f) The Social Importance of Rent20

BY ALFRED RUSSEL WALLACE

Rent is the equalizer of opportunities, the means of giving fair play to all cultivators of the soil in the struggle for existence. Farms differ greatly in value because of differences in fertility and differences in location as regards the market. The owner of a very fertile farm near the railroad has quite an advantage over one whose farm is less fertile and far removed from the main lines of communication. It is just the same with shops and stores. The business done, other things being equal, will depend upon the location. Now prices are fixed by the competition of the whole of the stores or farms. Because of the strength of the more favored class, were there no rents, the less favored class would be driven out and the whole business absorbed by their more fortunate rivals. But if all these shops belong to landlords, whether private individuals or municipalities, then rents will be so much higher in one case than in the other as to equalize the opportunities of both. Both will then be able to earn a living for a time, and the ultimate superior success of either will be a matter of business capacity. The competition between them will be fair and equal.

The same thing happens with rival manufacturers. Facilities for getting raw materials, cheapness of power, enable one to undersell another, and ultimately to drive him out of the market, unless the former is subjected to an increased rent, to compensate for his advantage of position.

g) The Benefits of Improvement21

BY ADOLPH WAGNER

The great expenditure of the State out of the resources of the entire population, and with the increasing population, for the most part out of the resources of those who do not own land, for street sanitation, education, etc., has ultimately the tendency to increase the height of rent and the value of property in urban lands and buildings, because the increase in the urban population is thereby favored. In such cases the urban landowner profits doubly, and the landless population pays in taxes the money for expenditure which indirectly leads to a new increase in rents, thus suffering in two

ways.

Adapted from "The Social Quagmire and the Way out of It," in Studies Scientific and Social, II, 404-405 (1900).

"Adapted from Grundlegung der politischen Oekonomie, 658-659 (1892).

351. The Social Injustice of Rent22

BY HENRY GEORGE

The coal and iron fields of Pennsylvania, that today are worth enormous sums, were fifty years ago valueless. What is the efficient cause of the difference? Simply the difference in population. The coal and iron beds of Wyoming and Montana, which today are valueless, will in fifty years from now be worth millions on millions simply because in the meantime population will have greatly increased.

The man who sets out from the Eastern seaboard in search of the margin of cultivation, where he may obtain land without paying rent, must, like the man who swam a river to get a drink, pass for long distances through half-tilled farms, and traverse vast areas of virgin soil, before he reaches the point where land can be had free of rent. He is forced so much further than he otherwise need have gone by the speculation which is holding these unused lands in expectation of increased value in the future.

That land speculation is the cause of industrial depression is clearly evident. In each period of industrial activity land values have steadily risen, culminating in speculation which carried them in great jumps. This has been invariably followed by a partial cessation of production accompanied by a commercial crash; and then has succeeded a period of comparative stagnation, during which again the equilibrium has been slowly established, and the same round has been run again.

Land can yield no wealth without the application of labor; labor can produce no wealth without land. These are the two equally necessary factors of production. Yet to say that they are equally necessary is not to say that in the making of contracts as to distribution, the possessors of the two meet on equal terms. For the nature of the two factors is very different. Land is a natural ele ment; the human being must have his stomach filled every few hours. Land can exist without labor; but labor cannot exist without land. Land can lie idle for years, and it will eat nothing. But the laborer and his family must eat every day. And so in the making of terms between them the landlord has an immense advantage. And, further than this, as population increases, as the competition for the use of land becomes more and more intense, so are the owners of land enabled to get for the use of their land a larger and larger part of the wealth which labor exerted upon it produces.

22 Adapted from Progress and Poverty, Book IV, chaps. ii, iv, and Book V, chap. i (1879), and The Land Question, 62 (1881).

That is to say the value of land steadily rises. This steady rise brings about confident expectations of future rises of value, which produces among landowners all the effects of a monopoly to hold for higher prices. Thus there is a constant tendency to force mere laborers to take less and less or to give more and more of the products of their work for the opportunity to work. In course of time, in any society, some of the people are able to take and enjoy a superabundance of all the fruits of labor without doing any labor at all, while others are forced to work the livelong day for a pitiful living.

352. The Theoretical Basis of the Single Tax13

BY C. B. FILLEBROWN

The argument in favor of the single tax may be put briefly as follows: The three economic legs necessary and sufficient whereupon the single tax stool may firmly stand are found in three. generic peculiarities quite exceptional in their nature, which distinguish land from man-made products. The failure to recognize this distinction is sufficient to account for the crookedness of the present system of taxation. These three attributes, firmly grounded in orthodox economics, are as follows: (a) The site value of land is a social product. (b) A land tax cannot be shifted. (c) The selling value of land is an untaxed value. These three fundamentals are worthy of brief separate consideration.

First in order is that land value is a social product, that it is created principally by the community through its activities, industries, and expenditures. The value of land is based upon economic rent, "what land is worth for use." Strictly speaking this worth for use attaches itself not only to the ground but to scores of things exterior to it and through it made available for use. In practice the term land is erroneously used to include destructible elements which require constant replacement; but these form no part of the economic advantage of situation. Ground rent may be said to result from at least three distinct causes, all of which are connected with aggregated social, as distinct from individual, activity: (1), public expenditure; (2), quasi-public expenditure; (3), private expenditure. Thus their very nature and origin would seem to point to land values as peculiarly fitted to bear justly the burden of taxation.

Second in order is the fundamental fact that a tax upon ground rent cannot be shifted upon the tenant in increased rent. Ground rent is determined, not by taxation, but by demand. Ground rent "Adapted from The A-B-C of Taxation, 155-163. Copyright by the author (1909).

is the gross income, a tax is a charge upon this income. A tax may be conceived of as a lien upon land held by the state. It affects the relations between owner and state; it has no bearing upon the relations between owner and tenant. Tax is simply the name of the gross ground rent which is taken by the state in taxation, the other part going to the owner. The greater the tax the smaller the net rent to the owner and vice versa. Ground rent is "all that the traffic will bear." The owner gets all he can for the use of his land whether the tax be light or heavy. Putting more tax upon land will not make it worth more for use.

Third is the necessary corollary that the selling value of land is an untaxed value, a proposition which has not been seriously questioned by economists. Every purchaser of a piece of property knows without argument that he is governed as to the price he will pay, not by the gross income, but by the net income that will remain to him after all charges and incumbrances have been discharged. Landowners who invest today are entirely exempt from taxation. It is in the very nature of things that the burden of a land tax cannot be made to survive a change of ownership.

If it is admittedly wrong that present land values should be untaxed, how can such fiscal wrong best be righted? Begin at once a transfer of taxes from improvements to land, so gradual that two old injustices will cease for every new one that is begun, until this untaxed value is made to bear at least its proportionate burden at the same rate with other things. If economists and taxation experts will quit their dead reckoning and steer their craft by the single-tax polestar, time and tide will do the rest.

353. A Criticism of the Single Tax"

BY CHARLES J. BULLOCK

In studying Mr. George's plans for land nationalization, the following considerations are important:

In one sense of the word, economic rent may be called an unearned income; yet it accrues mainly to people who incur the risks of investing in land, and cannot be secured without the exercise. of foresight. Now, Mr. George assumes that such investors never lose, but always gain. This is far from true. At present, investors run the risk of loss when they purchase land and improve it. This risk is counterbalanced by the prospect of an increase in economic rent. Mr. George would have the state appropriate all such incre

24 Adapted from Introduction to the Study of Economics, 454-456. Copyright by Silver, Burdett & Co. (1908).

ments of economic rent, while investors would bear all the losses on improvements that should become unprofitable on account of changes in the direction of the growth of the community. The late President Walker said, justly, "Heads I win, tails you lose, is not a game at which the state can, in fairness or decency, play a part." If the state takes from an investor all increments of rent due to social causes, it should guarantee him from losses on capital invested in improvements, provided that those losses result from social causes over which he has no control.

As a revenue measure, the single tax would often prove a disappointment. In England, for instance, the rents of practically all agricultural lands have steadily fallen for more than twenty years.

If the English government had bought out all owners of agricultural lands at the time when the Land Tenure Reform Association proposed such a course, it would have made a decidedly bad investment. In many states of our Union the same thing is true of agricultural rents, while it has occurred repeatedly in cities.

We must admit that a large unearned increment of ground rents is secured by the owners of specially favored lots. No one would question the justice of imposing a part of the burden of taxation upon such an income; but we should not forget that there are other unearned incomes besides those secured from some pieces of land. When a monopoly of any sort develops an unusually profitable field of investment, part of the monopoly profits are an unearned income, and should be taxed also. As a simple matter of fact, all those persons who have the good fortune to be favorably affected by each actual turn of social development are likely to receive unearned incomes. It is just to tax all of these incomes whenever they can be reached with certainty; but to tax them all away is quite a different matter. Finally, in the United States, there are practically no restrictions upon the purchase or sale of land. Any unearned increment is likely to be distributed quite widely, because landownership is widely extended.

Mr. George's plan of confiscating the value of land without compensating present owners does not appeal to the conscience of the average American as just. Society has allowed private landownership in this country ever since English settlement. The pres

ent owners have invested in land in good faith. If it should be decided inexpedient to continue our present system, the burden of the change should not be thrown upon the single class of landowners.