A Practical Way Out of the Depression

C.J. Lavery

[Reprinted from Land and Freedom, November-December 1938]

OF "The Present Mess" of relief, unemployment burdensome taxation to say nothing of the social problems arising from poverty.

How the collection of rent and the abolition of taxes can be instituted how it can be done with our existing political machinery why it would work what it would do.

Natural resources in this country were not exhausted In fact, they have been merely scratched. Production and the necessary means for creating, processing and trans porting wealth were, and now are, adequate to justify the expectation of the advent of an economy of plenty Despite these favorable conditions, there exists approximately 43 million "ill-fed, ill-clad and ill-housed" persons "One-third of our population" needing more and better food, clothing and shelter which distributers have been prepared and anxious to furnish. But effective demand failed because, as The Wall Street Journal emphasized repeatedly, in leading editorials a few years ago, product and potential consumers were "Kept Apart by Price The "unhappy third" could not, and the more fortune two-thirds would not, pay the exorbitant prices demand by those who could do no different because of enormous costs that were, and still are, pyramided by taxes. A instance: Processing taxes which doubled the price food and clothing within a few weeks. And next, "payroll taxes" social-security taxes (so-called) railroad retirement funds, old-age pensions and the unemployment taxes, all special taxes, levied for a strictly definite purpose and all passed on and included in the price of things needed and wanted by everybody and, especially, by the President's least fortunate "third."

There are many other reasons for excessive costs, most outside the jurisdiction of legislators to regulate, should have occurred to them that mis-placed and confiscatory tax levies might be responsible for the extreme costs and at the bottom of the various obstacles hindering trade. Instead, legislators messed around with wish-fulfilment devices which aggravated the economic situation increasing instead of reducing costs. A new tax, or old tax with a new name, was invariably imposed on things consumers needed and wanted to buy! The vicious cycle goes round and round and gets nowhere but worse! And now the President asks for more!

The consumer was and still is "the forgotten man. I beg pardon. Many were forgotten by the tax-imposed on many who have escaped taxation heretofore, i.e., those who collect rent. When federal or state "Solons" made any gesture to relieve trade and/or the "unhappy third" they forget to tax rent as a replacement for taxes that have been, and are now, eating the heart out of trade and despite the fact that a tax on rent can't be "passed on" to the consumer. They forget that rent is wholly due to the activity and wants of society and is never the product of individuals or corporations. They overlooked the fact that the Constitutional Amendment permitting income taxes applies with equal force to income from rent that all economic rent ought to be collected by society for its use.

Please "read, mark, learn and inwardly digest" an article entitled "Taxing Production to Death," by Albert Jay Nock, in the March, 1938, issue of The American Mercury. Mr. Nock does not mention rent among the items that "must come finally out of production" presumably because we have so far neglected our public business as to expropriate our social earnings, the natural fund that should be ours, collectively, to use as we now use taxes for liquidating the expenses of government, federal, state and our local public services such as schools and highways, courts and the like. Those who use that part of their body above their ears frequently become disgusted when observing the naivete and obvious stupidity of our Solons when in action. Rent also, enters into the entire price structure. And like taxes must be laid before wages, interest and upkeep can be met.

Despite the fact that legislators are powerless to do anything but harm in the economic field, they have everything to do with taxes. Other than the natural components of price, i.e., rent, wages and interest, we find some extraneous ingredients affecting it, the chief of which is the conglomerate mass of taxes. That is because society, through its legislators, fails, almost entirely, to collect the rent which itself creates. Society expropriated its own earnings and lacking that natural fund with which to pay government expenses it does some more expropriating, and as before, from itself, in the form of taxes, since everybody pays twice for government service; first, when paying rent which none can escape in any way; (second), when buying goods and services with all tax levies, from everywhere, carefully wrapped up and hidden in the price.

Other extraneous elements in price such as public and private debt, racketeering, crime, disproportionate salaries and commissions, charity contributions by business and industry, trade associations and their price manipulation, stifling of competition, strikes and other industrial warfare, conspicuous waste, social irregularities, instalment selling, etc., can be mostly accounted for among the evil effects incident to expropriation of rent. Some may be expected to vanish as society and its legislators gradually shift taxes from labor and industry to society's own and only product rent. Some of the worst may require political action, but it will be necessary to remove the impediment of trade-throttling taxes, and set the stage by taxing rent, before any effective relief can be had or even expected. All monopoly starts with and in expropriated rent.

Charlemagne formulated the axiom: "The welfare of a nation is the welfare of its least fortunate." The "unhappy third" cannot satisfy all their needs nor much that they want because prices are prohibitive; hence less things are consumed and, consequently, scanty need for labor to produce things. Consequently, unemployment and depression supervened, and, relief became necessary to prevent serious distress. Price, then, is the key to "The Present Mess" and, also, to "A Practical Way Out." The price of consumers' wants must come down. We must "Take Taxes Out of Prices."

The diagnosis of "The Present Mess" and its cause having been found to flow from "price" and the chief contributing cause ascertained to be taxes that should be abolished, our problem now is: The recovery of our expropriated rent; the total abatement of taxes, and, "How it can be done with our existing political machinery." At "first blush" it might appear that all trade-throttling taxes could be repealed and a levy made on rent to replace them, but that would be revolutionary and revolutions are too costly. It is best to "Take Things by the Smooth Handle." Neither our economy nor our democratic institutions need be imperiled while we shift taxes to economic rent. Capitalism has earned its spurs and, with some little fixing, can be depended on to function in an economy of plenty much better than in an economy of scarcity.