From The Righteous State
by Severin Christensen
11.—The Economy of the Righteous State in Brief
To make use of the formula: the common ownership may only be used for common purposes it was most of all necessary to define what common ownership is in an ethical sense, and what separate ownership is, and to do this the previous exploration has given us a utensil to use.
The common belongings are all things created by nature, and therefore it is the obvious right of the common to balance the advantage, which arises, when some individuals win the right to use these values. It is this thought which in the case of the land has found its expression in the suggestion of seizing the unearned increment, even though this is only half a step towards the realisation of the thought. It cannot be stressed enough that this seizure is something completely different from anything which is called taxes in the usual meaning of that word, since tax precisely is about taking away from the citizen something which should be respected as his rightful property. Tax is a measure, through which the state power overrules all moral doubts and directly goes against the spirit which should characterise a society: the respect for the difference between yours and mine. The state usurps through the tax a monopoly to turn up and down the moral laws, and creates by its bad example an indescribable demoralisation.
By means of the tax the state has fundamentally and principally withdrawn the purpose, of which the state exists, that is to guard anyone in possession of that profit, which his work brings forth.
The seizure of the unearned increment on the other side is of the sort of those royalties which must be paid as compensation for certain privileges, which the public authorities expressly bestows on individual persons or associations; since the possession of land has through the general legislation become a privilege as well as any other. “The private ownership to land, which we now can see has become established in all civilised countries, has only developed late and slowly from the original community.” Therefore, the term ‘single tax’, which many supporter of this principle use, is misleading and ought to be completely avoided.
The principle does not aim at the introduction of a single tax; it aims as much as possible to abandon all taxes. The word debt, which in the later years has come into fashion, expresses exactly what this is about to highlight.
One might by now ask the following question: is it necessary to collect all of the unearned increment, would it not be sufficient with a smaller amount Or, on the other hand, if the common responsibilities needs more than the unearned increment can cover, would it not be justifiable to claim a further amount in tax?
The solution to these questions appears from the examinations of the ethical right of property. Society cannot without doing wrong towards some of its citizen’s refrain from collecting the increment in full, since even with a partial collecting; those with the large land values would not be able to avoid unfair treatment of the others. And only for the necessary judicial purpose should the collected sum find use; what should be left should be distributed equally among all citizens as equally big shares of profit. The question about what the public authorities should do, if the amount of debt does not cover expenses, must be answered thus: since the common responsibilities in the constitutional state are only few compared to the tasks of the current state, it is unthinkable that the expenses should possibly be covered by the natural basic fund which first and foremost is available for the state, the unearned increment. It has been calculated that undoubtedly a profit would be the turn-out, which then should befall all citizens as equal shares. But apart from that the criterion of the budget of the state is not the amount, which passes as debt through the hands of the collectors, but that which is needed by the necessary judicial functions. Should the amount of debt contrary to expectations not be enough, the organs of the constitutional state shall collect a tax of equal size per individual.
We shall not further talk about which industries any state power necessarily will have to monopolise, only point out that also the privileges, which flows from the true monopolies must be taken back through the public purse in full, as these also happen to be the common possessions of the society.
Most current states also gets itself income from various businesses, for instance by using its territories or woods or by maintaining industrial businesses or certain parts of the traffic itself. It is now commonly held that the state is not very well endowed for agricultural activities, and it would probably be more in compliance with the responsibilities of the state, if it sold off such properties, instead of farming them out itself. When it comes to vegetation the matter is a bit different, since common interests must be considered. For instance, the importance of the woods as national values of beauty, as protection of territories (dune vegetation), their climactic and hygienic importance etc. On the other hand it is a question, whether the state could not maintain these interests just as well through control and acts of preservation, as through ownership. Only when new vegetation should happen to be of general importance, should the state take initiative itself, but this consideration at least should not be a financial one.
The administration of the means of traffic is not necessarily a responsibility for the state. In the hands of privates the greatest caution and economy would be secured, and the best personal forces, the functionalism, which in various ways commands both state and borough, can be avoided. And the principle must always be, that it is the responsibility of the state to justify any competition and intervention in professional life, any new task, any new staff of officers explained as necessary for the sake of securing justice being done within these areas; the proof always lies with the state in front of the privates which offer to exert the task.
The public authority should only reserve for itself the full compensation of the value of monopolies, which can be assessed, when a private company during an operation which by the way fully satisfies the common interests, has gained a suitable profit from the capital investments in it. The public authority therefore has a right of controlling the propriety and the charges. The traffic department belongs to those companies, which partly demands monopolising. Any expropriation must be justified by its absolute necessity: it might be necessary to expropriate a single line, but hardly ever parallel lines and so forth. It should be avoided that means of traffic, just as mail, gas, telephone, telegraph etc. are used for imposing indirect taxes on the people; the principle must be that the charges are proportionate of the value of the services.
The economy of the current state rests very much on direct taxes. It is worthwhile to investigate, in which way these are normally defended within the so-called financial science. Here especially two theories have played the leading parts: the utilitarianism or the theory of interest, and the ability or sacrifice theory. The first rests on the thought that anyone should pay according to the use, he gains from the state arrangements. But first of all the use cannot be used as a principle for the responsibilities of the state, and secondly it would be impossible to deduct the special usefulness of the arrangements had by the individual citizen. Defence of taxation based on ability has actually never sufficiently been attempted from an ethical point of view; this theory marks the high point of the in the 19th century most important and still reigning idea, that the decisions of a democratic majority in any case is above criticism; the taxation of ability is alone based on the power, which stands behind it (as it will always be possible to arrange taxation in a way which will have a majority to back it up), and on the argument, that it is practical. To take where the ability is, is practical and popular, whether it is fair has not interested anyone. The tendency reveals itself through the expressions, which are used; there are talked repeatedly about ‘targeting’ this or that one, as if it was the task of the state to eavesdrop for the most vulnerable sides to make a kill now and then. Consequently, this theory leads to progressive taxation, which is a rarely naked example of arbitrariness, since – independently of which measure one uses – in vain would look out for any justification of this exact raise.
Those, who want to attack a railway-train normally, are sensible enough to find the 1. Class waggon; a nobler ideal than this the progressive taxation would hardly be able to flatter itself of having. The same goes for the other adjustments of the principle of ability: the measure which favours especially the family breadwinners, which have many children (as if one had any right to ask others to pay for it); or those distinguishing, whether the income stems from work or capital, etc. They can all be considered failed attempts to redeem an in and of itself unfair principle: through power to take from the citizens a part of their rightful property. We do not have to address all the dark sides of the system already admitted: the intolerable interference and control, which the state power is allowed to make into private affairs, and the false declarations, which the citizens are forced to hand in as an act of self-defence.
How the level of taxation is distributed seems currently to be the centre of the utmost care; but to what extend one by these considerations moves in the darkness should be obvious from a sentence like this one in Cort Trap’s Grundrids af Finansvidenskaben, from 1908: “It can be a very difficult matter to establish, how the level of taxation is distributed in the actual case, and it is not impossible that an incoherent system of income tax from the source, which as a direct tax would be very unfair, yet in the end can appear to be more or less proportionate.” ‘Not impossible’… ‘More or less proportionate’! on such a lose basis is it that the calculations are made; on such a lose basis must the admittedly unfair taxation of the individual be defended!
Also succession duty is a violation of the rightful separate ownership. It follows of which kind of nature it is, because even large presents are taxed to avoid circumvention of the law of heredity. Such ideas show where to the principle of the omnipotent state leads. The truly raw and naked view is that heritage and gifts add to the ability to pay tax and thus most be ‘targeted’; thus this tax should also be progressive, as the income and capital taxes are.
Furthermore, the position of the constitutional state towards heritage is that all rights to inherit understood as a privilege for the surviving part ceases. Instead any person of age can through testament give away his estate to named individuals. The right freely to control ones profits from work contains an undiminished right to give and accept gifts. The right of property of the children shall be addressed in a later chapter.
Any kind of consumption tax is of course also from the point of the constitutional state as reprehensible as any of the aforementioned kinds of taxation. Any private person has the right to acquire the articles, he himself wants to, and the state has not through the levelling of duties on these things the right to artificially increase the price. The so-called ‘moral’ arguments, by which some of these taxes have been attempted to be justified, on alcohol and tobacco, for instance, it is best to keep out of consideration. Because the state has no right to play ward or to get involved in conditions, which only regards the individual citizen and his relations.
When it comes to duties, exactly the same consideration applies; therefore the question of protection of free trade from the point of the constitutional state so incredibly simple. All the lofty arguments about the usefulness for state or society of this or that duty can be dropped, whether it is financial or protective; one only has to ask about the right of the state to levy such burdens on the population, of which some even are so evil that they give privilege to certain already beforehand appointed circles at the cost of others. Furthermore, the whole duty matter is one grand proof of who difficult it is to reason from the utilitarianist position, and how impossible it is for a state power to make legislation based on it; over hundreds of years this matter has been debated back and forth, and still two equally strong parties stand against each other, of which no one to date has been able to produce a convincing argument for the truth of his argument. One has had to let the estimation rule, one has convinced the other with majority voting and power, not with arguments. The discussion about duty will not cease until the day, when it is acknowledged that this on the part of the state is a violation of justice and nothing else but that.
The land tax normally is levelled on the owner by his ability to gain economic profit, and it does not take into account, whether this profit comes from unearned increment, invested labour, or capital. Following rigid principles of justice it would only be justified to seize the unearned increment; the stronger one taxes buildings, reparations and such, the more one moves away from the rightful. Until 1903 the main part of the direct tax came from a productivity tax, assessed by the site quality. But this year the older taxes were replaced by a real property tax, which is a tax on all real estate in town and country, estimated from their collected value. This meant in an ethical perspective an absolute back-lash, since now rightful work- and business compensations were more involved in it.
If justice in this field is to be achieved one has to acknowledge that it would not be sufficient just to return to the productivity tax and any other know form of land tax. Since as it has been mentioned it is not at all tax, which the state shall impose, but an excise for a certain advantage, a reclaim of the value this privilege represents. So the essential thing is to determine as precise as possible how great this value is, if possible. That a man gets the full profit from the labour he uses on his lot, either if he builds a house or drain the land is no privilege, since profit is his rightful compensation. It is another matter with the natural quality of the land and its location; these things he has not created. Therefore the first thing is to find out what the amount of that, which we now call ‘the naked land value’, is.
One has for a long time appeared to be sceptical of such an assessment. The concept of the naked land value itself has been treated as a theoretical figment of imagination without any basis in reality.
At the same time the daily life of exchange often grapples with these values; determined assessments of land value have been made in many places the world over, and successfully more scientific methods have been developed. But there is no reason to dig further into the technical side of the matter.
Of course, many voices have been raised against the thought that such an excise on the land value as well as the payment for the expressly granted monopolies should make utmost important source of income for the state. For instance, it has been denied that the state should have the right to seize these valuables without compensation to the current owners; but as a rule the opposition has mixed moral with legal and other considerations. One cannot morally be disturbed over a breach of the right of property, when only the legal, officially sanctioned right of property is meant; that is quite illogical. A moral discussion can only be taken from one single basis: whether one acknowledge a moral starting point, that is that there are two completely different kinds of property: one, which according to the right of nature and the morality is true property, the valuables created through work, and another which can only be upheld through the language of power of the state, because it is an unreasonable privilege.
In Cort Trap’s Grundrids af Finansvidenskaben one can read the following: “No single tax would currently be able to cover all the immense expenses of the state…”. To this two things must be remarked: 1) at the assessment in 1916 the total land value was put at 3684 million kroner. 4 per cent of this amounts to more than 145 million kroner. At the assessment in 1945 the total land value was put at 6786 million kroner (including tax-free territories amounting to 506 million), that is 6280 million of debt-ripe land value. 4 per cent unearned increment amounts to 251 million kroner. 2) ‘The currently immense expenses of the state’ is hardly an indisputable amount or any blindly growing avalanche, under which society passively would allow itself to be buried. The expression must in the constitutional state be converted to “those for the functionality of the state indispensable costs”, which leads to a completely different figure.
Public loan must be considered incompatible with the idea of the constitutional state. They are unnecessary, since as the state and boroughs withdraw from all industrial and similar companies, no public investment funds of any consequence would be necessary. The main objection, however, is that it must be considered immoral to mortgage the rightful property of the coming generations and leave them to become the debtors of advantages, which is enjoyed at present. The state loans indicate one of these volatilizations of duty of which modern society is so abundant, since it is obvious that any political leader has no moral right to put a whole society limitless under such obligations, not to speak of the coming generations. Debt should be founded on a contractual relation, but who are those who have taken upon them the right to incur the debt, and who are these who have signed the bond? In another context we shall touch the term ‘juristic persons’ and their shady position in an ethical society. Here it is about the fiction of letting an uncertain number of persons owe a made-up person, ‘the state’, certain amounts, which unscrupulous political leaders long ago have used for certain purposes, which they incidentally had an interest in. In daily life this means that the citizens through taxes must paid large amounts of interest to domestic and foreign capital powers and that the state powers becomes dependent on this. In reality state loan and the current tax systems are two into each other entwined mistakes, since the state loans could not be made at all, if it did not rest on the looting monopoly of the state power; that is the only security our states can present. For the life of exchange the state loan functions in such a way that the rate is kept high for the benefit of those, who possess dispensable capital, but for the harm of the productive society.
If it is an unquestionable truth that governments no moral right has to burden the coming generations with debt, which has had no say in the desirability of the debt, and that such ‘obligations’ have not the least character of a contract, it follows that a people, whenever it comes to its senses about this truth, and they have acquired proper organs by which to rule themselves, cannot feel any obligation towards the creditors, who irresponsibly have taken part in these dubious affairs.
One of the few monopolies, which it is natural for the state to take care of, is the coinage. The experience of later years suggests that a more solid value than a certain amount of gold is making up the security of the means of exchange. The current system has failed during stressful times, in this country bank notes have been issued, which were false, since it was denied to hand over the value, which they according to their print should be exchangeable to. The National Bank has thus misused its monopoly to diminish the assets of people, who in good faith towards the bank authorities and signatures have acquired these papers instead of getting other more secure papers or gold.
To obtain a more solid condition it has been suggested to adjust the amount of notes and coins in relation to the land rent; doing this would avoid that the amount of notes became dependent on the whims of the political or financial institutions. This would be expedient to determine a certain relationship between the land rent and the amount of money in circulation. There is no doubt that the security behind these notes, would be much safer than from the gold which is supposed to cover the now so sadly ruffled notes from the National Bank. The income from this issuing of notes should without any reduction befall the society.
 L. H. Post: Ethics of Democracy. 2. Ed. 103
 E. de Laveleye: Om Ejendomsretten.
 Aug. Schwan: Den retfærdige revolution. Kbhvn. 1919.