The Single Tax

The Single Tax

In America the idea of a single tax upon land was revived by Henry George. The Physiocrats, as we have seen, were the first to suggest and explain such a tax. Of course, the economic basis upon which they justified the single tax differed greatly from that of Henry George. The motives which prompted its use were likewise different. With the Physiocrats a single tax was the logical consequence of a belief that the earnings of land were the only true source of wealth and that this produit net was secured by the landlords. Such a tax, therefore, levied upon a surplus interfered neither with capital expenditure nor wages. Private property in land they believed was the cornerstone of national economic life. Henry George, however, was impressed first of all with the unearned character of the return on land; a return made possible by social processes rather than individual labor, and by the harmful economic effects of private ownership of land. The single tax therefore was a means of taxing a return for which no one had worked, and eventually, George believed, it would trans­fer all land from private to public ownership.

Between the 18th century when the Physiocrats gave their theories to the world, and. the latter part of the 19th century when Henry George took up his pen to advocate the single tax, a number of economists and philosophers suggested similar ideas. There was. a professor at the University of Aberdeen named Ogilvie, who published an anonymous pamphlet in, which a plan was outlined for confiscating, the entire value of the. soil not due to improvements.. Tom Paine- also advised a similar procedure. John. Stuart Mill offered an extensive program for reclaiming land values through taxation; and. Herbert Spencer made a similar proposal, only to recant in a later essay. But it was Henry George who appeared at a time when the common man; would be receptive to such ideas: Perhaps it was because Henry George held' out such extravagant hopes for the benefits of the single tax that he received greater public acclaim, than his predecessors. No doubt his belief that poverty could be abolished by the rela­tively simple means of a tax on land had something to do with his popularity. Moreover none of the previous sponsors of this idea save the Physiocrats, used political means to popularize the tax.

George, as a result of his own experience, became aware of the great extremes of wealth and poverty which seemed to him to increase as civilization advanced. He refused to accept the ideas of Malthus and Ricardo that this was the natural consequence of population outrunning the means of subsistence. Neither did he hold much respect for the Marxian explanation that the in­creasing poverty of the working classes was due to the exploita­tion of the wage-earner by the capitalist, for both the worker and the capitalist seemed to George to be the victims of the landlord. He believed that labor and capital were merely different forms of the same thing—human effort. Wages and the return on capi­tal, therefore, tend to be equal, he said, rising and falling together. Furthermore the advance of civilization is marked by the increase in society's ability to produce the substance of human welfare, but the wage-earner does not share in this increase proportionally, for the increased production is taken by the landlord in the form of rent. Without work landowners reap the benefits of the con­tributions of civilization and the labor of man. Therefore, it is imperative, said George, that private property in land should be taxed out of existence. The single tax would not only accomplish this end but it would also help defray the expenses of the state and other forms of taxation would become unnecessary. How is this to be done? The government needs only to levy a tax upon land sufficiently high to confiscate all rent. Ownership might con­tinue undisturbed, but the owner would secure no benefit and land might just as well belong to the state.

Critics of Henry George's plan of reform are numerous, and many of the criticisms are hard to answer satisfactorily in spite of the plausibility of his plan. Land today is acquired mainly through purchase, and ownership of land is really no different from the ownership of capital. To confiscate the one and not the other would be quite unjust. Then what of decreases in land value? Will the owner be reimbursed for any loss he suffers? Rent is no doubt due to the increase in population and other social processes, but the value of other things—labor and capital for example—is increased by similar social activity. If justice were applied, these increases would likewise be taxed. With land, how­ever, the increases in value and the action of society in producing those increases, and the obvious absence of labor, single out rent and increases in land value as special and particularly dangerous instances of "unearned increment." They provide a most prom­inent and vulnerable point for anyone bent upon attacking the present economic system.

Although no outstanding economist has constructed, a general theory of taxation which has found its way into general practice, the problems of taxation and incidentally of government finance continue to mount. The most extensive work in analyzing the principles and practices of contemporary taxation is that done by Professor E. R. A. Seligman of Columbia University. His signifi­cant suggestions for reform of the tax structure have not, how­ever, been widely followed in actual taxation practice.

Under the staggering burden of billions of dollars in debt, and the necessity of spending added billions, the search for new sources of taxation goes on apace; But why should it be so diffi­cult to establish sufficient taxes to pay the expenses of govern­ment? Explanations are not far to seek. During recent years the use of taxation to equalize wealth in addition to providing revenue* for government expenditure has increased taxes far be­yond the amount necessary to run the government. Payroll taxes, processing taxes, surplus profits taxes, undivided profits taxes, and a host of others are quite obviously means of taking money from one group of society in order to give added benefits to another.

Underlying this system of taxation as well as the crea­tion of public debt in the past decade is the economic belief that business can be improved and prosperity restored by providing people in the low income groups with ample purchasing power to buy the products which industry is able to produce. Conse­quently, surpluses which might have been available to pay added government expense have already been eliminated by previous taxation. Furthermore, the old doctrine that only those best able to pay should be taxed has served to free the lower income group until recently from income taxes. But this group has been ex­cessively burdened by a host of indirect taxes, sometimes known as "hidden" taxes. It has been estimated that more than 30 cents out of every consumer's dollar goes to pay indirect taxes. With old sources of taxation resentful and impoverished and new sources either already claimed by hidden taxes or protected by social philosophy, it is difficult to raise necessary revenue. Finally, it must be acknowledged that taxation in a democratic nation is always difficult. Public approval is earned by appropriations, not by taxation, therefore legislators refuse to vote taxes on the inter­ests they represent, but are always willing to spend money in their behalf.