Special taxes.—A multitude of minor devices are worthy of brief consideration. An occupation tax on business men is easily levied, but bears unequally upon the original payers, and in the end falls most heavily upon the poorest. A house tax, measured by the number of rooms, or the number of windows, or the number of fireplaces, has been supposed adjustable to actual income of the possessors. But it bears very heavily upon men in certain professions requiring house-room, and forces the poor into narrow and crowded quarters. The rent of the poor is necessarily a larger proportion of their living expenses than that of the well-to-do. It is a serious hardship when a tax is levied upon that which a man cannot possibly save.
A tax upon retail dealers and peddlers is frequently [pg 365] advocated, as tending to prevent the increase of unnecessary middlemen and wasteful competition. Yet this, too, bears heavily upon the poor, since it crowds out also those who are satisfied with small profits and deal in small sales. Even a tax upon pawnbrokers, whose profits are supposed to be extraordinary, gives occasion for a sharper grinding of the poor. A study of all these devices will lead one to the conclusion that a tax upon property only, based upon a fair valuation and paid by the controller of the property, is fairest to the whole community and leads to truest conceptions of the relation of property to public expenditure. It is certainly best for rural welfare.
A single land tax.—A brief consideration must be given to a proposed system of taxation, commonly known as the single land tax. The proposition is to tax all lands, including building sites, to such an extent as may be necessary to meet all public expenditures. The lands are to be valued for this purpose at the rent they will bring, independent of all improvements. The supposition is that such an income is due entirely to the effect of crowding population, and therefore belongs to society as a whole rather than to the individual possessing it. In fact, if the state were to consume the entire economic rent, it would take only, it is said, what already belongs to the community. Other supposed advantages of the single tax system are the reduced expense of assessment and collection, together with incidental effects in promoting production by removing burdens from capital, in preventing the holding of land unproductive, possibly in equalizing wealth [pg 366] and diminishing greed for landed property, while the poorer, cheaper agricultural lands, having no rent value, would be relieved of all burden. These are essentially the views maintained by the followers of Henry George, the leading champion of such taxation. It is claimed, further, that the poor in crowded cities would be better housed, since buildings would bear no taxation, and holders of city lots would make them productive through construction of buildings without adding to their burden of taxation. It is claimed also that such taxation would be finally distributed, and fairly distributed, among all the consumers of products affected by land possession, as well as all even indirectly making use of the land. Since food and shelter are universal, all would contribute, so far as they are self-dependent, according to food consumed and space occupied.
These statements are somewhat inconsistent with each other. If rent is of such a nature, as assumed at the beginning of the argument, that it cannot directly affect all values because it depends upon those values for its existence, a tax levied upon it cannot be distributed but rests wholly upon the landholder. If, on the other hand, a tax on land is distributed among all consumers of its products, there is no economic rent, but the burden rests upon the consumers alone, according to the amount consumed, subjecting this tax to the objection against all indirect taxes that the poor bear the heavier burden.
It is evident, too, that such a tax must bear heavily upon the unthrifty. The valuation of farms must be [pg 367] made by an expert judge of what farms similarly situated ought to produce. A farm valued at $500 annual rent might, under thrifty management, produce twice as much as under unthrifty management. The tax, under thrifty management, could be easily paid; under unthrifty management, it would ruin the manager. This certainly does not levy the tax according to ability. It also bears heavily upon the enterprising young farmer whose capital is small, as compared with the long-established farmer with accumulated capital. The man weak in capital would bear as heavy a burden as the strong.
Again, it provides no system of taxation in newly settled communities where land has practically no value except from improvements. Unless a fictitious value be given to such land for purposes of taxation, as sometimes happens with reference to non-resident land-holders, no government could be maintained.
Finally, since under this system government assumes a control over landed estates, from which it exempts all other forms of property, it tends toward the nationalization of land, which would necessarily destroy the system itself. For if government claims all increment from land production, land ceases to be property and does not pass from owner to owner at a market value: then government fixes arbitrarily the rental of space, and taxation is distributed upon a new principle. If a new principle were not to be assumed, there could hardly be a device conceived more likely to make the rich richer and the poor poorer. Farmers, of all men, are best situated to realize the unequal workings of a single land tax system.
Government debts.—An important part of government machinery is connected with its ability to make use of borrowed capital. Under the pressure of heavy expenditures in case of war, or in undertaking permanent improvements in a new country, or in carrying on various enterprises for common welfare, the demand for means is greater than the supply from ordinary modes of taxation. Not even the special devices of war taxes can meet at once the burdens of a defensive war. The rightfulness of such expenditures upon the credit of the government depends upon the object to be secured. The expense of the war which defends and preserves the future home of posterity may properly be borne in part, at least, by posterity. The court house, the water works, or the electric plant, whose benefits will be shared by the people for a hundred years, may properly be so constructed that all the people benefited may share in the burden. Good economy requires the foresight which builds beyond mere present need. The danger is that expenditure made under expectation that others will pay may be wasteful, and often other reasons than actual needs in the interest of private speculation control.
Nevertheless, there is good reason for government debts; and every form of government, from the loftiest to the most insignificant, finds such indebtedness easy to contract. The smallest school district can issue scrip in payment of its teacher, or can issue bonds for the construction of its school-house. Only the general government, under our laws, can borrow by issuing due-bills in the form of legal tender notes. All of these certificates of indebtedness enter into the general commerce under [pg 369] the common law of supply and demand, and bear an economic price proportional to the certainty of their final payment and the convenience of their use in commercial transactions. The exemption of national bonds, or even state bonds, from local taxation works no more hardship than the exemption of state property. Under ordinary circumstances the entire advantage of such exemption is gained by the state, and so by all the taxpayers of the state. The exemption of national bonds from every form of taxation prohibits interference with the government's privilege of borrowing when and where it can, and the advantage comes back to the people in full through the low rate of interest or the premium in price which such bonds bear. They are subject to fluctuations in value through their being a means of transferring floating capital between industries. Under a stable government, with a somewhat permanent debt, a holder of bonds is a sort of stockholder in the governmental wealth, with definite stated dividends rather than profits.
Such bonds have various effects upon a general industry of the country. While they lessen somewhat the immediate burdens of present productive industries, they may increase the burden of the same industries in a second generation. Their convenience in securing annuities for long series of years may diminish the enterprise of a community by fostering a class of non-producers, whose wealth is represented in the display of government buildings rather than in productive enterprises. Just so far as government employs the capital of the country through bonds, it diminishes the capital [pg 370] which would otherwise find investment in productive employment. The danger of extravagance to even small communities, from the ease with which such government debts can be contracted, warrants the contrivance of strong constitutional limitations. Indeed, provision, not only against extravagant debt, but for reasonably prompt settlement, may well be required by constitutional law. All property holders, but especially land holders, are interested in preventing extravagant outlay by means of bonded indebtedness. Farmers must know that the burden will have to be borne, with all the natural additions, by the property they hold, and the value of that property will be lessened by whatever extra burden it bears.