The Essential Reform:
Land Value Taxation
In Theory & Practice
C. H. Chomley & R. L. Outhwaite
[Originally published in 1909 by Sidgwick &
Jackson, Ltd.,
London -- Part 1 of 15]
The aim of the following pages being to discuss a system of taxation
in all its bearings, it will be necessary to consider for a little the
principles upon which taxation is or may be founded, in order that we
may decide what system appears to be most in accord with justice. The
most just, it may be confidently asserted, will in the long run prove
to be the most expedient and socially useful, whatever the initial
difficulties in the way of its adoption. In making justice the
touchstone of political proposals we stand on firm ground, for while
men will honestly form a hundred different opinions as to the social,
political, and economic effects of any course of action, there is
comparative unanimity among unprejudiced minds as to what constitutes
justice, and history may be searched in vain for an instance when just
conduct on the part of a man or a nation has resulted in evil.
The canon of taxation which has the greatest weight of orthodox
authority behind it is that every citizen should contribute to the
needs of the State in proportion to his ability so to do. There is a
plausibility about this which causes it to be generally regarded as
indisputable and indeed self-evident. Taxation is postulated as an
evil -- a necessary evil, no doubt - but a bad thing in itself
nevertheless; and since it is granted that the State must have funds
to carry out its functions, it seems logically to follow that all
citizens should contribute to those funds in proportion to their
means. But in this argument there is involved an assumption, which we
hope to prove unwarranted -- namely, that the State, representing the
community, has no funds or has insufficient funds of its own to meet
demands upon it, and is therefore obliged to take a portion of the
property belonging to its citizens.
If we can show that, on the contrary, the community is the rightful
owner of property the returns from which would be sufficient to pay
for exercise of all its reasonable activities, it follows that there
is no justification for infringing the property rights of individuals,
and that the maxim, "Make each pay according to his capacity,"
is much akin to the injunction of a brigand captain to band, "Rob
the rich and spare the poor."
The only difference between humane brigandage and taxation of the
people according to their ability to pay is, that the latter is
sanctioned by law and assumption that the taking of private property
the only means of meeting public needs; but on these lines taxation is
nevertheless an infringement of the rights of private property, which
the advocates of such taxation profess to hold sacred.
Not only is the principle of payment according to ability far from
perfect, but in existing systems of taxation it is only half-heartedly
put into practice. The income tax, which is supposed to be founded on
this principle, takes as much from the man with a large family to keep
as from the bachelor with no dependents, though it is manifest that
their abilities to meet the impost are very far from equal. To
property taxes the same criticism applies, and they are open to the
further objection that the property of the poor man consists for the
most part of material things, such as houses, furniture, stock and
implements, which cannot be hidden from the revenue officer, while the
property of the rich is largely invisible or easily concealed. Stocks
and shares can be transferred temporarily from the country, they can
be under-valued; costly jewelry can be hidden. There are, in fact, so
many means by which the wealthy can evade a tax on property that it
has been abandoned by most of the countries which have experimented
with it.
But while lip service is accorded to the canon of taxation discussed
above, another canon which finds no favour with political economists
is acted upon throughout the world to such an extent that in
accordance with it the greater part of the world's public revenues are
raised. This canon is, "Tax a man upon what he consumes,"
or, in other words, "Tax him according to his needs." This
is the basis of all tariffs. The more clothes, the more food, the more
drink or tobacco a man requires, the more he must pay. Morally, such
taxes are indefensible. They take away private property, as do the
income tax and the property tax; but, unlike these imposts, customs
and import duties make no attempt at proportioning revenue burdens to
the tax-payer's means of meeting them. They fall principally on the
poor, for it is articles of general consumption, such as tea and
sugar, which yield the most revenue, because they are necessities to
the masses of the population, who can least afford to pay taxes. While
all of them are vicious in principle, customs and excise duties vary
in unfairness and hurtfulness according to the methods by which they
are levied, and the articles upon which they are imposed. Revenue
duties, such as those upon tea and other articles not produced in the
country which taxes them, are economical because the full amount of
the tax paid goes into the coffers of the State. Protective duties --
that is to say, duties levied upon goods imported into a country and
not upon similar goods produced within its borders -- are, on the
contrary, wasteful, because in addition to the money taken out of the
pockets of the consumers of the imported article in the form of duty,
which goes into the public revenue, much more money is taken from the
consumers of similar home-made articles in the shape of higher prices
to the manufacturer, who is enabled by the import duty to charge more
than he could do if he were unsheltered from the competition of
dutiable goods from abroad. On the other hand, certain special
disadvantages are involved in fixed revenue duties, such as those upon
tea and tobacco -- fixed duties levied according to number or quantity
and not according to value upon articles of every kind. The tea duty,
for instance, of 4d. per lb. amounts to a tax of 33-1/3 per cent. on
the poor man's expenditure of ls. upon a pound of cheap tea, and lets
off his wealthier neighbour who buys tea at 2s. per lb with a tax of
less than 17 per cent. on his outlay. Similarly, cigars being subject
to a fixed duty of 6s per lb. irrespective of quality, the man of
small means who buys a 3d. cigar smokes only 1d. worth of tobacco with
2d. worth of tax, and the man of large means, in his cigar at a
shilling, smokes only 2d. worth of tax with 10d. worth of tobacco. In
every shilling expended the poor man is paying just four times as much
tax as the rich.
From every point of view, therefore, customs and excise duties are
unfair and burdensome to the poorer classes; their great
recommendation to Chancellors of the Exchequer is that their grossness
and effect are concealed from those who pay them. Prices rise when
duties are imposed; the purchaser grumbles, perhaps, at the rise in
price, but in ninety-nine cases out of a hundred fails to see how he
is being fleeced.
The foregoing strictures upon customs and excise duties are concerned
with them only as instruments for raising revenue. They have other
aspects. Taxes upon alcohol and tobacco, for instance, are approved of
by certain people as a means for restricting the consumption of these
articles. Protective duties meet with approval from others on the
assumption that they encourage home production. This assumption we do
not grant, but, even if it were justified, no case for such duties
from the standpoint of revenue would be made out, since it is obvious
that the more successful they are in checking imports and thereby
increasing local production, the less effective will they be in
contributing to the Treasury. As to the moral effects of duties upon
alcohol, they are at least questionable, and in so far as they check
drinking they fail in their function as revenue-producing taxes.
Before going on to set out what we believe to be the true principle
of taxation it will be useful to glance at one or two other taxes
which can lay no claim to be founded on any principle but that of
grabbing, where grabbing is comparatively cheap and easy. Such is the
inhabited house duty, a peculiarly noxious tax on a special form of
property with a direct tendency to check the building of houses, and
therefore to promote high rents and overcrowding. Stamp duties of
various kinds are a levy upon the business activities of the people,
taking from them without return or justification (always providing
that the justification of necessity does not exist) a portion of their
earnings. Various duties on the property of deceased persons passing
on their death to others are a form of which inflict less hardship,
perhaps, than other taxes, but have no raison-d'etre except a
doubtful application of the principle of levying taxation in
accordance with ability to pay -- we say doubtful application because,
while it is true that duties on large properties are levied at a
higher rate than upon small ones, it is nevertheless true that among
the beneficiaries of an estate, who are the real payers of the tax,
one might be very rich and another very poor, yet suffer equal
reductions of their legacies for the benefit of the Exchequer.
The other principal sources of revenue in the United Kingdom are the
post-office and licences of various kinds. When the receipts from
posts and telegraphs arc in excess of the cost of operating them, the
surplus is a tax with nothing to justify it but the fact that it takes
the place pro tanto of perhaps more objectionable forms of
taxation. When the revenue equals the expenditure, the receipts are
not the proceeds of taxation but are merely payment for services
rendered.
Licences vary considerably in their nature and the principle upon
which they are based. Some, such as those imposed on the followers of
several trades and occupations in which there is no monopoly, are
demanded partly to pay the cost of super'4sing the conduct of the
licensee in the supposed interest of the public, and in greater part
as a means of obtaining revenue at the expense of the licensee or
those who employ him. Licences to sell liquor stand upon a different
footing. Rightly or wrongly the State has established a monopoly in
the liquor-selling business in business; this monopoly is the property
of the people as a whole and has great value. While it exists the
licensed traders, who pay for the right to sell liquor, are not, in
fact, being taxed at all. They get full value for their money, and
under present conditions in this country many of the traders, whose
licence fees are absurdly low, are receiving from the community a
large annual gift in the difference between the great value of the
partial immunity from competition which they enjoy and the small
amount they pay pay for this immunity.
We have now glanced at most existent forms of taxation, and have
found that none of them are or can ever truly be in accord with the
much-lauded principle of payment proportionate to the tax-payer's
ability. We have also endeavoured to show that this principle, even if
enforcible, would do nothing to justify the taxation which it is
intended to regulate, and is at best a statement of the most
considerate method of robbing individuals of their property in order
to fill the coffers of the State. We have pointed out that the only
justification for this robbery -- or, if the word robbery be objected
to, for this forcible taking of private property - rests in an
assumption of its necessity following another assumption that the
State has rightfully no property of its own.
Let us now see whether these assumptions are justified, whether there
is not on the contrary a fund rightfully belonging to the community
which would defray all the expenses of the State, and consequently by
its appropriation remove the need of taking form individuals property
belonging to them. If such a fund exists it follows that appropriation
of it by its rightful owner, the community, is not taxation in the
sense that word usually conveys; it is not a more or less arbitrary
levy on private property for purblic purposes. The fund to which we
refer is the land value created by society, and when the State taxes
this value it will be on the road to the abolition of all burdensome
taxes and the establishment of economic justice.
Proposals to tax land values are always and everywhere strenuously
resisted by those in possession of them, who regard as sacred a form
of property which enriches them without effort on their own part and
lays the work of the world under tribute. The landowners have long
been a privileged class holding an undue proportion of wealth
influence and power in the country, able thereby to remove most of the
public burdens from their own to other shoulders and they fiercely
resent any attempt to make them pay for the privileges they enjoy, by
taxing the value of the land they hold. Such a tax forms the subject
of this volume, in which an endeavour will be made to show that it is
the most just and consequently the most socially useful of all taxes,
as indeed it incontrovertibly must be, if the community and not the
individual has created the value of the land.
Its justice and usefulness we bbelieve capable of convincing proof as
a mere fiscal reform even to those who hesitate to assent to the
proposition that private property in land and kindred monopolies is
indefensible.
The canon by which we hold that the claims to justice of any tax
should be judged and in the light of which its amount should be
regulated may be phrased in the following words: Every person should
contribute to the expenses of the State in proportion to the
privileges conferred on him by the community of which the State is the
representative." The application of this canon to the taxation of
land values, and the nature and meaning of land values considered from
several points of view, will form the subject of the next chapter.
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