John Stuart Mill

Charles B. Fillebrown

[Reprinted from the book, Natural Taxation, published 1917.
Part I / The Authorities / Chapter 2]

John Stuart Mill was born in London in 1806 and died in Avignon in 1873. He was educated by his father and as a child displayed a most precocious intellect. Beginning the study of Greek at the age of 3, he had read the most important works of Greek and Latin authors by the time he was 12. He began the systematic study of political economy at the age of 14, and His Essays on Political Economy, showing mature thought, were written when he was 24. The keen, intellectual vigor which he displayed as a child he retained through life. He wrote copiously on many subjects, and every field which he touched he illuminated. His best-known works are his Logic, Unsettled Questions of Political Economy, Principles of Political Economy, Essays on Liberty, Utilitarianism, Examination of Sir William Hamilton's Philosophy, The Subjection of Women. He was for many years in the service of the East India House in London, rising to the position of chief examiner. He was elected to Parliament in 1865 and there championed the cause of equal suffrage for women and the taxation of the future increment of economic rent.

In 1873 he wrote his autobiography, and from that we catch glimpses of an inner life no less remarkable than were its outward intellectual manifestations. He retained from early manhood to his death a passion for justice and human liberty and an intense sympathy for all whom he considered oppressed by unwise laws or unjust social customs. He was ever ready to champion their cause. His sympathies for the laboring classes can be read between the lines of his Political Economy; and for the rights of women, in his essay on the "Subjection of Women" and in his work for equal suffrage while in parliament. The chief joy of his life was in the effort to transform the social order into one in which human nature might display itself on a freer and happier plane. For his philosophy was utilitarian, and human happiness the aim and end.

Taking the theory of rent as it came to him from his predecessors, Mill even more than they urged the necessity of taxing it. It was largely for the purpose of pressing this reform that he entered Parliament. His argument as given in his Principles of Political Economy (1848), Book V, chap. II secs. 5 and 6, for clear and convincing the logic, has not been surpassed:

Before leaving the subject to the quality of taxation, I must remark that there are cases in which exceptions may be made to it, consistently with that equal justice which is the groundwork of the rule. Suppose that there is a kind of income which constantly tends to increase, without any exertion or sacrifice on the part of the owners: those owners constituting a class in the community, whom the natural course of things progressively enriches, consistently with complete passiveness on their own part. In such a case it would be no violation of the principles on which private property is grounded, if the state should appropriate this increase of wealth, or part of it, as it arises. This would not properly be taking anything from anybody; it would merely be applying an accession of wealth, created by circumstances, to the benefit of society, instead of allowing it to become an unearned appendage to the riches of a particular class.

Now this is actually the case with rent. The ordinary progress of a society which increases in wealth is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserve the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies? I admit that it would be unjust to come upon each individual estate, and lay hold of the increase which might be found to have taken place in its rental; because there would be no means of distinguishing in individual cases, between an increase owing solely to the general circumstances of society, and one which was the effect of skill and expenditure on the part of the proprietor. The only admissible mode of proceeding would be by a general measure. The first step should be an evaluation of all land in the country. The present value of all land should be exempt from the tax; but after an interval had elapsed during which society had increased in population and capital, a rough estimate might be made of the spontaneous increase which had accrued to rent since the valuation was made. Of this the average price of produce would be some criterion; if that had risen, it would be certain that rents had increased, and (as already shown) even in a greater ratio than the rise of price. On this and other data, an approximate estimate might be made, how much value had been added to the land of the country by natural causes; and in laying on a general land tax, which for fear of miscalculation should be considerably within the amount loss indicated, there would be an assurance of it not touching any increase of income which might be the result of capital expended or industry exerted by the proprietor.

But though there could be no question as to the justice of taxing the increase of rent, if society had avowedly reserved the right, has not society waived that right, by not exercising it. In England, for example, have not all who bought land for the last century or more, given value not only for the existing income, but for the prospects of increase, under an any implied assurance of being only taxed in the same proportion with other incomes. This objection, insofar as valid, has a different degree of validity in different countries; depending on the degree of desuetude into which society has allowed a right to fall, which, no one can doubt, and it once fully possessed. In countries of Europe, the right to take by taxation, as exigency might require, and indefinite portion of the rent of land, has never been allowed to slumber. In several parts of the Continent the land tax forms a large proportion of the public revenues, and has always been confessedly liable to be raised or lowered without reference to other taxes. In these countries no one can pretend to have become the owner of land on the faith of never being called upon to pay an increased land tax. In England to the land tax has not varied since the early part of the last century. The last act of the Legislature in relation to its amount was to diminish it; and though the subsequent increase in the rental of the country has been immense, not only from agriculture, but from the growth of towns and the increase of buildings, the ascendancy of landholders in the Legislature has prevented any tax from being imposed, as it so justly might have been, upon the very large portion of this increase which was unearned, and, as it were accidental. For the expectations thus raised, it appears to me that an amply sufficient allowance is made, if the whole increase of income which has accrued during this long from a mere natural law, without exertion or sacrifice, is held sacred from any peculiar taxation. From the present date, or any subsequent time at which the Legislature may think fit to assert the principle, I see no objection to declaring that the future increment of rent should be liable to special taxation; in doing which all injustice to the landlords would be obviated, if the present market price of their land were secured to them, since that includes the present value of all future expectations. With reference to such a tax, perhaps a safer criterion would be either a rise of rents or a rise of the price of corn would be a general rise in the price of land. It would be easy to keep the tax within the amount which would reduce the market value of land below the original valuation: and up to that point, whatever the amount of tax might be, no injustice would be done to the proprietors.

6. But whatever may be thought of the legitimacy of making the State a sharer in all future increase of rent from natural causes, the existing land tax (which in this country unfortunately is very small) ought not to be regarded as a tax, but as a rent charge in favor of the public; all portion of the rent, reserved from the beginning by the State, which has never belonged to or formed part of the income of the landlords, and should not therefore be counted to them as part of their taxation, so as to exempt them from their fair share of every other tax. As well might the tithe be regarded as a tax on the landlords: as well, in Bengal, where the State, though entitled to the whole rent of the land, gave away one-tenth of it to individuals, retaining the other nine-tenths, might those nine- tenths considered as an unequal and unjust tax on the grantees of the tenth. That a person owns part of the rent does not make the rest of it his just right, injuriously withheld from him. The landlords originally held their estates subject to feudal burdens, for which the present land tax is an exceedingly small equivalent, and for their relief from which they should have been required to pay a much higher price. All who have bought land since the tax existed have bought it subject to the tax. There is not the smallest pretense for looking upon it as a payment exacted from the existing race of the landlords.

The legislative program by which Mill sought to realize the principals laid down in the above quotation may be found in a pamphlet which he prepared for the Land Tenure Reform Association for the popularization of these ideas. "It is proposed, we read," (sec. 4):

To claim for the benefit of this state the interception by taxation of the future unearned increase of the rent of land (so far as the same can be ascertained) or a great part of the increase, which is continually taking place without any effort or outlay by the proprietors merely through the growth of population and wealth; reserving to owners the option of relinquishing their property to the state at the market value which it may have acquired at the time when this principle may be adopted by the Legislature.

In explaining and defending the program of the association, he argues that --

in allowing the land to become private property, the state ought to have reserved to itself this accession of the income, and that lapse of time does not extinguish this right, whatever claim to compensation it may establish in favor of the landowner. The land is the original inheritance of mankind. The usual, and by far the best argument for its appropriation by individuals is that private ownership gives the strongest motive for making the so loyal yield the greatest possible produce. But this argument is only valid for leaving to the owner the full enjoyment of whatever value he adds to the land by his own exertions and expenditure. There is no similar reason for allowing him to appropriate and increase the value to which he has contributed nothing, but which accrues to him from the general growth of society; that is to say, not from his own labor and expenditure but from that of other people -- of the community at large.

From the foregoing quotations it is clear that in Mill recognizes the principle the land is the original inheritance of mankind, that is, the principle of the equal right to land. But he does not emphasize this point as a reason for the taxation of economic rent. Rather, he finds the justification of its appropriation by the state in the fact that it is an income due, not to labor and investment on the part of the landlord, but to the general social growth in population and wealth. He, however, recognizes the force of the "vested rights" argument. It would have been entirely consonant with justice had the state appropriated this entire "unearned increment" from the start. Private ownership should only have been permitted on these terms. But this was not done. Men had become landed proprietors with the understanding that the rent of their lands was to become their private income. This income had increased, and transfers of investments and real estate had been made in good faith on the strength of this increase up to the present time. Very well, let bygones be bygones. But for the future let no such unearned increment be allowed. Moreover, the state is to reserve from private ownership such lands as are still at its disposal.

From the nature of this very conservative proposal it is evident that the revenue from economic rent could not, in his opinion, be a single tax -- it would be insufficient. It was to be only part of a general system of taxation whose merits are discussed in other chapters of his book.