A Defense of the Single Tax Principle
Harry Gunnison Brown
[Reprinted from the American Academy of Political
and Social Science, Vol. 183, Government Finance in the Modern
Economy, January, 1936, pp. 63-69]
THE single tax has been so much scorned and misrepresented, and
fallacious arguments against it have appeared so persistently in
widely used text books, that it seems hopeless to think of making in
the pages allotted to this chapter a case which the reader schooled in
the current antagonism will consider convincing. Nevertheless, I hope
it may be possible to put into the minds of some even initially
unsympathetic readers a suspicion that there may be enough in the
single-tax theory and viewpoint to warrant further and respectful
I find that I am sometimes spoken of as a single-taxer by persons who
are opposed to the single tax, while some of the thoroughgoing
single-taxers profess themselves not wholly satisfied with my
orthodoxy. The truth is that I recognize the fundamental justice and
common sense of the single- tax idea. But that any other tax than a
tax on land values is always and everywhere wrong, regardless of
public needs or the nature of this other tax, I do not maintain. When
an enterprising lawyer finds as the nearest heir of an intestate
millionaire decedent a sixth cousin who was not even acquainted with
the millionaire whose wealth he is to inherit, I most certainly do not
contend that a heavy tax on the inheritance is objectionable just
because it would be a departure from complete reliance on a single
tax. But that the annual rental value of land should be, eventually,
almost entirely appropriated by the public in taxation and that it
should be the chief source, even though not necessarily the only
source, of public revenue, I am thoroughly convinced.
If this view is justified, then the so- called "model" tax
systems, based on other principles and using chiefly other taxes, are
not models at all except in the sense of being models of what to
PRODUCTION OF CAPITAL
At the basis of the single-tax theory lies a distinction between
capital and land and especially a distinction between the interest on
capital and the rent of land. Capital, as it is here to be understood,
can come into existence only by labor and saving. Both labor and
saving are essential. All persons need not save, but if capital is to
come into existence, it is necessary that some shall save.
Let us illustrate by consideration of the construction of a great
steel ocean- going vessel, such as the "Normandie" or the "Queen
Mary." The men who build the vessel and those who make the
materials of which it is constructed cannot eat or wear the ship or
its parts. Yet they must eat and they must have clothing. If they are
to spend their entire time building the ship, they must be "staked"
to these necessities, -unless they have some other and adequate source
of income. They are staked to these necessities through the savings of
others. If they were not, they would have to devote their own time,
largely if not wholly, to the production of food and clothing and
other things to meet their immediate needs. They could not, obviously,
devote themselves exclusively to the building of the ship. Those who
have saved, who have used less than their own production entitles them
to, and have made the resultant excess available to the builders of
the ship, have thereby made the building possible. The details of the
process, involving the use of money or bank checks and, commonly, of
stocks or bonds, we cannot here go into. But the underlying
relationship between saving and the construction of capital is
fundamental to the single-tax case.
Capital is productive. In other words, we can produce more with
capital than without it. It is definitely an aid in agriculture and in
industry. Therefore, if those through whose savings it comes into
existence receive income on their capital, such income is not at the
expense of others but represents a clear addition to society's annual
output of goods and services. Such income is truly earned. This is a
fact which socialists -- at any rate, the great majority of socialists
-- seem not at all to understand. But let not the run-of-the-mine
opponents of socialism pride themselves on having an appreciably
better understanding of our economic system than have the socialists.
If they had a thorough understanding of it they would know how,
logically, to confound the socialists, but they would at the same time
almost inevitably favor a change in our taxation system in the
direction of the public appropriation of the annual rental value of
land. For they would then clearly see wherein the rent of land differs
from the income of capital and why there is not the same justification
for its appropriation by the individual owner.
PRODUCTION OF LAND VALUE
While capital, as it has been here described, can come into existence
only as there are labor and saving, land owes its existence to
geological forces. In no significant degree can it be said that land
is produced by human labor. It is true that the situation advantages
of land are in large part the result of human activities; but they are
hardly at all produced by the individual or by private corporations as
such. The situation advantages of land, so far as they are not merely
the consequence of the operation of geological forces, are a
by-product of the growth of population, the laying out of streets and
highways, railroads and bridges, the way people group themselves about
various locations, and, in general, all the influences that may be
summed up in the expression, "community growth and development."
The situation advantages of an owner's land are, in short, scarcely at
all due to his own efforts or activities. They are, in general, almost
altogether due to the activities of others.
If these advantages are community- produced, why should not the
annual rental value of the advantages be the first source of public
revenue? And in so far as the advantages of special pieces of land,
including mines of copper, coal and iron ore, and subterranean
deposits of oil and gas, are the consequence of geological forces that
acted in remote geological eras, why should not these advantages be
generally enjoyed rather than be appropriated by a few to whom the
many must pay for permission to develop and use them?
In truth, we may with substantial accuracy phrase our question thus:
Why should the American people -- or any people-maintain a system
under which the majority must pay billions of dollars every year to a
relatively few, not for the use of capital produced and accumulated by
these few, but merely for permission to work and to live on the earth,
especially in locations having community-produced advantages, and for
permission to draw on Nature's subterranean supplies?
It distinctly is not a satisfactory answer to this question to
propose, in lieu of land-value taxation, income taxes, whether
proportional or progressive, which treat the earned income from
capital exactly the same as the community-produced and privately
unearned rental yield of land. Whether or not an income tax may be
desirable to supplement public appropriation of the rental value of
land is an entirely different question which, however, I cannot afford
space to discuss here. What I am asserting is that the taxation of
incomes is in no wise a substitute for the appropriation by the public
of the rental value of land and that it should not be used to decrease
it. This rental value should be the first source of public revenue
and, if inadequate, should nevertheless be made use of for whatever
funds it can yield before resort is had to other and economically less
EVILS THAT MIGHT BE AVOIDED
Because we do not take seriously what may be termed single-tax
principles, we suffer various economic evils that otherwise we might
avoid. One of these is the holding of land out of use for speculation.
Time was when some economists were prone to ridicule the contention of
single-taxers on this point, claiming, on the contrary, that very
little land was so held vacant and that, therefore, industry was not
forced to use poorer land or less land and that slum congestion was
not made appreciably worse by such holding. But in view of the recent
studies of Ernest M. Fisher, of Homer Hoyt, and of Herbert D.
Simpson, I venture the guess that not many economists who are
familiar with these studies will risk their scholarly reputations by
claiming that scarcely any land is held out of use. The number of lots
held vacant in some urban communities is very great indeed and the
holding of them from use must have undesirable economic consequences.
And, certainly, if land-value taxation were to take, for public use,
the major part (even though not all) of the annual value of land, the
holding of land out of use would so greatly and so obviously cost the
holder more than he could hope to gain from it, that the practice must
Even if it could be proved that land speculation never was practiced
and is not now practiced, there would remain plenty of reason for the
public appropriation of the community-produced rental value of land.
But the fact that such appropriation would abolish land speculation is
surely a consideration of some importance.
Another important consideration telling in favor of tax reform along
single-tax lines centers around the problem of ownership and tenancy.
Much stress is laid by various social idealists upon the desirability
of home ownership and of ownership of farms by their cultivators. Yet
a high price of land is a serious obstacle to such ownership and, in
many cases, an insuperable obstacle. The would-be home owner is unable
to earn enough to purchase the needed plot of land and either remains
formally a tenant or has to assume so heavy a mortgage to become an
owner in name that he can never get out of debt.
EFFECT ON HOME OWNERSHIP
The relation of land taxation to the problem can be seen as soon as
one understands the relation of the sale value of land to its annual
rent. The approximate probable sale value of a piece of land can be
arrived at by capitalizing its expected future rent at the current
rate of interest.
To illustrate, let us suppose a piece of land which is expected to
yield a net rent to its owner of $5,000 a year and that the current
net rate of return on capital is 5 per cent. Then the sale price of
the land would normally be about $100,000 or that sum of which $5,000
is 5 per cent. But what if a tax on land takes, for the public, nine
tenths of its annual rental value? Then the rent privately received
from the specific piece of land in question would be only (net) $500
and its sale value would be $10,000.
Land is not, like capital, produced by labor. The value of land,
therefore, is not fixed by cost of production but is to be arrived at
by capitalizing its expected future net rent at the current net rate
of interest. Capital, on the other hand, is produced by labor. In the
long run, barring monopoly, any specific kind of capital will sell for
no more than its cost of production (or reproduction), including in "cost,"
of course, the ordinary rate of return to the producer; nor will
capital normally be produced, year in and year out, to sell for less
than cost. In short, cost of production is a most essential
determinant of the value of produced capital.
To the person who, starting with nothing, is ambitious to save and to
buy a home or the land on which to build, it may make the most vital
difference whether or not the larger part of the rental value of land
is taken by the public. If land is thus taxed, land speculation is
discouraged, more land is available for use, labor is therefore more
productive and, presumably, wages are somewhat higher. So the worker
earns faster. If because of the high tax on land, capital is not
taxed, he can enjoy a higher interest rate on what he is able to save
and so can accumulate faster. The sale price of land is reduced, and
he can sooner afford to buy the land he needs. The more land is taxed,
then, and the less capital is taxed, the easier it is for the tenant
to escape tenancy and for the poor man to become a home owner. The
less land is taxed, the harder it is to make the transition.
Curiously enough, some professional economists, even, have never
succeeded in getting a clear understanding of this point. That they
have not is shown by an objection they sometimes make to it. The
objection is that the poor man anxious to buy a piece of land gains
nothing by the land-tax system because, although the purchase price of
land is, indeed, lower than if land were less taxed, yet this lower
purchase price is offset by the higher tax which must be paid on the
land after it is purchased. The fact is that even if the lower price
of the land were fully offset by the higher tax, the prospective buyer
would still gain heavily through the abolition (or the very great
reduction) of taxes on his buildings and other improvements and
movable capital and on such previously taxed commodities as he might
need to purchase. Home ownership would most distinctly be made easier
Indeed, it is clear that the sale price of land would tend to fall
even more than enough to offset the increased tax on the land. For
first, land speculation would be discouraged; and second, the untaxing
of improvements and other capital would mean capitalization of the net
rent of the land at a higher interest rate.
EFFECT ON INDUSTRY AND LABOR
The discouragement to land speculation would tend to make industry
and labor more productive and to raise wages. If the removal or the
very great reduction of taxes on capital operated to stimulate saving
and increase of capital, this also would promote production and tend
to raise wages. Economists whose limited understanding of arithmetic
precludes their comprehending these facts and principles should at
least avoid confusing the issue for the layman.
As I pointed out in my book on
The Economic Basis of Tax Reform: To tax land values rather
than improvements certainly does not guarantee fortunes to the
thriftless. It means heavier taxes on the non-improving owners of
land. It does nothing to encourage -- discourages rather -- the
holding of land by persons too thriftless to use it well. It does
remove a penalty now generally placed on thrift and land improvement.
Unlike part of our present taxation system, it is not communistic. It
does not try to reduce the efficient to the level of the inefficient.
It does not try to reduce the thrifty to the level of the unthrifty.
Finally, despite its non-communistic character, the taxation of land
values rather than improvements, incomes, commodities, etc., gives a
better chance to the ambitious poor to get started economically and to
acquire a competence.
And elsewhere in the same book I commented:
The fact is that any study of taxation policy ought to envisage all
of the important effects likely to result from a given kind of tax or
tax system, not merely whether the tax is in proportion to "ability"
or would involve "equal sacrifice" or (more communistically)
"least sacrifice." Among these other effects are the
possible stimulus to, or encouragement of, efficiency and thrift,
effects on land speculation and, therefore, on industrial
productivity, and effects, which may have tremendous economic and
social significance, on the sale value of land. To center attention
exclusively on the matter of "ability" or the immediate
personal sacrifice to the taxpayer, is consistent neither with a
properly scientific method of inquiry nor with common sense.
If any appreciable number of the states of the United States were to
adopt a single-tax policy, savings would flow to those states for
investment, industry would seek to locate in them because of the
relief of capital from taxes and because of the cheapness of land, and
labor would be attracted there because of higher wages and because of
the comparative ease in those states of attaining home ownership.
Does it not seem regrettable that so many who think of themselves as "liberals"
and so many of the literary intelligentsia who from the pages of "high-brow"
magazines essay to instruct their public on matters of economic
policy, show not the slightest sympathy for single-tax principles and
prefer to follow a philosophy essentially socialistic and even
THE DOCTRINE OF "VESTED RIGHTS"
But when the last word has been said on the advantages of relying for
public revenue, so far as possible, on the rental value of land and
when, as may sometimes happen, all other opposing arguments are
admitted to be untenable, there is brought forth as the one
all-sufficient objection the doctrine of "vested rights."
The private enjoyment of the rent of land has been permitted for so
long a time, it is said, and so many persons have bought land relying
on a continuance of the existing system that any change in the
direction of single tax must be regarded as morally wrong.
Whatever may be said for the proposition that any great change of
policy in such a matter should come by degrees -- which means, of
course, that its benefits, also, could come only by degrees-the
proposition that the change must not come at all, even gradually, is
so extreme as to seem silly. Indeed, it appears probable that few of
those who take this position would accept its implication in other
matters. They would not contend, I think, that because various
investors have made their investments counting on a continuance of a
certain tariff policy, therefore these investors have acquired a
vested right prohibitive of any change in this policy even though the
policy is intrinsically bad. They do not commonly contend that because
a person has purchased an automobile expecting a continuance of a
customary rate of gasoline and license taxes, therefore he has
acquired a vested right with which any increase of such taxes during
the life of his car would be inconsistent. It is doubtful whether a
majority of such objectors would contend that if the public has
allowed monopoly to flourish and monopoly prices to go unregulated
during a term of years, therefore the owners of the securities of a
monopoly have acquired a vested right never to have the public
undertake regulation lest the sale value of the securities of the
What justification is there, then, for the contention that because
the rate of taxation on sites and natural resources has been
relatively low in most communities in the past and usually no higher
than the tax rate on improvements, therefore landowners have acquired
a vested right precluding such a change in the tax system as would
eventually realize, as regards land rent, the single-tax ideal? Has
the purchaser of land bought it with an implied pledge on the part of
society never to change the tax system even by gradual steps in the
direction of the single tax? What stickler for vested rights will say
frankly and without equivocation that such is his opinion and be
willing to base his reputation for logic, reasonableness, and good
sense on such a pronouncement? The truth seems to be, substantially,
[I pointed out in my book above referred to] that no system as a
result of which some profit at the expense of others can be abolished
without infringement of "vested rights" unless the victims
of the system which is to be abolished themselves pay for their own
relief. Many people say with regard to slavery that the ideal way to
have freed the slaves would have been to pay the slave owners their
full value. But who should have paid this money to the owners? If the
property of non-slave-owners had been partially confiscated by
taxation -- or the future income of this property heavily taxed-to
provide the requisite means, would not the "vested rights"
of non-slave- owning property owners have been disregarded? Should the
slaves then have been paid for by the proceeds of a bond issue which
they themselves would have had to redeem, principal and interest? In
other words was it not necessary, if "vested rights" were to
be fully respected, that the victims of the system of slavery should
buy themselves free? May we not, then, as already suggested, lay it
down as a general truth that if and when persons owning property the
value of which depends upon exploiting power have made their plans and
purchases on the supposition of the indefinite continuance of such
power, practically nothing can be done to relieve the victims of the
exploiting system, except as these victims pay for their own relief,
unless we are willing to permit some abatement of vested claims? 
FOOTNOTES AND REFERENCES
- "Speculation in Suburban
Lands," American Economic Review, Vol. XXIII, No. 1
(Supple- ment), March 1933, pp. 152-162.
- One Hundred Years of Land
Values in Chicago, Chicago: University of Chicago Press, 1933,
various relevant passages.
- "Real Estate Speculation
and the Depression," American Economic Review, Vol. XXIII,
No. 1 (Supplement), March 1933, pp. 163-171.
- If because of a heavy tax on
land values, capital is not taxed at all and if, therefore, the
net return on capital is (say) 7 per cent instead of 5 per cent,
then the sale value of the piece of land of our illustration is
even less. Assuming, as before, that the expected annual net rent
to the owner is $500, then the sale value will be the sum of which
$500 is 7 per cent, or $7,142.86.
But the sale value of our lot, in the case of the assumed
land-value tax, will be even lower. For the land-value tax will
prevent speculative holding of land out of use, will increase the
competition to get land used, and so will reduce rent. In other
words, a piece of land which, with land values not especially
taxed, has an annual rental value of $5,000, may, with the assumed
high tax and the resultant discouragement to land speculation,
have a rent of (say) only $4,200 a year. With the tax taking nine
tenths of this amount and with a remaining net rent to the owner
from the lot of only $420, the normal sale price of the piece of
land we are considering will be that sum of which $420 is 7 per
cent, viz., $6,000.
Without dwelling further on mathematical details, it should be
obvious that the less land is taxed the higher is its sale price,
and that the more it is taxed the lower is its price.
- Harry Gunnison Brown, The
Economic Basis of Tax Reform (Columbia, Mo.: Lucas Brothers,
1932), pp. 317-318.
- Ibid., p. 215.
- For a critical discussion of
some of the current objections to public appropriation of the
rental value of land, see my book, The Economic Basis of Tax
Reform, op. cit., especially Ch. IV on "A Taxation
'Complex' of Some Contemporary Economists."
- Harry Gunnison Brown, op cit.,
pp. 247- 248.