The Single Tax
Edwin R.A. Seligman
[Chapter III, from Essays in Taxation, 1914]
The General Theory
The general economic theory on which the demand for the Single Tax is based may be summed up in a few words. Land is the creation of God; it is not the result of any man’s labor; no one, therefore, has a right to own land. Increase in the value of land is due mainly to the growth of the community; like the land itself, it is not the result of any individual effort; it is an unearned increment which properly belongs to society. Moreover, private property in land is undoubtedly the cause of all social evils. It therefore becomes the duty of the movement to take what rightfully belongs to the whole community. Every one may still retain the result of his own labor; but the value of the bare land, the economic rent, must be taken for the state. In this way, and in this way alone, can the social problem be solved.
In order to attain a basis for this discussion, it is necessary to allude to the two fundamental doctrines on which the plan is founded. The first is the underlying theory of private property; the second is the theory of the relation of the individual to the public purse.
In the first place, the Single Tax theory of property is the labor theory—the theory that individual human labor constitutes the only clear title to property. It would be interesting, were there space, to trace the genesis of this doctrine. The Romans, as is well known, had an entirely different theory—the occupation theory, based on the right of the first occupant. Against this rather brutal doctrine, which in the early middle ages paved a way for intolerable abuses, the philosophers advanced the labor theory, hoping thereby to bring about a reform in actual institutions. The labor theory went hand in hand with the doctrine of natural rights, which was the result of an earnest attempt to abolish the abuses of the ancien regime, and which came to a climax in the eighteenth century. Modern jurisprudence and modern political philosophy, however, have incontestably proved the mistake underlying this assumption of natural law or natural rights. They have shown that natural law is simply the idea of particular thinkers of a particular age of what ought to be law. These particular thinkers, indeed, often influence the social consciousness, as they in turn are influenced by it, so that natural law may be called law in the making. But at any given time it represents simply an ideal. Whether that ideal will approve itself to society depends on a variety of circumstances, but chiefly on the question whether society is prepared for the change. Just as the modern method of jurisprudence is the historical method, so also the modern theory of property may be called the social utility theory.
The social utility theory says that just as all law, all order and all justice are the direct outgrowths of social causes, and just as private ethics is nothing but the consequence of social ethics, so private property is to be justified simply by the fact that it is the last stage of a slow and painful social evolution. At the outset property—and specifically property in land was largely owned in common. It was only through the gradual progress of economic and social forces that private property came to be recognized as tending on the whole to further the welfare of the entire community. The social utility theory does not, of course, mean that what has once been must always be. It is not a reactionary doctrine which looks upon all that is as good. It simply maintains that the burden of proof is always upon the party urging the change ; and that when the change advocated is a direct reversal of the progress of centuries, and, a reversion to primitive conditions away from which all history has travelled, the necessity for its absolute proof becomes far stronger. The nationalization of land is a demand which in order to win general acceptance, must be based on theories independent of the doctrine of natural rights.
Even though we accept the theory of natural rights, we need not therefore accept the Single Tax. If it be said that the value of land is wholly the work of the community, and that therefore every one has a natural right to it, how can we logically deny that the value of any so-called product is, at least partly, the work of the community? Mr. George bases his defence of private property in commodities other than land on the labor theory. Yet individual labor, it may be said, has never by itself produced anything in civilized society. Take, for example, the workman fashioning a chair. The wood has not been produced by him; it is the gift of nature. The tools that he uses are the result of the contributions of others ; the house in which he works, the clothes he wears, the food he eats (all of which are necessary in civilized society to the making of a chair), are the result of the contributions of the community. His safety from robbery and pillage—nay, his very existence—is dependent on the ceaseless co-operation of the society about him. How can it be said, in the face of all this, that his own individual labor wholly creates anything? If it be maintained that he pays for his tools, his clothing and his protection, it may be answered that the landowner also pays for the land. Nothing is wholly the result of unaided individual labor. No one has a right to say: This belongs absolutely and completely to me, because I alone have produced it. Society, from this point of view, holds a mortgage on everything that is produced. The socialists have been in this respect more logical; and that perhaps explains why the movement to which Mr. George gave such an impetus in England and elsewhere is fast changing from one in favor of land nationalization into one for the nationalization of all means of production. The socialists, indeed, as well as Mr. George, are in error, because the premises of each are wrong. It is not the labor theory, but the social utility theory, which is the real defence of private property. But if we accept the premises of the Single-Taxers,” we are inevitably impelled to go further than they do. The difference between property in land and property in other things is from the standpoint of individual versus social effort simply one of degree, not of kind.
The other fundamental doctrine of the advocates of the Single Tax is the theory of benefit—the doctrine that a man ought to contribute to public burdens in proportion to the benefits that he receives. The theory is that, since the individual gets a special advantage from the community in the shape of unearned increment he ought to make some recompense. To this contention, two answers may be had: first, that the benefit theory of taxation is inadequate; and second, that, even if it were true, it would not support the Single Tax. Let us take up these in turn.
The payments made by the individual to the government are exceedingly diverse in character. Where the government acts simply as a private individual, in performing certain services for the citizen, the payment is a price. The government does something; the individual gives something. Again, even after common interests have developed, the individual may ask the government to do some particular thing for him, to confer some privilege upon him. He may wish to get married or to run a cab. For this particular privilege it is perfectly proper that the government should make a charge—known in modern times as a fee or toll. Again, the government may be at considerable expense in laying out a new street, the result of which will be to enhance the value of a particular plot of ground. There is then no reason why the government should not demand that the owner of this plot should defray, at all events in part, the cost of this improvement. This is called special assessment. In all these cases the individual receives an undeniable, special benefit as the result of a special expenditure made by the government. The principle of give and take, therefore, is applicable.
On the other hand, there are certain actions of the government which interest the whole community, and from which the individual receives no benefit, except what accrues to him incidentally as a member of the community. If the government undertakes a war, no one citizen is benefitted more than another. If the government spends money for cleaning the main thoroughfares, for erecting tribunals, or for patrolling the city by police, it cannot be claimed that any one individual receives a measurable, special benefit; all are equally interested in good government. When payment is made for these general expenditures—and such a payment is called a tax—the principle of contribution is no longer that of benefits or of give and take, but of ability, faculty, capacity. Every man must support the government to the full extent, if need be, of his ability to pay. He does not measure the benefits of state action to himself first, because these benefits are quantitatively unmeasurable; and secondly, because such measurement implies a decidedly erroneous conception of the relation of the individual to the modern state.
The principle of benefit, moreover, would lead us into the greatest absurdities. If we accept it, we must apply it logically; we must not restrict its beneficent workings to the landowner. The poor man, according to the theory of benefit, ought to be taxed more than the rich, because he is less able than the rich man to protect himself. Ability to pay is not only the ideal basis of taxation, but the goal toward which society is steadily working. It lies instinctively and unconsciously at the bottom of all our endeavors at reform. When we say that indirect taxes are on the whole unfair to laborers, we mean that they are less able than the wealthier portion of the community to pay the tax. When we say that a corporation with large receipts should pay more than one with small receipts, we do so because we know that its ability to pay is greater. … The principle of privilege or benefit is, therefore, not the basis of taxation. It is the principle away from which all modern science and progress have been working. It is founded on a false political philosophy, and it can result only in a false political economy.
But even if we accept the principle of benefit or opportunity, it will not justify the demand for the Single Tax. This question however, is so intimately interwoven with the problem of the justice of the Single Tax that we shall discuss it a little further on under that head.
Fiscal Defects
One of the great aims of every sound financial system is to bring about an equilibrium of the budget—that is, to avoid a surplus as well as a deficit. Now, while many taxes may be suddenly lowered, not many of them can be made to give a suddenly increased yield. One of the cardinal principles of taxation, therefore, is elasticity, in order to secure which requires two conditions. In the first place, the source from which the tax is derived must be of such a nature that an increase of the rate will always mean an increase of the yield. There should be in the source of taxation a reserve power which can be drawn upon in case of need. Secondly, the revenue should be secured from a number of objects, so that the shrinkages or deficits temporarily due to the one class may be made good by the increase or surplus revenues of the other class. Among the elastic taxes is the income tax, and it is well known that in English finance one of the chief functions of this income tax is to preserve the equilibrium of the budget. So again, certain taxes on commodities are often utilized for this purpose. The Single Tax on land values, however, is bitterly inelastic; for since, according to the theory of its advocates, the total rental value is to be taken from the landowners, the Single Tax cannot be increased. Where nothing has been left, nothing more can be taken. In the case of an emergency there would, therefore, be no possibility of increasing the revenues. Even if the total land value were not taken, it would still remain true that a direct tax on the unimproved value of land is far more inelastic than other taxes; for when the supply is constant and the price is fixed only by conditions of demand, the selling value as well as the rental value is subject to far more fluctuations than in commodities where the supply may be diminished at pleasure. Furthermore, as we have seen, a Single Tax of any kind, whether on lands or on anything else, would be less elastic than a system of taxes where one may be played off against the other. Lack of elasticity is a serious defect in the Single Tax.
Another fiscal weakness of the Single Tax is that it inevitably intensifies the inequalities resulting from unjust assessments. We all know how difficult it is to carry out laws which provide for equal assessments. Under the real estate tax in the United States, for example, the assessors are usually sworn to rate the property at its actual or selling value, and the selling value of a piece of land or of a house is comparatively easy to ascertain; yet it is notorious that in no two counties, nay even in no two adjoining pieces of property, is the standard of assessment the same. Thus the report of the Iowa Revenue Commission of 1893, states that realty in Iowa was assessed at from seventeen to sixty per cent of the true value. It is well known, too, that in the city of Chicago adjacent plots of real estate are assessed at percentages of ridiculously varying degree. Now, it is manifestly not so easy to assess the land values,—that is, the bare value of the land irrespective of all improvement,—as it is to assess the selling value of a piece of real estate. For instance, an acre of agricultural land near a large town may be worth $200; but if used for truck-farming, considerably more than $200 may have been expended on it during the last century or two. Who can tell how much of the $200 present value is the value of the bare land and how much is to be assigned to the labor expended? Under the present method we have at least a definite test—the selling value; under the new method we should have no test at all. There is every likelihood, therefore, that the difficulties of the present situation would be intensified. Moreover, under the present system, inadequate as it is, there is always a chance that the imperfect enforcement of a particular tax law will be offset by the assessment of other taxes, direct or indirect. Under the Single Tax not only would there be more difficulty than at present in making the original assessment, but the inequality of the assessment, which is inseparable from all democratic methods, would be seriously intensified by the very fact that it is a Single Tax.
Political Defects
The adoption of the Single Tax means the total abolition of all custom houses and import duties; it means that there can be no such thing as a system of protection to home industry. Many would, it is true, favor the Single Tax precisely on this account; but there are some self-styled “Single-Taxers” who believe that as a matter of national policy there is a justification for import duties. Whatever we may think of the economic justification of import duties, it must be recognized that they may sometimes form an important political weapon. It is clear, however, that leaving the question of protection entirely aside, the adoption of the Single Tax will make it impossible to utilize import duties for political, fiscal or other purposes.
In the second place, the adoption of the Single Tax would render it impossible for governments to utilize the taxing power as a political or social engine in any other way. For instance, the United States government now imposes a tax on the circulation of state bank-notes in order to bring about certain desirable results in the currency situation. Under the Single Tax this would be impossible. Again, the United States government levies a high tax on opium, not for the purpose of revenue, but in order to discourage the consumption of opium; and it also assesses a tax on oleomargarine, primarily in order to ensure the purity of butter. Under the Single Tax, all such efforts would be impossible. Finally, to mention only one other example, one of the chief methods of dealing with the drink question is through the imposition of high liquor licenses, the fiscal importance of which is only secondary. Under the Single Tax we should be prevented from attacking the problem in that way. Governments have always made use of the taxing power to regulate and to destroy, as well as to yield a revenue. Were the Single Tax to be adopted, this salutary power would be entirely taken away.
Thirdly, the political results of the Single Tax would be dangerous in another way. So far as there is any truth in the assertion that in democracy it involves some risk for a small class to pay the taxes and for a large class to vote them, it is especially applicable to the Single Tax. Since the “unearned increment” would flow of itself, silently and noiselessly into the treasury, there would be no need of a budget; and the sense of responsibility in the citizens would be perceptibly diminished. It is well known that liberty has been intimately bound up with the contest against unjust taxation; the constitutional history of England is to a large extent a history of the struggle of the people to gain control of the treasury; the American Revolution was precipitated by a question of taxation; the French Revolution was brought about primarily by the fiscal abuses of the ancien regime. To take away, then, from the vast majority of citizens the sense of their obligation to the government, and to divorce their economic interests from those of the state, would, especially in a democracy like that of America, be fraught with serious danger.
Ethical Defects
The advocates of the Single Tax love to base their arguments on the ground of justice. In this they are certainly wise; for even though all other arguments were in its favor, if the justice of the Single Tax could be successfully impugned it would be foredoomed to failure. Let us then ascertain whether it is indeed true that the Single Tax is an equitable method of taxation.
The two great canons of justice in taxation are universality and uniformity or equality. If anything has been gained by the revolutions of the eighteenth century and by the growing public conscience of the nineteenth, it is a recognition of the fact that all owe a duty to support the state, that a system of wholesale exemptions is iniquitous, and that all taxpayers should be treated according to the same standard. Judged by any or all of these tests, can it be seriously maintained that the Single Tax is an equitable form of taxation?
We have seen that the theory of natural rights is not adequate; we have learned that the principle of opportunity does not correctly portray the relations of the individual to the state. Even if the theory of unearned increment were true it would not by any means justify the Single Tax on land values. In the first place, land values do not always or necessarily increase; and, secondly, there are a great many other values which do increase, and which increase mainly by the operation of forces which the owner of the property neither creates nor controls.
Land values do not always or necessarily increase. Thus, in the testimony given before the Rapid Transit Commission in the city of New York in March, 1895, one of the witnesses spoke of several long avenues being lined with the graves of property-owners. What did he mean? Simply that ten, or twenty, or thirty years ago, certain individuals had invested in the land, in hopes of a rise in value, just as people invest in bonds or stocks or other securities. Instead of values rising, however, they remained stationary or even decreased; while, in the meantime, the accumulated taxes and assessments upon this non-productive property completely ruined many of the investors. It is indeed true that in most growing cities land values in certain localities will increase; but it is equally true that there are always sections in such cities where, for obvious reasons, land values decrease. These facts are familiar to all observers in large cities. Moreover, in some European countries the rental value of the land, as a whole, is less to-day than it was a few decades ago. The tax on land value would there yield only a precarious revenue, since there has been no unearned increment, but a decrement.
More important still is the fact that even though land values often increase, similar increase in value is not by any means confined to land. Let us ask any one whose mind is not befogged by the mist of erroneous enthusiasm: Who are the rich men of the world to-day? How has by far the greater part of our huge individual fortunes been acquired? Let us study the way in which men have become millionaires, especially in the United States. The usual cause is some fortuitous conjuncture of events, some chance happening due to no one’s labor, but to a turn in the wheel of fortune—call it speculation, call it luck, call it by any name we will. How have most of the fortunes in Wall Street been made? Who is responsible for the increased value of investments? Who can say that the successful manager of the ring, the comer, the pool and the trust has worked out his salvation through his own industry? Land speculation is only a part, and a very small part, of the sum total. If it be claimed that the fortunate speculator deserves his fortune because of his sagacity and foresight, why deny these attributes to the land- owner? It can, of course, not be denied that wealth has been acquired by thrift and industry; but it remains true that most of the very large fortunes that strike the common observer are due to these incalculable turns in the wheel of fortune, and that the so-called unearned increment of land values forms only a small share of these total gains.
It must not be forgotten that the modern age is the age of speculation, differing from former periods in that “time speculation” has supplanted “place speculation.” No economist would to-day venture to deny that speculation has its legitimate uses, and that the stock and produce exchanges of the present day play an indispensable part in the economy of our complex industrial society. But speculation is largely responsible for modern fortunes; and land speculation is simply a species in the larger genus. Value is a social phenomenon, not an individual phenomenon. A house in a desert is worth nothing; a house in a small town is worth more; a house in a large city is worth still more. The house is in part the product of labor, but the greater demand increases the value. A newspaper also is more profitable in a city than in a village. Thus, if social environment gives a value to bare land, the same social environment increases the demand for other commodities. If it be said that land differs from other things in that it is a monopoly, the answer is irresistible that if there is any one thing which distinguishes the modern age, it is the development of industrial monopoly; we live in a period of pools and trusts and economic monopolies of all kinds. So important, indeed, have these become that modern economic theory has been compelled to supplement the old doctrine of value which was based on the assumption of free competition by a newer and more comprehensive theory, especially applicable to all these modern forms of monopoly price. These monopoly profits cannot be reached by a tax on land values.
On what possible theory of justice, then, shall we tax the man who has invested $100,000 in land which the next year appreciates fifty per cent; and, on the other hand, exempt the man who has invested $100,000 in the stock of the Sugar Trust, which the next year may also enhance fifty per cent? Why should the earnings invested in land be taxed and the earnings invested in the Sugar Trust be wholly untaxed? Why should the earnings invested in land be taxed and the earnings invested in any railway bond be wholly untaxed?
It might, indeed, be claimed that the railway stockholder will be affected by a tax on the land owned by the corporation: but it is difficult to see how the railway bondholder can be reached by any tax on land values except in so far as the ultimate security for his debt may be affected. As the bonded indebtedness of the railways to-day far exceeds their capital stock it appears that, even in the case of these industries whose increasing values are largely due to the influence of the community, the majority of investors would scarcely be touched. In the great mass of industries, of which the Sugar Trust is an example, where the land owned by the corporation is of exceedingly small consequence as compared with its other assets, it is plain that a tax on land values would not reach even the stockholders or the owners proper. Almost every industry, moreover, is dependent for its increasing profits upon the development of the community, that is, upon the increasing demand for the product. Land rises in value because there are more people who want to occupy that land; the earnings of the Sugar Trust have increased chiefly because there are more people who want sugar. In each case the increased returns are due primarily to social causes; in each case we have a monopoly. One is a natural monopoly and the other is an economic or artificial monopoly; but, for all practical purposes, there is no distinction between them. To confiscate the capital invested in land with the chance of the land either falling or rising in value, while exempting absolutely the capital invested in corporate or industrial securities, is but a travesty of justice. It will be impossible to convince the common people that so-called unearned increments are confined to land. As a matter of fact the “unearned increment” of land is only one instance of a far larger class.
We must, on the contrary, plant ourselves firmly on the basis of faculty or ability to pay. So far as a man receives special opportunities from the community, which undoubtedly increase his ability to pay, they should be taken into account in framing any scheme of taxation. But let us not single out one special opportunity, because it strikes the eyes of urban observers, while we neglect all the other opportunities which are equally, or almost equally, the result of social forces. The Single Tax on land values is unjust; first, because opportunity is not the only element that must be taken into account; and, secondly, because, even though it were, revenues from land are by no means the only form—nay, not even the most important form—of the results of special opportunity. The Single Tax is unjust because it is exclusive and unequal.
But, even though the Single Tax were absolutely just in theory, it would not yet follow that it would be practicable. Let us, therefore, come to the final part of our inquiry.
Economic Defects
These considerations which have often been overlooked, may be discussed from three points of view: first, the economic effect of the Single Tax on poor and new communities; second, the economic effect on farmers and the agricultural interests in general; third, the economic effect on rich communities.
In the first place, what would be the effect on poor and new communities?
When an American farmer goes to the virgin soil of the Northwest and stakes out his farm, he finds virtually no land value at all; land, can be secured by any one on the payment of a merely nominal sum. The only property of these new farming communities consists of the log cabins erected on the land; of the tools, implements and beasts of burden used for tilling the land; and of the personal effects and money that are in many cases brought along by the farmers. The great mass of their possessions, therefore, consists of personalty. In so far as there is any real property at all, it is only to an exceedingly slight extent composed of land values. There is practically no land value. How then, it may be asked, can taxes be raised in this new community? How can the roads be laid out, the schoolhouses be erected, and the other improvements be effected?
Since land values are non-existent, a tax on zero must be zero. Even if any land values exist, the total confiscation of them would not suffice to defray any considerable part of the necessary expenditures. For proof, take any of the assessors’ reports in the new American states, and it will be found that, contrary to the conditions of the rest of the country, the assessed personal property far exceeds in value the total assessed real estate. For instance, in 1890 personalty was to total realty in Montana as 58 to 55 millions of dollars, in Wyoming as 20 to 13 millions, in New Mexico as 28 to 15 millions, in Arizona as 18 to 10 millions. Compare these figures with the older sections, as New York or Pennsylvania, where the proportion was as 382 to 3404 millions and 618 to 2042 millions respectively. If we are to abolish not only the tax on personalty, but all that part of the tax on realty which is not drawn from land values, it can easily be seen how impossible it would be to carry on government in these sections. A tax on the land values would be lamentably inadequate.
What has been said of new communities applies almost equally well to poor communities, that is, to communities made up largely or almost entirely of farm lands and of an agricultural population. The “Single-Taxers” themselves claim that land values amount to practically nothing in the farming districts. We shall see below the fallacy in this general contention; but so far as the community is a poor one there is undoubted truth in the statement that land values are trivial. If this is true, how can the expense be defrayed by a Single Tax on land values? In the testimony recently taken before the tax commission of Massachusetts, one of the Single-Taxers who was testifying as to the situation in certain rural townships was asked the question: How will it be possible for this poor town, in which there is very little land value, to raise its taxes? The witness was compelled to reply that it would be impossible for the community to do so, and he suggested that the expenses of the poor communities should be defrayed in large part from the revenues of the rich communities.
This remedy is somewhat visionary; for with the American theories of local government, it would be almost impossible to induce certain sections in the community to assume the burdens of other sections. We are all acquainted with the continual bickerings in our state taxation, due to the efforts of the richer counties to escape paying more than their proportion of the general state taxes; and we have recently seen the discontent aroused by an attempt in the shape of the federal income tax to make certain wealthy sections of the country pay the larger part of the revenue of the national government. Where these efforts have given rise to so much dissatisfaction, it is obviously out of the question to suppose that the purely local expenses of any community will ever be defrayed by the efforts of other communities. In local matters, at least, every county and town must stand on its own feet; and if the Single Tax is unable to de- fray even the local expenses of a poor community, not to speak of its share of general state or federal expenses, it is clearly beyond the realm of practical politics. In poor communities, as well as in new communities, the Single Tax would be an impossibility.
Let us consider, next, what would be the effects of the Single Tax on farmers in general. One of the claims of the advocates of the system is that it would relieve the farming population of the burden of taxes, now weighing upon them. A careful consideration of the facts shows, however, that this claim is unfounded, and that, on the contrary, the only result of the Single Tax would be to make the farmers pay more than they are paying to-day. This can be proved by recent statistics.
In only a few states is a distinction made in the assessments between land and improvements on land. Let us take, as a typical instance, Ohio county, in West Virginia, in which the city of Wheeling is situated. In the auditor’s report for 1892, we find the following figures:—
In other words, whereas Ohio county now pays ten and one- half per cent of all taxes, and would pay about the same if real estate alone were taxed, if the Single Tax were introduced it would pay only five and one-half per cent of the total taxes, or about one-half as much as at present. If the large towns would have to pay so much less, of course the farming districts would have to pay so much more. The improvements in the towns are worth more than the value of the bare land; while in the country districts the reverse is true.
As another example let us take California. In the comptroller’s report for 1893, we find the following figures:
We thus see that while in the city of San Francisco improvements equal thirty per cent of the total real estate value, in some of the country districts improvements are only ten or fifteen per cent of the total. Taking the state as a whole, land values equal seventy-six per cent of all real estate, while in San Francisco land values are only seventy per cent of all real estate. To levy the Single Tax would, therefore, make San Francisco pay less, and some of the country counties far more, than at present.
Again, let us call attention to the report of the Commission on Valuation, made in 1892 to the Pennsylvania Tax Conference, which is probably the most careful attempt yet made to distinguish land values from improvements. We find the following figures:
The proportion of land values to total valuation of all property is, in the county of Philadelphia, thirty-six per cent; in the agricultural counties of Sullivan and Greene, eighty-one per cent and seventy-five per cent, respectively; and in the whole state, fifty-two per cent. The Commission concludes: “As a rule, in agricultural counties the land values are the greatest, as would be expected; while in manufacturing counties and those having large cities, the value of the improvements is equal to that of the land, or greater.”
Let us now choose some Western states. In the report of the auditor of Colorado for 1894 we find the following figures:
In other words, in the towns improvements constitute about one-third of the total values; whereas in the country, improvements are only about one-sixth of the total.
As to Montana we find, in the report of the Board of Equalization for 1894, the following figures:
In Lewis and Clarke county, the home of the largest city in the state, the total value of all land was $11,397,860; that of improvements, $5,269,300. In some of the agricultural or grazing counties, however, the value of the land was far higher in pro- portion to the improvements; in Meagher county, for example, land was $1,821,385, while improvements were only $629,054. Most striking of all, in this very same county, in the case of agricultural property, the figures were, land $1,218,474, improvements $266,824; while in the town lots the figures were, bare land $602,911, improvements $362,375. In other words, not only are improvements proportionately less in the rural counties, but even in these rural counties by far the larger proportion of the improvements are found in the little towns, as compared with the farming or grazing land proper.
In the state of Washington, the State Board of Equalization agreed on the following figures for 1893:
In Utah, Salt Lake county, the seat of the chief city, assessed in 1893, real estate, exclusive of improvements, at $31,347,670; improvements, at $9,483,141. In rural counties like Rich county and Cache county, the figures were, in the one case, realty $527,666, improvements $81,445; in the other case, realty $3,771,810, improvements $915,614. Here again, the more densely settled the township, the greater in proportion is the value of the improvements.
Finally, in North Dakota, the State Board of Equalization has fixed the valuation for 1894 at these remarkable figures:
In all these cases—and they might be multiplied ad infinitum—it is seen that the value of the improvements is, on the whole, greater in the urban than in the rural districts. To many this will be a surprise, because they are apt to be blinded by the immediate facts about them. The Single Tax advocate generally lives in the city, and sees before him a city lot, each foot of which will sell for hundreds or perhaps thousands of dollars. The town lot, he is apt to exclaim, is worth hundreds of times as much as a piece of land in the agricultural districts. This is perfectly true; but it proves nothing as to the comparative ability of their owners to pay taxes because it overlooks a point of the greatest importance. When we compare urban with agricultural land values, we do not compare foot with foot, but total units with total units. Thus, an acre of land in New York City may be worth a thousand times as much as an acre of land in the country; but it must be remembered that there are many thousand times as many acres in the country as there are acres in New York City.
A lot in New York may be worth ten thousand dollars, but a farm of five hundred acres in the country may also be worth ten thousand dollars, exclusive of improvements. We must, therefore, compare, not the value per foot in the New York lot with the value per foot in the country farm, but we must compare the value of the New York lot with the value of the country farm. The farmer who has paid ten thousand dollars for his farm, and has then proceeded to improve and cultivate it, will not be satisfied, when the assessor taxes him, and exempts all the business men, house-owners and security holders in the adjoining village; he will not be satisfied with the statement that the owner of a ten-thousand-dollar lot in New York City pays a hundred times as much per front foot. He will be apt to reply that it makes no difference to him whether the New Yorker’s ten thousand dollars is taken away; but he objects to his own ten thousand dollars being taken away, while his neighbors in the village, who are far richer than he, pay no taxes at all. In short, while attention is directed to the fact that land values are undoubtedly less per acre in the country than in the city, it is forgotten that the number of acres in the country is so many times larger than the number of acres in the cities that the total land values in the country will form a large part of the whole. Moreover, we have seen that the value of improvements is greater in the towns than in the country. In the country the farm-house is built for five hundred dollars; in the city the fine stone mansion or steel business edifice is erected at a cost of thousands or hundreds of thousands of dollars. If, therefore, all improvements were to be entirely exempted, the only result of a tax on land values would be to make the farmers pay more than they do at present. It is not denied that as between the general property tax as actually administered and a tax on real estate only, the farmer would be benefited by the adoption of the latter. For personal property is assessed, chiefly in the agricultural communities. The remedy, however, consists not in taxing only real estate, but in striving to reach the abilities of the owners of personal property by some other method than that of the antiquated general property tax. But even assuming that this reform cannot be effected, what the farmers would gain by the abolition of the personal property tax, they would lose and far more than lose, as we have seen, by the total exemption of all improvements.
No wonder the farmers realize that this will ruin them. Immunity from indirect taxes would be dearly purchased at such a price; for it would result in the destruction of the one class above all others upon which our prosperity rests—the class of independent small farmers. As long as the United States remains pre-eminently an agricultural community, it is not likely that the Single Tax will become a practical question.
Thirdly, and finally, let us consider the economic effects of the Single Tax in rich urban communities.
It is contended by the Single Taxers, with special reference to the advantages claimed as likely to accrue to the tenement-house population of the large cities, that the introduction of their system would bring about the social millennium. It is supposed that if we abolish the tax on improvements, that is, on houses, the vacant lots will be built over as if by magic, rents will fall, the wages of the workmen will rise, and a period of general prosperity will be ushered in.
It may be asked, in the first place, where all this additional capital which is to be invested in houses is coming from. There is no fund floating about in the air which can be brought to earth simply by the imposition of the Single Tax; the amounts to be laid out in houses must be taken from the capital now invested in some other form of productive enterprise. The amount of loanable capital in the money market at any one time is definitely fixed. Even deposits in banks are already invested, for the most part, in mortgages or in corporate securities; that is, they are already utilized for productive purposes. What is put into new houses will, therefore, simply be so much taken away from other productive employments.
It may be asked next, how the rents of our tenement-house population will be reduced? The theory that a tax on houses is shifted to the consumer or tenant is true enough, provided that the tax be exclusive—that is, provided that nothing be taxed except houses. If, on the contrary, the house tax is simply a part of a wider system of taxation; if other forms of property are assessed like investments in land and in personal property; if a corporation tax is imposed to hit the investors in corporate securities; or if we have an income tax which is to reach general profits,—in all these cases the very conditions of the theory according to which a house tax is shifted disappear.
To the extent, then, that the house tax is not a Single Tax, the tendency for it to be shifted will be diminished. The only result, in this direction, of the Single Tax would be, as a matter of fact, that people would pay their rent to the state instead of to private individuals. We hear a great deal about the unoccupied lands held for speculative purposes in large cities; but it may safely be affirmed that south of Forty-second Street in the city of New York—the home of the major part of the tenement- house population—not one-fiftieth of one per cent of the building lots lie idle, and of these some lots are occupied as coal yards, and some adjoining factories or large establishments are used for storage purposes. How then would the Single Tax relieve the inhabitants of the slums? They will not go to the suburbs where there is an abundance of land, for the same reason that they do not go there now. Rent in the suburbs is at present considerably less than in the slums, which are nevertheless crowded. The average workman plainly prefers to be near his work, and to enjoy the social opportunities of contact with his fellow-workmen, evenings as well as day-time. Above all, he cannot afford the expenditures of time and money, necessary for conveying the various members of his family to and from the suburbs. Even assuming, therefore, that there was some magic fund to cover the suburban lots with houses, the rents in the slums would scarcely be affected.
Finally, we may ask how the wages of the workmen are to be increased by the Single Tax. Wages can be increased only through an increase in capital or through an increase of the efficiency of the laborer. Taxation in itself cannot accomplish either of these results. To turn economic rent over to the state cannot increase capital one whit, nor can it augment the efficiency of the laborer. Not only can the Single Tax have no influence on the wages of labor, but as we have seen it cannot decrease the rentals of the tenement-house population. The whole fair dream of economic felicity thus resolves itself into mere mist, into mere nothingness; the tenement-house population would derive as little advantage as the American farmer from the Single Tax.
So far as there is any truth in the doctrine that land in or near cities is largely held for speculative purposes, the difficulty can be met by the enforcement of now existing laws. The tax laws of the American states everywhere instruct the officials to assess property at its true or selling value, but it is notorious that un- improved lots are, as a rule considerably undervalued as compared with those on which improvements have been erected. If, then, we simply enforce the laws as they exist, it will be far more difficult for any one to hold land on speculation. But the desired purpose may be accomplished without invoking the aid of the Single Tax.
Furthermore, so far as there is an element of truth in the idea of unearned increment as applied to urban real estate, the problem is already, to a large extent, solved in America by the system of special assessments which takes for public purposes, and precisely at the time of its creation, the increased value which may properly be said to be due to any positive action on the part of the community. By enforcing the tax laws as they exist to-day and by extending the law of special assessments to all the cases which are properly referable to the principle of benefits, we shall do as much as is under existing conditions either practicable or equitable.
Conclusions
We have studied the Single Tax from different points of view; and we have seen that it is defective fiscally, politically, morally and economically. We have learned, first, that it would be inelastic, and that it would intensify the inequalities resulting from unjust assessments; secondly, that although itself proposed chiefly from social considerations it would prevent the government from utilizing the taxing power for other social purposes, and that it would divorce the interests of the people from those of the government; thirdly, that it would offend against the canons of universality and equality of taxation, and that it would seriously exaggerate the difference between profits from land and profits from other sources; and finally, that it would be entirely inadequate in poor and new communities, that it would generally have an injurious influence on the farmer, and that even in the large urban centres it would exempt large sections of the population without bringing any substantial relief to the poorer classes.
It is clearly impossible to discuss in this place the wider claim of the single-taxers, that the application of their scheme would introduce the social millennium. If economists thought that the distinguished single-tax leader had solved this problem, they would enthrone him high on their council seats; they would reverently bend the knee and acknowledge in him a master, a prophet. But when he comes to them with a tale that is as old as the hills; when he sets forth in his writings doctrines that have long since been refuted; when in his enthusiasm he seeks to impose a remedy which appears to them as unjust as it is one-sided, as inconsistent as it is inequitable, they have a right to protest. This is not the first time that some enthusiast has supposed that he has discovered a world-saving panacea. The remedy for social maladjustments does not lie in any such lopsided idea; the only cure is the slow, gradual evolution of the moral conscience of mankind. We cannot solve the labor problem by any rule of thumb. Every student of history, of political philosophy, of economics, will tell us that the progress of the race has been slow and painful; that the world has advanced step by step; and that each successive step, to be enduring, must be founded on justice. To suppose for a moment that the social millennium will be ushered in by any one sudden change—even were the change not so lamentably inadequate as the one above discussed—is an evidence not of wisdom, but of short- sightedness.
Even as a method of tax reform, the scheme is, as we have seen, a mistaken one. Our system of taxation is far from being ideal, or even comparatively just; for we are still clinging, in a great degree, to mediaeval errors. But whatever be the much- needed reform, it is safe to say that neither the common people nor the student will ever accept a scheme which is palpably unjust, which abandons the whole ideal theory of modern taxation—that of relative ability or faculty—and which seeks to put the burdens of the many on the shoulders of the few.