Some governments are better than others, but there is not a really good government on the face of the earth that raises its revenues by indirect taxation. It is impossible. Such a government must rob one citizen of wealth to enrich another; it must impoverish millions of consumers to favor a few hundreds or thousands of producers. It cannot be just. The wit of man cannot devise a method by which a government can make one citizen a favorite without making other citizens victims. . . .
We shall learn if we enquire: To whom does rent belong? We are speaking of economic rent solely—rent of land or other franchise or privilege. Most assuredly economic rent belongs to the general community which creates it. It cannot belong to the laborer. He has done no more to create it than any other man. And this is true of the capitalist, and it is just as true of the ground landlord. He has done no more to create rent value (site value) than has the tenant or any other man. The value, ground rent, is communal value, created solely by the community, and should be appropriated by the community for public use. It is the natural revenue which nature provides; and when men first allowed this natural public revenue to be diverted into private hands they let loose a whole train of social evils on mankind.
It is easier to point out the economic errors into which past generations of mankind have strayed than to provide a proper remedy. That must be a work of time and thought and education and statesmanship. But the first absolutely necessary step to be taken is to learn and understand and acknowledge the error. When that is done statesmen will be confronted with the most important problem of the age — the introduction of a method of raising public revenues that shall be natural, unburdensome, impartial and just.
GOVERNMENT AND REVENUE
Notwithstanding the contentions of philosophical anarchists and extreme individualists some form of organized government is an absolute necessity of human society. No condition of human society, however perfect, can be imagined in which organized government would not be necessary. If government were no longer necessary for the suppression of crime, if every individual were a sincere altruist, an established authority would still be required to decide on the thousand etceteras of streets, roads, railways, bridges, schools, inheritances and many other things which could not possibly be left to individual initiative and control.
It is equally clear and equally true that government requires public revenue. Society could not exist without government, and government could not exist without revenue. The matter of taxation is the most important question that can engage the attention of citizens; and, more vitally than any other question, it concerns their material and social conditions.
More than Enough for All.
A considerable increase in the incomes of millions of the poor need not deprive the middle classes of a single dollar. It would both increase their possessions and their security. Nature has provided abundant wealth for everybody. This earth is as rich as any corner in the wide universe. The solemn gloom of night is not cheered by a ray from any richer world than ours. Spectrum analyses confirm the truth that this earth is a concentration of all the wealth of the universe. And this country, stretching between two oceans for thousands of miles, is as rich as any on the earth’s surface. What are we doing today? We are producing more food than all the people can eat. We are making more clothing than all the people need to wear. We have provided, or could immediately provide, more comfortable dwellings than all the people require. And yet we have many thousands hungry, naked and houseless. We haven’t too many people here. We haven’t enough. We have only about twenty-eight to the square mile. Belgium has 580, Saxony has 600, Bremen has over 1000, Hamburg has 4000. Bring all the people now living on this earth to this country and we should have less than 500 to the square mile. And we can feed and clothe and maintain all mankind.
An Old Error
The old Malthusian theory that mankind increases faster than the means of subsistence is an old economic rag which it is quite time to bury. Our own experience as a nation is an absolute refutation of this theory. Compare our increase of population with our increase of wealth for fifty years. In 1850 when we had 28,191,876 people, our total wealth was computed to be $7,185,780,000, or about $308 per capita. In 1900 when our population had increased to 76,303,387 our wealth was estimated to be $94,300,000,000, or $1235.86 per head of population. While our population had increased more than three-fold our wealth had increased more than thirteen-fold. It is as clear as our national experience and reliable figures can make it that wealth increases at a greater ratio than population. It is not the fault of natural social law if increase of population does not bring an increasing quota of wealth to every individual. It is not the fault of nature that millions remain poor amid increasing wealth. It is our fault. It is the unavoidable result of our own laws. No other condition is possible while unjust and unequal laws remain. It is neither possible nor desirable that $6000 of wealth should be the portion of every family in the nation as it would be if wealth were equally divided. A millionaire may sometimes deserve his millions as much as the day laborer may deserve his weekly wages. And it would be as unjust to deprive a rich man, who has fairly earned his fortune, of his wealth as it would be to deprive the laborer of his small income. But while this must be conceded it cannot be maintained that the present grossly unequal division of wealth is just, or wise, or expedient, or safe. It is neither. And the interests of the moderately rich and of the great middle class, as well as the necessities of the poor, demand a more equitable division. But this can never be brought about while our present blundering and iniquitous system of
Indirect Taxation Remains.
Governments have long ago discovered how easy it is to plunder a nation by indirect taxation. The elder Pitt, when speaking in the
House of Lords against the proposition to increase the income tax to seven pence in the pound, declared that it would produce a revolution. “But,” he added, “you can get the money by an easier method. By the method of indirect taxation you can tax the last rag off a man’s back, the last mouthful of food from his mouth, and he won’t know what is injuring him, and he will grumble about hard times.” It is this method of taxation on which governments chiefly depend for their resources, and it is this method which produces the inequalities and the injustice and the hardships which people see and feel but do not know how to remedy. It is in the interests of every manufacturer and merchant, of every capitalist and workman, to understand the natural laws which control the production and distribution of wealth. This knowledge alone can reveal to legislators the true method of raising the national revenues. For nature has provided a proper revenue for governments as surely as it has provided proper sustenance for man. A man fed on improper food cannot help developing weakness and disease. But it is not more hopeless to expect such a man to be strong and healthy than it is to expect governments fed on unjust, on indirect taxation to avoid being partial, unjust, dishonest and corrupt. Some governments are better than others, but there is not a really good government on the face of the earth that raises its revenues by indirect taxation. It is impossible. Such a government must rob one citizen of wealth to enrich another; it must impoverish millions of consumers to favor a few hundreds or thousands of producers. It cannot be just. The wit of man cannot devise a method by which a government can make one citizen a favorite without making other citizens victims.
Wealth Distribution
Consider for a moment how wealth is created and distributed. There are three agents in the production of wealth—land, labor and capital. There are none others. Governments create no wealth; political parties create no wealth; the less they interfere, the less mischief they do. All wealth — every dollar — is created by the three factors named. As an economic term, land includes all the materials and forces of nature outside of man. Labor is human exertion, mental or physical. Capital is wealth used for further production of wealth. Every dollar of wealth in the nation is the result of the co-operation of these three agents.
Each of these agents receives an appropriate share in the natural division of the product. Rent is the share which goes to land. Wages is the share which goes to labor. Interest is the share which goes to capital. There is nothing left. Every other payment whatever it may be called, the profits of a franchise, salaries, commissions, brokerage, or whatever else, finds its proper place economically either as rent, wages or interest. These three portions of the total product arrange themselves automatically; they go to their proper owners naturally till we interfere with our unwise laws. They form a complete circle of exchanges from which no man can take anything out till he has put something in; and into which no man can put anything without receiving his equivalent out under just government. It is our interference with this natural circle of exchanges which produces all poverty, injustice and inequalities of society.
A Suggestion
Consider to whom does interest belong. Undoubtedly it belongs to the man whose capital has assisted labor in production. Let him have it. To whom does wages belong? Undeniably it belongs to the man who by mental or physical effort has produced the wealth. All the product naturally belongs to him. Adam Smith says the whole of the product of labor is the natural wages of labor. Not half of it, but the whole of it. But labor must pay interest for the use of capital if he employs it, and rent for occupation or opportunity. When these payments are made the whole of the remainder belongs to labor. And if we did not interfere, labor would get it. The manufacturer would get his share, the merchant would get his share and the workman would get his share. Now neither of them gets his whole share. His share is clipped by taxes, not one dollar of which he need be called upon to pay. Whence then must public revenue be derived? We shall learn if we enquire: To whom does rent belong? We are speaking of economic rent solely—rent of land or other franchise or privilege. Most assuredly economic rent belongs to the general community which creates it. It cannot belong to the laborer. He has done no more to create it than any other man. And this is true of the capitalist, and it is just as true of the ground landlord. He has done no more to create rent value (site value) than has the tenant or any other man. The value, ground rent, is communal value, created solely by the community, and should be appropriated by the community for public use. It is the natural revenue which nature provides; and when men first allowed this natural public revenue to be diverted into private hands they let loose a whole train of social evils on mankind.
It is easier to point out the economic errors into which past generations of mankind have strayed than to provide a proper remedy. That must be a work of time and thought and education and statesmanship. But the first absolutely necessary step to be taken is to learn and understand and acknowledge the error. When that is done statesmen will be confronted with the most important problem of the age — the introduction of a method of raising public revenues that shall be natural, unburdensome, impartial and just.
Comments