Nor do we hesitate to say that this way of securing the equal right
to the bounty of the Creator and the exclusive right to the products
of labor is the way intended by God for raising public revenues. For
we are not atheists, who deny God; nor semi-atheists, who deny that he
has any concern in politics and legislation.
It is true as you say — a salutary truth too often forgotten — that “man
is older than the state, and he holds the right of providing for the
life of his body prior to the formation of any state.” Yet, as
you too perceive, it is also true that the state is in the divinely appointed
order. For He who foresaw all things and provided for all things, foresaw
and provided that with the increase of population and the development
of industry the organization of human society into states or governments
would become both expedient and necessary.
No sooner does the state arise than, as we all know, it needs revenues.
This need for revenues is small at first, while population is sparse,
industry rude and the functions of the state few and simple. But with
growth of population and advance of civilization the functions of the
state increase and larger and larger revenues are needed.
Now, He that made the world and placed man in it, He that pre-ordained
civilization as the means whereby man might rise to higher powers and
become more and more conscious of the works of his Creator, must have
foreseen this increasing need for state revenues and have made provision
for it. That is to say: The increasing need for public revenues with
social advance, being a natural, God-ordained need, there must be a right
way of raising them — some way that we can truly say is the way
intended by God. It is clear that this right way of raising public revenues
must accord with the moral law.
It must not take from individuals what rightfully belongs to individuals.
It must not give some an advantage over others, as by increasing the
prices of what some have to sell and others must buy.
It must not lead men into temptation, by requiring trivial oaths, by
making it profitable to lie, to swear falsely, to bribe or to take bribes.
It must not confuse the distinctions of right and wrong, and weaken
the sanctions of religion and the state by creating crimes that are not
sins, and punishing men for doing what in itself they have an undoubted
right to do.
It must not repress industry. It must not check commerce. It must not
punish thrift. It must offer no impediment to the largest production
and the fairest division of wealth.
Let me ask your Holiness to consider the taxes on the processes and
products of industry by which through the civilized world public revenues
are collected — the octroi duties that surround Italian
cities with barriers; the monstrous customs duties that hamper intercourse
so-called Christian states; the taxes on occupations, on earnings, on
investments, on the building of houses, on the cultivation of fields,
on industry and thrift in all forms. Can these be the ways God has intended
that governments should raise the means they need? Have any of them the
characteristics indispensable in any plan we can deem a right one?
All these taxes violate the moral law. They take by force what belongs
to the individual alone; they give to the unscrupulous an advantage over
the scrupulous; they have the effect, nay are largely intended,
to increase the price of what some have to sell and others must buy; they corrupt
government; they make oaths a mockery; they shackle commerce; they
fine industry and thrift; they lessen the wealth that men might enjoy, and
enrich some by impoverishing others.
Yet what most strikingly shows how opposed to Christianity is this system
of raising public revenues is its influence on thought.
Christianity teaches us that all men are brethren; that their true interests
are harmonious, not antagonistic. It gives us, as the golden rule of
life, that we should do to others as we would have others do to us. But
out of the system of taxing the products and processes of labor,
and out of its effects in increasing the price of what some have
and others must buy, has grown the theory of “protection,” which
denies this gospel, which holds Christ ignorant of political economy
and proclaims laws of national well-being utterly at variance with his
teaching. This theory sanctifies national hatreds; it inculcates a universal
war of hostile tariffs; it teaches peoples that their prosperity lies
in imposing on the productions of other peoples restrictions they do
not wish imposed on their own; and instead of the Christian doctrine
of man’s brotherhood it makes injury of foreigners a civic virtue.
“By their fruits ye shall know them.” Can anything more
clearly show that to tax the products and processes of industry is not
the way God intended public revenues to be raised?
But to consider what we propose — the raising of public revenues
by a single tax on the value of land irrespective of improvements — is
to see that in all respects this does conform to the moral law.
Let me ask your Holiness to keep in mind that the value we propose to
tax, the value of land irrespective of improvements, does not come from
any exertion of labor or investment of capital on or in it — the
values produced in this way being values of improvement which we would
exempt. The value of land irrespective of improvement is the value that
attaches to land by reason of increasing population and social progress.
This is a value that always goes to the owner as owner, and never does
and never can go to the user; for if the user be a different person from
the owner he must always pay the owner for it in rent or in purchase-money;
while if the user be also the owner, it is as owner, not as user, that
he receives it, and by selling or renting the land he can, as owner,
continue to receive it after he ceases to be a user.
Thus, taxes on land irrespective of improvement cannot lessen the rewards
of industry, nor add to prices,* nor in any way take from the individual
what belongs to the individual. They can take only the value that attaches
to land by the growth of the community, and which therefore belongs to
the community as a whole.
* As to this point it may be well to add that all
economists are agreed that taxes on land values irrespective of improvement
or use — or what in the terminology of political economy is
styled rent, a term distinguished from the ordinary use of the word
rent by being applied solely to payments for the use of land itself — must
be paid by the owner and cannot be shifted by him on the user. To
explain in another way the reason given in the text: Price is not
determined by the will of the seller or the will of the buyer, but
by the equation of demand and supply, and therefore as to things
constantly demanded and constantly produced rests at a point determined
by the cost of production — whatever tends to increase the
cost of bringing fresh quantities of such articles to the consumer
increasing price by checking supply, and whatever tends to reduce
such cost decreasing price by increasing supply. Thus taxes on wheat
or tobacco or cloth add to the price that the consumer must pay,
and thus the cheapening in the cost of producing steel which improved
processes have made in recent years has greatly reduced the price
of steel. But land has no cost of production, since it is created
by God, not produced by man. Its price therefore is fixed —
1 (monopoly rent), where land is held in close monopoly,
by what the owners can extract from the users under penalty of
deprivation and consequently of starvation, and amounts to all
that common labor can earn on it beyond what is necessary to life;
2 (economic rent proper), where there is no special monopoly, by what the
particular land will yield to common labor over and above what may be had
by like expenditure and exertion on land having no special advantage and
for which no rent is paid; and,
3 (speculative rent, which is a species of monopoly rent, telling particularly
in selling price), by the expectation of future increase of value from
social growth and improvement, which expectation causing landowners to
withhold land at present prices has the same effect as combination.
Taxes on land values or economic rent can therefore
never be shifted by the landowner to the land-user, since they in
no wise increase the demand for land or enable landowners to check
supply by withholding land from use. Where rent depends on mere monopolization,
a case I mention because rent may in this way be demanded for the
use of land even before economic or natural rent arises, the taking
by taxation of what the landowners were able to extort from labor
could not enable them to extort any more, since laborers, if not
left enough to live on, will die. So, in the case of economic rent
proper, to take from the landowners the premiums they receive, would
in no way increase the superiority of their land and the demand for
it. While, so far as price is affected by speculative rent, to compel
the landowners to pay taxes on the value of land whether they were
getting any income from it or not, would make it more difficult for
them to withhold land from use; and to tax the full value would not
merely destroy the power but the desire to do so.
To take land values for the state, abolishing all taxes on the products
of labor, would therefore leave to the laborer the full produce of labor;
to the individual all that rightfully belongs to the individual. It would
impose no burden on industry, no check on
commerce, no punishment on
thrift; it would secure the largest production and the fairest distribution
of wealth, by leaving men free to produce and to exchange
as they please, without any artificial enhancement of prices; and by taking for public
purposes a value that cannot be carried off, that cannot be hidden, that
of all values is most easily ascertained and most certainly and cheaply
collected, it would enormously lessen the number of officials, dispense
with oaths, do away with temptations to bribery and evasion, and abolish
man-made crimes in themselves innocent.
But, further: That God has intended the state to obtain the revenues
it needs by the taxation of land values is shown by the same order and
degree of evidence that shows that God has intended the milk of the mother
for the nourishment of the babe.
See how close is the analogy. In that primitive condition ere the need
for the state arises there are no land values. The products of labor
have value, but in the sparsity of population no value as yet attaches
to land itself. But as increasing density of population and increasing
elaboration of industry necessitate the organization of the state, with
its need for revenues, value begins to attach to land. As population
still increases and industry grows more elaborate, so the needs for public
revenues increase. And at the same time and from the same causes land
values increase. The connection is invariable. The value of things produced
by labor tends to decline with social development, since the larger scale
of production and the improvement of processes tend steadily to reduce
their cost. But the value of land on which population centers goes up
and up. Take Rome or Paris or London or New York or Melbourne. Consider
the enormous value of land in such cities as compared with the value
of land in sparsely settled parts of the same countries. To what is this
due? Is it not due to the density and activity of the populations of
those cities — to the very causes that require great public expenditure
for streets, drains, public buildings, and all the many things needed
for the health, convenience and safety of such great cities? See how
with the growth of such cities the one thing that steadily increases
in value is land; how the opening of roads, the building of railways,
the making of any public improvement, adds to the value of land. Is it
not clear that here is a natural law — that is to say a tendency
willed by the Creator? Can it mean anything else than that He who
ordained the state with its needs has in the values which attach
to land provided
the means to meet those needs? ... read
the whole letter