Natural Taxation

Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)

IF two men find a diamond they do not march to a lapidary to have it cut in two. If three sons inherit a ship they do not proceed to saw her into three pieces; nor do they agree that if this cannot be done equal division is impossible. Nor yet is there no other way to secure the rights of the owners of a railway than by breaking up rail, engines, rolling stock and stations into as many separate bits as there are shareholders. And so it is not necessary in order to secure equal rights to land to make an equal division of land. All that it is necessary to do is to collect rent for the common benefit. — Social Problems — Chapter 19, The First Great Reform

WE would simply take for the community what belongs to the community, the value that attaches to land by the growth of the community; leave sacredly to the individual all that belongs to the individual; and, treating necessary monopolies as functions of the State, abolish all restrictions and prohibitions save those required for public health, safety, morals and convenience. — The Condition of Labor, an Open Letter to Pope Leo XIII 

MAN is driven by his instincts and needs to form society. Society, thus formed, has certain needs and functions for which revenue is required. These needs and functions increase with social development, requiring a larger and larger revenue. Now, experience and analogy, if not the instinctive perceptions of the human mind, teach us that there is a natural way of satisfying every natural want. And if human society is included in nature, as it surely is, this must apply to social wants as well as to the wants of the individual, and there must be a natural or right method of taxation, as there is a natural or right method of walking. —Social Problems — Chapter 19, The First Great Reform

THE tax upon land values is the most just and equal of all taxes. It falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses. When all rent is taken by taxation for the needs of the community, then will the equality ordained by nature be attained. No citizen will have an advantage over any other citizen save as is given by his industry, skill, and intelligence; and each will obtain what he fairly earns. Then, but not till then, will labor get its full reward, and capital its natural return. — Progress & Poverty — Book VIII, Chapter 3, Application of the Remedy: The Proposition Tried by the Canons of Taxation

HERE is a provision made by natural law for the increasing needs of social growth; here is an adaptation of nature by virtue of which the natural progress of society is a progress toward equality not toward inequality; a centripetal force tending to unity growing out of and ever balancing a centrifugal force tending to diversity. Here is a fund belonging to society as a whole, from which without the degradation of alms, private or public, provision can be made for the weak, the helpless, the aged; from which provision can be made for the common wants of all as a matter of common right to each. — Social Problems — Chapter 19, The First Great Reform

NOT only do all economic considerations point to a tax on land values as the proper source of public revenues; but so do all British traditions. A land tax of four shillings in the pound of rental value is still nominally enforced in England, but being levied on a valuation made in the reign of William III, it amounts in reality to not much over a penny in the pound. With the abolition of indirect taxation this is the tax to which men would naturally turn. The resistance of landholders would bring up the question of title, and thus any movement which went so far as to propose the substitution of direct for indirect taxation must inevitably end in a demand for the restoration to the British people of their birthright. — Protection or Free Trade— Chapter 27: The Lion in the Way - econlib 

THE feudal system, which is not peculiar to Europe but seems to be the natural result of the conquest of a settled country by a race among whom equality and individuality are yet strong, clearly recognized, in theory at least, that the land belongs to society at large, not to the individual. Rude outcome of an age in which might stood for right as nearly as it ever can (for the idea of right is ineradicable from the human mind, and must in some shape show itself even in the association of pirates and robbers), the feudal system yet admitted in no one the uncontrolled and exclusive right to land. A fief was essentially a a trust, and to enjoyment was annexed obligation. The sovereign, theoretically the representative of the collective power and rights of the whole people, was in feudal view the only absolute owner of land. And though land was granted to individual possession, yet in its possession were involved duties, by which the enjoyer of its revenues was supposed to render back to the commonwealth an equivalent for the benefits which from the delegation of the common right he received. — Progress &Poverty — Book VII, Chapter 4, Justice of the Remedy: Private Property in Land Historically Considered

THE abolition of the military tenures in England by the Long Parliament, ratified after the accession of Charles II, though simply an appropriation of public revenues by the feudal landowners, who thus got rid of the consideration on which they held the common property of the nation, and saddled it on the people at large in the taxation of all consumers, has been long characterized, and is still held up in the law books, as a triumph of the spirit of freedom. Yet here is the source of the immense debt and heavy taxation of England. Had the form of these feudal dues been simply changed into one better adapted to the changed times, English wars need never have occasioned the incurring of debt to the amount of a single pound, and the labor and capital of England need not have been taxed a single farthing for the maintenance of a military establishment. All this would have come from rent, which the landholders since that time have appropriated to themselves — from the tax which land ownership levies on the earnings of labor and capital. The landholders of England got their land on terms which required them even in the sparse population of Norman days to put in the field, upon call, sixty thousand perfectly equipped horsemen, and on the further condition of various fines and incidents which amounted to a considerable part of the rent. It would probably be a low estimate to put the pecuniary value of these various services and dues at one-half the rental value of the land. Had the landholders been kept to this contract and no land been permitted to be inclosed except upon similar terms, the income accruing to the nation from English land would today be greater by many millions than the entire public revenues of the United Kingdom. England today might have enjoyed absolute free trade. There need not have been a customs duty, an excise, license or income tax, yet all the present expenditures could be met, and a large surplus remain to be devoted to any purpose which would conduce to the comfort or well-being of the whole people. — Progress &Poverty — Book VII, Chapter 4, Justice of the Remedy: Private Property in Land Historically Considered

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Bill Batt: Comment on Parts of the NYS Legislative Tax Study Commission's 1985 study “Who Pays New York Taxes?”

The question still begs to be answered, “why tax land?” And what happens when we don’t tax land? Henry George answered this more than a century ago more forcefully and clearly, perhaps, than anyone has since. He recognized full well that the economic surplus not expended by human hands or minds in the production of capital wealth gravitates to land. Particular land sites come to reflect the value of their strategic location for market exchanges by assuming a price for their monopoly use. Regardless whether those who acquire title to such sites use them to the full extent of their potential, the flow of rent to such locations is commensurate with their full capacity. This is why John Stuart Mill more than a century ago observed that, “Landlords grow richer in their sleep without working, risking or economizing. The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold title.”33 Absent its recovery by taxation this rent becomes a “free lunch” to opportunistically situated titleholders. When offered for sale, the projected rental value is capitalized in the present value for purposes of attaching a market price and sold as a commodity. Yet simple justice calls for the recovery in taxes what is the community’s creation. Moreover, the failure to recover the land rent connected to sites makes it necessary to tax productive activities in our economy, and this leads to economic and technical inefficiency known as “deadweight loss.”34 It means that the economy performs suboptimally.

Land, and by this Henry George meant any natural factor of production not created by human hands or minds, is ours only to use, not to buy or sell as a commodity. In the equally immortal words of Jefferson a century earlier, “The earth belongs in usufruct to the living; . . . [It is] given as a common stock for men to labor and live on.”35 This passage likely needs a bit of parsing for the modern reader. The word usufruct, understood since Roman times, has almost passed from use today. It means “the right to use the property of another so long as its value is not diminished.”36 Note also that Jefferson regarded the earth as a “common stock;” not allotted to individuals with possessory titles. Only the phrase “to the living” might be subject to challenge by forward-looking environmentalists who, taking an idea from Native American cultures, argue that “we do not inherit the earth from our ancestors; we borrow it from our children.” The presumption that real property titles are acquired legitimately is a claim that does not withstand scrutiny; rather all such titles owe their origin ultimately to force or fraud.37

If we own the land sites that we occupy only in usufruct, and the rent that derives from those sites is due to community enterprise, it is not a large logical leap to argue that the community’s recovery of that rent should be the proper source of taxation. This is the Georgist argument: that the recapture of land rent is the proper – indeed the natural – source of taxation.38 ... read the whole commentary