Those who favor a Single Tax on Land
CHAPTER V in
The Shifting and Incidence of Taxation (1899)
The theory that all taxes are finally shifted to the landowner is commonly ascribed to the Physiocrats. Yet the same theory was expounded in England long before their time. The first inkling of the doctrine is found in a celebrated seventeenth-century tract, in which the author contends that the landowners “bear all the Taxes and publick burthens; which in truth are onely born by those who buy and sell not; all sellers raising the price of their commodities, or abating of their goodness, according to their Taxes.”[i]
This theory of incidence was, however, worked out much more fully by John Locke. He lays down his general thesis in the words: “Taxes, however contrived, and out of whose Hand soever immediately taken, do, in a Country, where the great Fund is in Land, for the most part terminate upon Land.”[ii] To prove this, Locke first attempts to show that a tax levied on the landowner cannot be shifted. If the “country gentleman” actually pays the tax out of his own pocket, says Locke, he certainly feels the burden. But “this influences not at all the yearly Rent of the Land, which the Rack-renter or under Tenant pays; it being the same thing to him, whether he pays all his Rent to the King or his Landlord.” For the “Tenant’s Bargain and Profit is the same, whether the Land be charg’d, or not charg’d with an Annuity payable to another Man.” The landowner, in other words, cannot shift a land tax.[iii]
But how is it, if taxes are levied not on land but on commodities .”A tax on commodities, says Locke, must raise the price of the commodities to the consumer.” Let us see now who at long run must pay this and where it will light.” ” ‘Tis plain, the Merchant and Brokre, neither will nor can; for if he pays more for Commodities than he did, he will sell them at a Price proportionably raised.” On the other hand, the “poor Labourer and Handicraftsman cannot; for he just lives from hand to mouth already.” The consequence of a tax on the laborer will be either that “his Wages must rise with the Price of things, to make him live, or else, not being able to maintain himself and Family by his Labour, he comes to the Parish; and then the Land bears the Burthen a heavier way.” But if the laborer’s wages rise, the farmer who must pay “more for Wages as well as other things, whil’st he sells his Corn and Wool, either at the same rate, or lower, at the Market (since the Tax laid upon it makes People less forward to buy) must either have his Rent abated, or else break and run away in his Landlord’s Debt, and … so the yearly Value of the Land is brought down, and who then pays the Tax at the years end but the Landlord?”[iv]
A tax on commodities imported, he continues, will always be shifted from the merchant to the consumer. In fact, the importer will generally expect a profit and “raise his price above what his Tax comes to.” For “you must not think that the raising their Price will lessen the vent of fashionable, Foreign Commodities amongst you.”[v] With the produce of land it is different. “Your Landlord being forced to bring his Commodities to Market, such as his Land and Industry afford him, common and known things, must sell them there at such price as he can get.” When a tax is laid on these “homebred Commodities,” which are seldom “the Favourites of your people, every one makes as sparing a use of them as he can;” prices will fall and rents will decrease.
Hence Locke concludes in the famous passage: “It is in vain, in a Country whose great Fund is Land, to hope to lay the publick charge of the Government on anything else, there at last it will terminate. The Merchant (do what you can) will not bear it: the Labourer cannot, and therefore the Landowner must; and whether he were best to do it, by laying it directly where it will last settle, or by letting it come to him by the sinking of his Rents, which when they are once fallen, every one knows are not easily raised again, let him consider.”[vi]
Locke’s theory was soon accepted by a number of writers. One of the earliest was the renowned financier Davenant. But while Davenant accepts Locke’s theory of incidence, he does not draw the conclusion that it is advisable to levy a single tax on land. For instance, he intimates in one place that it may be wise to supplement the land tax by a “tax on money.”[vii] He is also quite a partisan of the excise, and asks “Can any tax be more reasonable?” He thinks, however, that “the proper commodities to lay excises upon are those which serve merely to luxury, because that way the poor would be least affected.”[viii] Even here, however, he believes that excises also fall ultimately on land, even if with somewhat less crushing force than a direct land tax.[ix] Davenant, in fact, holds that the farther off taxes are laid from the producer, the smaller will be their tendency to rest on the land.[x] But this tendency, he admits, cannot be entirely arrested; and he does not shrink from stating that “all taxes whatsoever are in their last resort a charge upon land.”[xi] So also Asgill[xii] and Cantillon[xiii] were worthy precursors of the Physiocrats, so far as they asserted that land was the real foundation of all wealth, and therefore ultimately bore the weight of all taxes.
In the early decades of the eighteenth century, Locke’s theory is frequently encountered. Some authors, like Wood, were quite content simply to quote his views.[xiv] Others sought to add to Locke’s argument. One writer, who accepts the general theory, boldly takes issue with the doctrine as expounded by Davenant, and maintains that the more indirect the tax, the worse it will be for the landowner.[xv] Another writer, whose pages are filled with quotations from Locke, does not deny that excises add to the price paid by the consumer, but thinks that the producer also pays the tax, at all events in part.[xvi] He seeks to prove this by an inductive study of the malt tax. The same result, he thinks, is clear from a scrutiny of the “duty on lights,” which was intended as a tax on the tenant, and yet turned out to be a tax on the owner.[xvii] “In this Instance,” says our author, “we see how readily and quickly the Tax centers in the Landlord; from whence one would suspect that this is the Case in most of the excisable Goods.”[xviii] “The many windings and turnings in Trade,” he concludes, ” may make it longer e’er the Tax reaches the Landholder, and may prevent our discovering how it takes its Course, yet there it must and does come at last.”[xix]
At the time of Walpole’s excise scheme, it was but natural that this view should again be emphasized. One of the disputants sought to crush his adversary by stating that “it hath been fully proved by unanswerable Authority that all Taxes, in this Kingdom, must ultimately affect Land.”[xx] But after Locke, the theory was most fully explained at about the same time, although independently of the excise controversy, by Vanderlint, with whose views on the subject of the workingman we have already become acquainted.[xxi]
Vanderlint contends that if all the existing taxes were suddenly to be abolished and to be replaced by a tax on real estate, the benefit would still inure to the landowner. His argument is as follows: prices of commodities, when freed from taxation, either will remain the same or will fall. If they remain the same,—assuming also that there has been no change in the money supply,—the cost of production will decrease, because of the abolition of the tax on the producers. The difference between cost and price, however, is rent. Hence, the only result will be to increase the rent of the landowner.[xxii] On the other hand, if the prices fall, demand will increase. But, since all commodities, in last resort, come from the land, this increased demand means higher rent.[xxiii] Thus, from either point of view, remission of taxes redounds to the welfare of the landlord. In other words, the incidence of all taxes is on the land. Vanderlint accordingly proposed a single tax on land, as at once far cheaper and far better than the existing complicated and inconvenient taxes, which after all, in his opinion, finally fall on land.
This view of the incidence of taxation occasionally appeared in subsequent decades. Thus, during the forties,[xxiv] one writer seeks to prove at some length that not only do “Taxes laid upon our Home consumption center chiefly in the Landowner,” but “the same must be true of the, any other way, advanced Price of the Necessaries of Life.” Another writer of the same date states: “It is now no longer a Question; all men are convinced, and see clearly, that all Taxes … do either immediately, mediately, or ultimately, fall upon the Land-Holder.”[xxv] The doctrine was, however, presented to the English public for the last time, although in an alleged translation from the French, as late as the decade immediately preceding Adam Smith, in the following statement: “Since the time of that great metaphysical legislator, Locke, it is an acknowledged and adopted principle of all who reflect with any perspicuity, that the weight of every tax upon consumption, ultimately falls and sets heavy on the proprietors of the soil.”[xxvi]
[i] Reasons for a Limited Exportation of Wool. 1677, p. 5. The author also states that the landowners “are Masters and Proprietaries of the foundation of all the wealth in this Nation, all profit arising out of the Ground, which is theirs.” Therefore it is much more to the interest of the nation to “preserve the Nobility, Gentry, and those to whom the Land of this Country belongs then a few Artificers imployed in working the Superfluity of our Wooll or the Merchants who gain by the exportation of our Manufacture.” This tract was written as a reply to England’s Interest by Trade asserted, shewing the Necessity and Excellency thereof, etc. By W. C. (William Carter), a Servant to his King and Country. London, 1671. It was in turn answered by Carter in A Reply to a Paper Intituled Reasons for a Limited Exportation of Wooll, or Objections against England’s Interest. London, 1689.
[ii] Some Considerations of the Consequences of the Lowering of Interest, and Raising the Value of Money. In a Letter to a Member of Parliament. [By John Locke.] London, 1692, p. 87. The date of this work is generally given as 1691. But although the epistle dedicatory bears the date of Nov. 7, 1691, the book itself has the imprint 1692. The passage quoted in the text may also be found reprinted in the Collected Works of John Locke, I2th edition, 1824, vol. iv, p. 55.
[iii] Some Considerations, pp. 88, 89.
[iv] Ibid., p. 91.
[v] Some Considerations, pp. 92, 93.
[vi] Ibid., p. 95, 96. This is the first instance in English literature of any allusion to the term “direct taxes.”
[vii] See above, p. 67. .
[viii] 4 An Essay upon Ways and Means of supplying the War. [By Charles Davenant.] London, 1695. In the Collected Works of Davenant, edited by Whitworth, London, 1771, vol. i, pp. 65, 66
[ix] “Though excises will affect land in no degree like taxes that charge it directly, yet excises will always lie so heavily upon the landed man, as to make them concerned in parliament, to continue such duties no longer than the necessity of the war continues.”—An Essay upon Ways and Means, p. 77.
[x] “All excises should be laid as remotely from land as possible; it is true they yield less when so put, because the first maker is best come at; but when the last manufacturer or vender is charged, they lie with most equality upon the whole body of the people, and come not upon land in so direct a manner.”—Discourses on the Publick Revenues and of the Trade of England. London, 1698. In Collected Works, i, p. 224.
In a later work, Davenant neglects this aspect of the excises, and emphasizes their injurious results to trade. “There is scarce any of these new Revenues, which do not give Trade some desperate Wound. The Additional Duties on Beer and Ale, and the Tax upon Malt are apparently a Burthen upon the Woollen Manufactures, affecting the Carder, Spinner, Weaver and the Dyer, who all of them must be rais’d in their Wages, when the Necessaries of Life are rais’d to them. The Consequences of which will be. That our Woollen Goods must come at a heavy and disadvantagious Price into the Foreign Markets.”—An Essay upon the Probable Means of making a People Gainers in the Ballance of Trade, By the author of the Essay upon Ways and Means. London, 1699, p. 145. (Also in Collected Works.) Cf. pp. 146, 147, where he discusses the bad influence of the salt tax on “Manufactures and Navigation.” Cf. also a passage much quoted at the time of Walpole’s Excise scheme: ” This may be generally said, That all Duties whatsoever, upon the Consumption of a large Produce, fall with the greatest Weight upon the Common Sort; so that such as think in new Duties that they chiefly tax the Rich, will find themselves quite mistaken; for either their Fund must yield little, or it must arise from the whole Body of the People, of which the richer Sort are but a small Proportion.” This passage is quoted on the title-page of The Nature of the Present Excise. London, 1733, mentioned below, p. 81.
[xi] An Essay upon Ways and Means. In Collected Works, i, p. 77.
[xii] 4 Several Assertions Proved in order to Create another Species of Money than Gold or Silver. By John Asgill. London, 1696, esp. p. 20. ” Man deals in nothing but Earth; the Merchants are the Factors of the world to exchange one parte of the earth for another. The King himself is fed by the labour of the ox and the Cloathing of the army and the Victualing of the navy, must all be paid for to the owner of the soil as the ultimate Receiver, and whatever the ultimate Receiver will demand or accept must be a rule for the intermediate Receivers to govern themselves by.” Asgill was first quoted by Lauderdale in An Inquiry into the Nature and Origin of Public Wealth. London, 1804, p. 113.
[xiii] Cantillon, Essai sur la Nature du Commerce en General, 1755. (Translation of the English work written before 1734 but not published.) See esp. chap, xii: “Tous les Ordres et tous les Hommes d’un Etat subsistent ou s’enrichissent aux dépens des Propriétaires des Terres.”
[xiv] A Letter to a Member of Parliament: shewing the Justice of a more equal and impartial Assessment on Land: the Sacredness of Publick Engagements: the Advantages of lowering the Customs and high Duties on Trade: And the Ease of reducing by Degrees the Debts of the Nation. London, 1 71 7, esp. pp. 7 and 28. If this pamphlet was not written by William Wood, he must be accused of plagiarism. For in a large work of the next year, which Wood wrote, we find whole pages on the subject of taxation, including extracts from Locke, copied word for word from the pamphlet, without mentioning it at all. Cf. A Survey of Trade in Four Parts . … together with Considerations on our Money and Bullion. [By William Wood.] London, 1 7 18, pp. 68-72, where pp. 5-8 of the pamphlet are copied bodily. Wood, however, does not go quite as far as to advocate the single tax on land. He simply objects to taking off any taxes on land.
[xv] “If Land Owners can and do prevent the Load of a Tax from falling directly and immediately on themselves, yet in the last Resort there it will fall, let them shift it seemingly as far off as they will in the first Imposition; and perhaps just so much farther off from them as it is laid in the first Instant, and according to common View and Estimation, just so much the more heavily it comes upon them at the last.”—An Essay on Leases and Annuities. London, n.d. \_circa 1730], p. 109.
[xvi] “There is no Doubt but the last Retaler of excisable Goods makes an Addition to the Price of them, equal to the Tax laid upon them; and yet I am afraid that the first Producer pays it likewise, so that in the Event ’tis twice paid.”—Some Thoughts on the Interest of Money in General, and particularly in the Publick Funds, With Reasons for Fixing the same at a lower Rate, in both Instances, with Regard especially to Landholders. London, n.d., p. 93. This work, as appears from internal evidence, was published between 1728 and 1739. The quotations are made from the second edition.
[xvii] “The Custom in some Places, I may say in some Countries, is to throw it on the Owners, and they discount it as regularly as they do the Land Tax.”—Ibid., p. 94.
[xviii] ” Since the Pretext of the Duty,” he adds, ” is so good a Handle to beat down the Price of them in the Hands of the first Producer.”—Ibid., p. 95.
[xix] Ibid., p. 95.
[xx] A Review of the Excise Scheme; in Answer to a Pamphlet, intitled The Rise and Fall of the late projected Excise, impartially considered. [By Pulteney?] London, 1733, p. 22.
[xxi] Money answers all Things, etc. By Jacob Vanderlint. London, 1734. For the full title, see above, p. 42.
[xxii] “Suppose the Cash, amongst the People in general, to be what it now is; and that all the Taxes were taken off Goods; it’s evident, this would not, in the End, lower the Price of Goods to the Consumers; since that Price … depends on the Quantity of Money circulating amongst the People: But if the Duties were taken off Goods, they must cost as much less than they do now, as the Taxes now on them … now enhance them; therefore, I think, if the Taxes were taken off Goods and laid on Lands and Houses only, so much more Money must in this Case come to the Hands of the Farmers for the Produce of the Ground, as would enable them to pay as much larger Rents.”—Ibid., pp. 112, 113.
[xxiii] “If the Taxes were taken off Goods, they would come Cheaper, and Cheapness would increase the Consumption, as Cheapness of everything always doth; and that Increase of the Consumption would increase the Demand for those Things. Now since everything is the Produce of the Ground, the Demand for the Produce would increase the Demand for Land, and that would necessarily raise the Rent, even till all the Money now paid for Taxes, together with all the Charge they are necessarily attended with, would come into the Landlords Pockets for Rent.”—Ibid., p. 114.
[xxiv] 3 The State of our Wool and Woollen Trade Review’d. Wherein some Objections to the Grasier’s Advocate are consider’d, etc. London, 1743, p. 47.
[xxv] The Axe (once more) laid to the Root of the Tree, etc. London, 1743, p. 6. For the full title, as well as for some other views of the author, see above, p. 53.
[xxvi] A General View of England; Respecting its Policy, Trade, Commerce, Taxes, Debts, Produce of Land, Colonies, Manners, etc., etc. Argumentatively stated from the Year 1600, to 1762; In a Letter to A. M. L. C. D. By M. V. D. M. Now translated from the French, first printed in 1762. London, 1766, p. 17. Cf. p. 200.