Free Gifts of Nature

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

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.

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. ... read the whole article

Peter Barnes: Capitalism 3.0 — Chapter 6: Trusteeship of Creation (pages 79-100)

Gifts of creation were produced only once and are irreplaceable. By contrast, products traded in markets tend to be mass-produced and highly disposable. It’s hard to imagine a deity who’d view such temporal goods as equivalent to his or her enduring handiwork. The question is whether creation’s irreplaceable gifts are different enough to merit different treatment by our economic operating system. A strong case can be made that they are.

The case is moral as well as economic. The moral argument is that we have a duty to preserve irreplaceable gifts of creation, whereas we have no comparable duty toward transient commercial goods. The economic argument is that any society that depletes its natural capital is bound to become impoverished over time. I find both lines of argument convincing.

But what’s the reality today? Here we encounter two disconcerting facts. The first is that there are very few property rights protecting nature’s gifts. With the exception of a few set-asides such as parks and wilderness areas, we subject creation’s gifts to the same rules as Wal-Mart’s merchandise. The second is that the right of corporations to profit dominates all other rights.

It’s time to treat creation’s gifts differently, to put different “tags” on them so markets will recognize them and apply different rules to them. This chapter shows how we can do that. ...

At the moment, there’s one law that does give preference to creation’s gifts: the Endangered Species Act, which says a species’ right to survive trumps capital’s right to short-term gain. The trouble is, the law comes into play only when a species has been so devastated it’s on the brink of extinction. Even then, the courts don’t always enforce it. Recently, in a very dry year, the government reduced its delivery of subsidized water to California farmers because endangered fish needed it to survive. Some farmers sued, arguing that the government had unconstitutionally “taken” their property. A federal court agreed, the Bush administration refused to appeal, and the farmers collected $13 million in damages.

It seems to me that, if anything is divine, it should be gifts of creation. Morally, they’re gifts we inherit together and must pass on, undiminished, to future generations. Economically, they’re irreplaceable and invaluable capital. Protection of these shared assets should trump transient private gain. Broad benefit should trump narrow benefit. The commons should trump capital. This should be written into our economic operating system and enforced by the courts. ...

A trustee isn’t the same thing as a steward. Stewards care for an asset, but their obligations are voluntary and vague. By contrast, trustees’ obligations are mandatory and quite specific. Trusteeship is thus a more formal and rigorous responsibility than stewardship.

Trusts can be in charge of financial as well as physical assets. In this chapter, my concern is natural assets — gifts we inherit from creation. One of my premises is that each generation has a contract to pass on such gifts, undiminished, to those not yet born. If we are to keep this contract, someone must act as trustee of nature’s gifts, or at least of the most endangered of them. The question is, who?

The candidates are government, corporations, and trusts. I argued earlier that neither corporations nor government can fulfill this function; they’re both too bound to short-term private interests. That leaves trusts. ... read the whole chapter