Review of the Book

The Economic Basis of Tax Reform
by Harry Gunnison Brown

Joseph Dana Miller

[Reprinted from Land and Freedom, March-April, 1933]

Any book coming from the pen of Prof. Harry Gunnison Brown is important. It is also likely to be characterized, as this work is, by a notable clarity where so many political economists write obscurely. Prof. Brown sets forth his conclusions simply and in easily understood English.

We wish the chapter entitled "Tax Relief for Real Estate" could be placed in the hands of our muddled legislators who are clamoring for increased taxes on "intangibles." Prof. Brown places squarely on the shoulders of Prof. E.R.A. Seligman the responsibility for the modern trend of economic thought. And, as he intimates, we cannot condemn very harshly politicians and legislators when those whose duty it is to direct economic thought into correct channels fail us so utterly as teachers.

The lance Prof. Brown levels in a number of places against the vulnerable armor of Prof. Seligman is sharply pointed. Our friend from the University of Missouri is a far better economist than Prof. Seligman because he is capable of clear thinking and approaches his subject with no predispositions. It has always seemed to us that Dr. Seligman, with the best of intentions, is wholly incapable of appreciating the nature and operation of economic rent. An acute mind, blinded by a curious obsession, he is unable to perceive the fiscal or social advantages of a land value tax. And the taking of the full economic rent in lieu of all taxes is an adventure that chills his marrow.

There are some stalements of Prof. Brown we should be inclined to question. One of these is as follows: "Continuous increase of population, since natural resources are limited, tends towards diminished per capita production." Natural resources are practically unlimited and continuous increase of populalion unpredictable. Even if seemingly theoretically admissible the statement is discounted by what we know of both population and land.

We would also take exception to the following with much of the discussion that follows it:

"Whatever may be true of most labor incomes, it is certain that some incomes from labor are unearned, if the test be the giving of a quit pro quo to those from whom, in the last analysis, the incomes in question are drawn. Thus a business concern may, as the National Cash Register Company was proved in court to have done, misrepresent a competitor's goods."

In this and in some of what follows Prof. Brown is confusing earnings with fraud and misrepresentation. It is clear that the earnings of labor are wages. That those who practise fraudulent tactics derive income therefrom is granted, but it is not wages and therefore not earnings. Labor in political economy earns wages and the income from fraud is something else again. Something of the same criticism applies to what is said of interest, the earnings of capital (page 37).

After all what is indicated are small defects. We are glad to have Prof. Brown saying:

"And those enthusiasts for government ownership of all natural resources, who would have the public buy up these resources from the present owners at current values are, in this view, simply proposing that the tribute now collected as rent or royalties or dividends shall be given an added sanction and shall be collected in the future as interest on government bonds, to the payment of which government will be pledged. These natural resources had no cost of construction. Their salable value seems to be but the capitalization of tribute. To issue government bonds for them, is, therefore, it may be said, only to make this tribute-rendeiing more irrevocable than before" (Page 53).

In Chapter III, "The Rent of Land and its Taxation," Prof. Brown gets fairly into his stride. Single Taxers will regard this as the most important part of the work. On the whole it is admirably done. But there are several parts where we would again disagree, and it is perhaps well to indicate these differences that the position of Single Taxers nay be made clear to all our readers. On page 156 our author says:

"A number of enthusiastic perhaps some would call them fanatical Single Taxers contend that any other tax than a tax on the rental value of land is necessarilly morally objectionable, that the State has no right, under any circumstances, to levy on the earnings of capital and labor, that the rent of land should suffice for all governmental expenditures.

"I do not hold to any view so extreme. The services of government are important to all of us, except, possibly, criminals. All of us benefit, though perhaps in varying degrees which cannot be precisely measured, from the existence of government."

This looks like a non sequitur and is no real justification for any other tax where land rent is sufficient to meet all public expense. Single Taxers believe that the thought is better expressed in the statement that if the rent of land meets all expenses it is the only value that ought to be taken, that because it is a public value and labor products an individual value, it is both immoral and inexpedient to tax the latter.

Great public exigencies and the need of revenue not immediately to be met by sufficient land rent, may justify the taxation of labor products -- but surely not otherwise. Therefore in all ordinary circumstances the taxation of labor products may properly be characterized as immoral without incurring the charge of fanaticism.

We are sorry that Prof. Brown has given us a hiatus in his reasoning. That needs to be bridged. He has shown us how the various taxes, taxes on mortgages, on gasoline, amusements, etc., etc., are devised for the special purpose of securing immunity for publicly-created land rent.

If he had not characterized this process as immoral we want to do so on Prof. Brown's own showing, for he has intimated that a number of those in high places are not without a guilty knowledge of what is being done. But when our author tells us that "if popular ignorance limits the taxation of publicly-created land rent it would be better for capital and labor to supply government wholly from their earnings"

If anybody else but Prof. Brown has said it we should be compelled to smile at its naivete.

I We would not convey for a single minute the impression that these slight flaws mitigate against this most admirable work. After all they are merely thoughts in passing and do not affect the conclusions. They arise from Prof. Brown's desire to examine every angle, and may be said to be a tribute to his thoroughness even where we have been compelled to question them.

There is no better treatment of our economists anywhere than is contained in Chapter IV, "A Taxation Complex of Some Political Economists." It is subtile and unusually keen in its analysis. We wish we had room to quote, but the work should be read by every student of political economy. It is really a great contribution to our literature.

RESPONSE TO THIS REVIEW BY HARRY GUNNISON BROWN
Reprinted from Land and Freedom, May-June, 1933

I have been meaning to write to you and express my appreciation for the long and favorable review that you recently gave me. There is one little passage in the review where I think you inadvertently gave a somewhat wrong impression. This is where you referred to my remark that " if popular ignorance and misunderstanding prevent its taxation, it would be better for capital and labor to support government wholly from these earnings, however hard and fairly won, than to be deprived of its services." But leaving out the phrase "than to be deprived of its services," you made my position seem weaker to your readers than it otherwise would be. I am sure that some, at least, of your readers would agree with me that even the securing of revenue from a very bad source would ordinarily be better than not to have any government at all.

However, this is a comparatively minor point and the general tone of your comments is indeed friendly. Also, you did what very favorable reviewers sometimes neglect to do, viz., you included in your comments complimentary statements capable of being quoted in advertisements. Some reviewers quote at length from a book, show by implication that they like it and make the review fairly extensive without ever inserting a single striking or definitely favorable comment which a publisher can use. Such a review is more disappointing in many cases than one which is uncompromisingly antagonistic and therefore likely to arouse some interest.