For, keeping in mind the fact that all wealth is the result of human exertion,
it is clearly seen that, having in view the promotion of the general prosperity,
it is the height of absurdity to tax wealth for purposes of revenue while
there remains, unexhausted by taxation, any value attaching to land. We may
tax land values as much as we please, without in the slightest degree lessening
the amount of land, or the capabilities of land, or the inducement to use
land. But we cannot tax wealth without lessening the inducement to the production
of wealth, and decreasing the amount of wealth. We might take the whole value
of land in taxation, so as to make the ownership of land worth nothing, and
the land would still remain, and be as useful as before. The effect would
be to throw land open to users free of price, and thus to increase its capabilities,
which are brought out by increased population. But impose anything like such
taxation upon wealth, and the inducement to the production of wealth would
be gone. Movable wealth would be hidden or carried off, immovable wealth
would be suffered to go to decay, and where was prosperity would soon be
the silence of desolation.
And the reason of this difference is clear. The possession of wealth is
the inducement to the exertion necessary to the production and maintenance
of wealth. Men do not work for the pleasure of working, but to get the things
their work will give them. And to tax the things that are produced by exertion
is to lessen the inducement to exertion. But over and above the benefit to
the possessor, which is the stimulating motive to the production of wealth,
there is a benefit to the community, for no matter how selfish he may be,
it is utterly impossible for any one to entirely keep to himself the benefit
of any desirable thing he may possess. These diffused benefits when localized
give value to land, and this may be taxed without in any wise diminishing
the incentive to production.
To illustrate: A man builds a fine house or large factory in a poorly improved
neighborhood. To tax this building and its adjuncts is to make him pay for
his enterprise and expenditure — to take from him part of his natural
reward. But the improvement thus made has given new beauty or life to the
neighborhood, making it a more desirable place than before for the erection
of other houses or factories, and additional value is given to land all about.
Now to tax improvements is not only to deprive of his proper reward the man
who has made the improvement, but it is to deter others from making similar
improvements. But, instead of taxing improvements, to tax these land values
is to leave the natural inducement to further improvement in full force,
and at the same time to keep down an obstacle to further improvement, which,
under the present system, improvement itself tends to raise. For the advance
of land values which follows improvement, and even the expectation of improvement,
makes further improvement more costly.
See how unjust and short-sighted is this system. Here is a man who, gathering
what little capital he can, and taking his family, starts West to find a
place where he can make himself a home. He must travel long distances; for,
though he will pass plenty of land nobody is using, it is held at prices
too high for him. Finally he will go no further, and selects a place where,
since the creation of the world, the soil, so far as we know, has never felt
a plowshare. But here, too, in nine cases out of ten, he will find the speculator
has been ahead of him, for the speculator moves quicker, and has superior
means of information to the emigrant. Before he can put this land to the
use for which nature intended it, and to which it is for the general good
that it should be put, he must make terms with some man who in all probability
never saw the land, and never dreamed of using it, and who, it may be, resides
in some city, thousands of miles away. In order to get permission to use
this land, he must give up a large part of the little capital which is seed-wheat
to him, and perhaps in addition mortgage his future labor for years. Still
he goes to work: he works himself, and his wife works, and his children work — work
like horses, and live in the hardest and dreariest manner. Such a man deserves
encouragement, not discouragement; but on him taxation falls with peculiar
severity. Almost everything that he has to buy — groceries, clothing,
tools — is largely raised in price by a system of tariff taxation which
cannot add to the price of the grain or hogs or cattle that he has to sell.
And when the assessor comes around he is taxed on the improvements he has
made, although these improvements have added not only to the value of surrounding
land, but even to the value of land in distant commercial centers. Not merely
this, but, as a general rule, his land, irrespective of the improvements,
will be assessed at a higher rate than unimproved land around it, on the
ground that "productive property" ought to pay more than "unproductive
property" — a principle just the reverse of the correct one, for
the man who makes land productive adds to the general prosperity, while the
man who keeps land unproductive stands in the way of the general prosperity,
is but a dog-in-the-manger, who prevents others from using what he will not
use himself.
Or, take the case of the railroads. That railroads are a public benefit
no one will dispute. We want more railroads, and want them to reduce their
fares and freight. Why then should we tax them? for taxes upon railroads
deter from railroad building, and compel higher charges. Instead of taxing
the railroads, is it not clear that we should rather tax the increased value
which they give to land? To tax railroads is to check railroad building,
to reduce profits, and compel higher rates; to tax the value they give to
land is to increase railroad business and permit lower rates. The elevated
railroads, for instance, have opened to the overcrowded population of New
York the wide, vacant spaces of the upper part of the island. But this great
public benefit is neutralized by the rise in land values. Because these vacant
lots can be reached more cheaply and quickly, their owners demand more for
them, and so the public gain in one way is offset in another, while the roads
lose the business they would get were not building checked by the high prices
demanded for lots. The increase of land values, which the elevated roads
have caused, is not merely no advantage to them — it is an injury;
and it is clearly a public injury. The elevated railroads ought not to be
taxed. The more profit they make, with the better conscience can they be
asked to still further reduce fares. It is the increased land values which
they have created that ought to be taxed, for taxing them will give the public
the full benefit of cheap fares.
So with railroads everywhere. And so not alone with railroads, but with
all industrial enterprises. So long as we consider that community most prosperous
which increases most rapidly in wealth, so long is it the height of absurdity
for us to tax wealth in any of its beneficial forms. We should tax what we
want to repress, not what we want to encourage. We should tax that which
results from the general prosperity, not that which conduces to it. It is
the increase of population, the extension of cultivation, the manufacture
of goods, the building of houses and ships and railroads, the accumulation
of capital, and the growth of commerce that add to the value of land — not
the increase in the value of land that induces the increase of population
and increase of wealth. It is not that the land of Manhattan Island is now
worth hundreds of millions where, in the time of the early Dutch settlers,
it was only worth dollars, that there are on it now so many more people,
and so much more wealth. It is because of the increase of population and
the increase of wealth that the value of the land has so much increased.
Increase of land values tends of itself to repel population and prevent improvement.
And thus the taxation of land values, unlike taxation of other property,
does not tend to prevent the increase of wealth, but rather to stimulate
it. It is the taking of the golden egg, not the choking of the goose that
lays it.
Every consideration of policy and ethics squares with this conclusion.
The tax upon land values is the most economically perfect of all taxes. It
does not raise prices; it maybe collected at least cost, and with the utmost
ease and certainty; it leaves in full strength all the springs of production;
and, above all, it consorts with the truest equality and the highest justice.
For, to take for the common purposes of the community that value which results
from the growth of the community, and to free industry and enterprise and
thrift from burden and restraint, is to leave to each that which he fairly
earns, and to assert the first and most comprehensive of equal rights — the
equal right of all to the land on which, and from which, all must live.
Thus it is that the scheme of taxation which conduces to the greatest production
is also that which conduces to the fairest distribution, and that in the
proper adjustment of taxation lies not merely the possibility of enormously
increasing the general wealth, but the solution of these pressing social
and political problems which spring from unnatural inequality in the distribution
of wealth. ... read the whole article