Honest Farm Relief and Fair Taxation
Harry Gunnison Brown
[An address delivered at the Henry George Congress;
Monday, 10 September, 1928. Reprinted from Land and Freedom,
September-October and November-December, 1928]
The economic system under which we live, as contrasted with a caste
system and with various proposed systems of communism and socialism,
is a system of freedom of choice for each person as to lines of
industrial activity. The needs of the community are supplied because
the demand for the goods wanted keeps up their price and makes it
profitable for some to choose each necessary industry. If any one
industry is, for a while, much more profitable than others, more
people go into it and their competition cuts down wages and profits.
If any industry is, for a time, much less profitable than others,
because it is supplying more goods than the public is willing to pay
for at a profitable price, some of those who are in it become
dissatisfied and withdraw, competition becomes less intense, and an
approximate equality with other industries is restored. Meanwhile,
whether in the temporarily, more or less temporarily, profitable
industries, the efficient, hardworking and thrifty gain most and the
inefficient, lazy and thriftless gain least.
This is what our economic system is supposed to be, by its
conservative defenders. This, in part, is what it is. But the
qualifications are numerous and important. The system is full of
imperfections that make it rob some persons to profit others. And
while a few of these imperfections may be the result of historical
accident, involving no purposeful chicanery, others are the
consequence, in some degree, of deliberately selfish political
machinations. That is to say, one group or another uses its votes or
political influence to work the economic structure to its own supposed
advantage. Most of us, the farmers included, suffer from these
imperfections and warpings, with the consequent unfair advantage or
special privilege of the favored groups.
All such special privilege, whether accidental or otherwise, should
be abated as inconsistent with our professed ideals of equality of
opportunity, as contrary to the ideals of democracy, as alien elements
in an economic system which exists to reward service. Legislative
relief of any class, and perhaps of farmers most of all, should be
directed to the abolition of all those forms of privilege which
abstract from them their hard-earned wealth, to the correction of all
those imperfections in our economic system which enable some to profit
at the expense of others.
But what, in fact, do we find? Those who are most vocal in the
movement for alleged farm relief are, almost without exception,
advocates not of the abolition of privilege but of its further
extension. Not only is it a fact that the farmers of the great
grain-growing states, who are now said to suffer from but in no way to
be benefited by the high tariff, have, in effect, voted for that and
similar tariffs during many decades. It is also a fact that the scheme
which appears now to be the only one having large support among them
is one which has all the viciousness of the worst kind of protective
tariff, if not some special viciousness of its own besides. The only
excuse for it and this excuse comes with poor grace from those farm
leaders who have always supported the high tariff on the plea that it
helps the farmers is that if the manufacturing population is to steal
from the farmers then the latter are going to attempt some stealing on
their own account. If the stealing were merely from those who in turn
steal from them, the proposal might not be so bad. But there are other
millions who are already robbed by the existing tariff system, which
artificially raises the cost of much which they must buy and to whom
an artificially induced scarcity of wheat, corn, cotton, etc., would
be a still further injury.
For what is it that the advocates of so-called farm relief propose?
It is to collect money to dispose of what they are pleased to call a
surplus as if the very existence of trade with foreign countries did
not necessarily involve our having more of some goods than we
ourselves want in such a way as to create an artificial domestic
scarcity and raise the price above a competitive level. To make the
domestic price higher than it otherwise would be, through sending more
of the supply abroad than would normally go abroad and this it is
proposed to do will operate to reduce the foreign price. This means a
loss on foreign sales, the loss to be covered by a so-called
equalization fee or tax. In order that the producer should be
benefited, the domestic price must be raised, by the scarcity
artificially produced, not only enough to give him the coveted larger
return on what he sells at home but also by a greater amount so as to
offset the loss on what is sold abroad. And in order to benefit those
farmers whose land is so poor or so unfortunately located that they
really and greatly need relief, it compels consumers to pay a larger
return equally to those farmers who are prosperous under existing
conditions and to those owners of valuable agricultural land who would
take the higher prices artificially brought about as a signal for
charging higher rents to their tenants who do the actual work.
A few years ago it was common to hear complaints regarding some
American companies, to the effect that they kept up the price of their
output to home consumers, behind the tariff wall, while selling the
same goods abroad for less. The idea was to avoid "spoiling the
home market" from which the tariff shut out foreign competitors,
while still producing and selling elsewhere a surplus. I wonder how
many congressmen who recently voted for a so-called farm relief
measure intended to enable the farmers to do what the wicked
corporations are denounced for doing, used to be among the denouncers?
Let us face the facts frankly. The legislator or executive who uses
his vote or his administrative power to advance measures favorable to
his own financial ventures, the corporation which employs lobbyists
and makes campaign contributions that its financial gain may be
maximized at the expense of the general public, and any group of
people in a specific industry who force their representatives, often
posing as "progressives," to vote for measures artificially
enhancing the price of their product at the general expense, are all
in the same business, are all wearing cloth cut to the same pattern,
are all participants in the discreditable game of seeking something
for nothing, are all helping to betray the interests of the public.
However much we who have come together at this Henry George
Conference may commiserate the condition of and sympathize with those
farmers for whom a living is now so hard to obtain, I am confident
that no arrangement for extending the domain of special privilege, for
trying to create new kinds of special privilege to balance old ones,
for thus making our economic system a crazy quilt of special
privileges will meet with the approval of any of us. We are convinced,
rather, that in abolishing special privilege, never in extending it,
lies the true salvation of the masses, including therein those who
make their living by their labor as farmers.
What are some of the imperfections and special privileges in our
economic system from which the farmers suffer? Obviously tariffs which
raise the prices of the things they have to buy constitute one kind of
injury. Another injury is suffered from the fluctuating value of our
money. It is certainly an injury to a man who has borrowed (say)
$20,000 to buy a farm, when he finds that he must pay back his debt,
principal and interest, in dollars that will buy half again as much as
the dollar he borrowed and that are half again as hard to earn.
But, to my mind, the greatest handicap that has to be met, alike for
farming, for home owning and for industry in general, lies in our
system of taxation. This system of taxation fails to distinguish
between interest on capital and rent on land; it fails to note the
difference between values produced by individual energy and thrift and
those community-made values for which the individual is not
responsible and which he can not properly be said to earn. Such
taxation penalizes efficiency and thrift much as communism would; it
lays an especially grievous burden on the owners of the more isolated
farms far from the parallel streaks of steel and the concrete ribbons
that make farming even now profitable to those whose location is most
favorable; and it makes land so expensive that to get title to any but
the poorest land a man must either first save a large sum of money or
else he must burden himself with a mortgage which he cannot pay off
for years, if ever. These are the conditions that demand relief, not
the somewhat diminished returns to the well-to-do owners of the best
located farms. Can it be the case that the noisiest advocates of
so-called farm relief have actually no understanding of and no
slightest interest in the evils that are really the fundamental ones?
A tax on community-produced land values, which is what we of this
congress are urging, would not penalize thrift and industry; it would
relieve especially those isolated farmers whose incomes are small
because their locations are poor; and it would make easier the
acquisition of land and so tend to lessen the evil of land tenancy and
of prolonged mortgage debt.
I have said that our present tax system fails to distinguish between
the individually-earned interest on capital and the community-produced
rent of land. Let me emphasize this distinction for a few moments,
because it is fundamental to all the practical conclusions which are
to follow.
There is a widespread notion that the interest on capital is not
earned as truly as are the wages of labor. The socialists regard all
income from property as unearned and consider only the income from
work as legitimate. The socialist is not necessarily a communist. He
may not desire to have all incomes equal. He may not wish that the
enjoyments of the efficient worker shall be decreased in order that
the inefficient worker shall have more. His complaint is not that
incomes from work are unequal although he doubtless sometimes regards
them as more unequal than they should be but that many individuals
receive income from property. The socialist would have the public own
and operate industrial plants in order that individuals should not get
income from in- vestments but only from their labor. Yet the notion
that interest on capital, as such, is unearned has not the least basis
in logic. It is an utterly wrong notion. Capital can be brought into
existence only by saving. To have capital we must produce more than we
consume, i.e., save. By not consuming all of your income but instead
investing part of it you really turn the use of the invested part over
to laborers, et al., whose time is thus set free for the construction
of capital the tools and equipment of industry. If nobody saved, all
the time of all laborers would have to be spent producing goods for
immediate consumption; no time could be spared for producing
equipment.
And capital is useful. Though to save it involves temporary
sacrifice, yet much more wealth can be produced with capital than
without it. So the person who works and, saving part of his proceeds,
thereby makes possible the construction of capital, adds thereafter
more to the annual output of industry than the person who works but
does not save. To give him a larger income in the form of interest on
capital is not to rob anyone else. It is merely to give him wealth
which, except for him, would never have been brought into existence.
But the case is not at all the same with regard to land. Land is not
humanly produced. The situation-advantages of land are not brought
into existence by the individual owner. The rental yield which the
owner derives from land or sites is not therefore, in general, the
product of any owner's work and is not the product of any owner's
saving. Land is valuable because of natural advantages of location and
because of community growth and development. The latter influence is
recognized wherever the phrase "unearned increment" is
current. We all know that the annual rent which an owner could charge
for a piece of bare land in Chicago's loop district, to a prospective
builder desiring a long lease, is not a consequence of the owner's
saving the land or making the land, but is the consequence of the
growth of Chicago and surrounding territory. An eighth of an acre at
the corner of State and Madison streets in Chicago has been expertly
appraised as worth, bare-land value, about two and a half million
dollars or at the rate of twenty million per acre. Wherein is such an
eighth of an acre better than an eighth of an acre of farm land worth
twelve or fifteen or twenty dollars? Is the additional value of the
land in Chicago due to the owner's activities? Everyone who is honest
with himself knows it is not. It is the result of the growth and
development of the geographically tributary country, and of Chicago as
a port and a market center.
The same is true of the several billions of dollars of land value in
New York City. New York is situated on a great natural harbor. If
there were none to use it except a few pioneer farmers on Manhattan
Island trading some ot their surplus produce for the textiles and
other goods of Europe, landing space for a very few boats or perhaps
for a single one would be all that would be needed. But as the rich
interior of the North American continent was settled, with its mines
of iron ore, copper and coal, its prairie and river-bottom wheat and
corn-lands, and its other resources, more and more goods were produced
to be poured through the port ot New York into foreign countries and
increasing quantities of goods were wanted in exchange which could
most advantageously pass through the same port. Today there is needed
in New York City a large population to meet the requirements of this
great hinterland (as the Germans would say) or tributary country.
If all the present working population of New York were whisked away
overnight, the land of New York would still have great value because
of the need for millions of men and women on it to serve the commerce
of the back country. A new population would move in and take up the
important work for the rest of us which can be done nowhere else so
well; and those who own that part of the earth's surface would be in a
position to make this new population pay handsomely for the privilege
of working for us and of living where we need to have them live in
order that this work may be effectively done.
The demand of the tributary country for this service makes a demand
for the use of the land by the people who must live and work there to
render the service. Incidentally, too, it makes a tremendous demand
and correspondingly high rents and values for the use of especially
well-situated lots for the location of department stores, lunch rooms,
banks, lawyer's offices, etc., necessary to supply near-at-hand the
requirements of those who live there to serve the non-sea-coast
sections.
Surely, the rent of land is in a very peculiar sense socially
produced rather than individually earned, and ought to be sharply
distinguished in thought from interest on capital produced by
individuals.
The distinction between interest on capital an earned income and rent
on land an unearned income is slurred over by socialists. They, as a
rule, class both together. They would abolish both as private incomes.
But our most conservative citizens, though many of them would be
shocked and perhaps angered to be classed with the socialists, seem to
share in some degree the socialists notion. They, also, see no
distinction between interest on capital brought into existence by work
and thrift, and rent from sites made valuable by community
development. They also see no essential difference between land and
capital. Although they would not abolish private income from either,
they insist on taxing the income from both and at equal rates. Both
socialists and conservatives are, in regard to their inability to
distinguish between land and capital, like the farmer's new hired man
who, sent to drive in the sheep, spent several hours at the task.
Pointing to a little animal in the pen with the sheep, the farmer
asked: "What's that Jack-rabbit doing in here?" "Oh, is
that a Jack-rabbit?" said the new man. "Why, that's the
little fellow that gave me all the trouble."
If we were not blinded by a prejudice which will not let us see fact,
we could not help appreciating the logic of 'taxing land values more
and other values less. Why should we penalize saving? Why should we
levy a higher tax on one who improves his land than on one who holds
his land idle? Why should we levy as high a tax on income from labor
and capital as on income produced by the presence of the community?
We now come to the fact that our existing tax system penalizes
industry and thrift, like the communism which our conservatives
pretend to be opposed to but the principle of which, where they are
accustomed to it and it benefits their own class, they are quite
willing to approve.
The essence of communism lies in the equal sharing in the products of
industry without much regard to contribution or efficiency. The larger
output of goods produced by the comparatively efficient is, in part,
taken from them for the support of the inefficient.
When conservatively-minded persons criticize communistic schemes on
any other basis than their own immediate selfish pecuniary interests,
their criticism is to the effect that such schemes fail to reward
efficiency and thrift, divorce superior service from superior
remuneration, and are likely, therefore, not to work well. Yet these
same conservatively-minded persons will defend the existing system of
taxation which certainly has large elements of communism against a
system which would penalize much less or not at all any future labor
or thrift of any person. Our Federal income tax is certainly, in some
degree, communistic. Not only does it take more from those whose hard
work and thrift give them larger incomes than the inefficient,
wasteful and lazy, but it taxes the former at a much higher rate. Even
our state and local property taxes put a greater burden though not a
greater proportionate burden on those whose efficient work and whose
habits of thrift enable them to accumulate capital. If a man saves and
improves his property, he must pay more taxes. If he is lazy and
thriftless his taxes remain low. If, constructing a great factory, he
increases the efficiency of hundreds or thousands of workmen and so
adds to the sum of commodities which all may enjoy, he is punished by
increased taxes. But if, instead, he keeps a piece of land vacant and
unused until the activities of those around him and the growth and
development of the community have given it high value; if he then
makes money out of what these others have done, requiring the person
who would use the land to pay him a high price for advantages of
situation for which not his activities but the activities of others
are responsible, we keep his taxes relatively low.
On the other hand, a tax on bare-land values which are produced by
the growth and activities of the community is clearly not communistic
as communism has been above defined. Such a tax would take from the
individual only that part of his income for which the community is
peculiarly responsible. If his income is larger because the growth of
the community about him enables him to secure a high rent from a
favorably situated piece of land, his tax would be higher. But if his
income is larger because he works more efficiently than others or
because by his thrift he is enabled to build stores, factories or
houses or to cover bare acres with fruit trees, his bare land-value
tax would be no greater. The rewards of his superior efficiency and of
his superior thrift would not be taken from him. His efficiency and
his thrift would not be penalized in order that the inefficient, lazy
and unthrifty should share, without deserving, in what he has
produced.
The intelligent application of this principle to American agriculture
would involve the removal of all taxes, not only from farm machinery
and buildings but also from the fertility value of the soil in so far
as it is built up or maintained by the farmer's work and thrift. For
in this connection we must remember that fertility elements put into
the soil and, equally, fertility elements maintained through constant
renewal by a farmer, are, in the economic sense, capital rather than
land. In the city we construct capital on land. In the country we
often put it, largely, into the land. Let us reckon as bare-land
value, therefore, in the case of agriculture, only that value which
the land would have if in large degree exhausted, and consider any
greater value which it may have as a result of the care and attention
applied to putting it into or keeping it in fertile condition, as
compared with its "run down" value, to be capital as truly
as the buildings, machinery and planted trees upon it. If we really
wish not to penalize efficiency, not to penalize thrift, and not to
tax as unearned income values which are produced by individuals rather
than by nature and society, then we shall wish to arrange that the
farmer who builds up or, even who merely maintains, the fertility of
his land, shall not have to pay any higher tax than if he kept it in
run-down condition and with no buildings, orchards or other
improvements on it.
To tax community-made land values rather than labor and thrift would,
in general, give relief to those farmers who most need it. It is not
the wealthy owners of prairie land well situated on a concrete highway
not far from a railroad station, whether they direct their own
operations or live off of the rents paid by tenants, who most need
relief. The farmers who most need help (leaving out of consideration,
for the present, tenant farmers and farmers so heavily mortgaged as to
be almost in the tenant class) are those whose farms yield almost no
economic rent and who would, therefore, pay no or almost no tax if
only the community-produced economic rent of land were taxed to meet
public needs, i.e., if community-produced bare-land values were the
sole source or nearly the sole source of taxation.
The bare-land value of a farm is what would be left after subtracting
the value of buildings, of fruit trees, of fences, installed drainage,
growing crops, tools and machinery, horses and cattle, and fertility
also in so far as it has been built up or maintained by fertilization
and careful cultivation. A tax on the bare-land value of a farm would
therefore be, really, a tax on the "run down" value of land,
after the value of all the so-called improvements had been
substracted. Where such "run-down" value is zero, a tax on
the bare-land value of the farm, no matter how high the rate of
taxation, would be a zero tax!
Another way of expressing the matter is to say that a bare-land-value
tax certainly should not take more than the entire economic rent, and
the entire economic rent, in the case of many farms, is nothing. For
what is economic rent? Suppose a man owns a farm which he leases to a
tenant by the year. Before we know what is the economic rent, we must
subtract from the yearly payment made for the farm by the tenant, not
only enough to cover depreciation of improvements, but also a
reasonable percentage of interest on the value of all improvements,
including fruit trees and including the fertility value built up or
maintained by fertilization, careful crop rotation, etc. Only the
surplus above such interest is economic rent or rent of the bare land.
A tax on bare-land value could not take anything beyond such economic
rent. If it did, it would be a tax on improvements, too, and not just
a tax on bare-land value.
Let's look at the matter in still another way. If the owner runs his
own farm i.e., if he is a typical American working farmer what really
is his economic rent which is all that would be taxed under a
bare-land-value tax? To find what is his economic rent, we must first
subtract from his total income as pay for his work, all that he would
make as a tenant if someone else owned the farm. Then, second, we must
subtract from the remainder enough to cover not only depreciation but
also a reasonable percentage return as interest on the value of all
improvements. And in these improvements must be counted the fertility
value built up or maintained by wise cultivation and proper
fertilization. Only what is left after making these subtractions, is
economic rent. A tax on this remainder would be a tax on bare-land
values. And a tax on bare- land values alone could not take more than
this remainder. A tax taking more than this would not be a tax on
bare- land values alone but on improvements also. A bare-land value
tax is a tax on the run-down value of the land not counting any
improvements.
One would think that farmers and farm leaders would devote themselves
enthusiastically to putting into effect such a scheme of taxation of
bare-land values. For this would be practically no tax at all on a
considerable proportion of farmers. Especially in this recent period
of agricultural depression when all sorts of nostrums have been
advocated to cure the evil, is it not amazing that more farmers have
not demanded scientific taxation which would leave them all the wages
of their labor and interest on all their improvements, which would tax
only their economic rent, if and when they received any, and which
would never penalize them for improving their farms, by raising their
taxes?
That many farm owners would most certainly gain if taxes were removed
from improvements and concentrated on bare-land values is evident to
anyone who will examine the facts. A recent investigation carried on
by the Agricultural Experiment Station of the Michigan State College,
in cooperation with the United States Department of Agriculture
clearly shows it. Among other data are those showing the proportion of
taxes to net property returns on farms surveyed in seven Northern
Michigan counties from 1919 to 1925 inclusive. The taxes averaged over
90 per cent. In 1922 they averaged over 150 per cent. It is perfectly
obvious that these taxes must have been very greatly in excess of the
economic rent or return on bare-land value. Since a large part of the
return on most farms, besides the wages of labor, is interest on
improvements, and only a part, probably a distinctly minor part, is
economic rent, how can any one suppose that a tax on economic rent
alone would be anything like so burdensome as a tax which, as in this
instance, has been taking nearly the whole of both interest and rent?
But perhaps the most important reason for taxing community-made land
values rather than other things, and at the same time the most
important objection to our present tax system is that the former will
make land cheap and the acquisition of ownership relatively easy;
whereas our present tax system operates to make land expensive and so
tends towards heavy mortgages or towards long and, often, hopeless
tenancy.
In order to make this perfectly clear, it is necessary that we
distinguish between the conditions determining the value of capital
and those determining the value of land. The difference lies in the
fact that the value of capital depends upon its cost of production or
of duplication while the value of land depends solely upon its
expected future income. This distinction is, from the point of view of
public policy, of the utmost importance. Capital includes all tools of
production brought into existence by the effort and thrift of human
beings. It includes planted trees and the fertility put into land by
the owner's effort and investment or restored and maintained by the
owner's care and thrift. The bare-land is a gift of nature. Since
capital has to be produced, its value depends on its cost of
production, whereas land has no cost of production and its value is
dependent solely on its expected future income. Of course the value of
capital, also, is related to the prospect of income. An unseaworthy
ship does not have high value just because its cost of construction
was high, and a railroad built through a desert may have little value
despite a high cost of building. Yet in the long run and on the
average there is certainly a close relation between the value of
capital and its cost. Competition tends to bring about a price for any
capital which just about covers the cost of producing it, including in
cost the ordinary "profit" to the producer. Indeed, no one
will go on year after year producing capital instruments to sell for
less than their cost; and no one, unless he has a monopoly, can go on
year after year charging much more.
But the value of land has no relation to any cost of production,
since the land was not humanly produced and is not reproducible. The
would-be buyer of land asks only how much net return he is likely to
be able to make from it. Such an expected net yield is then
capitalized at the prevailing rate of interest. However much the
community may grow, capital cannot rise in value except as the cost of
producing it increases; while land rises in value as and because the
community grows and develops, and in proportion as roads, subways,
railroads, schools, etc., are built around, through and in it. A
business block in the center of a great city is valuable (bare-land
value), not because of the activities of those who own that particular
piece of land, but chiefly because of the way in which others settle
about it. The development of the environing areas enables the owner of
that block to enjoy larger rents, and the possibility of enjoying
these rents gives the privilege of ownership value and makes the land
sell for a high price. Individuals create the values of their capital
by saving and constructing the capital. Nature and society create the
value of land.
Since the value of land has no relation to any cost of production but
depends solely on its expected future rent, a tax on this value which
reduces the net rent of land will correspondingly reduce the salable
value of the land. Here is a fundamental difference, frequently
overlooked or not comprehended, between the effect of taxing capital
and the effect of taxing land value. The more land is taxed the less
is its salable value, while the less it is taxed the greater is its
value. But this rule does not apply to capital.
Since the salable value of land is lower in proportion as land values
are more heavily taxed, therefore the taxation of land values, above
all other economic reforms, tends to diminish tenancy and to give all
who are hard working and thrifty the opportunity of owning land. If
incomes, commodities and capital saved are less taxed, it is easier
for a poor man to accumulate a competence. And if land is taxed more,
then it is cheaper and can be bought at a lower price. The greater
cheapness of the land fully offsets the higher tax on it and there is
to be reckoned, also, the reduction or removal of other taxes. Thus
there is a clear gain to any person intending to buy land for a home
or other use, but no gain to the mere land speculator.
Many persons, and among them some professional economists, have never
succeeded in getting a thorough comprehension of this point. Thus, the
writer has heard the objection advanced that the greater cheapness of
land is no advantage to the poor man who is trying to save enough from
his earnings to buy a piece of land; for, it is said, the higher taxes
on the land after it is acquired, offset the lower purchase price.
What such objectors do not see is that even if the lower price of land
does no more than balance the higher tax on it, the reduction or
removal of other taxes is all clear gain. It is easier to save in
proportion as earnings and commodities are relieved of taxation. It is
easier to buy land, because its selling price is lower, if the land is
taxed. And although the land, after its purchase, continues to be
taxed, not only can this tax be fully paid out of the annual interest
on the saving in the purchase price, but also there is to be reckoned
the saving in taxes on buildings and other improvements and in
whatever other taxes are thus rendered unnecessary. It would seem,
then, that those economists who can see no advantage to the common man
in case of becoming an owner of property, from the taxation of land
values rather than of other things, are lacking in the ability to make
a very simple mathematical calculation. And if to tax land values
rather than other values would aid the property-less person to acquire
a competence, it would obviously make easier the economic
rehabilitation of those to whom fortune has dealt heavy blows or of
their children who must begin, at the bottom, the struggle to restore
their broken family fortunes. Thus, this reform may be likened to the
abolition of debt slavery and of imprisonment for debt and to the
establishment of bankruptcy laws. Men could not sink so hopelessly low
in the economic scale as is now possible.
The taxation of land values rather than incomes, commodities and
capital is not communistic, as is a part of our present tax system.
Land-value taxation does not penalize the efficient. It provides no
royal road to wealth for the lazy and the thriftless. It does not
attempt to reduce all to a common level. It is essentially
individualistic. It leaves to the individual all that he can acquire
by labor and saving. It takes for society a value which is in a
peculiar sense a social product. But no system of taxing commodities,
incomes, and property in general can possibly be so good for the
common man, do so much to encourage ownership as against tenancy, make
the opportunities of getting a start in life so hopeful, as a system
of relying chiefly on the rental value of land for the provision of
public revenues.
My impression has been and still is, that among the so-called
spokesmen of the farmers there are almost none who understand the
fundamental principles involved and are seeking a remedy which is fair
and at the same time goes to the root of the difficulty. The current
complaint about low land prices proves this. If those who think that a
high salable value of land and high taxes on other values are the
things to be desired have their way, we shall likely end with a tenant
population perhaps reduced almost to the status of serfdom.
There have been periods before of low prices for agricultural
staples. Such periods will occur again. Even if by some kind of
favoritism of government these prices could for a time be made
abnormally high, there is no guarantee that they would stay high. But
while they were high would be just the time that many farmers would
buy farms at high prices, mortgaging themselves with high interest
payments for years ahead. Then any fall of the prices of products
would again, as so often heretofore, bring bankruptcies and
foreclosures, spreading ruin among those who might, under saner
taxation, have continued solvent and relatively prosperous. For a tax
levied only on the rental value of land would be a lighter burden on
farmers in a decade when low prices of their products made the rental
value of farm land low; and always, whether prices of products were
high or low, it would keep down the salable value of land and
facilitate the change from tenancy to ownership, without compelling
the assumption of heavy mortgage indebtedness certain to bring
bankruptcies and foreclosures with every price recession. Here, then,
is a reform, not of a temporary nature, serviceable only to our own
generation, but one of incalculable benefit to our children and our
children's children.
There are many persons who are, or think they are, of a liberal cast
of mind and who are desirous of contributing to the welfare of common
folk, who nevertheless make no substantial contribution to this end
because they have not learned though some of them may have grown gray
in social studies how to relate cause and effect, clearly and without
bias, in the field of economics, or to distinguish significant
influences from trifles. Of what use to hold conferences and make
social surveys and carry on extended investigations of the evils of
farm tenancy when the in- vestigators never by any chance stress the
effects of our inept land and taxation policy in producing a high
salable value of land and so making ownership as against tenancy, as
difficult for the masses of men as possible? Of what use for students
of social affairs of "liberal" persuasion to plume
themselves on their support of high taxes on the rich, as such,
without distinction as to the sources of their incomes, when such
taxes are in place of high taxes on land values, and so would leave
the salable value of land high, land speculation unchecked, and
congestion and tenancy, including farm tenancy, little relieved?
What shall we say of a so-called liberalism which does not note the
effect of taxing the rental value of speculattively-held vacant land
as well as of used land, in discouraging land speculation and so
reducing land rent; and which does not understand how both the direct
reduction, through taxing it, of the net rent privately received, and
its indirect reduction through discouragement of land speculation,
operate to lower the salable value of land? What shall we say of a
so-called liberalism which has no least suspicion of how the resultant
possible untaxing of capital may, by increasing the net rate of
interest on it to those who save (unless and until increased saving
again lowers the rate) further bring down the salable value of land
through causing the capitalization of its reduced rent at a higher
interest or discount rate? What shall we say of a professed liberalism
which thus utterly fails to comprehend how important is land-value
taxation from the point of view of the common man and how poor a
substitute is any system of taxing all kinds of property or of income,
even though such taxation be made progressively higher on the rich?
May we not characterize the "liberalism" which favors taxing
different kinds of property or of income at the same rate as a
liberalism innocent of arithmetic!
Those students of economics who have turned for guidance to thinkers
thus confused will scarcely themselves have acquired a clear and
unbiased comprehension of the land rent problem. On the contrary there
may with some justice be asserted to be true of them what the
historian, Buckle, remarked as being frequently true of the so-called
educated, viz., that the progress of their knowledge "has been
actually retarded by the activity of their education," that they
are "burdened by prejudices which their reading, instead of
dissipating, has rendered more inveterate," that their "erudition
ministers to their ignorance" and that "the more they read,
the less they know."
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