see also: what percentage?, annual value, ground rent
That is, what percentage of the value of land is it appropriate to apply
to that value to say what tax an individual landholder should pay each year?
In part, this is a function of a related question — what percentage
of Rent should we collect? But let's accept that we should be collecting
of Rent and leaving the other 5% to the landholder.
Estimates generally fall in the 5% to 7% range; that is, that to move from
our current approach of taxing land just a little to taking something approaching
95% of rent would mean collecting, initially, about 5% to 7% of what
for. (Collecting the right amount would reduce the selling price of the land
to almost nothing, so the calculation of rent would be handled differently in
following years. The value of the land, though, would not be reduced.)
Louis Post: Outlines of Louis F. Post's
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.,
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,
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
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
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
"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,
"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,
"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
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 ... read the book
Charles B. Fillebrown: A Catechism
of Natural Taxation, from Principles of
Natural Taxation (1917)
Q10. What is the distinction between the taxation of land and the taxation
A. Taxing land means, in the ordinary use of the words, to tax the land upon
its capital value, or selling value, at a given rate per $100 or $1,000 of that
value. Taxing rent means taxing the annual value, or ground rent, at a given
percentage of that rent. It is in one case a tax on rent; in the other is a tax
on capitalized rent.
Q15. What should be the limit of revenue under the single tax?
A. The same as under any other system of taxation, the cost of government economically
Q16. Did not Henry George hold that the full ground rent of land should
be taken in taxation?
A. No! Not only did he concede a margin of rent to the landlord, but as a matter
of fact, as Thomas G. Shearman said, "not all the power of all governments" could
collect in taxation all of ground rent.
Q40. What is meant by a capitalized tax?
A. It is a sum, the interest of which would pay the tax.
Q62. Would it be wise to take gradually in taxation, say, 1/4,
one half, or 3/4 of the future increase in economic
A. One hundred and one professors of political
economy have answered "Yes." Twenty-nine have answered "No."
Q63. How could the single tax be put into
A. By gradually transferring to land all taxes not
already on it.
Q64. How might such a plan be worked out?
A. If fifty cents per thousand should be deducted yearly for 30 years from the
rate on all property other than land, the reduction would finally amount to $15
per thousand, and it would then
be practically exempt from all taxation.
Q65. But how could it be worked out in case of
A. Recognizing that a right thing may be done in a wrong way, it is insisted
that a right way ought to be found to do a thing that ought to be done. The following
is presented as a natural
and convenient unit of calculation:
To be exact, an average of about 20 percent
of the gross ground rent of land is now taken in taxation, for instance, in Boston,
as well as for the whole state of Massachusetts. If an additional one percent
should be taken each year for 30 years, it would amount at the end of that period
to 30 percent, which, added to 20 percent, would make 50 percent, or one half,
which is about the average proportion that present taxes levied on all property
bear to gross ground rent. Meantime few landowners would feel the change, much
less be prejudiced by it.
The following variable illustrations, A, B, and C, make clear.
A "Modus Operandi"
A Increase of Present Tax
For instance, applied to the assessment of a specific lot of land for which
the user pays a gross ground rent of say ...... $68.00
Of which amount there is taken in taxation, 1915 ..... $18.00
Leaving a net income to the owner of .... $50.00
The selling value (presumably also the assessed valuation) would be at 5 per
cent ... $1,000.00
Proceeding to take yearly from now on 1 per cent additional of the gross ground
rent of $68 for a period of thirty years would amount in all to 30 per cent
of $68, equal to .... $20.40
Which, added to the tax already taken .... $18.00
Would give at the end of thirty years, from the $1,000 worth of land alone,
everything else being exempted, a total tax of .... $38.40.
Which is not much more than one half of the gross ground rent of ... $68.00
The opening exhibit in detail would stand as follows:
In 1915 the tax on this $1,000 worth of land was $18.00
In 1916 the tax would be $18 plus 68 cents (1 per cent of the gross ground
rent, $68); equal to .... $18.68
Reducing the owner's net rent from $50 to $49.32
In 1917 the tax would be $18 plus $1.36 (2 per cent of the $68), totaling ....
Reducing the owner's net rent from $50 to $48.64,
In 1918 the tax would be $18 plus $2.04 (3 per cent of the $68) or $20.45
Reducing the owner's net rent from $50 to $47.96
In 1945 the tax on the land would be $18 plus $20.40 (30 per cent of the $68)
or ... $38.40
With all improvements exempted.
Reducing the owner's net rent from $50 to $29.60.
The taking in taxation of any desired
proportion of the future increment could be accomplished simply by continuing
the present valuation and present rate as constant factors, and making a separate
individual assessment of the increment tax after the following or similar formula,
according to the proportion to be taken. For instance, to take in taxation
50 per cent of the future increase:
For a Future Increment Tax
||Tax for year 1916,
||Tax for year 1917,
||Tax for year 1918,
||Tax for year 1919,
||Tax for year 1920,
In applying this formula it would be necessary after the first few years at least
to increase the rate to correspond to the decrease in assessed valuation due
to this new tax. For computations upon
this and related points, see the Report of
the New York City Commission on New Sources of City Revenue (1913), p.
7 and Appendices X to XV.
It should be reiterated that inasmuchas gross ground rent, actual or potential,
is the initial factor in getting at the value of land, it cannot be unprofitable
to become familiar with a more correct formula
as expressed in terms of rent.
The Assessment of Rent
Starting with the present unit of annual value for use to take in taxation in
25 years 50 per cent of the future increase in ground rent:
||Tax for year 1916,
||Tax for year 1917,
||Tax for year 1918,
||Tax for year 1919,
|Tax for year 1920,
||Tax for year 1940,
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