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.
And the reason of this difference is clear. The
possession of wealth is the inducement to the exertion
necessary to the production and maintenance of wealth.
Men do not work for the pleasure of working, but to get
the things their work will give them. And to tax the
things that are produced by exertion is to lessen the
inducement to exertion. But over and above the benefit to
the possessor, which is the stimulating motive to the
production of wealth, there is a benefit to the
community, for no matter how selfish he may be, it is
utterly impossible for any one to entirely keep to
himself the benefit of any desirable thing he may
possess. These diffused benefits when localized give
value to land, and this may be taxed without in any wise
diminishing the incentive to production.
To illustrate: A man builds a fine house or large
factory in a poorly improved neighborhood. To tax this
building and its adjuncts is to make him pay for his
enterprise and expenditure — to take from him part
of his natural reward. But the improvement thus made has
given new beauty or life to the neighborhood, making it a
more desirable place than before for the erection of
other houses or factories, and additional value is given
to land all about. Now to tax improvements is not only to
deprive of his proper reward the man who has made the
improvement, but it is to deter others from making
similar improvements. But, instead of taxing
improvements, to tax these land values is to leave the
natural inducement to further improvement in full force,
and at the same time to keep down an obstacle to further
improvement, which, under the present system, improvement
itself tends to raise. For the advance of land values
which follows improvement, and even the expectation of
improvement, makes further improvement more costly.
See how unjust and short-sighted is this system. Here
is a man who, gathering what little capital he can, and
taking his family, starts West to find a place where he
can make himself a home. He must travel long distances;
for, though he will pass plenty of land nobody is using,
it is held at prices too high for him. Finally he will go
no further, and selects a place where, since the creation
of the world, the soil, so far as we know, has never felt
a plowshare. But here, too, in nine cases out of ten, he
will find the speculator has been ahead of him, for the
speculator moves quicker, and has superior means of
information to the emigrant. Before he can put this land
to the use for which nature intended it, and to which it
is for the general good that it should be put, he must
make terms with some man who in all probability never saw
the land, and never dreamed of using it, and who, it may
be, resides in some city, thousands of miles away. In
order to get permission to use this land, he must give up
a large part of the little capital which is seed-wheat to
him, and perhaps in addition mortgage his future labor
for years. Still he goes to work: he works himself, and
his wife works, and his children work — work like
horses, and live in the hardest and dreariest manner.
Such a man deserves encouragement, not discouragement;
but on him taxation falls with peculiar severity. Almost
everything that he has to buy — groceries,
clothing, tools — is largely raised in price by a
system of tariff taxation which cannot add to the price
of the grain or hogs or cattle that he has to sell. And
when the assessor comes around he is taxed on the
improvements he has made, although these improvements
have added not only to the value of surrounding land, but
even to the value of land in distant commercial centers.
Not merely this, but, as a general rule, his land,
irrespective of the improvements, will be assessed at a
higher rate than unimproved land around it, on the ground
that "productive property" ought to pay more than
"unproductive property" — a principle just the
reverse of the correct one, for the man who makes land
productive adds to the general prosperity, while the man
who keeps land unproductive stands in the way of the
general prosperity, is but a dog-in-the-manger, who
prevents others from using what he will not use
himself.
Or, take the case of the railroads. That railroads are
a public benefit no one will dispute. We want more
railroads, and want them to reduce their fares and
freight. Why then should we tax them? for taxes upon
railroads deter from railroad building, and compel higher
charges. Instead of taxing the railroads, is it not clear
that we should rather tax the increased value which they
give to land? To tax railroads is to check railroad
building, to reduce profits, and compel higher rates; to
tax the value they give to land is to increase railroad
business and permit lower rates. The elevated railroads,
for instance, have opened to the overcrowded population
of New York the wide, vacant spaces of the upper part of
the island. But this great public benefit is neutralized
by the rise in land values. Because these vacant lots can
be reached more cheaply and quickly, their owners demand
more for them, and so the public gain in one way is
offset in another, while the roads lose the business they
would get were not building checked by the high prices
demanded for lots. The increase of land values, which the
elevated roads have caused, is not merely no advantage to
them — it is an injury; and it is clearly a public
injury. The elevated railroads ought not to be taxed. The
more profit they make, with the better conscience can
they be asked to still further reduce fares. It is the
increased land values which they have created that ought
to be taxed, for taxing them will give the public the
full benefit of cheap fares.
So with railroads everywhere. And so not alone with
railroads, but with all industrial enterprises. So long
as we consider that community most prosperous which
increases most rapidly in wealth, so long is it the
height of absurdity for us to tax wealth in any of its
beneficial forms. We should tax what we want to repress,
not what we want to encourage. We should tax that which
results from the general prosperity, not that which
conduces to it. It is the increase of population, the
extension of cultivation, the manufacture of goods, the
building of houses and ships and railroads, the
accumulation of capital, and the growth of commerce that
add to the value of land — not the increase in the
value of land that induces the increase of population and
increase of wealth. It is not that the land of Manhattan
Island is now worth hundreds of millions where, in the
time of the early Dutch settlers, it was only worth
dollars, that there are on it now so many more people,
and so much more wealth. It is because of the increase of
population and the increase of wealth that the value of
the land has so much increased. Increase of land values
tends of itself to repel population and prevent
improvement. And thus the taxation of land values, unlike
taxation of other property, does not tend to prevent the
increase of wealth, but rather to stimulate it. It is the
taking of the golden egg, not the choking of the goose
that lays it.
Every consideration of policy and ethics squares with
this conclusion. The tax upon land values is the most
economically perfect of all taxes. It does not
raise prices; it maybe collected at least cost,
and with the utmost ease and certainty; it leaves in full
strength all the springs of production; and, above all,
it consorts with the truest equality and the highest
justice. For, to take for the common purposes of the
community that value which results from the growth of the
community, and to free industry and enterprise and thrift
from burden and restraint, is to leave to each that which
he fairly earns, and to assert the first and most
comprehensive of equal rights — the equal right of
all to the land on which, and from which, all must
live.
Thus it is that the scheme of taxation which conduces
to the greatest production is also that which conduces to
the fairest distribution, and that in the proper
adjustment of taxation lies not merely the possibility of
enormously increasing the general wealth, but the
solution of these pressing social and political problems
which spring from unnatural inequality in the
distribution of wealth. ...
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