Single Tax as a fiscal policy
BY L. B. SCHWARTZ
of the St. Paul Bar
"OUR present taxing system,” the late Judge Jaggard of the Supreme Court of Minnesota, once exclaimed, “is the most asinine imaginable.” A strong statement that! And yet any student of taxation will tell you that it might be applied not only to the system in Minnesota to which the judge was referring, but to the fiscal policy of every state in the Union.
Benjamin Harrison, President of the United States as well as eminent constitutional lawyer, jokingly suggested as the only reform possible, an invitation to the rich men of the country to come forward and generously hand over all their property to the government. Every remedy seems to have been suggested from that of President Harrison to that recently made by a self styled “economist,” who urged that all property should be taxed, as the true principle, and to carry it out, that any property wilfully omitted from the taxpayers’ sworn statement should be unceremoniously confiscated by the state.
Wonderful, is it not? Pick out almost any of us, and ask him how he would manage it, if it were his own private business, and I would wager dollars to doughnuts, that he could in a jiffy have a system answering every canon of taxation and every dictate of justice. And yet there we stand, 90,000,000 of the most progressive people on earth (by our own admission), and what does Shakspere say -- “in apprehension so like gods?” — and heirs to all the wisdom of the gods that went before us, able to avail ourselves of their mistakes and experiences from hoary old Egypt’s time up to our very own, tinkering with the problem in over forty independent experimental stations, and yet, unable to evolve a better system of raising our public revenues than one characterized and generally admitted to be asinine.
Now what are the canons of taxation? The economists tell us—but let us not rely on what others tell us. What, shall another tell us how to run our own business? We, all the people, want to do the right thing, don’t we? So let us ourselves evolve a system which will do the right thing by all of us. What requisites, then, must a system of taxation have in order that it may deal justly with all of us and with each of us.
Well, first, it must be a just tax. But what is a just tax?
Qualification 1. A just tax must not have the effect of taking property from one of us and transferring it to another’s pockets; and conversely, it must not take something belonging to all of us and transfer it to one of us, nor take from one of us more than his share.
Qualification 2. A just tax should be certain, so that it shall not offer any incentive to graft and corruption, to injustice, and so that each one of us should be able to see that it works justly.
Qualification 3. A just tax should take from the citizen in proportion to the benefits he receives, value for value given, and no more.
Qualification 4. A just tax should not be oppressive, nor kill nor drive away the goose that lays the golden eggs.
Qualification 5. A just tax should be easily ascertainable and collectible, or inexpensive, as the expense also falls on the citizens.
Qualification 6. A just tax should stay put,-—one that cannot be shifted; for if the one paying it can shift it by adding the tax to the price of the article taxed, it will finally occur that some will be enabled to shift the whole burden to the shoulders of others.
Here I pause, when some “economist” cries out, “Oh, but you have left out the most important canon; to wit, that in order to be just, the tax should fall as equally as possible on all the members of the community, and that this merely means that each ought to pay according to his ability."
That sounds well, but let us see. Just imagine an office building, one of your 45-story modern sky scrapers, owned by its tenants in common. Now you have each tenant occupying a certain space. Its heating, gas, and water plants are its public utilities. Its elevator service is its traction system. It has its police and health department in its janitors. It perhaps has its private fire department, and possibly its own private hospital in its sick and resting rooms. A complete little government or city in itself. Now suppose you go to those tenants and ask them to raise the revenues for the support of that building by a tax, what would they call assessing each other equally? Say it costs $20,000 per annum to run that building, would they divide the expense among its two hundred tenants, assessing each $100? Or can you imagine them assessing each other according to their ability to pay, or the amount of business they did? Not if they were sane. What then? Manifestly they would assess each tenant according to the value of the space he occupied in that building. That, each would instinctively recognize as the just tax, as the one that treated all with equal favor, — equally, equitably, and justly. That tax or assessment would be easily ascertainable and collectible, would stay put, and could not be shifted from one tenant to another. It would take from each a value that belonged to all, and from no one, a value belonging to him alone. It would entail no corruption; for each would know how much space he occupies and the value of that space. It would be inexpensive, as one official could assess and collect all of it. It would not be oppressive, for you could not collect more than the value of the space each occupied; and if a tenant paid less than that value, other tenants would object to his taking part of a value that belonged to all for his own private pocket. If the amount collected was more than was needed, the surplus would be put in the public treasury for the benefit of all the tenants; and if they desired, they might with it add a library or any other improvement in the building that would add to their common use or enjoyment; or they might, if they desired, grant a pension out of the surplus to such tenants as were disabled in that building.
Suppose the tenants should, however, adopt your system of making each pay according to his financial ability. What would happen? Why the same thing that is happening wherever it is tried. How would you gauge the tenant’s ability to pay? Well, as we do now, by his sworn returns, of all his property, money in bank, etc. Second, by the kind of clothes and furniture he had. Third, by a system of spies prying into the private affairs of each tenant. Fourth, perhaps, by making each tenant pay a tax on everything he bought outside of the building. (This would, of course, serve the double purpose of raising revenue, and “protecting" the tenants.) Fifth, by an income and inheritance tax; and lastly, by assessing each tenant, in front of whose door you had repaired the hallway, so that tenants walking in and out of his office should not break their necks.
The result would be as follows: Most of the tenants would become perjurers, and swear they were paupers. The system of spies, euphemistically termed deputy assessors, would be rather expensive. The temptation to use bribery and show favoritism would prevail, as each tenant would try to get as low an assessment as possible. The more cunning and able who could control the election of assessor would pay less, and the weaker and honest, more. Soon you would have a “Boss,” who would by promises and favors control the election. The tenants, who like the farmers, must keep their property in full view, would get the worst end of the bargain, while the bankers and brokers who could conceal their assets, the best end of it. The tenants selling goods would add their assessment to their expense, and so shift the tax to the purchasing tenants, and so no one could tell who was actually paying the assessment. Some of the tenants would soon engage in smuggling in goods to evade the "protective” tax. Incomes and inheritances would be concealed as much as possible, the honest and the guileless alone paying their share. You would have a premium on crookedness and a fine on honesty. The tenants would be discouraged from buying good clothes and furniture, besides their purchasing power being diminished by the tax; and they would fight like steers, to keep the defective walk in front of their door from being repaired. Some of the more farsighted tenants would pre-empt as much space as they could get, and sublet to others as they came in, holding some of the space for a rise in value. Soon some of the tenants would discover that they did not need to work, that it paid better to sit back and let the other tenants work, and just pay them rent. This rent would of course go up with every increase in the prosperity of the working tenants, so that no matter what the working tenants produced, the increased rent would absorb it all. With every new tenant increasing the value of space in the building, and the space lords getting more rent than they could use, they would then loan it back to the other tenants as capital, and in the form of interest still further deplete the wealth of the working tenants. And why any sensible tenants should go to all that expense, trouble, and complication, when by assessing each according to the space each occupied it could all be avoided, is beyond the comprehension of a sane mind.
Yet is not that exactly what we, all of us, tenants in common of mother earth, — of city, county, state, and nation, — are doing? Here are a thousand and one proposals, a very babble of tongues, — tariff for revenue and tariff for protection, income, inheritance taxes, direct and indirect tax, — and there is the one plain thing to do, so evident to the single taxer, and yet all others seemingly unable to grasp the thought. For the single tax is nothing more nor less than this, — abolish all other taxes, tariffs, and assessments. Instead assess yourselves according to the value of the space you occupy.
Here some one objects, “Would you put all taxes on that little farm, or that little home, and exempt the stocks and bonds of the rich and the stock of the department store?” My answer can only be, that if that were the effect of the single tax, all the “interests” in the country would be clamoring for it, instead of fighting it tooth and nail, as they are doing in Oregon, Washington, Missouri, and Ohio. In the last state, at its recent constitutional convention, the large business interests there represented had a prohibition put in the new Constitution against the initiative and referendum, then adopted, ever being used to bring in the single tax. Now the initiative and referendum are always desired by the common people. The rich do not need it. They can usually get what they want more easily by lobbying through the legislature. And yet these rich interests put in a constitutional inhibition against the “mob” ever using the initiative to lift the burden of taxation from stocks and bonds and putting it on the small farm and home. Queer, is it not?
No, Mr. Objector, the only thing about the farm that would be taxed under the single tax, would be the site value of the land. His improvements, cultivation value, stock, buildings, and machinery would all be exempt, and so he would pay less than he does now. One lot in a city 40 by 100 feet, that is valued at $10,000 would pay more taxes than three farms of 160 acres each. And that lot in New York that recently sold for $800,000 would pay as much taxes as a whole county of farmers.
Under the single tax, most of the value of that lot in yearly instalments would go into the public treasury to meet the expenses of government, and so would take off the taxes now resting on the small home and farm. Now its value goes into private pockets, and is paid by the farmer and small home owner, when they buy the goods manufactured or sold on that lot. Having paid this, Mr. Farmer and Mr. “Small-home-owner” are taxed again on their piano, sewing machines, sugar, and what not, by a complicated system of taxes, tariffs, and licenses, all designed to “protect” him, yet it is estimated, strange to say, by taking away from $15 to $20 a month of his small earnings.
A lot on which a small home stands is probably worth $1,000. It is on that valuation that the single tax would be levied, the building, usually worth twice that sum, being exempt. Here Mr. Objector again demurs, "Here is a man that owns a lot on which stands a skyscraper worth $100,000, and next to it is a lot of the same size on which stands a “humble home.” Would you tax them both the same?” My answer is, that humble homes are not erected next to skyscrapers, as the land next to such a building is usually worth say $10,000, and humble home owners are usually not fortunate enough to possess anything more valuable than a thousand dollar lot under their homes. But why should the owner of that skyscraper be fined for building it? By doing so he has benefited the community. We want more buildings. More buildings mean more work and cheaper rent. The man who owns that vacant lot next door is conferring no benefit on the community. He is merely lying in wait, his land absorbing the benefit of every improvement in the community, of every person coming to or born in that community; and at the right moment he will get up, title deed in hand, and hold up the user of that land for a certain amount, which amount the community must pay in the last analysis, in the added price of the things sold or produced on that land. Thus, the members of the community will pay him a value that they have themselves produced. If anyone ought to be taxed more, it is the man who holds land idle, and not the one who puts it to use. But who pays that increased tax on the skyscraper? Not the owner, but the tenant. And who pays the tenant? The man who does business with him. So that it gets down again to Mr. Common-man. It is absolutely beyond the ingenuity of man to devise any tax on personal property that will not be shifted.
Can a tax on land be shifted? No. A tax on land, exclusive of improvements, puts a penalty on holding land out of use, and a premium on using, improving, it. It therefore forces more land into use.
The owners of land being obliged to either use it or sell, its price falls. And so, instead of the tax being added to its price, the tax cheapens its price.
“But why,” says Mr. Landowner, “should land alone be singled out of all property for taxation?” Well, Mr. Landlord, for one reason, because our canons of taxation point your way. If those canons are correct, there is but one conclusion possible. If they are not, it is for you to point out the error. For another reason, because the value of land is peculiarly the result, not of your labor, but the result of the working of the community. It is a community-produced value. Anything else that you own is the product of your own labor or some other person's labor. Did you make that land? You might have been in China without affecting its value. You might have never done a stroke of work, and still the value of that land would go up with every increase of population, and every improvement, public or private, in the community. There it is, as it was since the six days of creation. Fifty years ago, it was worth $10. Twenty years ago its value had increased to $200. Ten years ago its value had risen to $1,000, and to-day it is worth $10,000. Yet it is vacant now and always was so. That is the constant phenomenon of land values. Buildings —everything else deteriorates, decays, disappears, becomes cheaper as time goes on. “There is only one crop of land,” and that is ever growing dearer, absorbing the surplus value produced in the community. There in New York it increased $200,000,000 a year from 1896 to 1900. Who made that increase? The labor of its owners? No. Every man, woman, and child coming to the city, every new street laid, library, building, or home put up has made that value. Now if the value was produced by the community, why is not the community entitled to it? What I produce is mine. What you produce is yours. What we all produce is ours. And just as it would be robbery for me to appropriate what you produced, so is it equally robbery for any one of us to privately appropriate what we produce.
Notice further. Just as in that office building, we saw that as the tenants increased, and the building’s needs increased, its space value became dearer, and so the revenues increased; so in the community the same phenomenon appears. In your small village, its needs and expenses are small. So are its land values. As that village grows to the size of the metropolitan city, its land values rise in direct proportion to its needs. And when its expenses require millions, one little lot is worth a hundred thousand dollars or more. Now morally, the owner of that lot is not entitled to its value. Its value was produced bythe community, and it is therefore robbery for him to appropriate it. The single taxer points out that there is the natural source of the government’s revenues. There is the fund which belongs to the community, and to which it alone is entitled. And it is not entitled to one cent of money or property which I individually produced by my labor.
The owner of the land, you object, may have bought it, and gave the product of his labor for it. Suppose, however, he had bought a slave. By law, I admit, he might be entitled to the product of that slave’s toil. But morally, though he had paid a lifetime’s honest earnings for the slave, he would not be entitled to anything that slave produced. You cannot make something rightful property by purchase which is not so in fact. The title, defective at its source, remains defective, no matter how many times transferred.
Consider what is meant by the assertion of ownership to land. The assertion of ownership to this pen or suit of clothes implies the extension of that right to morally own any number of pens or suits, even to the extent of owning all the clothing now in existence. If I acquired all that clothing rightfully, that is, by giving the products of my labor in exchange therefor, no one could object to what use I put that clothing, so long as I did not create a nuisance. That is true from the nature of things. The amount of clothing that can be made is unlimited; and if I choose to refuse the use of my clothing, either by purchase or exchange, that is my business; and mankind must get busy and make other clothing, and until then, if necessary, use fig leafs to cover its nakedness. Presumably, when I acquired that clothing, I had given equal value therefor, — my labor or its product, for your labor or its product. But suppose I should purchase all the earth, its surface, space, or sites. I might have given the product of my labor, but would I be getting in return the product of anybody’s labor? No. All the sellers could give me or would be giving me would be the right (?) not to let anybody work on that land, until they either gave me or agreed to give me part of their labor. Just think what is implied, when I sell land to you and your heirs forever. I give you a perpetual mortgage on all the labor that shall ever be employed on that land from now until all eternity. Generations will have come and gone, I will have been long dead and forgotten, and yet your descendants and their assigns will be collecting a toll from everything produced on that land, — perhaps a half or a third or two thirds interest, — because you a thousand generations back gave me $10 worth of potatoes, and I gave you a piece of paper describing that land.
Now when I owned that clothing I could morally exclude all people from the use of that clothing. Could I, by owning all the earth, morally exclude all people from living on my earth? “Ah,” you say, you are merely pushing a qualified right to an extreme.” My reply is, that for the same reason that you qualify the right, you must also deny it. For why do you qualify the right? “Because,” you answer, “to give me the right to own all the surface of the earth were to give me the power of life and death over my fellow beings; and that right you cannot admit in anyone, because it is inconsistent with the equal right of all persons to be on this earth.” But, say I, the other persons could work for me and so by their labor purchase part of the earth’s surface from me. You then object that the right to sell implies the right to refuse to sell; and if I refused, I could make all people either quit the earth, or give me almost all their produce as rent. The right, you say, must then be restricted so that each person can own a limited portion of the earth’s surface. Well then, say I, let us divide the earth’s surface among all its inhabitants; surely that is reasonable. Now tomorrow a baby is born. He, in course of time, becomes a man. Say his father has sold or squandered his estate, or willed it away to another child. He also has a right to live on this earth, has he not? Must he quit the planet, unless he finds someone willing to sell him a portion of the earth’s surface? If so, then his life is dependent on somebody’s willingness to sell or not to sell. That is, they have the power of life and death over him. And I thought you said that all persons had an equal right to live. So that it seems that your qualified right when'examined becomes no right at all.
The single tax obviates the difficulty by taking the value of every piece of land, the rental value, for the benefit of all the people. Such land as had no value would of course pay no tax, being free to any user.
Government, society, is a benefit that all of us confer on each of us. The price of a benefit should not be graduated according to the ability of the person to pay, no more than when you sell clothing or office space, do you charge a rich man more than a poor man. Get any tax that does not satisfy our canons or qualifications, and it won’t work, that is all. Tax incomes and inheritances, and only the honest will pay it. It violates qualification 2, and so breeds corruption and perjury. It is beyond the ingenuity of man to devise an unjust tax that will work out justly. Tax goods, and you kill the goose that lays the golden egg. Your tax is added to the value, and so decreases the purchasing power of the masses. When you tax dogs you want less dogs. Do you want less goods or buildings? Besides the purchaser pays it, and so it does not stay put. Stocks and bonds are in the nature of mortgages, and no tax has yet been devised which the mortgagee could not shift to the mortgagor.
The tax on land values satisfies all the canons of taxation. It cannot decrease land, but will decrease its price. It can’t be shifted, because it cheapens land. It is easy of assessment. All of it is in view, and its value easily ascertainable. It takes from no one what he produced, and assesses each according to the value of the space he occupies. It is inexpensive to collect, and needs no espionage system. It is just, and free from incentive to graft and corruption. It stimulates the use of land. More land used means more demand for labor, and that means higher wages. More labor employed means more commodities produced, and that means cheaper commodities. High wages and cheap commodities spell, among other things, the solution to the high cost of living. But that is without the domain of my article. I was merely to discuss the single tax as a fiscal system, not as a social and economic philosophy.