Land Taxes and John Stuart Mill

Land Taxes and John Stuart Mill

Of the great economists in the English tradition John Stuart Mill was perhaps the first to advocate a distinct change in the system of taxation with the Intention of bringing about social re­form. Mill considered renr an economic charge which was detri­mental both to his philosophy of individualism and to the economic process of distribution, for it secured to individuals a return for which they had performed no- labor. The main con­tention of individualism was that each man should enjoy the benefits of his own production. Rent nullified this aim. Mill held that this extra payment for the use of land was the result of the increasing density of population and should be returned to the state, through a tax upon rent, which would increase as the in­crease in population further raised the level of rent. Furthermore, Mill took exception ta inheritance because it allowed persons to possess wealth which they had not produced. Mill defended the right of an owner to dispose of his property as he wished. This was merely the right of free people under a rule of individualism. Nevertheless, he held that this right no longer existed at death. He therefore suggested a limitation upon the amount which any­one might inherit. Instead of the state's curtailing the right of a person to dispose of his property as he saw fit, the state" merely restricted the right of one to receive as a free gift more than a certain sum.

Although the original idea was suggested by his father (James Mill), John Stuart Mill actively supported a program of land re­form based upon confiscation by the state of the unearned in­creases in land values. In his Principles of Political Economy, Mill expounded the theory which subsequently became the stated purpose of the Land Tenure Reform Association founded in 1870. The proposal called for the gradual nationalization of land through a tax upon increases in valuation. A practical beginning was to be made by evaluating the whole of the land on a given date. Subsequent evaluations would be made periodically, and the assessors would estimate how much of the increase in value was due to individual improvements and how much due to com­munity activity such as increases in population and general im­provements. A general tax would then be levied transferring this gain to the state.

Mill was not the first to suggest the use of an inheritance tax. As we have noted, Thomas Paine had already mentioned it as a possibility. But the first formal mention of inheritance taxes was made by Jeremy Bentham in a brief essay published in 1795, in which he dealt with the problem of disposing of inheritances when no will existed. Inheritance taxes are distinctly modern. Their appearance corresponds clearly with the growth of democ­racy. Why this association should exist leads of course to a great amount of speculation. Are inheritance taxes clear evidence that the democratic ideal requires economic as well as political equal­ity, or are they merely the logical application of principles estab­lished by Adam Smith that taxes should be equal and levied upon those best able to pay? The answer to that question cannot be given definitely. Bentham claimed that the state could receive a revenue without reducing the legitimate income of anyone simply by preventing inheritance from going to any except immediate descendants in the case of persons who died without leaving a will. But Bentham went even farther. He claimed that the state should have an equal share in sums received with or without will by such close relatives as grandparents, uncles and aunts, and perhaps nephews and nieces. This source of revenue Bentham did not consider as a tax, and its chief advantage was its "un-burthensomeness." "For hardship depends on disappointment; disappointment upon expectation, and if the law of succession leaves him nothing, he will not expect anything." It was further argued that whatever may have been the original family basis of inheritance, the dispersal of the patriarchal family has reduced family consciousness to the immediate relatives. Later writers have developed the principle of state co-heirship—that is, the state a partner to every inheritance—but there is no evidence to show that Bentham had considered this idea. Nor did Bentham think of the state as having a responsibility for preventing the growth of large fortunes and bringing about a more equal distribution of wealth. Later socialistic writers were the first to offer this argument in defense of inheritance taxes.