P&P Chapter 16
The Enigma Resolved - the First Great Reform
To remove an evil or problem, we need to remove the cause.
To extirpate poverty...
Extirpate: pull out by the roots, root out; remove completely.
To extirpate poverty, make wages what justice commands, the full earnings of labor.
To do this, we untax wages and shift taxation to land rent.
When George talks about common ownership of land,
he really means the common ownership of the rent.
Land titles would still be private, and the individual owners would have full rights of possession of the land and full ownership of the improvements.
George says nothing else will go to the cause of the evil of poverty.
Other reforms may we important and worth doing, but they will not by themselves cure the problem.
So why is this reform not done?
George recognizes that this change in policy will arouse the most bitter antagonism.
In George's social philosophy, the natural laws of society are harmonious.
In neoclassical economics, they are not in harmony.
There is a necessary conflict between equality and efficiency.
In the geoclassical economics of Henry George, the laws of morality are in harmony with the laws of economics.
What leads to maximum prosperity is also what is just and equitable.
We could have the government own the land and lease it.
But George says this is not the best was to collect the rent.
Some places already do that, such as Hong Kong.
But in the US and other countries where this is not common, George says,
To do that would involve a needless shock to present customs and habits of thought, which is best avoided.
To do that would involve a needless extension of government machinery, which should be avoided.
George says, it is an axiom of statesmanship that great changes can best be brought about under old forms.
George says, he does not propose the confiscation of private property in land.
It is only necessary to equalize the benefits of land by collect the rent for public revenue.
The machinery for doing this already exists in the current property tax on real estate.
All that is needed is to exempt buildings and increase the rate on the land.
P. 140: "We may put the proposition into practical form by proposing to abolish all taxation save upon land values."
Private communities finance their collective goods the Henry George way, by charging rentals (dues, assessments) unrelated to the income, sales, or personal possessions of the members.
17 The proposition tried by the canons of taxation.
(Not to be confused with cannon, a large gun.)
Canon: a standard to judge by.
See if you agree with these criteria:
1. that it bear as lightly as possible on production. Hence, have the least impact on incentives.
2. that it be easily and cheaply collected, falling as directly as possible on the ultimate payers.
To take from the people as little as possible in addition to what they pay to government.
I.e. the least excess burden.
3. That it be certain and give the least opportunity for corruption and tyranny, and the least temptation to evasion.
4. That it put no citizen at an advantage or disadvantage (after the transition).
The mode of taxation is as important as the amount.
A small burden badly placed may distress a horse that could carry with ease a mluch larger burden properly adjusted.
A tax on date trees caused the trees to be cut down, but a tax on the land would not have caused this.
Taxes on land rent increase production rather than increase it.
They increase it by moving the margin to a more productive level.
Q: what is the effect on urban sprawl of a tax on most of the rent?
Taxes on rent also increase production by avoiding depressions.
On canon #4
Some say that justice require that every person contribute to government revenues, so all income should be taxed.
But if one person has the same income as a family with several children, is it just to tax them equally?
Is it just to equally tax wages and rent?
George says no, because the worker contributes to production by giving up a portion of his life.
The landlord get the rent just from having title.
Some argue that all property is equally protected by the state.
George responds that this is only true for land.
The value of urban land depends on the surrounding community.
Farmland has more value when there are roads serving it.
When the rent is used for public revenue, all citizens have equal benefits from natural opportunities and an equal right of self-ownership.
This is the deepest type or moral equality.
Also: a tax on rent is paid by a tenant, and most people are tenants, owner-occupiers being their own tenants. The burden is on the owner in not keeping that rent, but the funds are paid by the tenants.
18 Endorsements and Objections
Ricardo: a tax on rent would fall only on the owner and could not be shifted to the tenant.
French physiocrats, led by Quesnay
Espoused laissez faire, free trade.
A powerful class has an interest in keeping down the tax on land values and substituting other taxes.
19 Property in land historically considered
In many societies, land was treated as common property.
Families could have the use of particular plots, but it remained the property of the community.
Wars and the concentration of power in a ruling aristocracy or military class led to the appropriation of the land by an elite group.
In Latin America, it was the Spanish conquest that created large estates.
US: most land was given to speculators.
The modern concept of full individual ownership of land and its rent originated in ancient Rome.
In Great Britain, the enclosure movement converted common village land to the private property of aristocrats.
Landless peasants went to the cities and had to work for low wages.
20 The rightful basis of property
Property rights in goods originate in self-ownership.
P. 166: We own our bodies, our time, our lives, and therefore our labor and the fruits of our labor.
Nature knows no distinction between master and slave.
The natural default is human equality.