PART TWO
Land Value Taxation
as a Tax Reform




CHAPTER I

DIRECT AND INDIRECT TAXATION
[Notes]

Taxes are either direct or indirect; or, as they have been aptly described, "straight" or "crooked."

Indirect taxes are those that may be shifted by the first payer from himself to others; direct taxes are those that cannot be shifted.[12]

The shifting of indirect taxes is accomplished by means of their tendency to increase the prices of commodities upon which they fall. Their magnitude and incidence[13] are thereby disguised. It was for this reason that a French economist of the eighteenth century denounced them as "a scheme for so plucking geese as to get the most feathers with the least squawking."[14]

Indirect taxation costs the real tax-payers much more than the government receives, partly because the middlemen through whose hands taxed commodities pass are able to exact compound profits upon their taxes,[15] and partly on account of the extraordinary expenses of original collection;[16] it favors corruption in government by concealing from the people the fact that they contribute to the support of government; and it tends, by obstructing production, to crush legitimate industry and to establish monopolies.[17] The questions it raises are of vastly more concern than the sum total of public expenditures.

Whoever calmly reflects and candidly decides upon the merits of indirect taxation must reject it in all its forms.

But to do that is to make a great stride toward the taxation of land values exclusively. For this is a form of direct taxation. Land value taxes cannot be shifted.[18]


CHAPTER II

THE TWO KINDS OF DIRECT TAXATION
[Notes]

Direct taxes fall into two general classes: (a) taxes that are levied upon taxpayers in proportion to their ability to pay, and (b) taxes that are levied upon them in proportion to the benefits received by them from the public.

Income taxes are the principal ones of the first class; the land value tax is the only important one of the second class.

There should be no difficulty in choosing between the two. To tax in proportion to ability to pay regardless of benefits received, is not in accord with any principle of just government. The land value tax, therefore, as the only important tax in proportion to benefits, comes nearest to being an ideal tax.

But here we encounter two plausible objections.

One arises from the common but mistaken notion that men are not taxed in proportion to benefits unless they pay taxes upon every kind of property they own that comes under the protection of government; the other is founded in the assumption that it is impossible to measure the value of the public benefits that each individual enjoys.

Though the first of those objections ostensibly accepts the doctrine of taxation according to benefits,[19] yet, as it leads to attempts at taxation in proportion to wealth, it, like the other, is really a plea for taxation according to ability to pay. The two objections stand or fall together.

Neither objection would any longer have weight were the fact once generally perceived that the value of the service which the public gives to each individual is fairly measured by land value taxation. We should then no more think of taxing citizens in proportion to their ability to pay regardless of the benefits they receive from the public, than an honest merchant would think of charging his customers in proportion to their ability to pay regardless of the value of the goods they buy of him.


CHAPTER III

LAND VALUE TAXES ARE IN PROPORTION TO BENEFITS
[Notes]

To perceive that land value taxation would justly measure the value of public benefits which every individual respectively enjoys, we have only to consider that the mass of individuals everywhere and now, in paying for the land they use, actually pay for public benefits in proportion to what they receive.

He who would enjoy those benefits must use land where the benefits can be enjoyed. He cannot, for instance, carry land from where government is poor to where it is good; neither can he carry it from where the benefits of good government are few or enjoyed with difficulty to where they are many and fully enjoyed. He must rent or buy land where the benefits of government are available, or forego them. And unless he buys or rents where they are greatest or most available, he must forego them in degree. Consequently, if he would work or live where the benefits of government are available, and does not already own land there, he will be compelled to rent or buy at a valuation which, other things being equal, will depend upon the value of the government service that the site he selects enables him to enjoy.[20] Thus does he pay for the service of government in proportion to its value to him. But he does not pay the public, which provides the service; he is required to pay land-owners.

The economic principle pursuant to which landowners are thus able to charge their fellow-citizens for the common benefits of their common government, points to the true method of taxation. With the exception of such other monopoly property as is analogous to land titles, and which in the purview of the Single Tax is included with land for purposes of taxation,[21] land is the only kind of property that is increased in value by government; and the increase tends to be in proportion to the public service which its possession secures to the occupant.

Therefore, by taxing land in proportion to its value, and exempting all other property, kindred monopolies excepted—that is to say, by adopting exclusive land value taxation—we should be levying taxes according to benefits.[22]

Nor would this be in any sense class taxation, Indeed, the cry of class taxation is rather impudent for owners of valuable land to raise against land value taxes, when it is considered that under existing systems of taxation such land-owners are exempt.[23]

Even the poorest and most degraded classes in the community, besides paying land-owners for such public benefits as come their way, are compelled by indirect taxation to contribute to the support of government.

But land-owners as a class go free. They enjoy the protection of the courts, and of the police and fire departments, and they have the use of schools and the benefit of highways and other public improvements, all in common with the most favored, and upon the same specific terms; yet, though they go through the form of paying taxes, and if their holdings are of considerable value pose as "the taxpayers" on all important occasions, they, in effect, and considered as a class, pay no taxes. Enjoying the same intangible benefits of government that others do, many of them as individuals and all of them as a class receive in addition a pecuniary benefit which government confers upon no other class of property-owners. The value of their property is enhanced in proportion to the benefits of good government and other characteristics of social improvement which its occupants enjoy. To tax them alone, therefore, is not to discriminate against them; it is to charge them for what they get from the public.[24]


CHAPTER IV

CONFORMITY TO GENERAL PRINCIPLES OF TAXATION
[Notes]

Land value taxation conforms most closely to the essential principles of Adam Smith's four classical maxims, which are stated by Henry George[25] as follows:

"The best tax by which public revenues can be raised is evidently that which will closest conform to the following conditions:

  1. That it bear as lightly as possible upon production—so as least to check the increase of the general fund from which taxes must be paid and the community maintained.[26]
  2. That it be easily and cheaply collected, and fall as directly as may be upon the ultimate payers—so as to take from the people as little as possible in addition to what it yields to the government.[27]
  3. That it be certain—so as to give the least opportunity for tyranny or corruption on the part of officials, and the least temptation to lawbreaking and evasion on the part of the taxpayers.[28]
  4. That it bear equally—so as to give no citizen an advantage or put any at a disadvantage as compared with others."[29]


SECTION 1Interference with Production

Indirect taxes tend to check production and to cause scarcity by obstructing the processes of production. They fall upon men as they work, as they do business, as they invest capital productively.[30] But land value taxes which must be paid and be the same in amount regardless of whether the taxpayer works or plays, or whether he invests his capital productively or wastes it, or whether he uses his land for the most productive purposes[31] or in lesser degree or not at all, lay no penalties upon industry and thrift. Therefore they conform to the first maxim quoted above.

SECTION 2Cheapness of Collection

Indirect taxes are passed along from first payers to final consumers through many exchanges, accumulating compound profits as they go, until they take enormous sums from the people in addition to what the government receives.[32] But land value taxes take nothing from the people in excess of the tax. Therefore they conform to the second maxim quoted above.

SECTION 3Certainty

No other tax, direct or indirect, conforms so closely to the third maxim. "Land lies out of doors." It cannot be hidden; it cannot be "accidentally" overlooked. Nor can its value be greatly misapprehended or misstated. Neither under-appraisement nor over-appraisement is possible to any important extent without the connivance of the whole community.[33] The land values of a neighborhood are matters of common knowledge. Any intelligent resident can justly appraise them, and every other intelligent resident can fairly test the appraisement. Therefore the tyranny, corruption, fraud, favoritism, and evasions which are so common in connection with the taxation of imports, manufactures, incomes, personal property, and buildings—the values of which, even when the object itself can not be hidden, are so distinctly matters of minute special knowledge that only experts can fairly appraise them—would be out of the question if land value taxation were substituted for existing fiscal methods.[34]

SECTION 4Equality

In conforming to the fourth maxim, the land value tax bears more equally—that is to say, more justly—than any other tax. It is the only tax that falls upon the taxpayer in proportion to the pecuniary benefits he receives from the public,[35] and its tendency, accelerating with increase of the tax, is to leave to every one the full fruit of his own productive enterprise and effort.[36]