This, the third and final instalment, appeared in The Standard, October 22, 1887:
THE DISTRIBUTION OF WEALTH.
Having reached the conclusion that indirect, or as the writer first
called it five years ago, "crooked" taxation is certain to produce
enormous inequality of wealth, that it is palpably and indisputably
unjust, and that it inevitably leads to that worst form of
inequality which involves the perpetual ownership of more than half
of the wealth of a country by less than the one-hundredth part of
its inhabitants, we are prepared to take up the next and final
question in our series.
What can be done to effect a more equal distribution of wealth, without diminishing its production?
Again let us waive the discussion of rent. Having purposely avoided all consideration of that tender subject, we will not take it up just now. Assuming that rent can rightfully be private property, and that the community is not to claim it, simply as rent — conceding all that the champions of private property in land claim — let us inquire what, nevertheless, remains to be done and ought to be done, in order to prevent the unjust use of government to the injury of the poor, and to check the artificial tendency toward the monopoly of wealth by a hundredth part of the population.
Neither let us enter into dispute with the believers in co-operation or state interference in the interest of labor. All that need be said just now is that no advocate of any of these theories can prove, by actual facts and figures, that the average laborer would be any better off for the adoption of his theory. He believes that all laborers would be benefited, of course, by the adoption of his favorite scheme; but he cannot prove it to the amount of one dollar. Why should not such friends or the laborer agree to make a beginning with a reform which they and every one else must admit is just and necessary, and which is easily proved, beyond all doubt, to benefit the laboring class? Why should not all unite first to let the laborer keep the money which he now earns before insisting upon schemes which may enable him to earn more, but which certainly cannot enable him to keep it without a reform in taxation? Why insist upon putting more money into a purse full of holes before stopping up the holes?
Some good men, especially among the clergy, insist strenuously upon the necessity of a moral reform among the people themselves as the only method by which they can be elevated. We agree that without a good foundation of moral principle no man can attain to any real good. But what is so helpful to this end as a good example in society and the state? And is not the first and best step toward such an example to be taken by ceasing to oppress and rob the poor?
Where there is a plain duty at hand it is worse than useless to postpone its performance for the sake of finding something else to be done which is not at all plain. "Let him that stole steal no more." That is a duty which he can and must perform instantly. Shall he say, "I will go on stealing until I am able to make restitution for all that I ever stolen?" That is the way in which many people deal with public duties. They admit that grievous wrongs exist which could be removed at once; but they refuse to raise a finger for their removal, because they think that they see other wrongs which cannot be so easily disposed of.
Here is a plain duty — to put an end to an obvious wrong. The answer to our great question is simple and indisputable. Abolish crooked taxation, and the current which now flows irresistibly toward inequality will instantly begin to flow toward equality. Put an end to a system under which a poor washerwoman pays more than 80% of all her savings, under the pretense of taxation, while a Stanford, a Mackay or a Carnegie pays only 3%. Substitute straight taxation for crooked; make every one pay in proportion to what he has, or ought to have, and not in proportion to what he never could have, and you will at least put an end to one influence which now inevitably and irresistibly tends to "make men poor, keep them poor, and drive them into pauperism."
A system of absolutely direct taxation under which each taxpayer should pay only his fair share, should pay it himself and should pay it only to the state and not to any private person, would do more to enrich the poor without impoverishing the rich than any other reform which has ever been taken on by any political party or benevolent society.
Practically, this is admitted by all who have studied the subject. No one has ever denied the justice of the demand for this reform. There has never been any answer to it, except that it is impossible to be attained. Of course, we must all admit that perfection cannot be attained in this or in anything else. Taxes cannot be laid in the precise proportion to a cent which absolute justice would require. But that is not the meaning of the objection. Protectionists like Mr. Ellis H. Roberts, and anti-protectionists like Mr. Atkinson, insist that every kind of tax distributes itself among consumers in proportion to their expenses in precisely the same manner as tariff and excise taxes.
But in this these gentlemen are entirely mistaken. The illustrations which they use only prove that many forms of taxation do distribute themselves in this way. It is true that all taxes upon production do so. A so-called "direct tax" on goods and chattels, on mortgages, debts and personal property of any kind, will distribute itself; as they correctly claim; and it will be paid in the proportion of eighty cents by the washerwoman and three cents by the railway king. But there are taxes which cannot be thus shifted. Every economic writer who has studied the question agrees upon these; but they need no authority to make the matter clear. Common sense shows that they cannot be collected by the first taxpayer from anybody else.
Only two such taxes, however, are known, which could possibly be made to produce sufficient revenue for the support of government. These are the income tax and the tax on land alone, excluding all improvements. We will not waste time in explaining why all other available taxes, even though usually called direct, are really indirect, and distribute themselves among consumers, because everybody concedes the fact. But we will consider the two taxes mentioned.
The income tax cannot be shifted by the taxpayer. No economic writer pretends that it can be; but it has suited the purposes of those who have a selfish interest in maintaining the present system to assert of late years that it is shifted, like most other taxes. If the income of any one class of producers should be taxed, while leaving others untaxed, it is true that such a tax would be partly shifted; because if, for instance, the income of all bakers should be taxed, while grocers' incomes were not taxed, many bakers would quit the business and become grocers, and the bread buyers would have fewer bakers from whom to buy, so that the bakers who remained in the business, having less competition, could and would raise their prices sufficiently to give them an extra profit, sufficient to pay their income tax. But if grocers and every one else should pay income tax, no one could gain anything by changing his occupation; and if any one attempted to raise his prices, so as to recover his income tax, his neighbors would undersell him, and he would lose his whole trade.
Be this as it may, a fatal objection to the income tax is that no means have ever been devised by which it can be justly assessed and honestly collected. After many years' experience in detecting frauds and perfecting the machinery of collection, with the aid of arbitrary powers of examination and assessment, with the immense advantage of a compact population, in which inquiry into each man's business is comparatively easy, and with many other facilities which American officials can never have, it is nevertheless universally admitted that European officials fail to collect the income tax in full, or to assess it fairly. It is a tax which is paid in full by strictly honest men, but by no one else. It offers, therefore, a premium to fraud and perjury; and the experience of all nations and of all history shows that taxes which can be thus evaded are an infallible source of fraud and demoralization.
A progressive income tax has long been a favorite plan of the German socialists, and it has been taken up by shallow politicians in England as well as by still shallower ones in America. No doubt, if it could be honestly collected, it would furnish an instrument by which all inequalities of wealth could be entirely done away with. But then the same end could be reached by converting the whole world into monks and nuns. And it would be rather easier to do that than to secure the honest payment of each man's share under a progressive income tax. Any income tax is difficult enough to collect, but a progressive income tax is ten times more easily evaded and more impracticable of enforcement. A uniform income tax can be to a large extent collected by requiring all corporations to deduct it from their payments of dividends and interest, and such payments are among the most important contributions under that tax. But if the tax is to be 5% on the first $5,000, 10% on the next, 15% on the next, and so on until it reaches 50% or 75%, as some propose, it would be impossible to collect anything through corporations, because no one would allow more stock or bonds to stand in his name than would produce an income of $5,000; and so the treasury would never collect more than 5% from any one. If, on the other hand, the highest tax should be collected from dividends and interest, say 50%, leaving those who ought to pay less to apply for a refund, either the whole must be kept by the state, which would simply extinguish corporations, or all the excess over 5% would be applied for by persons who would claim to be owners of the stock and bonds, and to have no income in excess of $5,000. In short, in one way or the other the state would lose all the advantages which it now gains by collecting through the medium of corporations, and would be thrown back upon the old method of catechising each taxpayer separately and taxing him for so much as he could not swear out of. Meantime, the taxpayer whose conscience would not allow him to swear to a point blank lie would divide his income among his relations and friends, so as to bring his own income within the lowest limit, trusting in their good faith to return him the money when he had sworn off for the year. But, supposing that all these resources failed, how long would the man whose income was a million a year and who under this plan would be taxed $500,000, have to wait before he could find an official open to a bribe of $100,000 a year to let him escape? The whole scheme is one of those wild theories, impossible in practice, which moonstruck minds occupy themselves in spinning.
A succession tax — that is, a tax upon property passing from a dead man to a living person — is a strictly direct tax, which cannot be shifted; and, if moderate in amount, it can be collected through probate courts with tolerable ease and certainty. If raised to an oppressive figure it will be evaded by death bed transfers. But if kept down to such proportion as is collectable it will not produce a quarter of the amount needed for governmental purposes. It need not, therefore, be considered except as a supplementary tax in case of urgent necessity.
We come round, therefore, to the tax on land values as the only tax which, while producing enough to supply the public need, is incapable of being shifted upon the consumer, and so transferred from property to labor. We have reached this conclusion by a course of reasoning which has never involved any disputed question as to the right of private property in land, the justice of rent or the right of private owners to collect and keep all the rent which they can get. We have seen that the present system of taxation is a wholesale robbery of the poor, which, nevertheless, does not materially benefit the rich; its final effect being to leave the rich in about the same condition as they would be under an impartial system of taxation, while it crushes the poor into the earth. Unless, therefore, the more wealthy classes take a positive satisfaction in seeing the mass of men miserable, there is no reason why they should oppose a system of fair and equal taxation. The poor man might truly say to his rich neighbor that this system "not enriches him, but leaves me poor indeed." We have seen that, by the general consent of all who have studied the subject, there are practically only two methods of taxation sufficient for the public needs which are not open to at least half the objections which apply to the existing system, and no others which are not open to all the objections which apply to our state and local systems. We have seen that one of these two methods substitutes a tax on honesty for a tax on poverty. What objections can be raised to the only remaining alternative — a tax on land values?
These objections have been somewhat fully considered in another paper. It is not necessary now to go into them in detail; but it is necessary to meet a few of them sufficiently to show that, in any event, the faults which are alleged to lie in this mode of taxation are not so great as those which make all others so injurious and unjust.
The first objection is that the land tax could be shifted just as readily as any other tax, and therefore that it would finally fall upon the consumer, exactly as the tax on whisky, tobacco or woolen cloth does.
If this were true, it would still be an excellent thing to adopt this tax, for it could only be true in case the same fact were true of all other forms of taxation; and this tax is so easily collected and so much more easy to assess fairly than any other tax which has ever been tried that its adoption would save the people a hundred millions every year in the immediate reduction of needless taxes, six or seven hundred millions in the abolition of the system of private profit which is maintained under the tariff and internal revenue taxes, and several millions in the abolition of many thousand superfluous federal tax collecting offices. It would also release so many branches of industry from the restraints which now hamper them as to increase the productive power of the nation at the very least 20%, which means an addition of two thousand millions to the wealth of the whole people every year. All this we could demonstrate if it were worth while to take up the space. But it is all conceded by the most resolute opponents of the land tax, other than the protectionists. And even they will concede that an immense part of these advantages could be gained through a land tax, provided it were accompanied by a system of bounties to domestic mine owners, wool growers, ship owners and steel makers. We do not dwell upon these points, however, because the question now at issue relates to the distribution of wealth, rather than to its production. If the land tax can be distributed among consumers like other taxes, its adoption would have comparatively small effect in changing the distribution of wealth, certainly no more than would the adoption of any other form of nominally direct taxation.
But there is no truth in this objection. If it were well founded, no one would be more in favor of this form of taxation than the very persons who are most fiercely opposed to it; for they generally belong to a class which would gain by the adoption of any such tax, provided it could be shifted off the shoulders of the wealthy taxpayer. It is precisely because they know that it cannot be shifted, that the land owner must pay it, and that he cannot add it to his rent or to the price of the produce of his land, that they are so bitterly opposed to it. Every writer upon economic subjects, since the days of Ricardo, and even before him, agrees with John Stuart Mill that a tax upon the value or rent of land cannot be shifted. Every one who will study the subject for himself, with an unprejudiced mind, must come to the same conclusion. Land is something which cannot be made by man. Even Holland does not contain a speck of land which is man-made, although it consists largely of that which has been made habitable by man. Men gathered earth from the dry land and piled up dikes against the sea, and then, drawing off the water from the soil, made it fertile and useful; but no man really made an inch of land. By taxing the land and its natural contents at their value in the state in which they were left by nature, it is clear that no discouragement can be put upon the production of land, because land is not produced. If the landlord is thus taxed, he cannot increase his rent, because he is already getting all the rent which any one can afford to pay for the land. If he demands more than this in order to pay his taxes, the tenant will be forced to quit the land, and then it will bring the landlord no rent whatever, while he will be obliged to pay the tax all the same. Thus his only resource for the payment of the tax is to continue to rent the land at the same price as before, and so he cannot collect the tax from anybody. If he works the land himself he cannot add the tax to the price of its productions, for he is already getting as high a price as competition will allow. If he refuses to produce because of the tax he would be still forced to pay the tax without getting any compensation for it. If he refuses to pay, the state will forthwith seize his land and hire it out to some one who will pay the tax and will use the land in such manner as to make it produce the tax and something more. If he wants to raise more money out of the land in order to meet the tax, there is but one way in which he can do it. He must produce more, not less, and in doing so he will make the things produced more plentiful, and, therefore, cheaper. Thus he will be driven to employ more labor, thus raising wages, while he will increase production, thus lowering prices. The laborer who owns no land will thus gain at both ends; his wages will be increased, while his expenses will be lessened.
The absurdity of supposing that the land tax can be shifted may be easily illustrated. Take a piece of land from which only 20 bushels of wheat per acre can be extracted. Suppose this wheat to sell, as it does now, for less than $14 on the farm. Suppose that the owner gets a rent of $5 an acre, which he cannot do; but still, suppose he does. Then imagine him taxed $4 an acre on this land. He raises his rent to $9. Suppose he gets even this. The state, the next year, raises his tax to $9. Can he raise his rent to $14? What inducement would any farmer have to work the land at that price? Would not the landlord have either to pay the tax out of his own pocket or else to give up the land entirely? And, in the latter case, would not his tenant hire it from the state and pay to the state what he used to pay to the landlord?
There is not then the slightest doubt that a pure land tax would fall solely upon land owners, and could not in any way be recovered by them from any other class. If, then, all the people were land owners to an equal amount this would be unquestionably the best tax and one which would most effectually produce the good results which we have seen would follow the laying of a perfectly uniform tax. But the people are not all land owners, and hardly two of them own precisely the same amount or value in land. The bulk of the value of land is held by the classes whose income exceeds $1,000. Few indeed of the class whose income is less than this hold any considerable amount of land free from debt, and if they are in debt their creditors are the real owners of the land to the amount of their debts. Consequently, the land tax would not at present fall to any appreciable extent upon 12,000,000 of the 17,000,000 persons engaged in work of all kinds, while the larger share of it would fall upon less than 500,000 persons. As to the 12,000,000, the effect of a single land tax would at first be exactly as beneficial as the total abolition of all taxes, for that is what it would amount to in their case. As we shall see presently, they would gradually become taxpayers as their prosperity increased. As to at least 4,000,000 more, their share of the land tax would be always much smaller than the taxes which, directly or indirectly, they now pay. The burden of the change would fall mainly upon 100,000 or at most 200,000 persons.
Let us make a rough estimate of probable results. In doing this it must never be forgotten that more than half the present burden of taxation is wholly unnecessary, and would be entirely done away with under a land tax. That fact alone explains why it would be possible to take the burden entirely off the shoulders of the majority, without increasing the burden which would be imposed upon the minority under an equal distribution of the present taxes. If Smith and Jones are each paying $100 a year in taxes and the government concludes to be content with half the amount, Smith is really no worse off than he was before, if he has to pay all the tax, and Jones is allowed to go free. In the next place, it must be remembered that, under a single land tax, the production of the country would rapidly increase, and therefore that the wealthy classes themselves would have a much larger income. We have estimated this increase at 20% for the whole country, and there is no reason to suppose that the richer classes would not have their full share of this increase.
Now, referring to table No. 3, we have estimated the present income of the 107,000 wealthy persons at $1,550,000,000. Add 20% to this and it would be $l,860,000,000. Now suppose that all the taxes were collected from these classes alone, which is not a possible thing; still, let us suppose it. The taxes would be reduced to $600,000,000, and they still have $1,260,000,000 left. In table No. 7 it is shown that the same classes ought at the very least to pay, even under reduced taxation, assessed on all kinds of property, $191,355,000. But, the present tax burden being more than double that upon which this computation is made, these classes ought now to pay over $400,000,000. This would leave them only $1,150,000,000, so that, collectively, they would actually be far better off under a system of taxation which nominally threw the whole burden upon them than they are now.
To be quite fair, however, we must point out that we are only dealing with these classes collectively. If they were subdivided into two classes, one holding land for speculation, and the other using it for practical purposes, it would then appear that the former class would be deprived of seven-eighths of its income, while the latter class would gain all the advantage. It is not necessary or proper, however, to make any such division. Comparatively few belong to the class who have no other source of income than ground rents or speculative land values. The large majority, even of rich men, have interests on both sides; and, under the land tax system, they would gain on the one hand all that they would lose on the other.
The number of persons who would sustain any real loss, therefore, by the abolition of all taxes except on land values is so small as to be unworthy of consideration. The question of compensation is not, in the individual judgment of the writer, an important one, provided it were possible to establish a tribunal capable of dealing with it on the basis of exact justice. Assessed upon the same principles which usually govern assessments for local improvements — deducting from the award of damages the value of the probable benefits, and confining the award to the actual loss sustained by the present generation, which is all or nearly all that ought to be allowed — and making no allowance for more than the actual cost of the land to the particular owner who claims compensation — it is probable that the award could not exceed the benefit which the community would gain within the next five or ten years, at the very outside. The real difficulty is the practical impossibility of securing such a tribunal and of making an honest assessment.
But there is no precedent in history for granting such compensation. The classes which now insist upon it are the very ones who have scoffed at the idea when changing the tax laws to suit their own interests. They have unhesitatingly ruined thousands of merchants and destroyed vast industries which furnished bread to hundreds of thousands. If millions, indeed, have not been starved in consequence of the selfish changes in taxation effected by these classes, no thanks are due to them. The protective tariffs which they have befooled the country into accepting were intended to destroy the mercantile business, the shipping and the foreign trade of American citizens, and to starve foreign workmen at their forges and looms. Let them drink a little of their own medicine. It is yet quite within their power by offering a fair compromise to secure compensation; but, like the Irish landlords, they will undoubtedly resist to the last, and so be ultimately compelled to submit without any compensation whatever.
Moreover, how could compensation be given, and for what? What is the ground upon which compensation is asked? For taking away the title to land? Under the proposed system, the last thing which the state would want to do would be to deprive any owner of his title to land. For changing the methods of taxation? It cannot be denied that the existing methods are grossly unjust, and ought to be changed. For abolishing a method which takes from the poor ten times as much as from the rich, and substituting a method which takes from the rich five times as much as from the poor? If compensation is to be allowed to the rich for doing this in the future, compensation must certainly be allowed to the poor for doing a worse thing to them in the past and the present. As those who have been first wronged are entitled to the first compensation, and as it would absorb all the surplus taxes which could be collected in the next century, it is a rather dangerous thing to open the question at all. If there is to be a statute of limitations as to the past, there must be a similar limitation as to the future. But the whole question of compensation is not a practical one, and is never likely to be. And its introduction here is a digression indulged in to meet the objections which would be raised in the minds of many readers.
Having considered the case of the rich and found that, upon the whole, they would not be at all injured by an exclusive land tax, let us consider the case of the poor. Table No. 6 shows that if all taxes were removed the vast mass of 16,000,000 workers, constituting more than nine-tenths of the community, and earning on an average less than $400 a year, would have it in their power, with no greater economy than they now use, to save about twelve hundred millions every year. Supposing that, as they gradually increased their ownership of land, they paid one-third of the whole land tax, which is quite probable, this would still leave them one thousand millions untouched, Table No. 7 shows that if it were possible to tax the actual property of rich and poor alike, including personal as well as real, the tax upon the same classes would amount to $260,000,000, and their net savings to $837,000,000. The land tax would, therefore, work more beneficially for the poor than an absolutely equal tax upon all property, if that could possibly be collected.
It will be naturally asked, "Why should not taxation be exactly equal, and the poor pay precisely as much in proportion to their actual possessions as the rich? Why should a system of taxation which is unfair to the poor be replaced by one which is unfair to the rich?"
To answer this reasonable question by showing that this apparently unequal tax is not really unequal, and that it does not bear more severely upon any one class than upon all others, would require us to enter into the great controversy concerning rent, which has thus far been rigorously excluded from the field of inquiry. Adhering to this resolution, let us submit for the present to the erroneous assumption that the question is based upon fact. Supposing then that the land tax would be unfair to the rich, what tax can be put in its place which will not be either still more unfair to them or else far more unfair to the poor? And if one or the other class must suffer some injustice, shall it be the rich or the poor? Shall we, in order to prevent the rich from being taxed one dollar too much, tax the poor five dollars too much? Shall we, rather than take from the rich one-tenth of their surplus in excess of what is strictly just, strip the poor of their last dollar and take the bread out of their mouths? That is all the choice which is left to us.
It has already been shown that, by the consent of all who have studied the subject, there are only three or four methods of taxation which are not really indirect, and that all indirect taxes bear with tremendous hardship and injustice upon the poor. Among strictly direct forms of taxation none are worth mentioning except the land tax, the income tax and the succession tax. Now the succession tax could only be collected in cases where the intervention of a court was required to appoint an executor or administrator or to enable an heir to enforce his title to land. Such intervention is never required in cases of poverty. It is often quite needless, even where the person who has died has left considerable property. Estates worth several thousand dollars are constantly settled by agreement among all parties interested, without any appeal to the probate court. Not one-tenth, probably not one-twentieth of the estates of deceased persons belonging to the laboring classes are brought into court. But the estates of wealthy persons almost invariably are, and it would be easy to enforce a law compelling all to be thus settled. Consequently a succession tax would be effectually collected from the rich and could not be collected at all from the poor. The income tax never has been collected from the very poor; and in this country it would be impossible to collect it from any one whose income was less than $600, if indeed it could be enforced so far as that. If adopted, there can be no doubt that all incomes below $1,000 would be exempted. Under the income tax of war times the exemption was at first $600 and house rent, and was soon raised to $2,000 and house rent. Either exemption would concentrate the tax upon the rich in a degree far exceeding the effect of the land tax.
The question is, therefore, sufficiently answered even upon the unfounded assumption that the land tax is some what unfair to the rich. It is far less unfair than any other direct tax which any nation has ever tried. And in this world, as our practical friends are always reminding us, we must be content with practical results. It would never do to shock the delicate nerves of our protectionist friends by proposing an ideally perfect system.
But still, without touching the question of rent, it can be shown that the land tax would steadily work toward that ideal of perfectly equal taxation in precise proportion to the wealth of rich and poor alike which has been so impossible of attainment under other methods. While at first such a tax would fall somewhat disproportionately upon the richer classes who are now practically the owners of the soil, either directly or by mortgage, a great change would rapidly take place. The poorer classes would save wealth at an unprecedented rate, and must invest these savings. What investment is so tempting to the laboring man as a house and home? Almost unlimited quantities of land would under the operation of the land tax be thrown open for settlement, with no price to be paid except the annual tax. Not less than three-fourths of the laborers would take a little land and build themselves homes out of their savings. Instead of paying interest to a mortgagee as at present they would pay the same amount in taxes to the state. Indeed, how is it possible to make investments suited to the wants of the laboring class without including land? Houses, mortgages, railroad shares, mining and manufacturing shares all represent land as well as improvements on the land or personal property. The man who saves anything must become a holder of land. And this virtual ownership of land runs in pretty equal proportions through all kinds of investments and through all classes of investors. Under the present system multitudes of nominal land owners are not such in reality, because their land is mortgaged. But under a heavy land tax there could be no mortgages on the mere land as the security would be undermined. The vast majority of those who are now mere tenants or mortgagors would become real land holders, paying direct taxes to the state in a wonderfully exact proportion to their savings.
Let us now briefly review the whole case as here presented:
There are many causes at work to produce an unequal distribution of wealth among individuals. Most of these causes could not be removed without destroying the motives which now stimulate men to the production of wealth. Socialists assert that other motives could be substituted which would be equally effectual; but, while this may be true, it is certain that it has never been proved upon any scale large enough to make the experiment of turning society upside down safe enough to meet with favor for many years to come if ever.
But there is a cause at work which could be removed without any such consequences, which not only tends to produce inequality of wealth between individuals, but also tends irresistibly to concentrate the greater part of the national wealth in the hands of less than the one-hundredth part of the population. All the other causes now at work could not produce this result, as is proved by the fact that if this one cause were removed the tendency toward the wider diffusion of wealth would make it certain that a vast majority of the national wealth would be speedily owned by a majority of the people if they continued to be as economical as they now are.
This perennial source of inequality is indirect taxation.
While much may be said and has been said in favor of inequality of wealth as between individuals, especially on the ground that wealth is used as a tool for the creation of new wealth, and thus for the advancement of civilization in the whole community, and that it is necessary that such a tool should be placed in the hands of men who can use it effectually, nothing sensible has ever been said in favor of a system under which two-thirds of the property of a nation is placed in the hands of a hundredth part of the people. On the contrary, all wise men appreciate the importance of having a majority of the country's wealth in the hands of a majority of its people.
Nobody has a word to say in favor of indirect taxation except that it is more easily collected than direct taxes. That is no recommendation at all, except to those who want to deceive and defraud the people. Indirect taxes are easy to collect because the mass of the people do not know what they are paying, and therefore are not particular as to what becomes of the money. Under direct taxation the people know what they pay, and insist upon knowing what is done with it.
Indirect taxation then should be absolutely abolished; and it must be before it can be possible to change the tendency of wealth to concentrate itself into a few hands. All other schemes for the redress of the condition of the poor must fail so long as this chief source of oppression and pauperization remains untouched.
But indirect taxation can only be abolished by substituting direct taxation; and there are but three forms of direct taxation which could be made to produce the necessary revenue — the income tax, the succession tax and the land tax on the annual rental value of the bare land, irrespective of improvements. The income tax is impracticable, because it is impossible in a free country to enforce the stringent inquisition into private affairs which would be necessary in order to ascertain the truth about incomes and because, even under despotic rule, it has always been and must always be impossible to ascertain that truth accurately. This tax must, therefore, always bear twice or thrice as heavily upon the honest as upon the dishonest and unscrupulous. Moreover, this tax unfairly makes the man whose labor gains a thousand dollars pay just as much as the man who draws a thousand dollars from invested wealth. It is, therefore, unjust as well as impracticable; although it is much less unjust than indirect taxation of any kind.
The succession tax would have to be made so heavy, in order to supply the needs of the state, that it would offer an enormous temptation to evasion, and it could largely be evaded by deathbed transfers. If these, too, were taxed, there would have to be a general tax on transfers, and this would lead us back to another form of indirect taxation, as it would amount to a tax on sales, one of the very worst taxes which human perversity ever devised.
The land tax is practicable, simple, direct, easy to assess with equality and easy to collect with less than one-quarter of the present official machinery. The rental value of land in its unimproved condition is usually one of the easiest things to learn. It may be difficult to ascertain in some cases, but it will not present a hundredth part of the difficulties attendant upon any other system. This tax cannot be evaded; it cannot be shifted upon the shoulders of the poor; it will not interfere in the slightest degree with the production of wealth; on the contrary, it will powerfully tend to encourage such production.
Under a land tax the rich would pay no more than they would now pay if taxes on the present basis could be fairly divided according to property; the middling classes, earning from $1,000 to $5,000, would pay much less than they do now, and nine-tenths of the people would at first pay nothing or next to nothing. As the condition of the poorer classes improved, they would rise into the tax paying class; they would possess land having some value, instead of renting it from private landlords, and they would begin to pay taxes to the state, instead of paying rent or mortgage interest. But they would pay no more in taxes than they now do in rent; so they would be no worse off for paying taxes, and soon the great body of the people would become small taxpayers. Then they would look sharply after public expenses, and insist upon honesty and economy in the expenditure of every dollar.
Whereas, under the present system the annual savings of all the unskilled laborers of the country, including the small farmers, do not probably amount to $140,000,000, and would not amount in 30 years to one-tenth of the estimated wealth of the nation, their savings under the single tax upon land values would amount to over $300,000,000 a year, and would in 30 years equal six-tenths of the present national wealth, even if their actual money income did not increase. But, as the abolition of all taxes on production would certainly lead to an increase of not less than 20% in the annual production, of which the laborers would gain, at the very least, their full share, this tax reform would imply an addition to their earnings of over $900,000,000 a year, and thus would enable them to live 20% more comfortably than they now do, and yet to save fully $1,000,000,000 every year. If they were thus economical, they would own half the national wealth within one generation and three-fourths of it within two generations. No special skill would be required to bring this about; nothing but ordinary industry and moderate economy.
Thus, without having said one word upon the abstract theory of rent, and without questioning the right of private property in land, we arrive at the conclusion that no other tax is so fair, so just, so equal, so honestly collectable and so beneficial to the poor without doing any wrong to the rich, as a tax on the rental value of land without assessing its improvements. We find that the adoption of this method of taxation offers a surer prospect for the relief of the poor from excessive burdens than any other scheme yet proposed which can be verified by figures, and that it opens the way to a wider diffusion and more equal distribution of wealth than is possible under any other plan of social reform which does not involve the destruction of society as it exists, and the tearing up of our existing civilization by the roots.