Having abandoned this promising and theoretically perfect plan for securing to the state all state-produced increase in the value of the public lands, the New Zealand parliament was still anxious to secure for the country the other advantages held out by the author of the single-tax doctrine. These advantages may be briefly summed up in the words, the discouragement of large holdings and the prevention of speculation in future land values. To obtain these results without laying the community open to the charge of practical confiscation, which has been, and probably will always be, the strongest argument against the practical application of the doctrine of the single tax, as propounded by its author, was felt to be no easy matter. Even in New Zealand there were already some large freehold estates, and these naturally included some of the most desirable and valuable of the land. It was eventually decided to impose a land tax, the incidence of which would tend at least to discourage speculation, while it supplied revenue for the public expenditure.
A uniform tax of one penny in the pound sterling, equivalent to one two-hundred-and-fortieth part of the capital value of all land in the country held in freehold by Europeans, was imposed, the value of improvements being in all cases deducted from such valuation. Each owner of land is, however, allowed an exemption of land to the value of two thousand five hundred dollars, on which no tax is payable, as well as of all mortgage money secured on the freehold. Thus all freehold lands held by any individual are liable to be taxed above the value of $2,500, so far as he is really interested in them; while all money lent on mortgage of land is subject to a tax of five per cent on the annual interest reserved by the terms of the mortgage. New Zealand is mainly a country of small holdings, and the result of this system has been that, out of about 90,000 holders of land in freehold, only about 13,000 actually pay the tax on land. In other words, the settlers of the colony who own land which, apart from improvements and mortgage debts, is worth more than $2,500, are found to be only about one-seventh of the whole number.
To provide for the discouragement of land speculation on a large scale a further provision is made by the enactment of a further tax upon all lands held by individuals or corporations of a value exceeding $25,000 clear of incumbrance. This is called the graduated land tax, and provides for a farther taxation on all such lands, beginning at one-eighth in addition to the original tax, and rising by advances of an additional eighth for each sum of $25,000 at which the land is valued, until a maximum rate of three times the original tax is reached in the case of large estates. To provide for the risk of vexatious opposition to valuations on the part of owners, there is a farther provision that the government may at its option elect to purchase, at an advance of ten per cent over the valuation objected to, any unimproved land held in freehold. It is also a part of the system that the government may compulsorily purchase at a valuation any lands not in actual use in case any association of persons shall apply to have this done, undertaking satisfactorily to take the land upon its purchase under the conditions of perpetual lease, which of course includes subdivision into small areas, with residence and improvement.
By these means the people of New Zealand confidently expect to secure the subdivision of the lands of the country into small areas; to discourage to the utmost the holding of land by capitalists in expectation of greatly increased values at the expense of the less wealthy classes; to render practically impossible the establishment on any extensive scale of private landlordism in respect of agricultural lands; and gradually to substitute, as far as possible, the payment to the state of a yearly interest on value, for the purchase of the freehold in the land of the country.
So far as the experience of the last eight years, during which the system has been in force, may be taken as a reliable guide, the experiment shows many signs of success. It has certainly checked the tendency to speculate in lands with a view to a rise in price, which threatened to become a great, as it certainly was a growing, evil. It has been found that it will not pay to do this in the face of taxation, and particularly of the graduated tax; and owners of large areas of land have developed a strong inclination to subdivide and sell lands which they formerly were disposed to hoard and increase. The power given to the government to purchase lands where the owners have objected to the valuation for taxation purposes has not been widely exercised, but several very important and considerable compulsory purchases of estates have been made in cases where associations of persons wishing to take the land on perpetual lease have applied to the government for that purpose. The chief benefit of such examples, indeed, seems to have been in compelling owners either to use the land themselves or to offer it for sale to persons anxious to use it; but from the New Zealand point of view this would appear to be almost if not quite equally desirable. Finally, the land tax has largely enabled the country to do without other taxes, which would necessarily have fallen more heavily upon the class of workers with small incomes, instead of being levied on the classes best able to bear them.
It yet remains to be seen whether evils may not lurk, as yet unnoticed, in the system, which may impair if not destroy its usefulness. One consequence which was predicted by its opponents, however, has not been found to follow upon the introduction of the system. It was said that capital would be withdrawn from the country, and that poverty and stagnation would result. No such result has followed up to this time. New Zealand, with its less than a million inhabitants, is to-day looked on as one of the soundest dependencies of the British empire; it continues to draw to it from the mother country as much capital as it can profitably use; its exports steadily increase; and its people, if not rich, are well-to-do and comfortable.
It may be said, indeed, that New Zealand has not accepted Henry George’s doctrines as they were propounded by their author, and this is literally true. It is, however, also true that they have accepted the essential spirit of those doctrines, and, applying that spirit to the circumstances of their own country, are giving probably the most useful practical illustration of all that is best in them for the world’s acceptance. No doctrine in economics yet propounded for the acceptance of humanity has ever been found to be applicable in exactly the same form or to exactly the same extent under all circumstances, and this, it may be safely said, will prove emphatically true of the doctrine of the single tax. The single tax, like all other economic plans, is not an end, but only a means. The end must be the amelioration of the condition of the masses of the people, and the consequent prosperity and happiness of the great majority. In New Zealand the people and their leaders believe this to be secured by taxing wealth rather than comparative poverty; by giving every encouragement to those who will devote themselves to the cultivation of the land; and by throwing every obstacle in the path of those who would fain establish and promote the pernicious system of private landlordism, which everywhere tends to create and perpetuate class distinctions, with their long train of attendant evils.
In these respects New Zealand presents an object-lesson which can hardly fail to be of value to other countries, even if their conditions differ widely from her own. Her successes may be noted with advantage, her mistakes may be criticised with profit, in every free country and by all those who see that existing conditions are far from perfect in any part of the world, and that the safety as well as the advancement of society may depend largely upon the introduction of wise and, it may be, far-reaching reforms.