Progress and Poverty

There is no solution to “the recurring paroxysms of industrial depression, the scarcity of employment, the stagnation of capital, the tendency of wages to the starvation point” than to abolish private land ownership (401). Private land ownership denies natural rights and prevents true social progress. However, abolition can be accomplished without “formally confiscating all the land” to avoid using “a needless extension of government machinery” (402).

Instead, landowners may continue to control their land because “It is not necessary to confiscate land; it is only necessary to confiscate rent” (403). Existent arrangements can be used to accomplish this objective: For instance, instead of taking some land rent through taxes, all of it will be taken. This solution of abolishing land rent through taxation

will raise wages, increase the earnings of capital, extirpate pauperism, abolish poverty, give remunerative employment to whomever wishes it, afford free scope to human powers, lessen crime, elevate morals, and taste, and intelligence, purify government and carry civilization to yet nobler heights (404).

In turn, this type of land taxation will lead to the abolition of all other taxes.

Four conditions are required to institute the optimal land tax to obtain public revenue. First, such a tax must have little impact on industrial production. Second, its collection must be simple and cheap. Third, corruption should be minimized. Fourth, the objective of this tax is equality.

I. The Effect of Taxes Upon Production

At present, taxation “diminishes the earnings of the laborers or the returns of the capitalist,” thus negatively impacting both (407). Taxes on industrial production also hinder wealth creation. Also, the mode of taxation is as important as the taxation amount. There are also monopolies that are easier to abolish rather than a tax. However, the monopoly on land surpasses them all, “And the value of land expressing a monopoly […] is in every respect fitted for taxation” (410). After all, land value is not made up of the railroads or telegraph lines built upon it. Indeed, land taxation would stimulate industrial production “by destroying speculative rent” and increase the generation of wealth (411).

II. As to Ease and Cheapness of Collection

Compared to other taxes, taxing land value is a simple and affordable way to collect because land cannot be hidden and its value is easy to assess. Such a tax is to be paid directly by the landowner. Thus, the land-value tax would even lead to significant savings as compared to “the horde of officials” collecting taxes now (412). Such a tax would also increase competition between landowners “by compelling those who hold land on speculation to sell or let go for what they can get” leading to the price reduction of the land (414). Overall, a land-value tax would result in “the largest net revenue in proportion to the amount taken from the people” (414).

III. As to Certainty

The element of certainty is crucial to taxation since tax collectors must be honest and diligent. For example, there is much corruption in the U.S. in the realm of tobacco and alcohol taxation. Corruption and bribery in the realm of tax collection act as demoralizing factors. However, land-value tax “is the least arbitrary of taxes” and is thus the most certain through land assessment (416).

IV. As to Equality

According to Adam Smith, every type of tax “which falls upon rent, or only upon wages, or only upon interest, is necessarily unequal” (416). For this reason, it is important to turn to natural law. After all, “Nature gives to labor; and to labor alone” (417). Smith argues that income is “enjoyed under the protection of the state” which is the source of equal taxation (418). As communities create value, it must also be used to cover their expenses. However, the latter argument is only true when it comes to land value because it does not exist until a community arises. Thus, land-value tax is “the most just and equal of all taxes” (418). Collecting taxes from all land rent will benefit the needs of a community equally. 

All major economists and political theorists, such as David Ricardo and John Stuart Mill, admit in one way or another that “the tax on land values or rent is the best method of raising public revenues” (421). For example, Ricardo suggests that “a tax on rent would fall wholly on landlords and could not be shifted to any class of consumers” (421). Even the accepted rent doctrine claims land rent should be subject to taxation. However, these ideas “have not been pushed to their necessary conclusions” (421).

One key objection to taxing land rent or values is “that from the difficulty of separation, we might, in taxing the rent on land, tax something else” (422). However, land’s value is always easy to differentiate from the value of the land improvement. For example, in the U.S., land assessors typically estimate these two categories separately. Another objection is that “it is highly desirable that taxation should fall not on one class, such as landowners, but on all” (424). This approach would ensure that those with political power “feel a proper interest in economic government,” thus ensuring that taxation remains linked to representation (424). However, the existing political system does not allow “to combine with political power the consciousness of public burdens” (424).

The land-value tax cannot shift the burden of paying it to anyone other than the landowners themselves. It would also greatly simplify the tax system. However, there is significant opposition to the land-value tax but not to the other types of taxes. Thus, “a union of political forces strong enough” to push through this type of tax is needed (427).