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