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.
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