A Capital Incentive Reform
Beneficial to Labor
Harry Gunnison Brown
[Reprinted from the American Journal of Economics
and Sociology, Vol.24, No.1, January, 1965, pp. 69-70]
DEFENDERS OF CAPITALISM-free private enterprise-should logically
support land value taxation. If they truly believe in capitalist
incentive, they cannot consistently oppose this reform in our property
tax. For, in any city or state, to abolish or greatly reduce, taxes on
capital, definitely increases the reward-the incentive-for increasing
capital (buildings, machinery, trucks, etc.) in that city or state.
To tax land values at a higher rate than now, so as to secure the
same total revenue as before, certainly decreases the "incentive"
to handicap commerce and industry by holding good and needed land
speculatively out of use. Such strangulation of the economy (nearly 13
million vacant lots in American cities), cannot possibly strengthen
capitalism in its rivalry with communism. Instead, it must inevitably
weaken capitalism. Hence, our business and political leaders who are
opposed to-or merely uninformed about-land value taxation, though they
may vociferously profess opposition to communism, are, in practical
effect, allies of the communists. But how about labor-how about the
citizen who has no income from property but must support himself and
his family by what he earns at his job?
Such a citizen is likely to feel that the ideal tax for him is a tax
which bears heavily upon the very rich whose incomes are many times
larger than his. And he is likely to feel that it should bear very
lightly-preferably, perhaps, not at all-on him. Scarcely ever does he
have the slightest idea that it would be any advantage to him if land
values were taxed much more and man-made capital much less or not at
all. The truth is that a land value tax, within the limits of what it
can yield, would be more advantageous to him than a sharply graduated
income tax bearing heavily on the rich and from which he was himself
completely exempt. This may seem startling, for the tax authorities
generally cited never mention it. Yet it is none the less true. And
despite the fact that the recognized authorities seem to be unaware of
it, it is as important as it is true.
To reform our property tax by abolishing-or at any rate greatly
reducing-the tax on buildings and other man-made capital, and
increasing the tax on land values so as to get the necessary revenue,
would greatly benefit such a worker. But how?
- By breaking the log jam holding land speculatively out of use,
land value taxation would make building sites cheaper. This alone
would inevitably lower the cost of rental housing and would lower,
also, the cost of buying or building a home. And it is not
necessarily only the lower price of land that makes rental housing
cost less. For with the tax on buildings abolished-or greatly
reduced-those who buy or build rental housing may for this reason,
too, more easily afford to charge lower rentals.
- Slum owners will no longer be punished by higher taxes if they
make their slums less slumlike; and they will no longer be
rewarded by lower taxes if they allow their slums to become still
less habitable. Consequently, fewer of our low income families
will be forced to live under the almost intolerable conditions
that many of them must now suffer.
- Obviously, industrialists are more likely to build, expand and
modernize when they are not penalized by higher taxes for doing
so. Thus labor is better equipped and can produce more and,
therefore, can earn more.
A sharply progressive income tax, with substantial exemptions, may
indeed take little or nothing from a worker's pay check. But it
cannot, in addition, lower the cost of rental housing, lower the cost
of acquiring a home, minimize slums or increase the worker's
productivity, -- hence, his wages. A land value tax can accomplish all
four of these. Here is a reform consistent with the principles of
incentive to which capitalists give at least lip service, and
demonstrably more advantageous to labor than any other tax policy can
possibly be. Should not both capital and labor support it
enthusiastically?
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