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. ...
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