The Single Tax

Joseph Hyder: The Case for Land Nationalisation
Chapter XVI: THe Single Tax

History records many things, which ought to make us hate evil actions; but neither history, nor morals, nor policy can teach us to punish innocent men on that account.
Edmund Burke,
Letters on Irish Affairs.


THE whole purpose of the preceding arguments and illustrations being designed to prove the inherent inequity and impolicy of private property in land, we now pass to consider a proposal which has been put forward with much skill, energy, and persistence, and which claims to be a complete solution of the land problem.

It is, of course, well known that the movement for the taxation of land values owes its origin to the teachings of Henry George, and that Progress and Poverty is its Bible. With inimitable power Henry George impeached the system of private ownership of land, and with a wonderful eloquence, which appealed to the emotions. He put a life into the dry bones of political economy that no other writer had ever succeeded in doing, and he had the inestimable advantage, which few great writers ever possess, of being a master of platform oratory as well. His works have been translated into many languages, ardent disciples of his are to be found in many countries, and his principles have, if only partially, been applied by statesmen.

Looking at the vast undeveloped resources of America, withheld from present use for the sake of future profit, he came to the conclusion that, if all land were taxed on its real value, the dog-in-the-manger policy of the land speculators would be rendered impossible, the big estates would be cut up and sold to the actual users, and there would be such abundance of employment that wages would rise to the full level of a man’s earnings, and poverty would be completely abolished. And he imagined that there would be no difficulty in starting with a small tax which could be gradually increased until the entire value of land was absorbed in taxation, or only enough left to the landlords to induce them to act as tax-collectors for the State.

It cannot be said that his doctrine of destroying private property in land by such means has made much headway in any country, but there is in the proposal something that has commended itself to many men for other reasons. And so we find there is a very strong movement for the taxation of land values as a means of forcing withheld land into the market, of reducing land rents and land prices, and of making the owners of land contribute more than they do now to the expenses of government.

These objects are so good and reasonable that the policy which promises their achievement numbers among its supporters a very large number of men who have no desire and no intention to go much further than a very short way along the road which Henry George planned out for them. While, therefore, the leading spirits and the active engineers of that movement are themselves wholehearted believers in Henry George’s gospel, it derives its main weight and influence from men who see no wrong in private property in land and have no wish to destroy it. The hope is, however, cherished, that when the first step has been taken, the beneficial results which are prophesied for it will be so convincing that the next step will become inevitable, and that the moderate supporters of the experimental stage will as ardently work for all the succeeding stages as they now do for the imposition of a small but universal tax on land according to its value and not its rent.

The taxation of land values must therefore be considered not merely as a justifiable means of raising revenue from sources at present untapped, or as a means of bursting the land monopoly and pricking monopoly prices, but as a possible method of abolishing private property in land. It is the only serious rival and competitor of land nationalisation by purchase, and its claims must be examined in the light of that fact. Just as the advocate of Free Trade is compelled to deal with the rival theories of Protection, and has no other chance of clearing the ground for his own case, so the land-nationaliser is compelled to deal with the land-taxer’s claim that nothing more is needed than the progressive taxation of land values. The questions arise at once: Is it practicable, is it effective, and is it just? To the present writer the answer in each case is in the negative.

It is perfectly just that the value of land should be separately assessed, and separately rated or taxed, but it is quite obvious that very much depends upon the amount of the special tax on land. Thanks to the tremendous influence, which the landed interest has enjoyed for centuries in the making and administration of the laws, they have escaped their fair share of the burdens of taxation in the past. They have had a very good innings, and they have made the best use of it for themselves. And it is only right that they should pay more than they pay now. At the same time it must always be remembered that untold millions of earned money have been invested in the purchase of land. It has been looked upon as the safest investment that a man could put his savings into, and its price has been determined in part by the taxation it at present bears, and by any additional burdens which may be reasonably anticipated in the future.

The Henry Georgeite tells us that the question of compensation or no compensation does not arise under his scheme. That is quite true, but the question of fair-dealing does, and when new taxes are proposed, or additions to old taxes, a proper regard must be paid to all legitimate interests, which have been allowed to grow up under the sanction of the law. It is beside the mark to say that private property in land is wrong in toto, that land values are the rightful revenue of the State and not of the individual, and that nothing can ever justify their permanent appropriation to private ends. In all these contentions the land-nationaliser agrees. They are common ground. But hard facts have to be faced, however much we may try to avoid them.

The problem before us is the righting of a great wrong, not the punishment of wrong-doers. If we had to deal with those who started that wrong, the issue would be as simple as it is now complex. Even if we had only to deal with their proved descendants, it would be simpler than it is. If we had to deal only with great landlords, there would be less difficulty. If we could discriminate (as we cannot between those who have bought land, and those who have merely inherited it from ancestors who never bought it in the first instance, it would be different. But we have to deal with a large number of men who had no part in the institution of the system, who are no more responsible for its maintenance than the rest of the people who have similarly acquiesced in it, and who often derive less profits from it directly than many others derive indirectly who do not own any land at all. Therefore to treat them as if they were specially responsible for the system would be manifestly unfair, and any attempt to do so would quite certainly fail.

It is not upon such lines that the nation’s right to the land is ever likely to be successfully asserted. “The common sense of most” rebels against it. Even the landless democracy is opposed to it, for the direct representatives of labour in Parliament are unanimous in favouring the nationalisation of land, accompanied with compensation, rather than the policy of taxing the landlords out of existence.

It is often argued that the masses of the people were not represented when the landlord system was established, that they had no part in the making of the land laws, and that they are therefore entitled to set them aside as of no validity. Their right to revise the laws is unquestionable, and when they do so they are likely to show far more consideration to the landlords than was ever shown to the rights of the common people in times gone by. But, even if they were as likely to do it unfairly, as they are to exercise mercy and moderation, the fact that they had the power would be no proof that they had the right. A wrong does not become a right simply because it is backed by numbers. Might is not right, and never can be – the might of numbers no more than the might of privilege. A Parliament that is elected under universal suffrage must therefore as strictly observe the laws of justice, which are higher than all the laws of Parliament, as Parliaments, elected on a narrower franchise, ought to have done but did not.

Civilised government would be at an end if no respect were to be paid to contracts previously entered into and sanctioned by the law. The minority that opposes a war is saddled with its share of the cost of it, as much as if it had promoted it. And when it gets into power it enters into a legacy of debt for incurring which it had no responsibility. But it does not on that account repudiate its liability.

In the same way our laws have encouraged men to buy land, taxes have been levied by the State upon every transfer of it, and numerous regulations have been made with regard to it. Vested interests have therefore been established which it would be unjust to ignore when the State decides to reverse all its previous policy, and either to resume possession of the land or to increase the taxes upon it.

Private property in land is a mistake, not a crime. For that mistake we are all collectively responsible, including even those who as individuals may have protested against it and worked for its rectification.

And here it is well to notice that democracies, which have had the power to establish a just system, which would have safeguarded the equal rights of all men to the use of the earth, have so far used it instead to divide the land among themselves as private property. The French Revolutionists took the land of the dispossessed aristocracy to be their own individual property. They rose against the abuses and exactions of the great estates, but they saw no wrong in private property in land so long as they had a share in it. The new territories of America and Australia and New Zealand formed great national estates which ought never to have been alienated. But the governments of those countries, elected on a very wide franchise, have succeeded in a few generations in denationalising nearly the whole of two continents.

In Ireland, too, we have seen that that great patriot, Michael Davitt, completely failed to convince his countrymen that when the land was taken from the big landlords it ought to be made a national rather than a private possession. He stood almost alone. The farmers were not ripe for such a doctrine. Moved by the natural but short-sighted desire for their own immediate self-interest, which is always so powerful in governing human action, and which is responsible for most of the evils under which mankind suffers, they insisted upon the continuance of private property in land, leaving the future to look after itself. And scarcely a word of protest came from the landless British democracy anywhere.

Further than that, since the franchise has been extended, at election after election the masses have consistently voted for upholders of the evil system of treating land like an ordinary marketable commodity. This being so it can hardly be claimed on their behalf that they are quite free from blame for its continuance.

It is, however, blandly urged by the single-taxer that taxation is not confiscation. All that he proposes to do, he says, is to transfer taxation from one thing to another. Improvements on land are to be encouraged by being relieved, and the withholding of land from being put to its highest possible use is to be correspondingly discouraged.

The objects thus stated are undoubtedly good ones, and in time will be achieved. But the process of changing the present system of rating land and buildings together on their annual rental value to one of rating land alone on its selling value cannot be done justly unless done gradually. Even when it was completed it would not have taken us far on the road to the abolition of the private appropriation of land values, which is the object its leading advocates have in view, and we should be no nearer to the public control of land, which is so important and necessary.

At the present time we levy a duty of a half-penny in the £ on the selling value of undeveloped land, which is equivalent to about a shilling in the £ on its potential annual rent. This was as far as the strongest Government of modern times found themselves able to go. The new proposal goes much further. If the same rate were levied on undeveloped land as on developed land, it would often be nearly ten times as much as the new tax that formed part of the 1909-10 Budget, and it is inconceivable that any responsible Government would propose such a tremendous jump as that. It must therefore be assumed that confiscation on such a scale, under the fair-seeming guise of a change in the basis of rating, is not within the range of practical politics.

But, besides the proposal that the ‘taxing out’ process should be carried out by a new system of local rating, there is another for a national tax to be levied on all land values without any exception. For many years local authorities have received grants from the Treasury, and these now amount to £25,000,000. And they have been persistent in applying for more. It is suggested by land-taxers that the money derived from the national tax on land values should be applied, among other things, to further grants for education, poor relief, main roads, asylums, and police. Besides this they urge that it should be used to take the place of the duties on tea, sugar, cocoa, and other articles of food.

The work that has to be done by the new land taxes is therefore enormous. It covers:

The exemption or partial exemption of buildings and improvements from local rates.

The further relief of local rates by means of national grants.

The abolition of all taxes on food.

As if this were not enough, two of the best-known singletaxers, Mr. C. H. Chomley and Mr. R. L. Outhwaite, in The Essential Reform: Land Values Taxation in Theory and Practice, throw in as an attractive makeweight the nationalisation of the entire railway system; the buildings and rolling stock to be purchased, and the land to be “acquired” more cheaply through the progressive absorption of its value by taxation.

It is, of course, obvious that no moderate tax on land would ever achieve so much. And in any case, it would require very cogent reasons indeed to justify the entire cost of the proposed reforms being made to fall upon one class of property owner, to the corresponding relief of all others.

The present system proceeds, though roughly and imperfectly, upon the principle of taxing a man according to his ability to pay. The new system professes to proceed upon the principle of taxing a man according to the benefits he receives, and the result would be more rough and imperfect still. The whole community, not merely the landlords, receives benefits from the expenditure of rates and taxes, although it is quite true that those benefits are not equal. It is good for us all that all children should be well educated, that there should be an effective drainage system, that the streets should be maintained in good condition and well lighted, that the poor and the afflicted should be relieved, that life and property should be protected by a well-organised police force, and that our shores should be guarded against aggression. To endeavour to put the whole cost of these public services upon the owners of one kind of property, even though it be property in land, is therefore manifestly and grossly unfair.

If all landlords were rich men, and none but they were rich, there would be more plausibility in the proposal. As a matter of fact many landlords are men of very moderate means, and many of the richest men in the country have invested their money in improvement values to a greater extent than in land values.

One man saves £1,000 and buys industrial shares; he is to be relieved. Another saves £1,000 and buys land; he is to pay for that relief. A stockbroker hires an office in the city, rents a place in the country, cuts up the roads with his motor-car, and needs the police for the protection of his movable property. He is to be let off. Another man has bought a few acres of land which practically need no police protection, he is too poor to have a motor-car, and he gets his living by working on his own land; he and men like him are to pay so that the richer man may escape. A well-to-do manufacturer buys a piece of land and puts up an expensive factory, which is worth a great deal more than the site it occupies. He pays rates on the total value of the land and the buildings. Under the new system he would only pay on the land. The difference is to be made up by other men whose ability to pay is often much less.

Now the raising of local and national revenues from land values, and the corresponding relief of buildings and other improvements, would undoubtedly be a very good thing. It is the ideal of the land-nationalist as well as that of the single-taxer. But the former holds that it cannot be justly done except by the public acquisition of the land on fair terms, while the latter regards the landlord as the possessor of stolen property; and, although he does not propose to carry out the change of system suddenly, and professes his desire to avoid the infliction of hardships, it is quite certain that serious hardships would arise if his policy were adopted.

The advocates of that policy have so far been very chary in giving details to show how their new system would work out in practice. They give plenty of instances to show that the present system checks enterprise by taxing it, and encourages the withholding of land from use by exempting it. But this is not enough. Destructive criticism ought to be supplemented by constructive statesmanship. They have been challenged to value a parish on their principle in order to show in detail the advantages, which they claim for it. One of their chief spokesmen told the Departmental Committee on Local Taxation that they had done so, but it is most significant that he added the information that that valuation had never been published. The inference is obvious. In the meantime we have therefore to be content with Mr. Trustram Eve’s valuation of a Bedfordshire parish.

Tabulated and summarised, this is the result according to that valuation:

Allowing that this valuation puts the value of the land of the railway company and the brickyard at much too low a figure, it still appears that the very properties which are the most prosperous and the best able to pay would receive an enormous relief, and those which are the least prosperous and the least able to pay would have to carry a very heavy additional burden. The railway and the brickyard dividends would rise, but what of the owners or tenants of the farmlands?

The question at once arises as to the power of the landlord to escape the new tax by transferring it to his tenants in the shape of a higher rent. In the case under review the farms now pay £147 l0s. 2d. in rates. Under the new system they would pay £1,092 8s. 2d. To the extent to which the farms are relieved of rates on the buildings and improvements the rents might be raised without affecting the farmers at all. But, as the presumption is that they are already paying as much rent as they can afford, the landlords cannot raise it by an amount greater than the relief. As the net increase in rates is £944, this would have to be paid by the landlords.

Surely by all the canons of fair taxation such an impost cannot for a moment be defended. Bad as the landlord system is, the landlords are entitled to be dealt with more mercifully than that. It is also difficult to see how the agricultural industry would be benefited by the crippling of those upon whom now devolves the first cost of farm buildings, or how it would assist them to carry out their duty (already so notoriously neglected) of putting up cottages for the farm workers.

In so far, therefore, as a landlord is unable to shift a land tax to his tenants, it is necessary that it should be moderate in amount if unwarrantable hardships are to be avoided. And, in so far as he is able to shift it, the tenants will gain little by the proposed change, which the state will fail to secure the land values, to which it is entitled.

Can A Land Tax Be Shifted?

Upon the question of the landlord’s power to increase rent in proportion to the proposed new land tax a strong divergence of opinion prevails. On the one hand it is claimed that he cannot escape any part of it, and, on the other, that he can escape it altogether. The truth probably lies between these two extreme positions.

In support of the first proposition the single-taxer quotes the economists.

Adam Smith says: “A tax on ground rents would not raise the rents of his houses. It would fall altogether upon the owner of the ground rent, who acts always as a monopolist, and exacts the greatest rent which can be got for his ground.”

Ricardo says: “A tax on rent would fall wholly on the landlords, and could not be shifted to any class of consumers.”

John Stuart Mill says: “A tax on rent falls wholly on the landlord. There are no means by which he can shift the burden upon any one else.”

At first sight this appeal to authority seems unanswerable. It is, of course, quite true – other things remaining the same – that the mere fact of a landlord having to pay an additional tax does not by itself enable him to charge more than he charges now. In the generality of cases he charges all he can now. He cannot charge more simply because his own outgoings are increased, whether the increase be due to a new claim by the State, or to private reasons, as, for instance, by the expenses of his family increasing. But the whole point of the single-taxer’s case is that other things do not remain the same. His contention is that the taxation of land values would stimulate industry and create an unprecedented boom in trade. The demand for land would therefore be much greater than it is now, capital would find new opportunities for profitable investment, and labour would be employed to the full. And, beyond all this, the whole body of land-users would be relieved of local rates, and of at least a part of the national taxes, which they now have to pay.

Under these circumstances the dicta of the economists do not apply. For every one of the benefits, which the taxation of land values is designed to accomplish must infallibly raise the aggregate value of land, and, the landlords being in possession, they would usually be able to recoup themselves by appropriating the increment which the improved land market would give them.

Henry George himself stated the position with his usual clearness and emphasis when he swept aside the contention that poverty could be relieved by greater economy in government. In Progress and Poverty (Book vi., Section I) he says:

“A reduction in the amount taken from the aggregate produce of a community by taxation would be simply equivalent to an increase in the power of net production. It would in effect add to the productive power of labour, just as do the increasing density of population and improvements in the arts. And as the advantage in the one case goes, and must go, to the owners of land in increased rent, so would the advantage in the other.”

If the proceeds of the new land tax were to be thrown into the sea, or to be devoted to the waging of a war, the users of land would receive no benefit, and land values would be unaltered. As they are to be devoted to the reduction of fiscal burdens and to the stimulating of trade and industry, the users of land would derive very substantial benefits, which are bound to express themselves in terms of rent. Therefore, so long as private property in land continues, the landlord would be able to intercept for himself the benefits that were intended for the tenant, and be able with one hand to recoup himself, in whole or in part, for what he is called upon by the State to surrender with the other.

To hold this view is in no degree inconsistent with the previous contention that the taxation of land values is unjust, when levied with the intention of taxing landlords out of existence. For although it would not have that effect upon all landlords, it would upon some of them. And in this very inequality of treatment lies one of the greatest objections to it. If they are to be destroyed by taxation they should all be treated alike. But the owner of developed land could, speaking generally, pass the tax on to his tenant. The owner of undeveloped land, or of under-developed land, could not. While, therefore, many (perhaps most) owners would escape scot-free, others would be hard hit, and some would be ruined. Fortunately we are not confined to abstract arguments on this question. The system, which is recommended by single-taxers for our adoption here in England, has been already adopted in some other countries, and we can consequently test the theories by the results actually achieved. It should, however, be noted that all of them are new, or comparatively new, countries. In all of them the proportion of undeveloped land is very much greater than it is in our own country, and it is therefore better able to carry the newly-imposed burden. It is absolutely necessary to keep this important consideration in mind, although it is never mentioned by those who erroneously assume that the same results would be obtained here as in countries where the conditions are altogether different.