Review of the Book

Local Taxation in the Empire
By Josiah C. Wedgwood

Joseph Dana Miller

[Reprinted from Land and Freedom, January-February 1928]

This is the title of a pamphlet of twenty-odd pages bound in stiff covers in which the former Colonial Secretary, Josiah C. Wedgwood, reviews the systems of taxation in Great Britain and the Colonies. It has a Foreword by Hon. J. H. Thomas, one of the prominent Labor members of Parliament, and, as stated on frontispiece, is "Published in association with the Labor party." We should be very glad to know that the members of that party would undertake to urge official recognition of the confusion that exists, and the necessity of making a clean sweep of the taxation anomalies that are indicated in various localities in Great Britain and in the Crown Colonies.

Though Colonel Wedgwood does not make an extended argument for any particular system, contenting himself with pointing out the infinite variety of taxes that exist today in the Empire, he does quote from Labor leaders, Ramsay MacDonald and Arthur Henderson, their perfectly clear statements for the transference or rent from private pockets to the public treasury, not merely for the additional revenue it would give, but as a means of opening up the natural sources from which wealth is produced. It is to be regretted that Mr. MacDonald at other times wanders away from the central truth which he is capable of voicing with so much force and clarity.

Col. Wedgwood touches upon taxation in the United States and gives instances which here and elsewhere show a wholesome trend toward a juster system. The pamphlet will be useful to our friends on the other side.

But to one argument advanced we must take a serious exception. We quote from page 5:

"'Capital Value' is a wiser basis for taxation than 'Annual Value,' not merely more easy to arrive at. For unbuilt-on suburban land, though it has a negligible 'Annual Value,' has a comparatively high 'Capital Value.' This high 'Capital Value' is being maintained and increased by the wise expenditure of the local authority, and constitutes a just source of revenue which cannot be made to contribute by rating upon 'Annual Value.'"

It is of course much easier under present conditions to estimate capital value; and while taxation of land values is very light a tax on capital value may reach a speculative value that would escape under an attempt to determine the annual rental value. But as soon as taxation becomes heavier, the "capitalization of the tax" (or otherwise stated, the reduction in net income of land) decreases its capital or selling value, and to a large extent thus defeats the purpose of the tax by contracting the tax basis.

The wiser basis, therefore, is that of annual rental value, actual or potential. And just as the capital value of land which is not for sale, can be fixed by an assessing official by comparison with other land, so the rental value of unused land could be fixed by comparison with the rent of used land. The ascertainment of either kind of value is not a difficult administrative function. And the sooner the public mind is educated to the fact that the primary form of land value is annual rental value, and that the capital value is merely a price charged for the privilege of collecting that annual rent, the easier it will be to continue the increase of taxation up to the point of absorbing the entire annual rent.