $500,000,000
to be a fair estimate of the land values of Boston. Making this the
basis of contrast, we have:
Proceeds of single tax 5.29 per cent on $500,000,000
... .... .... .... $26,450,000
Present tax levy ... .... ... .... .... .... ....
.... ..... .... .... .... .... ..... .... .... ..$11,805,036
Loss to public treasury by present system ...
... ... ... .... .... .... ....$14,644,974
3. THE SINGLE TAX FALLS IN PROPORTION TO BENEFITS
To perceive that the single tax would justly measure the value of government
service we have only to realize that the mass of individuals everywhere and now,
in paying for the land they use, actually pay for government service in proportion
to what they receive. He who would enjoy the benefits of a government must use
land within its jurisdiction. He cannot carry land from where government is poor
to where it is good; neither can he carry it from where the benefits of good
government are few or enjoyed with difficulty to where they are many and fully
enjoyed. He must rent or buy land where the benefits of government are available,
or forego them. And unless he buys or rents where they are greatest and most
available he must forego them in degree. Consequently, if he would work or live
where the benefits of government are available, and does not already own land
there, he will be compelled to rent or buy at a valuation which, other things
being equal, will depend upon the value of the government service that the site
he selects enables him to enjoy. 14 Thus does he pay for the service of government
in proportion to its value to him. But he does not pay the public which provides
the service; he is required to pay land-owners.
14. Land values are lower in all countries of poor government
than in any country of better government, other things being equal. They
are lower in cities of poor government, other things being equal, than
in cities of better government. Land values are lower, for example, in
Juarez, on the Mexican side of the Rio Grande, where government is bad,
than in El Paso, the neighboring city on the American side, where government
is better. They are lower in the same city under bad government than
under improved government. When Seth Low, after a reform campaign, was
elected mayor of Brooklyn, N.Y., rents advanced before he took the oath
of office, upon the bare expectation that he would eradicate municipal
abuses. Let the city authorities anywhere pave a street, put water through
it and sewer it, or do any of these things, and lots in the neighborhood
rise in value. Everywhere that the "good roads" agitation of
wheel men has borne fruit in better highways, the value of adjacent land
has increased. Instances of this effect as results of public improvements
might be collected in abundance. Every man must be able to recall some
within his own experience.
And it is perfectly reasonable that it should be so.
Land and not other property must rise in value with desired improvements
in government, because, while any tendency on the part of other kinds
of property to rise in value is checked by greater production, land can
not be reproduced.
Imagine an utterly lawless place, where life and property
are constantly threatened by desperadoes. He must be either a very bold
man or a very avaricious one who will build a store in such a community
and stock it with goods; but suppose such a man should appear. His store
costs him more than the same building would cost in a civilized community;
mechanics are not plentiful in such a place, and materials are hard to
get. The building is finally erected, however, and stocked. And now what
about this merchant's prices for goods? Competition is weak, because
there are few men who will take the chances he has taken, and he charges
all that his customers will pay. A hundred per cent, five hundred per
cent, perhaps one or two thousand per cent profit rewards him for his
pains and risk. His goods are dear, enormously dear — dear enough
to satisfy the most contemptuous enemy of cheapness; and if any one should
wish to buy his store that would be dear too, for the difficulties in
the way of building continue. But land is cheap! This is the
type of community in which may be found that land, so often mentioned
and so seldom seen, which "the owners actually can't give away,
you know!"
But suppose that government improves. An efficient administration
of justice rids the place of desperadoes, and life and property are safe.
What about prices then? It would no longer require a bold or desperately
avaricious man to engage in selling goods in that community, and competition
would set in. High profits would soon come down. Goods would be cheap — as
cheap as anywhere in the world, the cost of transportation considered.
Builders and building materials could be had without difficulty, and
stores would be cheap, too. But land would be dear! Improvement
in government increases the value of that, and of that alone.
Now, the economic principle pursuant to which land-owners are thus able
to charge their fellow-citizens for the common benefits of their common government
points to the true method of taxation. With the exception of such other monopoly
property as is analogous to land titles, and which in the purview of the
single tax is included with land for purposes of taxation, 15 land is the
only kind of property that is increased in value by government; and the increase
of value is in proportion, other influences aside, to the public service
which its possession secures to the occupant. Therefore, by taxing land in
proportion to its value, and exempting all other property, kindred monopolies
excepted — that is to say, by adopting the single tax — we should
be levying taxes according to benefits.16
15. Railroad franchises, for example, are not usually
thought of as land titles, but that is what they are. By an act of sovereign
authority they confer rights of control for transportation purposes over
narrow strips of land between terminals and along trading points. The
value of this right of way is a land value.
16. Each occupant would pay to his landlord the value
of the public benefits in the way of highways, schools, courts, police
and fire protection, etc., that his site enabled him to enjoy. The landlord
would pay a tax proportioned to the pecuniary benefits conferred upon
him by the public in raising and maintaining the value of his holding.
And if occupant and owner were the same, he would pay directly according
to the value of his land for all the public benefits he enjoyed, both
intangible and pecuniary.
And in no sense would this be class taxation. Indeed, the cry of class
taxation is a rather impudent one for owners of valuable land to raise against
the single tax, when it is considered that under existing systems of taxation
they are exempt. 17 Even the poorest and the most degraded classes in the
community, besides paying land-owners for such public benefits as come their
way, are compelled by indirect taxation to contribute to the support of government.
But landowners as a class go free. They enjoy the protection of the courts,
and of police and fire departments, and they have the use of schools and
the benefit of highways and other public improvements, all in common with
the most favored, and upon the same specific terms; yet, though they go through
the form of paying taxes, and if their holdings are of considerable value
pose as "the tax-payers" on all important occasions, they,
in effect and considered as a class, pay no taxes, because government, by
increasing the value of their land, enables them to recover back in higher
rents and higher prices more than their taxes amount to. Enjoying the same
tangible benefits of government that others do, many of them as individuals
and all of them as a class receive in addition a tangible pecuniary benefit
which government confers upon no other property-owners. The value of their
property is enhanced in proportion to the benefits of government which its
occupants enjoy. To tax them alone, therefore, is not to discriminate against
them; it is to charge them for what they get.18
17. While the landholders of the City of Washington were
paying something less than two per cent annually in taxes, a Congressional
Committee (Report of the Select Committee to Investigate Tax Assessments
in the District of Columbia, composed of Messrs. Johnson, of Ohio, Chairman,
Wadsworth, of New York, and Washington, of Tennessee. Made to the House
of Representatives, May 24, 1892. Report No. 1469), brought out
the fact that the value of their land had been increasing at a minimum
rate of ten per cent per annum. The Washington land-owners as a class
thus appear to have received back in higher land values, actually and
potentially, about ten dollars for every two dollars that as land-owners
they paid in taxes. If any one supposes that this condition is peculiar
to Washington let him make similar estimates for any progressive locality,
and see if the land-owners there are not favored in like manner.
But the point is not dependent upon increase in the capitalized
value of land. If the land yields or will yield to its owner an income
in the nature of actual or potential ground rent, then to the extent
that this actual or possible income is dependent upon government the
landlord is in effect exempt from taxation. No matter what tax he pays
on account of his ownership of land, the public gives it back to him
to that extent.
18. Take for illustration two towns, one of excellent
government and the other of inefficient government, but in all other
respects alike. Suppose you are hunting for a place of residence and
find a suitable site in the town of good government. For simplicity of
illustration let us suppose that the land there is not sold outright
but is let upon ground rent. You meet the owner of the lot you have selected
and ask him his terms. He replies:
"Two hundred and fifty dollars a year."
"Two hundred and fifty dollars a year!" you
exclaim. "Why, I can get just as good a site in that other town
for a hundred dollars a year."
"Certainly you can," he will say. "But
if you build a house there and it catches fire it will burn down; they
have no fire department. If you go out after dark you will be 'held up'
and robbed; they have no police force. If you ride out in the spring,
your carriage will stick in the mud up to the hubs, and if you walk you
may break your legs and will be lucky if you don t break your neck; they
have no street pavements and their sidewalks are dangerously out of repair.
When the moon doesn't shine the streets are in darkness, for they have
no street lights. The water you need for your house you must get from
a well; there is no water supply there. Now in our town it is different.
We have a splendid fire department, and the best police force in the
world. Our streets are macadamized, and lighted with electricity; our
sidewalks are always in first class repair; we have a water system that
equals that of New York; and in every way the public benefits in this
town are unsurpassed. It is the best governed town in all this region.
Isn't it worth a hundred and fifty dollars a year more for a building
site here than over in that poorly governed town?"
You recognize the advantages and agree to the terms.
But when your house is built and the assessor visits you officially,
what would be the conversation if your sense of the fitness of things
were not warped by familiarity with false systems of taxation? Would
it not be something like what follows?
"How much do you regard this house as worth? " asks
the assessor.
"What is that to you?" you inquire.
"I am the town assessor and am about to appraise
your property for taxation."
"Am I to be taxed by this town? What for?"
"What for?" echoes the assessor in surprise. "What
for? Is not your house protected from fire by our magnificent fire department?
Are not you protected from robbery by the best police force in the world?
Do not you have the use of macadamized pavements, and good sidewalks,
and electric street lights, and a first class water supply? Don't you
suppose these things cost something? And don't you think you ought to
pay your share?"
"Yes," you answer, with more or less calmness; "I
do have the benefit of these things, and I do think that I ought to pay
my share toward supporting them. But I have already paid my share for
this year. I have paid it to the owner of this lot. He charges me two
hundred and fifty dollars a year -- one hundred and fifty dollars more
than I should pay or he could get but for those very benefits. He has
collected my share of this year's expense of maintaining town improvements;
you go and collect from him. If you do not, but insist upon collecting
from me, I shall be paying twice for these things, once to him and once
to you; and he won't be paying at all, but will be making money out of
them, although he derives the same benefits from them in all other respects
that I do." ...
d. Effect of Confiscating Rent to Private Use.
By giving Rent to individuals society ignores this most just law, 99 thereby
creating social disorder and inviting social disease. Upon society alone,
therefore, and not upon divine Providence which has provided bountifully,
nor upon the disinherited poor, rests the responsibility for poverty and
fear of poverty.
99. "Whatever dispute arouses the passions of men,
the conflict is sure to rage, not so much as to the question 'Is it wise?'
as to the question 'Is it right?'
"This tendency of popular discussions to take an
ethical form has a cause. It springs from a law of the human mind; it
rests upon a vague and instinctive recognition of what is probably the
deepest truth we can grasp. That alone is wise which is just; that alone
is enduring which is right. In the narrow scale of individual actions
and individual life this truth may be often obscured, but in the wider
field of national life it everywhere stands out.
"I bow to this arbitrament, and accept this test." — Progress
and Poverty, book vii, ch. i.
The reader who has been deceived into believing that Mr.
George's proposition is in any respect unjust, will find profit in a
perusal of the entire chapter from which the foregoing extract is taken.
Let us try to trace the connection by means of a chart, beginning with the
white spaces on page 68. As before, the first-comers take possession of the
best land. But instead of leaving for others what they do not themselves
need for use, as in the previous illustrations, they appropriate the whole
space, using only part, but claiming ownership of the rest. We may distinguish
the used part with red color, and that which is appropriated without use
with blue. Thus: [chart]
But what motive is there for appropriating more of the space than is used?
Simply that the appropriators may secure the pecuniary benefit of future
social growth. What will enable them to secure that? Our system of confiscating
Rent from the community that earns it, and giving it to land-owners who,
as such, earn nothing.100
100. It is reported from Iowa that a few years ago a workman
in that State saw a meteorite fall, and. securing possession of it after
much digging, he was offered $105 by a college for his "find." But
the owner of the land on which the meteorite fell claimed the money,
and the two went to law about it. After an appeal to the highest court
of the State, it was finally decided that neither by right of discovery,
nor by right of labor, could the workman have the money, because the
title to the meteorite was in the man who owned the land upon which it
fell.
Observe the effect now upon Rent and Wages. When other men come, instead
of finding half of the best land still common and free, as in the corresponding
chart on page 68, they find all of it owned, and are obliged either to go
upon poorer land or to buy or rent from owners of the best. How much will
they pay for the best? Not more than 1, if they want it for use and not to
hold for a higher price in the future, for that represents the full difference
between its productiveness and the productiveness of the next best. But if
the first-comers, reasoning that the next best land will soon be scarce and
theirs will then rise in value, refuse to sell or to rent at that valuation,
the newcomers must resort to land of the second grade, though the best be
as yet only partly used. Consequently land of the first grade commands Rent
before it otherwise would.
As the sellers' price, under these circumstances, is arbitrary it cannot
be stated in the chart; but the buyers' price is limited by the superiority
of the best land over that which can be had for nothing, and the chart may
be made to show it: [chart]
And now, owing to the success of the appropriators of the best land in securing
more than their fellows for the same expenditure of labor force, a rush is
made for unappropriated land. It is not to use it that it is wanted, but
to enable its appropriators to put Rent into their own pockets as soon as
growing demand for land makes it valuable.101 We may, for illustration, suppose
that all the remainder of the second space and the whole of the third are
thus appropriated, and note the effect: [chart]
At this point Rent does not increase nor Wages fall, because there is no
increased demand for land for use. The holding of inferior land for higher
prices, when demand for use is at a standstill, is like owning lots in the
moon — entertaining, perhaps, but not profitable. But let more land
be needed for use, and matters promptly assume a different appearance. The
new labor must either go to the space that yields but 1, or buy or rent from
owners of better grades, or hire out. The effect would be the same in any
case. Nobody for the given expenditure of labor force would get more than
1; the surplus of products would go to landowners as Rent, either directly
in rent payments, or indirectly through lower Wages. Thus: [chart]
101. The text speaks of Rent only as a periodical or continuous
payment — what would be called "ground rent." But actual
or potential Rent may always be, and frequently is, capitalized for the
purpose of selling the right to enjoy it, and it is to selling value
that we usually refer when dealing in land.
Land which has the power of yielding Rent to its owner
will have a selling value, whether it be used or not, and whether Rent
is actually derived from it or not. This selling value will be the capitalization
of its present or prospective power of producing Rent. In fact, much
the larger proportion of laud that has a selling value is wholly or partly
unused, producing no Rent at all, or less than it would if fully used.
This condition is expressed in the chart by the blue color.
"The capitalized value of land is the actuarial 'discounted'
value of all the net incomes which it is likely to afford, allowance
being made on the one hand for all incidental expenses, including those
of collecting the rents, and on the other for its mineral wealth, its
capabilities of development for any kind of business, and its advantages,
material, social, and aesthetic, for the purposes of residence." — Marshall's
Prin., book vi, ch. ix, sec. 9.
"The value of land is commonly expressed as a certain
number of times the current money rental, or in other words, a certain
'number of years' purchase' of that rental; and other things being equal,
it will be the higher the more important these direct gratifications
are, as well as the greater the chance that they and the money income
afforded by the land will rise." — Id., note.
"Value . . . means not utility, not any quality inhering
in the thing itself, but a quality which gives to the possession of a
thing the power of obtaining other things, in return for it or for its
use. . . Value in this sense — the usual sense — is purely
relative. It exists from and is measured by the power of obtaining things
for things by exchanging them. . . Utility is necessary to value, for
nothing can be valuable unless it has the quality of gratifying some
physical or mental desire of man, though it be but a fancy or whim. But
utility of itself does not give value. . . If we ask ourselves the reason
of . . . variations in . . . value . . . we see that things having some
form of utility or desirability, are valuable or not valuable, as they
are hard or easy to get. And if we ask further, we may see that with
most of the things that have value this difficulty or ease of getting
them, which determines value, depends on the amount of labor which must
be expended in producing them ; i.e., bringing them into the place, form
and condition in which they are desired. . . Value is simply an expression
of the labor required for the production of such a thing. But there are
some things as to which this is not so clear. Land is not produced by
labor, yet land, irrespective of any improvements that labor has made
on it, often has value. . . Yet a little examination will show that such
facts are but exemplifications of the general principle, just as the
rise of a balloon and the fall of a stone both exemplify the universal
law of gravitation. . . The value of everything produced by labor, from
a pound of chalk or a paper of pins to the elaborate structure and appurtenances
of a first-class ocean steamer, is resolvable on analysis into an equivalent
of the labor required to produce such a thing in form and place; while
the value of things not produced by labor, but nevertheless susceptible
of ownership, is in the same way resolvable into an equivalent of the
labor which the ownership of such a thing enables the owner to obtain
or save." — Perplexed Philosopher, ch. v.
The figure 1 in parenthesis, as an item of Rent, indicates potential Rent.
Labor would give that much for the privilege of using the space, but the
owners hold out for better terms; therefore neither Rent nor Wages is actually
produced, though but for this both might be.
In this chart, notwithstanding that but little space is used, indicated
with red, Wages are reduced to the same low point by the mere appropriation
of space, indicated with blue, that they would reach if all the space above
the poorest were fully used. It thereby appears that under a system which
confiscates Rent to private uses, the demand for land for speculative purposes
becomes so great that Wages fall to a minimum long before they would if land
were appropriated only for use.
In illustrating the effect of confiscating Rent to private use we have as
yet ignored the element of social growth. Let us now assume as before (page
73), that social growth increases the productive power of the given expenditure
of labor force to 100 when applied to the best land, 50 when applied to the
next best, 10 to the next, 3 to the next, and 1 to the poorest. Labor would
not be benefited now, as it appeared to be when on page 73 we illustrated
the appropriation of land for use only, although much less land is actually
used. The prizes which expectation of future social growth dangles before
men as the rewards of owning land, would raise demand so as to make it more
than ever difficult to get land. All of the fourth grade would be taken up
in expectation of future demand; and "surplus labor" would be crowded
out to the open space that originally yielded nothing, but which in consequence
of increased labor power now yields as much as the poorest closed space originally
yielded, namely, 1 to the given expenditure of labor force.102 Wages would
then be reduced to the present productiveness of the open space. Thus: [chart]
102. The paradise to which the youth of our country have
so long been directed in the advice, "Go West, young man, go West," is
truthfully described in "Progress and Poverty," book iv, ch.
iv, as follows :
"The man who sets out from the eastern seaboard
in search of the margin of cultivation, where he may obtain land without
paying rent, must, like the man who swam the river to get a drink,
pass for long distances through half-titled farms, and traverse vast
areas of virgin soil, before he reaches the point where land can be
had free of rent — i.e., by homestead entry or preemption."
If we assume that 1 for the given expenditure of labor force is the least
that labor can take while exerting the same force, the downward movement
of Wages will be here held in equilibrium. They cannot fall below 1; but
neither can they rise above it, no matter how much productive power may increase,
so long as it pays to hold land for higher values. Some laborers would continually
be pushed back to land which increased productive power would have brought
up in productiveness from 0 to 1, and by perpetual competition for work would
so regulate the labor market that the given expenditure of labor force, however
much it produced, could nowhere secure more than 1 in Wages.103 And this
tendency would persist until some labor was forced upon land which, despite
increase in productive power, would not yield the accustomed living without
increase of labor force. Competition for work would then compel all laborers
to increase their expenditure of labor force, and to do it over and over
again as progress went on and lower and lower grades of land were monopolized,
until human endurance could go no further.104 Either that, or they would
be obliged to adapt themselves to a lower scale of living.105
103. Henry Fawcett, in his work on "Political Economy," book
ii, ch. iii, observes with reference to improvements in agricultural
implements which diminish the expense of cultivation, that they do not
increase the profits of the farmer or the wages of his laborers, but
that "the landlord will receive in addition to the rent already
paid to him, all that is saved in the expense of cultivation." This
is true not alone of improvements in agriculture, but also of improvements
in all other branches of industry.
104. "The cause which limits speculation in commodities,
the tendency of increasing price to draw forth additional supplies, cannot
limit the speculative advance in land values, as land is a fixed quantity,
which human agency can neither increase nor diminish; but there is nevertheless
a limit to the price of land, in the minimum required by labor and capital
as the condition of engaging in production. If it were possible to continuously
reduce wages until zero were reached, it would be possible to continuously
increase rent until it swallowed up the whole produce. But as wages cannot
be permanently reduced below the point at which laborers will consent
to work and reproduce, nor interest below the point at which capital
will be devoted to production, there is a limit which restrains the speculative
advance of rent. Hence, speculation cannot have the same scope to advance
rent in countries where wages and interest are already near the minimum,
as in countries where they are considerably above it. Yet that there
is in all progressive countries a constant tendency in the speculative
advance of rent to overpass the limit where production would cease, is,
I think, shown by recurring seasons of industrial paralysis." — Progress
and Poverty, book iv, ch. iv.
105. As Puck once put it, "the man who makes two
blades of grass to grow where but one grew before, must not be surprised
when ordered to 'keep off the grass.' "
They in fact do both, and the incidental disturbances of general readjustment
are what we call "hard times." 106 These culminate in forcing unused
land into the market, thereby reducing Rent and reviving industry. Thus increase
of labor force, a lowering of the scale of living, and depression of Rent,
co-operate to bring on what we call "good times." But no sooner
do "good times" return than renewed demands for land set in, Rent
rises again, Wages fall again, and "hard times" duly reappear.
The end of every period of "hard times" finds Rent higher and Wages
lower than at the end of the previous period.107
106. "That a speculative advance in rent or land
values invariably precedes each of these seasons of industrial depression
is everywhere clear. That they bear to each other the relation of cause
and effect, is obvious to whoever considers the necessary relation between
land and labor." — Progress and Poverty, book v, ch. i.
107. What are called "good times" reach a point
at which an upward land market sets in. From that point there is a downward
tendency of wages (or a rise in the cost of living, which is the same
thing) in all departments of labor and with all grades of laborers. This
tendency continues until the fictitious values of land give way. So long
as the tendency is felt only by that class which is hired for wages,
it is poverty merely; when the same tendency is felt by the class of
labor that is distinguished as "the business interests of the country," it
is "hard times." And "hard times" are periodical
because land values, by falling, allow "good times" to set
it, and by rising with "good times" bring "hard times" on
again. The effect of "hard times" may be overcome, without
much, if any, fall in land values, by sufficient increase in productive
power to overtake the fictitious value of land.
The dishonest and disorderly system under which society confiscates Rent
from common to individual uses, produces this result. That maladjustment
is the fundamental cause of poverty. And progress, so long as the maladjustment
continues, instead of tending to remove poverty as naturally it should, actually
generates and intensifies it. Poverty persists with increase of productive
power because land values, when Rent is privately appropriated, tend to even
greater increase. There can be but one outcome if this continues: for individuals
suffering and degradation, and for society destruction.
Q22. What difference would it make to tenants whether they paid land rent
to the community or to private owners?
A. When they pay it to the community they are paying it in part to themselves,
and what others pay they share in; for they are part of the community. They
are also exempt from taxes. And since there would be no inducement to speculate
in land if rent went to the community, land would be more plentiful and rents
would consequently be lower. ... read the book
Charles B. Fillebrown: A Catechism
of Natural Taxation, from Principles of
Natural Taxation (1917)
Q20. Why should stocks and bonds be exempt?
A. Stocks, because they are only paper certificates of property which itself
has been taxed once already. Bonds, if legitimate, because a tax on borrowed
money is paid after all by the borrower and so becomes an added factor
in cost of production, and consequently in the cost of living.
Q42. Should not all people pay taxes for the protection of their property?
A. Yes, and that is what they are doing when they pay their ground rent. To tax
them again, as is now done, is double taxation.
... read the whole article
Robert V. Andelson The
Earth is the Lord's
On another occasion he [Henry George] wrote:
The tax on land values is
the most just and equal of all
taxes. It falls only upon those who receive from society a peculiar and
valuable benefit, and upon them in proportion to the benefit they
receive. It is the taking by the community, for the use of the
community, of that value which is the creation of the community. It is
the application of the common property to common uses (George, P&P,
421).
And yet, my friends, in the
topsy-turvy world in which we live,
this provided fund goes mainly into the pockets of speculators and
monopolists, while the body politic meets its needs by extorting from
individual producers the fruits of honest toil. If ever there were
any doubt about the perversity of human nature, our present system of
taxation is the proof! Everywhere about us, we see the ironic
spectacle of the community penalizing the individual for his industry
and initiative, and taking away from him a share of that which he
produces, yet at the same time lavishing upon the non-producer
undeserved windfalls which it — the community — produces.
And, as Winston Churchill put it, the unearned increment, the
socially-produced value of the land, is reaped by the speculator in
exact proportion, not to the service, but to the disservice, done.
"The greater the injury to society, the greater the reward." Read
the whole article
Joseph Fels: True Christianity
and My Own Religious Beliefs
Do you question the relationship
between taxation and righteousness?
Let us see. If government is a natural growth, then surely God's
natural law provides food and sustenance for government as that food is
needed; for where in Nature do we find a creature coming into the world
without timely provision of natural food for it? It is in our system of
taxation that we find the most emphatic denial of the Fatherhood of God
and the Brotherhood of Man, because,
- first, in order to meet our common
needs, we take from individuals what does not belong to us in common;
- second, we permit individuals to take for themselves what
does belong
to us in common;
- thus, third, under the pretext of taxation for public
purposes, we have established a system that permits some men to tax
other men for private profit.... read the whole letter
... The other
potentially supportive businesses -- service providers -- do not consume
much in
the way of resources or prime locations. Even service providers
on valuable sites, were they to pay more, could still come out ahead in the
better business climate of zero taxes on sales, on paid wages, on customers'
income, and of less onerous mortgage. Presently
taxes and mortgages consume about 65% of the average worker's income, drastically
reducing discretionary spending. ...
A big problem needs a big solution which
in turn needs a matching shift of our prevailing paradigm. Geonomics -- advocating
that we share the social value of sites and natural resources and untax earnings
-- does just that. Read the whole article
Charles T. Root — Not a Single Tax! (1925)
Every community, whatever its political name and extent -- village, city, state
or province or nation -- has its own normal, unfailing income, growing with
the growth of the community and always adequate to meet necessary governmental
expenditure.
To explain: Every community has an indefeasible original right to the land
on which it exists, and to all the natural, unmodified properties and advantages
of that particular area of the earth's surface. To this land in its natural
state, undrained, unfenced, unfertilized, unplanted and unoccupied, including
its waters, its contents and its location, every individual in the community
(which may consist of any political unit selected) has an equal right, while
all the individuals together have a joint right to the value for use which
society has conferred upon these natural advantages.
This value for use is known as "Land Value," or by the not particularly
descriptive but generally adopted name of "Economic Rent."
Briefly defined the land value or economic rent of any piece of ground is
the largest annual amount voluntarily offered for the exclusive use of that
ground, or of an equivalent parcel, independent of improvements thereon. Every
holder or user of land pays economic rent, but he now pays most of it to the
wrong party. The aggregate economic rent of the territory occupied
by any political unit is, as has been stated above, always sufficient, usually
more than sufficient,
for the legitimate expenses of the government of that unit. As also stated
above, the economic rent belongs to the community, and not to individual landowners. ...
Let us roughly restate the proposition: All members of the community having
a joint right to the income which the social advantages of the land will command,
they are all partners in this income.
Therefore, when one of their number wishes to take for his private use a parcel
of this land, he should buy out his partners, i.e., the rest of the community,
by paying regularly into the common treasury the economic rent of that parcel,
instead of paying, as at present, the purchase price, i.e., the right to collect
the economic rent, in a lump, to some other individual who has no more original
right to it than himself. ... read the whole article
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