Nor do we hesitate to say that this way of securing
the equal right to the bounty of the Creator and the
exclusive right to the products of labor is the way
intended by God for raising public revenues. For we are
not atheists, who deny God; nor semi-atheists, who deny
that he has any concern in politics and legislation.
It is true as you say — a salutary truth too
often forgotten — that “man is older than the
state, and he holds the right of providing for the life
of his body prior to the formation of any state.”
Yet, as you too perceive, it is also true that the state
is in the divinely appointed order. For He who foresaw
all things and provided for all things, foresaw and
provided that with the increase of population and the
development of industry the organization of human society
into states or governments would become both expedient
and necessary.
No sooner does the state arise than, as we all know,
it needs revenues. This need for revenues is small at
first, while population is sparse, industry rude and the
functions of the state few and simple. But with growth of
population and advance of civilization the functions of
the state increase and larger and larger revenues are
needed.
Now, He that made the world and placed man in it, He
that pre-ordained civilization as the means whereby man
might rise to higher powers and become more and more
conscious of the works of his Creator, must have foreseen
this increasing need for state revenues and have made
provision for it. That is to say: The increasing need for
public revenues with social advance, being a natural,
God-ordained need, there must be a right way of raising
them — some way that we can truly say is the way
intended by God. It is clear that this right way of
raising public revenues must accord with the moral
law.
Hence:
It must not take from individuals what rightfully
belongs to individuals.
It must not give some an advantage over others, as by
increasing the prices of what some have to sell and
others must buy.
It must not lead men into temptation, by requiring
trivial oaths, by making it profitable to lie, to swear
falsely, to bribe or to take bribes.
It must not confuse the distinctions of right and
wrong, and weaken the sanctions of religion and the state
by creating crimes that are not sins, and punishing men
for doing what in itself they have an undoubted right to
do.
It must not repress industry. It must not
check commerce. It must not punish thrift. It must offer
no impediment to the largest production and the fairest
division of wealth.
Let me ask your Holiness to consider the taxes on the
processes and products of industry by which through the
civilized world public revenues are collected — the
octroi duties that surround Italian cities with barriers;
the monstrous customs duties that hamper intercourse
between so-called Christian states; the taxes on
occupations, on earnings, on investments, on the building
of houses, on the cultivation of fields, on industry and
thrift in all forms. Can these be the ways God
has intended that governments should raise the means they
need? Have any of them the characteristics indispensable
in any plan we can deem a right one?
All these taxes violate the moral law. They take by
force what belongs to the individual alone; they give to
the unscrupulous an advantage over the scrupulous; they
have the effect, nay are largely intended, to increase
the price of what some have to sell and others must buy;
they corrupt government; they make oaths a mockery;
they shackle commerce; they fine industry and
thrift; they lessen the wealth that men might
enjoy, and enrich some by impoverishing others.
Yet what most strikingly shows how opposed to
Christianity is this system of raising public revenues is
its influence on thought.
Christianity teaches us that all men are brethren;
that their true interests are harmonious, not
antagonistic. It gives us, as the golden rule of life,
that we should do to others as we would have others do to
us. But out of the system of taxing the products and
processes of labor, and out of its effects in increasing
the price of what some have to sell and others must buy,
has grown the theory of “protection,” which
denies this gospel, which holds Christ ignorant of
political economy and proclaims laws of national
well-being utterly at variance with his teaching. This
theory sanctifies national hatreds; it inculcates a
universal war of hostile tariffs; it teaches peoples that
their prosperity lies in imposing on the productions of
other peoples restrictions they do not wish imposed on
their own; and instead of the Christian doctrine of
man’s brotherhood it makes injury of foreigners a
civic virtue.
“By their fruits ye shall know them.”
Can anything more clearly show that to tax the
products and processes of industry is not the way God
intended public revenues to be raised?
But to consider what we propose — the raising of
public revenues by a single tax on the value of land
irrespective of improvements — is to see that in
all respects this does conform to the moral law.
Let me ask your Holiness to keep in mind that the
value we propose to tax, the value of land irrespective
of improvements, does not come from any exertion of labor
or investment of capital on or in it — the values
produced in this way being values of improvement which we
would exempt. The value of land irrespective of
improvement is the value that attaches to land by reason
of increasing population and social progress. This is a
value that always goes to the owner as owner, and never
does and never can go to the user; for if the user be a
different person from the owner he must always pay the
owner for it in rent or in purchase-money; while if the
user be also the owner, it is as owner, not as user, that
he receives it, and by selling or renting the land he
can, as owner, continue to receive it after he ceases to
be a user.
Thus, taxes on land irrespective of
improvement cannot lessen the rewards of industry, nor
add to prices,* nor in any way take from the individual
what belongs to the individual. They can take
only the value that attaches to land by the growth of the
community, and which therefore belongs to the community
as a whole.
* As to this point it may be well to add
that all economists are agreed that taxes on land
values irrespective of improvement or use — or
what in the terminology of political economy is styled
rent, a term distinguished from the ordinary use of the
word rent by being applied solely to payments for the
use of land itself — must be paid by the owner
and cannot be shifted by him on the user. To explain in
another way the reason given in the text: Price is not
determined by the will of the seller or the will of the
buyer, but by the equation of demand and supply, and
therefore as to things constantly demanded and
constantly produced rests at a point determined by the
cost of production — whatever tends to increase
the cost of bringing fresh quantities of such articles
to the consumer increasing price by checking supply,
and whatever tends to reduce such cost decreasing price
by increasing supply. Thus taxes on wheat or tobacco or
cloth add to the price that the consumer must pay, and
thus the cheapening in the cost of producing steel
which improved processes have made in recent years has
greatly reduced the price of steel. But land has no
cost of production, since it is created by God, not
produced by man. Its price therefore is fixed
—
1 (monopoly rent), where land is held
in close monopoly, by what the owners can extract
from the users under penalty of deprivation and
consequently of starvation, and amounts to all that
common labor can earn on it beyond what is necessary
to life;
2 (economic rent proper), where there is no special
monopoly, by what the particular land will yield to
common labor over and above what may be had by like
expenditure and exertion on land having no special
advantage and for which no rent is paid; and,
3 (speculative rent, which is a species of monopoly
rent, telling particularly in selling price), by the
expectation of future increase of value from social
growth and improvement, which expectation causing
landowners to withhold land at present prices has the
same effect as combination.
Taxes on land values or economic rent can
therefore never be shifted by the landowner to the
land-user, since they in no wise increase the demand
for land or enable landowners to check supply by
withholding land from use. Where rent depends on mere
monopolization, a case I mention because rent may in
this way be demanded for the use of land even before
economic or natural rent arises, the taking by taxation
of what the landowners were able to extort from labor
could not enable them to extort any more, since
laborers, if not left enough to live on, will die. So,
in the case of economic rent proper, to take from the
landowners the premiums they receive, would in no way
increase the superiority of their land and the demand
for it. While, so far as price is affected by
speculative rent, to compel the landowners to pay taxes
on the value of land whether they were getting any
income from it or not, would make it more difficult for
them to withhold land from use; and to tax the full
value would not merely destroy the power but the desire
to do so.
To take land values for the state, abolishing all
taxes on the products of labor, would therefore leave to
the laborer the full produce of labor; to the individual
all that rightfully belongs to the individual. It
would impose no burden on industry, no check on commerce,
no punishment on thrift; it would secure the
largest production and the fairest distribution of
wealth, by leaving men free to produce and to exchange as
they please, without any artificial enhancement of
prices; and by taking for public purposes a value that
cannot be carried off, that cannot be hidden, that of all
values is most easily ascertained and most certainly and
cheaply collected, it would enormously lessen the number
of officials, dispense with oaths, do away with
temptations to bribery and evasion, and abolish man-made
crimes in themselves innocent.
But, further: That God has intended the state to
obtain the revenues it needs by the taxation of land
values is shown by the same order and degree of evidence
that shows that God has intended the milk of the mother
for the nourishment of the babe.
See how close is the analogy. In that primitive
condition ere the need for the state arises there are no
land values. The products of labor have value, but in the
sparsity of population no value as yet attaches to land
itself. But as increasing density of population and
increasing elaboration of industry necessitate the
organization of the state, with its need for revenues,
value begins to attach to land. As population still
increases and industry grows more elaborate, so the needs
for public revenues increase. And at the same time and
from the same causes land values increase. The connection
is invariable. The value of things produced by labor
tends to decline with social development, since the
larger scale of production and the improvement of
processes tend steadily to reduce their cost. But the
value of land on which population centers goes up and up.
Take Rome or Paris or London or New York or Melbourne.
Consider the enormous value of land in such cities as
compared with the value of land in sparsely settled parts
of the same countries. To what is this due? Is it not due
to the density and activity of the populations of those
cities — to the very causes that require great
public expenditure for streets, drains, public buildings,
and all the many things needed for the health,
convenience and safety of such great cities? See how with
the growth of such cities the one thing that steadily
increases in value is land; how the opening of roads, the
building of railways, the making of any public
improvement, adds to the value of land. Is it not clear
that here is a natural law — that is to say a
tendency willed by the Creator? Can it mean anything else
than that He who ordained the state with its needs has in
the values which attach to land provided the means to
meet those needs? ... read the whole
letter