The Essential Reform:
Land Value Taxation
In Theory and Practice
C. H. Chomley and R. L. Outhwaite
[Part 7 of 15]
We have seen how the taxation of land values would stimulate the
production of wealth from the soil, and its effect in stimulating the
production of manufactured goods may now be indicated.
Mr. Joseph Chamberlain, in a speech delivered at Birmingham in 1876,
said: "There is a trade at present in our midst which would
return to the wealth England £250,000,000 per annum, which would
give employment to I know not how many families of the working
classes. And that trade we might win, not by conciliating barbarous
potentates with slavery circulars, not by exporting civilisation in
chests of opium, nor by forcing it upon ignorant people at the
bayonet's point, but by freeing the land of England from the trammels
of a bygone age."
This statement of a fundamental truth is as applicable to present
conditions as it was to those maintaining when it was uttered, though
the amount to be returned has increased enormously since. Perhaps
nothing has done so much to divert attention from the necessity of
reform at home as the belief that expansion in manufacturing is
capable of being promoted to the highest degree by the opening up of
markets abroad. The belief that "Trade follows the Flag" has
been held to justify almost any expenditure of blood and treasure and
to sanctify exploits of doubtful morality. When the heathen have been
civilised "at the bayonet's point" and deserts have been
colonised by the Maxim gun, there has always been a satisfactory
belief that the enterprise had the saving grace of good business,
seeing that, the trouble over, a fresh market for Manchester goods
would probably result. But if a quota of the human effort and national
treasure that has been devoted to so stimulating the demand of the
heathen for British goods had been expended on extending the blessings
of civilisation to millions at home less fortunate than the savages
themselves in material well-being, the manufacturing industry of Great
Britain might have been stimulated to an infinitely greater extent. No
foreign market offers such potentialities as does the home market of
44,000,000 people. Over foreign markets British Governments can have
little control. The bayonet's point has now a very limited field of
possible application, and the late Mr. Cecil Rhodes' belief in war as
"good business" has not been justified by results in the
case in which he thus urged its claims to consideration by an
enlightened nation. But over the home market British Governments
exercise supreme control, and can increase or limit the demand made by
the nation for commodities.
Demand in the main depends upon the opportunity afforded labour to
apply itself to the land, upon the wage received by the workers, and
upon the incidence of taxation.
We will deal with the last factor first. Pitt, referring to indirect
taxation, said: "There is a means by which you can tax the last
rag from a man's back and the last bite from his lips without causing
a murmur. The grumbling will be against hard times; the people have
yet to learn that hard times are caused by taxation." And as hard
times are caused by taxation that limits the spending capacity of the
masses of the people, so, conversely, "hard times" will tend
to brighten in the ratio of its abolition. More especially will this
be the case if at the same time a form of taxation be substituted,
which, by increasing the demand for labour, will enable the workers to
at least maintain the wage rate, and so benefit to the full by the
remission of indirect taxation levied on commodities. As the taxation
of land values will not only maintain the wage rate but increase it,
the abolition of indirect taxation in its favour may be expected to
increase the demand for commodities to the extent of the remission,
which, in respect of the tea and sugar duties, would amount to over £12,500,000
per annum. So too the substitution of a rate or tax upon land values
for rates falling upon houses, which correspond to taxes falling upon
commodities, would increase the consuming capacity of the masses to
the extent of the actual remission in the first place, and to the
extent to which the tax would lead to reduction of rent by forcing
idle land into use. The millions living on a scale of existence which
leaves all but the barest desires of themselves and those dependent
upon them unsatisfied may be expected to increase their expenditure to
the extent of any remissions of taxes, rates, or rents.
It may be urged, however, that land monopolists will have their
consuming capacity reduced, and that demand will only be stimulated in
one direction to be lessened in another. But the manufacturers of the
thousand and one articles of general consumption, of boots and
clothing and household requisites, can view this contingency with
complacency. The huge tribute that the land monopolists of the country
extract from the pockets of the people cannot be consumed by the
monopolists. Their homes are already furnished, and the Duke with £100,000
per annum probably spends no more on boots, coats and trousers than he
would if he had a fraction of that sum. Were all land values taxed
into the Treasury he would still live well on the returns from his
capital in the form of buildings and land improvements which would be
free of taxation. His children would not patter barefoot through the
ancestral hall nor his Duchess shiver in threadbare garments.
The surplus of the tribute that the monopolists cannot consume is
expended in the acquisition of tribute rights the world over.
Territories in Africa, South America and North America, Canada,
Australasia; mineral lands, oil lands, coal-bearing lands, city lands,
pastoral and farming lands, in every part of the earth, have been
acquired with the unconsumed share of the tribute wrung by British
monopolists from the people. Hence indeed it comes that the sun never
sets upon the British Empire.
It is now a favourite Protectionist argument to point to the exodus
of capital abroad as a sign of the nation's decadence under Free
Trade. The simplest means to keep it at home is to pass it into the
British Treasury by the taxation of monopoly values, and capital so
kept at home and used in remission of indirect taxation will act, as
we have seen, as a powerful stimulant to British industry.
But while the substitution of land values taxation for indirect
taxation is calculated to increase demand in the home market for
manufactures, the effect of the tax in opening up the land to labour
will accentuate it to a far greater extent.
If only the drift from the countryside into the cities of men
destined to join the ranks of the unemployed, or to throw others out
of work by undercutting their wage, can be stopped, and these men be
established as producers of wealth from the soil, the demand for
manufactured commodities must be increased. They will produce primary
products, and what they cannot consume they will exchange for
secondary products.
Let us take, by way of illustration, the Elveden estate of Lord
Iveagh of 20,000 acres in Suffolk, which is held in the main as a game
preserve in a district from which there is an exodus of men whose
dearest wish is to have a few acres to till. If this great estate were
made available in small areas to would-be cultivators and co-operative
dairying established, they could easily produce on it £30,000 of
butter annually, besides other produce. The surplus beyond what was
requisite to butter their own bread these workers would exchange for
articles that would in the main be supplied in British factories-not
only for articles of household consumption, but for machinery,
implements, and general farming requisites as well. And what would
happen as regards this estate would happen throughout the length and
breadth of the Kingdom, with a cumulative effect upon the
manufacturing industry that would be difficult to exaggerate.
It may, however, be urged that produce from British soil would oust
imported produce which is paid for by exports of British manufactures,
and that therefore the gain indicated would be more apparent than
real. This argument might hold good were the taxation of land values
calculated to increase production alone. But, as indicated, it will
pari passu increase consumption, and it is a matter of
increasing at the same time fresh producers and consumers, and not a
matter merely of substituting a fresh source of supply to meet a
stationary demand.
But probably more than from any other cause, the taxation of land
values will increase demand for manufactured goods, because it will
increase the wage rate over the whole field of employment, and thus
the consuming capacity of the bulk of the nation. It needs no argument
to prove that, if the freeing of the land to would-be users causes
wages to rise, so too it will cause the demand for manufactured
commodities to increase in like degree. Here it can only be stated
that such a result will follow as regards wages, since proof can be
more conveniently undertaken in a forthcoming chapter.
Then again the substitution of land values taxation for the present
rating system, which penalises all forms of industrial enterprise,
must have a direct effect in furthering manufacturing industry. The
manufacturer must embark upon a heavy capital expenditure as a
preliminary to production, and the rating on buildings and fixed
machinery falls with crushing weight upon him. At the same time the
locking up of the land, which the present system fosters, compels him
to pay a heavy toll to monopoly before he can even lay the foundations
of his factory.
An instance was given by Sir Alfred Thomas, M.P., when presiding at a
land value taxation demonstration at Cardiff on February 4, 1909. Sir
Alfred Thomas said: --
"He sat for many years in Parliament beside Sir
Charles Mark Palmer, the great shipbuilder. The latter once told him
that he nearly came to Cardiff to start shipbuilding. He selected
fifty acres of ground admirably suited to the purpose and made
inquiries of the owner's agent as to the price. He was asked as much
annually as the land was worth freehold. Had he obtained that land
on reasonable terms, Sir Charles would have brought 6000 men to
Cardiff, which would have meant an increase of 30,000 to the
population. If taxation of land values had been in operation then,
Sir Charles would have got a very different reception, and Cardiff,
instead of Jarrow, would have become one of the greatest
shipbuilding centres in the country. The rateable value of Cardiff
at present was £1,094,000, and the ratepayers of the city paid
in rates £400,000 a year. The landlords received over £300,000
from ground rents, but not a penny out of that £300,000 went to
the relief of the rates."
To escape the burden of town rates some manufacturers have carried
their works into the country, but the rates have followed them. Their
enterprise has driven up the values of surrounding land, but this lies
vacant and under-rated, whilst the industrialist is compelled to carry
an altogether unjust burden. For a nation, the bulk of whose people
are dependent for livelihood upon the prosperity of manufacturing
enterprises, to maintain a system under which a manufacturer is
heavily fined annually for building a factory, in order that monopoly
may be relieved of its obligations, is as absurd as it is suicidal.
In yet another way will the taxation of land values lead to a relief
of manufacturing enterprise from unjust burdens. Transportation is
to-day in the hands of monopohsts who own the railways and canals, and
whose monopoly is based on the ownership of particular strips of land.
As will be shown in another chapter, the taxation of land values will
enable the State to nationalise these monopolies and then to act as
carrier without demanding monopoly rates, making good the reduction in
freights by a levy on the land values the railways have created and
are maintaining.
To sum up, it may be claimed that the taxation of land values will
stimulate the production of wealth in manufacturing industries, to be
brought about --
(1) Through an increase in the consuming capacity of the
community due to (a) The relief of the masses from indirect
taxation, monopoly rents and rates on houses; (b) The opening up of
the land; (c) The raising of the wage rate.
(2) Through relief from rates falling on factories and fixtures.
(3) Through making it possible for the State to substitute
transport services at cost for similar services at monopoly charges.
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