Wealth and Want
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Double Taxation


Henry George: The Common Sense of Taxation (1881 article)

Now discarding all idea that there rests upon us any obligation to equally tax all kinds of property, and assuming for our guidance the true rule, that taxation should be levied with a view to the promotion of the general prosperity, the securing of substantial equality, and the recognition of inalienable rights, let us consider upon what species of property it may be best laid.

To consider what is included in the category of property is to see the absurdity of saying that all property should be equally taxed. For not to speak of minor differences that arise from application and use, there are commonly included under this term things of essentially different nature. Whatever is recognized by municipal law as subject to ownership is property. But between things thus classed together are wide differences. In the first place, there are certain of them which have in themselves no value, but are merely the representatives or doubles of property in itself valuable. Such are stocks, bonds, mortgages, promissory notes of all kinds, whether made by individuals or issued by governments to serve as money, solvent debts, book-accounts, etc. These things may be to the individual valuable property, and are correctly included in any estimate of his wealth. But they are no part of the wealth of the community. Their increase does not make the community a whit the richer; and they may be utterly destroyed without the community becoming a whit the poorer. If I buy a horse, giving my note for the amount, the result of the transaction (supposing me to be solvent) is that the seller gets property to the value of the horse, while I get the horse. But there has been no increase in wealth. To the seller, my note may be quite as good as the horse, and in estimating his wealth it may be as properly included as the horse; but if the note be destroyed, the community is nothing the poorer, while if the horse break his neck, there is a lessening of the general wealth by one horse. And so, the issuance of bonds by a government, or the watering of stock by a corporation, can in no wise increase the general sum of wealth, nor will any diminution either in the amount or in the selling price of such bonds or stock reduce it. If all the governments of the world were to repudiate their debts tomorrow, an immense amount of property, now carefully guarded, would become waste paper, and thousands of people now rich would be made poor, but the wealth of the human race would not be diminished one iota.

These are truisms. Yet so widespread and persistent is the notion that all property should be taxed, that they are generally ignored. Nothing is clearer than that when a farmer who wants more capital puts a mortgage on his farm, no new value is thereby created. Yet, in most of our States, both the farm and the mortgage are taxed; though so obvious is the double taxation that in some of them the clumsy expedient of making an exemption to the debtor is resorted to.

But it is manifest that property of this kind is not a fit subject for taxation, and ought not to be considered in making up the assessment rolls. It has, in itself, no value. It is merely the representative, or token, of value — the certificate of ownership, or the obligation to pay value. It either represents other property, or property yet to be brought into existence. And, as nothing real can be drawn from that which is not real, taxation upon property of this kind must ultimately fall, either upon the property represented, in which case there is double taxation, or upon those whose obligations it expresses, in which case men are taxed, not upon what they own, but upon what they owe; and all cumbrous devices to prevent the unjust effects of such taxation, like other complications of the revenue system, simply give to the stronger and more unscrupulous opportunities of throwing the burden upon the weaker and more conscientious. Property of this kind ought not to be taxed at all. Property in itself valuable is clearly that with which any wise scheme of taxation should alone deal.

To consider the nature of property of this kind is again to see a clear distinction. That distinction is not, as the lawyers have it, between movables and immovables, between personal property and real estate. The true distinction is between property which is, and property which is not, the result of human labor; or, to use the terms of political economy, between land and wealth. For, in any precise use of the term, land is not wealth, any more than labor is wealth. Land and labor are the factors of production. Wealth is such result of their union as retains the capacity of ministering to human desire. A lot and the house which stands upon it are alike property, alike have a tangible value, and are alike classed as real estate. But there are between them the most essential differences. The one is the free gift of Nature, the other the result of human exertion; the one exists from generation to generation, while men come and go; the other is constantly tending to decay, and can only be preserved by continual exertion. To the one, the right of exclusive possession, which makes it individual property, can, like the right of property in slaves, be traced to nothing but municipal law; to the other, the right of exclusive property springs clearly from those natural relations which are among the primary perceptions of the human mind. Nor are these mere abstract distinctions. They are distinctions of the first importance in determining what should and what should not be taxed. ... read the whole article




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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper