Note 2. In "Progress and Poverty," book viii, ch. iv,
Henry George speaks of "the effect of substituting for
the manifold taxes now imposed, a single tax on the value
of land"; but the term did not become a distinctive name
until 1888.
The first general movement along the lines of
"Progress and Poverty" began New York City election of
1886, when Henry George polled 68,110 votes as an
independent candidate for mayor, and was defeated by the
Democratic candidate, Abram S. Hewitt, by a plurality of
only 22,442, the Republican, Theodore Roosevelt, polling
but 60,435. Following that election the United Labor
Party was formed, the Syracuse Convention in August,
1887, by the exclusion of the Socialists, came to present
the central idea of "Progress and Poverty" as
distinguished from the Socialistic propaganda which until
then was identified with it. Coincident with the
organization of the United Labor Party the Anti-Poverty
Society was formed; and the two bodies, one representing
the political and the other the religious phase of the
idea, worked together until President Cleveland's tariff
message of 1887 appeared. In this message Mr. George saw
the timid beginnings of that open struggle between
protection and free trade to which he had for years
looked forward as the political movement that must
culminate in the abolition of all taxes save those upon
land values, and he responded at once to the sentiments
of the message. But many protectionists, who had followed
him because they supposed he was a land nationalizer, now
broke away from his leadership, and the United Labor
Party and the Anti-Poverty Society were soon practically
dissolved. Those who understood Mr. George's real
position regarding the land question readily acquiesced
in his views as to political policy, and a considerable
movement resulted, which, however, for some time lacked
an identifying name. This was the situation when
Thomas G. Shearman, Esq., wrote for the
Standard an article on taxation in which he
illustrated and advocated the land value tax as a fiscal
measure. The article had been submitted without
a caption, and Mr. George, then the editor of the
Standard, entitled it "The Single Tax." This
title was at once adopted by the "George men," as they
were often called, and has ever since served as the name
of the movement it describes.
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., sec. 175.
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, p. 64.
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 morality.
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 for
Revenue."
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 depress prices.
"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, pp.209, 210.
"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,
quoting Ricardo.
"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 of
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
3. THE SINGLE TAX FALLS IN PROPORTION TO
BENEFITS
To perceive that the single tax would justly measure the
value of government service we have only to realize that
the mass of individuals everywhere and now, in paying for
the land they use, actually pay for government service in
proportion to what they receive. He who would enjoy the
benefits of a government must use land within its
jurisdiction. He cannot carry land from where government
is poor to where it is good; neither can he carry it from
where the benefits of good government are few or enjoyed
with difficulty to where they are many and fully enjoyed.
He must rent or buy land where the benefits of government
are available, or forego them. And unless he buys or
rents where they are greatest and most available he must
forego them in degree. Consequently, if he would work or
live where the benefits of government are available, and
does not already own land there, he will be compelled to
rent or buy at a valuation which, other things being
equal, will depend upon the value of the government
service that the site he selects enables him to enjoy. 14
Thus does he pay for the service of government in
proportion to its value to him. But he does not pay the
public which provides the service; he is required to pay
land-owners.
14. Land values are lower in all
countries of poor government than in any country of
better government, other things being equal. They are
lower in cities of poor government, other things being
equal, than in cities of better government. Land values
are lower, for example, in Juarez, on the Mexican side
of the Rio Grande, where government is bad, than in El
Paso, the neighboring city on the American side, where
government is better. They are lower in the same city
under bad government than under improved government.
When Seth Low, after a reform campaign, was elected
mayor of Brooklyn, N.Y., rents advanced before he took
the oath of office, upon the bare expectation that he
would eradicate municipal abuses. Let the city
authorities anywhere pave a street, put water through
it and sewer it, or do any of these things, and lots in
the neighborhood rise in value. Everywhere that the
"good roads" agitation of wheel men has borne fruit in
better highways, the value of adjacent land has
increased. Instances of this effect as results of
public improvements might be collected in abundance.
Every man must be able to recall some within his own
experience.
And it is perfectly reasonable that it
should be so. Land and not other property must rise in
value with desired improvements in government, because,
while any tendency on the part of other kinds of
property to rise in value is checked by greater
production, land can not be reproduced.
Imagine an utterly lawless place, where
life and property are constantly threatened by
desperadoes. He must be either a very bold man or a
very avaricious one who will build a store in such a
community and stock it with goods; but suppose such a
man should appear. His store costs him more than the
same building would cost in a civilized community;
mechanics are not plentiful in such a place, and
materials are hard to get. The building is finally
erected, however, and stocked. And now what about this
merchant's prices for goods? Competition is weak,
because there are few men who will take the chances he
has taken, and he charges all that his customers will
pay. A hundred per cent, five hundred per cent, perhaps
one or two thousand per cent profit rewards him for his
pains and risk. His goods are dear, enormously dear
— dear enough to satisfy the most contemptuous
enemy of cheapness; and if any one should wish to buy
his store that would be dear too, for the difficulties
in the way of building continue. But land is
cheap! This is the type of community in which may
be found that land, so often mentioned and so seldom
seen, which "the owners actually can't give away, you
know!"
But suppose that government improves. An
efficient administration of justice rids the place of
desperadoes, and life and property are safe. What about
prices then? It would no longer require a bold or
desperately avaricious man to engage in selling goods
in that community, and competition would set in. High
profits would soon come down. Goods would be cheap
— as cheap as anywhere in the world, the cost of
transportation considered. Builders and building
materials could be had without difficulty, and stores
would be cheap, too. But land would be dear!
Improvement in government increases the value of that,
and of that alone.
Now, the economic principle pursuant to which
land-owners are thus able to charge their fellow-citizens
for the common benefits of their common government points
to the true method of taxation. With the exception of
such other monopoly property as is analogous to land
titles, and which in the purview of the single tax is
included with land for purposes of taxation, 15 land is
the only kind of property that is increased in value by
government; and the increase of value is in proportion,
other influences aside, to the public service which its
possession secures to the occupant. Therefore, by taxing
land in proportion to its value, and exempting all other
property, kindred monopolies excepted — that is to
say, by adopting the single tax — we should be
levying taxes according to benefits.16
15. Railroad franchises, for example, are
not usually thought of as land titles, but that is what
they are. By an act of sovereign authority they confer
rights of control for transportation purposes over
narrow strips of land between terminals and along
trading points. The value of this right of way is a
land value.
16. Each occupant would pay to his
landlord the value of the public benefits in the way of
highways, schools, courts, police and fire protection,
etc., that his site enabled him to enjoy. The landlord
would pay a tax proportioned to the pecuniary benefits
conferred upon him by the public in raising and
maintaining the value of his holding. And if occupant
and owner were the same, he would pay directly
according to the value of his land for all the public
benefits he enjoyed, both intangible and pecuniary.
And in no sense would this be class taxation. Indeed,
the cry of class taxation is a rather impudent one for
owners of valuable land to raise against the single tax,
when it is considered that under existing systems of
taxation they are exempt. 17 Even the poorest and the
most degraded classes in the community, besides paying
land-owners for such public benefits as come their way,
are compelled by indirect taxation to contribute to the
support of government. But landowners as a class go free.
They enjoy the protection of the courts, and of police
and fire departments, and they have the use of schools
and the benefit of highways and other public
improvements, all in common with the most favored, and
upon the same specific terms; yet, though they go through
the form of paying taxes, and if their holdings are of
considerable value pose as "the tax-payers" on
all important occasions, they, in effect and considered
as a class, pay no taxes, because government, by
increasing the value of their land, enables them to
recover back in higher rents and higher prices more than
their taxes amount to. Enjoying the same tangible
benefits of government that others do, many of them as
individuals and all of them as a class receive in
addition a tangible pecuniary benefit which government
confers upon no other property-owners. The value of their
property is enhanced in proportion to the benefits of
government which its occupants enjoy. To tax them alone,
therefore, is not to discriminate against them; it is to
charge them for what they get.18
17. While the landholders of the City of
Washington were paying something less than two per cent
annually in taxes, a Congressional Committee
(Report of the Select Committee to Investigate Tax
Assessments in the District of Columbia, composed of
Messrs. Johnson, of Ohio, Chairman, Wadsworth, of New
York, and Washington, of Tennessee. Made to the House
of Representatives, May 24, 1892. Report No.
1469), brought out the fact that the value of
their land had been increasing at a minimum rate of ten
per cent per annum. The Washington land-owners as a
class thus appear to have received back in higher land
values, actually and potentially, about ten dollars for
every two dollars that as land-owners they paid in
taxes. If any one supposes that this condition is
peculiar to Washington let him make similar estimates
for any progressive locality, and see if the
land-owners there are not favored in like manner.
But the point is not dependent upon
increase in the capitalized value of land. If the land
yields or will yield to its owner an income in the
nature of actual or potential ground rent, then to the
extent that this actual or possible income is dependent
upon government the landlord is in effect exempt from
taxation. No matter what tax he pays on account of his
ownership of land, the public gives it back to him to
that extent.
18. Take for illustration two towns, one
of excellent government and the other of inefficient
government, but in all other respects alike. Suppose
you are hunting for a place of residence and find a
suitable site in the town of good government. For
simplicity of illustration let us suppose that the land
there is not sold outright but is let upon ground rent.
You meet the owner of the lot you have selected and ask
him his terms. He replies:
"Two hundred and fifty dollars a
year."
"Two hundred and fifty dollars a year!"
you exclaim. "Why, I can get just as good a site in
that other town for a hundred dollars a year."
"Certainly you can," he will say. "But if
you build a house there and it catches fire it will
burn down; they have no fire department. If you go out
after dark you will be 'held up' and robbed; they have
no police force. If you ride out in the spring, your
carriage will stick in the mud up to the hubs, and if
you walk you may break your legs and will be lucky if
you don t break your neck; they have no street
pavements and their sidewalks are dangerously out of
repair. When the moon doesn't shine the streets are in
darkness, for they have no street lights. The water you
need for your house you must get from a well; there is
no water supply there. Now in our town it is different.
We have a splendid fire department, and the best police
force in the world. Our streets are macadamized, and
lighted with electricity; our sidewalks are always in
first class repair; we have a water system that equals
that of New York; and in every way the public benefits
in this town are unsurpassed. It is the best governed
town in all this region. Isn't it worth a hundred and
fifty dollars a year more for a building site here than
over in that poorly governed town?"
You recognize the advantages and agree to
the terms. But when your house is built and the
assessor visits you officially, what would be the
conversation if your sense of the fitness of things
were not warped by familiarity with false systems of
taxation? Would it not be something like what
follows?
"How much do you regard this house as
worth? " asks the assessor.
"What is that to you?" you inquire.
"I am the town assessor and am about to
appraise your property for taxation."
"Am I to be taxed by this town? What
for?"
"What for?" echoes the assessor in
surprise. "What for? Is not your house protected from
fire by our magnificent fire department? Are not you
protected from robbery by the best police force in the
world? Do not you have the use of macadamized
pavements, and good sidewalks, and electric street
lights, and a first class water supply? Don't you
suppose these things cost something? And don't you
think you ought to pay your share?"
"Yes," you answer, with more or less
calmness; "I do have the benefit of these things, and I
do think that I ought to pay my share toward supporting
them. But I have already paid my share for this year. I
have paid it to the owner of this lot. He charges me
two hundred and fifty dollars a year -- one hundred and
fifty dollars more than I should pay or he could get
but for those very benefits. He has collected
my share of this year's expense of maintaining town
improvements; you go and collect from him. If you do
not, but insist upon collecting from me, I shall be
paying twice for these things, once to him and once to
you; and he won't be paying at all, but will be making
money out of them, although he derives the same
benefits from them in all other respects that I
do."
4. CONFORMITY TO GENERAL PRINCIPLES OF
TAXATION
The single tax conforms most closely to the essential
principles of Adam Smith's four classical maxims, which
are stated best by Henry George 19 as follows:
The best tax by which public revenues can be raised is
evidently that which will closest conform to the
following conditions:
- That it bear as lightly as possible upon production
— so as least to check the increase of the
general fund from which taxes must be paid and the
community maintained. 20
- That it be easily and cheaply collected, and fall
as directly as may be upon the ultimate payers —
so as to take from the people as little as possible in
addition to what it yields the government. 21
- That it be certain — so as to give the least
opportunity for tyranny or corruption on the part of
officials, and the least temptation to law-breaking and
evasion on the part of the tax-payers. 22
- That it bear equally — so as to give no
citizen an advantage or put any at a disadvantage, as
compared with others. 23
19. "Progress and Poverty," book viii.
ch.iii.
20. This is the second part of Adam
Smith's fourth maxim. He states it as follows: "Every
tax ought to be so contrived as both to take out and to
keep out of the pockets of the people as little as
possible over and above what it brings into the public
treasury of the state. A tax may either take out or
keep out of the pockets of the people a great deal more
than it brings into the public treasury in the four
following ways: . . . Secondly, it may obstruct the
industry of the people, and discourage them from
applying to certain branches of business which might
give maintenance and employment to great multitudes.
While it obliges the people to pay, it may thus
diminish or perhaps destroy some of the funds which
might enable them more easily to do so."
21. This is the first part of Adam
Smith's fourth maxim, in which he condemns a tax that
takes out of the pockets of the people more than it
brings into the public treasury.
22. This is Adam Smith's second maxim. He
states it as follows: "The tax which each individual is
bound to pay ought to be certain and not arbitrary. The
time of payment, the manner of payment, the quantity to
be paid, ought all to be clear and plain to the
contributor and to every other person. Where it is
otherwise, every person subject to the tax is put more
or less in the power of the tax gatherer."
23. This is Adam Smith's first maxim. He
states it as follows: "The subjects of every state
ought to contribute towards the support of the
government as nearly as possible in proportion to their
respective abilities, that is to say, in proportion to
the revenue which they respectively enjoy under the
protection of the state. The expense of government to
the individuals of a great nation is like the expense
of management to the joint tenants of a great estate,
who are all obliged to contribute in proportion to
their respective interests in the estate. In the
observation or neglect of this maxim consists what is
called the equality or inequality of taxation."
In changing this Mr. George says
("Progress and Poverty," book viii, ch. iii, subd.
4): "Adam Smith speaks of incomes as enjoyed
'under the protection of the state'; and this is the
ground upon which the equal taxation of all species of
property is commonly insisted upon — that it is
equally protected by the state. The basis of this idea
is evidently that the enjoyment of property is made
possible by the state — that there is a value
created and maintained by the community; which is
justly called upon to meet community expenses. Now, of
what values is this true? Only of the value of land.
This is a value that does not arise until a community
is formed, and that, unlike other values, grows with
the growth of the community. It only exists as the
community exists. Scatter again the largest community,
and land, now so valuable, would have no value at all.
With every increase of population the value of land
rises; with every decrease it falls. This is true of
nothing else save of things which, like the ownership
of land, are in their nature monopolies."
Adam Smith's third maxim refers only to
conveniency of payment, and gives countenance to
indirect taxation, which is in conflict with the
principle of his fourth maxim. Mr. George properly
excludes it.
a. Interference with Production
Indirect taxes tend to check production and cause
scarcity, by obstructing the processes of production.
They fall upon men as they work, as
they do business, as they invest capital
productively. 24 But the single tax, which must be paid
and be the same in amount regardless of whether the payer
works or plays, of whether he invests his capital
productively or wastes it, of whether he uses his land
for the most productive purposes 26 or in lesser degree
or not at all, removes fiscal penalties from industry and
thrift, and tends to leave production free. It therefore
conforms more closely than indirect taxation to the first
maxim quoted above.
24. "Taxation which falls upon the
processes of production interposes an artificial
obstacle to the creation of wealth. Taxation which
falls upon labor as it is exerted, wealth as it is used
as capital, land as it is cultivated, will manifestly
tend to discourage production much more powerfully than
taxation to the same amount levied upon laborers
whether they work or play, upon wealth whether used
productively or unproductively, or upon land whether
cultivated or left waste" — Progress and
Poverty, book viii, ch. iii, subd. I.
b. Cheapness of Collection
Indirect taxes are passed along from first payers to
final consumers through many exchanges, accumulating
compound profits as they go, until they take enormous
sums from the people in addition to what the government
receives.25 But the single tax takes nothing from the
people in excess of the tax. It therefore conforms more
closely than indirect taxation to the second maxim quoted
above.
25. It is common, besides taxing
improvements, as fast as they are made, to levy higher
taxes upon land when put to its best use than when put
to partial use or to no use at all. This is upon the
theory that when his land is used the owner gets full
income from it and can afford to pay high taxes; but
that he gets little or no income when the land is out
of use, and so cannot afford to pay much. It is an
absurd but perfectly legitimate illustration of the
pretentious doctrine of taxation according to ability
to pay.
Examples are numerous. Improved building
lots, and even those that are only plotted for
improvement, are usually taxed more than contiguous
unused and unplotted land which is equally in demand
for building purposes and equally valuable. So coal
land, iron land, oil land, and sugar land are as a rule
taxed less as land when opened up for appropriate use
than when lying idle or put to inferior uses, though
the land value be the same. Any serious proposal to put
land to its appropriate use is commonly regarded as a
signal for increasing the tax upon it.
26. "All taxes upon things of unfixed
quantity increase prices, and in the course of exchange
are shifted from seller to buyer, increasing as they
go. If we impose a tax on money loaned, as has been
often attempted, the lender will charge the tax to the
borrower, and the borrower must pay it or not obtain
the loan. If the borrower uses it in his business, he
in his turn must get back the tax from his customers,
or his business becomes unprofitable. If we impose a
tax upon buildings, the users of buildings must finally
pay it, for the erection of buildings will cease until
building rents become high enough to pay the regular
profit and the tax besides. If we impose a tax upon
manufactures or imported goods, the manufacturer or
importer will charge it in a higher price to the
jobber, the jobber to the retailer. and the retailer to
the consumer. Now, the consumer, on whom the tax thus
ultimately falls, must not only pay the amount of the
tax, but also a profit on this amount to everyone who
has thus advanced it — for profit on the capital
he has advanced in paying taxes is as much required by
each dealer as profit on the capital he has advanced in
paying for goods." — Progress and Poverty,
book viii, ch. iii, subd. 2.
c. Certainty
No other tax, direct or indirect, conforms so closely
to the third maxim. "Land lies out of doors." It cannot
be hidden; it cannot be "accidentally" overlooked. Nor
can its value be seriously misstated. Neither
under-appraisement nor over-appraisement to any important
degree is possible without the connivance of the whole
community. 27 The land values of a neighborhood are
matters of common knowledge. Any intelligent resident can
justly appraise them, and every other intelligent
resident can fairly test the appraisement. Therefore, the
tyranny, corruption, fraud, favoritism, and evasions that
are so common in connection with the taxation of imports,
manufactures, incomes, personal property, and buildings
— the values of which, even when the object itself
cannot be hidden, are so distinctly matters of minute
special knowledge that only experts can fairly appraise
them — would be out of the question if the single
tax were substituted for existing fiscal methods. 28
27. The under-appraisements so common at
present, and alluded to in note 25, are possible
because the community, ignorant of the just principles
of taxation, does connive at them. Under-appraisements
are not secret crimes on the part of assessors; they
are distinctly recognized, but thoughtlessly
disregarded when not actually insisted upon, by the
people themselves. And this is due to the dishonest
ideas of taxation that are taught. Let the vicious
doctrine that people ought to pay taxes according to
their ability give way to the honest principle that
they should pay in proportion to the benefits they
receive, which benefits, as we have already seen, are
measured by the land values they own, and
underappraisement of land would cease. No assessor can
befool the community in respect of the value of the
land within his jurisdiction.
And, with the cessation of general
under-appraisement, favoritism in individual
appraisements also would cease. General
under-appraisement fosters unfair individual
appraisements. If land were generally appraised at its
full value, a particular unfair appraisement would
stand out in such relief that the crime of the assessor
would be exposed. But now if a man's land is appraised
at a higher valuation than his neighbor's equally
valuable land, and he complains of the unfairness, he
is promptly and effectually silenced with a warning
that his land is worth much more than it is appraised
at, anyhow, and if he makes a fuss his appraisement
will be increased. To complain further of the deficient
taxation of his neighbor is to invite the imposition of
a higher tax upon himself.
28. If you wish to test the merits in
point of certainty of the single tax as compared with
other taxes, go to a real estate agent in your
community, and, showing him a building lot upon the
map, ask him its value. If he inquires about the
improvements, instruct him to ignore them. He will be
able at once to tell you what the lot is worth. And if
you go to twenty other agents their estimates will not
materially vary from his. Yet none of the agents will
have left his office. Each will have inferred the value
from the size and location of the lot.
But suppose when you show the map to the
first agent you ask him the value of the land and its
improvements. He will tell you that he cannot give an
estimate until he examines the improvements. And if it
is the highly improved property of a rich man he will
engage building experts to assist him. Should you ask
him to include the value of the contents of the
buildings, he would need a corps of selected experts,
including artists and liverymen, dealers in furniture
and bric-a-brac, librarians and jewelers. Should you
propose that he also include the value of the
occupant's income, the agent would throw up his hands
in despair.
If without the aid of an army of experts
the agent should make an estimate of these
miscellaneous values, and twenty others should do the
same, their several estimates would be as wide apart as
ignorant guesses usually are. And the richer the owner
of the property the lower as a proportion would the
guesses probably be.
Now turn the real estate agent into an
assessor, and is it not plain that he would appraise
the land values with much greater certainty and
cheapness than he could appraise the values of all
kinds of property? With a plot map before him he might
fairly make every appraisement without leaving his desk
at the town hall.
And there would be no material difference
if the property in question were a farm instead of a
building lot. A competent farmer or business man in a
farming community can, without leaving his own
door-yard, appraise the value of the land of any farm
there; whereas it would be impossible for him to value
the improvements, stock, produce, etc., without at
least inspecting them.
d. Equality
In respect of the fourth maxim the single tax bears
more equally— that is to say, more justly —
than any other tax. It is the only tax that falls upon
the taxpayer in proportion to the pecuniary benefits he
receives from the public; 29 and its tendency,
accelerating with the increase of the tax, is to leave
every one the full fruit of his own productive enterprise
and effort. 30
29 The benefits of government are not the
only public benefits whose value attaches exclusively
to land. Communal development from whatever cause
produces the same effect. But as it is under the
protection of government that land-owners are able to
maintain ownership of land and through that to enjoy
the pecuniary benefits of advancing social conditions,
government confers upon them as a class not only the
pecuniary benefits of good government but also the
pecuniary benefits of progress in general.
30. "Here are two men of equal
incomes — that of the one derived from the
exertion of his labor, that of the other from the rent
of land. Is it just that they should equally contribute
to the expenses of the state? Evidently not. The income
of the one represents wealth he creates and adds to the
general wealth of the state; the income of the other
represents merely wealth that he takes from the general
stock, returning nothing." — Progress and
Poverty, book viii, ch. iii, subd. 4. ...
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