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Chapter XIII.

The Farmer and the Land Tax.

The most strenuous opposition to the land tax comes from the small farmer. He looks upon it as a burden specially placed on fais shoulders to the relief of the city dweller. A very little examination will will show that this attitude arises from an imperfect acquaintance with facts and a misconception of the operation of a land tax.

The working farmer, whether farming his own land or that of landlord, would receive immense gain from a heavy land tax. The benefit is twofold: cheapened land and a lightening of the burden

In no other country in the world is the taxation of land value so pronounced as in New Zealand. No other country furnishes sort ample data for estimating the effect of a land tax on the farmer. Consequently this chapter will draw its illustrations wholly from New Zealand. Here a graduated land tax rising to 2½ pre cent of the unimproved value has been imposed upon land. Land, however, up to £500 in value is exempt from taxation. The object of the graduated tax is to compel the cutting-up of large estates, held more or less for speculative purposes. Such taxation has rendered accessible to close settlement many broad tracts of unimproved or imperfectly improved land. Many estates have also been pruchased by the Government for the same purpose. This latterc method however, is exceedingly expensive, and progressively so in a countery like New Zealand, where the growth of land values is both rapid and steady. The present Government recognises the growing difficulty in the way of promoting close settlement by the State purchase of estates. Last year it introduced and passed through Parliament a measure increasing the graduated tax to such an extent for long render it impossible for the very large estates to continue for long intact. The effect must be to bring a great deal of land on the market. This will tend to arrest the rising value of agriculturals land and appease somewhat the intense earth-hunger which prevails even in this young country. The benefit to those who want to sattle on the land and work it cannot be over-estimate. Cheap agricultural land is a great boon to a country. It brings with it enlarged productiveness, and stimulates industry in all directions. Dear land represents a heavy toll upon the fruits of the earth, and throws producers into hopeless dependence on money-lenders. Were the land tax in New Zealand heavy enough throughout, all the speculative owners of land would be forced to sell. Property-holders page 105 would find that their self-interest lay in cultivating their land or selling it to those who would cultivate. Only genuine cultivators would be in the market as buyers. Speculators would, perforce, discontinue their traffic in land values. The gambling in unearned increments would stop. Land would lose its fictitious value arising from the anticipation of future increase with the enlarging needs of society. Unused land would be brought into cultivation, and locked-up land laid open to the farmer. The profits of specultaion would be destroyed; the profits of farming, of legitimate cultivation, would be augmented. The tax would be beneficial to all those who desire to make a living by working the land, and disastrous to those who desire to make a fortune by trafficking in its value. Land taxation has not so far affected speculation in small properties, seeing that properties under £500 of unimproved value are totally exempt, but it has greatly diminished it in large ones.

But the land tax does more than free the farming community from the ill effects of speculation; it lessens the weight of taxation.

Suppose a substantial land tax were in operation, what would be the relative contribution of the farmers of New Zealand to the revenue. A most valuable return, B—17a, 1907, issued by the Government furnishes all the material for precisely answering this question, and a close examination reveals some remarkable facts. It is generally considered that a land tax is specially burdensome on the agriculturist with a small holding. The return, however, shows that while the total unimproved value of all rural land held in private ownership is £67,288,774, the total unimproved value of all land held in farms of less than £1,000 in unimproved value is £9,432,438. There are 10,780 persons owning land of a value of £1,000 and upwards, and 28.195 owning land of a value of less than £1,000. Thus, under a general tax, the 10,000 large land owners would pay in the aggregate six times more to the State than the 28,000 small farmers. Or, to include holders of land up to £2,000 of unimproved value, we find there are 33,404 such owners, with a total unimproved value of £17,950,364, whilst there are 5,571 owners, holding land of £2.000 of unimproved value and upwards, with a total unimproved value of £49,338,410. Thus, under a general land tax. 53,000 small and medium farmers would pay to the revenue amongst them only about one-fifth of the amount paid by 5,000 owners of large estates. The burden of land taxation is immeasurably greater upon the large land owner than upon the small one. Ten thousand of the former would pay six times more to the State than 28,000 of the latter, or 5,000 would pay nearly five times more than 33,000 respectively.

Further, it is often said that land taxation is an expedient for relieving the cities at the expense of the country. The falsity of this allegation admits of easy proof so far as it refers to the genuine farmer. More than half the owners of country lands page 106 own land of less unimproved value than £500. The total unimproved value of these small holdings is £4,136,883. The aggregate unimproved value, however, of town lands held in lots of less than £500 of unimproved value is £9,951,724. Therefore, under a geaeral land tax, were it as heavy as a single tax, more than half the farmers in the Dominion would pay to the revenue less than half the amount paid by the owners of town lands of less unimproved value than £500. Even when the owners of land of up to £1,000 in unimproved value are taken, the town owners would pay half as much again as the country owners. Two-thirds of the owners of land in the country would pay less under a land tax of any degree than the towns. If the owners of large country estates are excepted, it is undeniably true that the burden of land taxation falls on the towns and not on the country. Now the owners of large estates do not represent the farming community. It is therefore undeniably true that the weight of uniform land taxation in New Zealand would be heavier on the city site than on the farm.

But granting all this we are still met with the objection that the land tax is a class tax, that it relieves the landless at the expense of the land-owning class. Wherein lies the justice, it may be asked, of laying a greater portion of the burden of the administration of State on the landowner? We are told that the farmer pays at the present time quite enough to the revenue, and should not be called on to pay any more, merely for the relief of the worker in the town or the farm hand in the country.

The equitable grounds for taxation of land values have already been covered. The urgency of such taxation, apart altogether from the needs of State, has been emphasised. But the peculiar feature of a land tax is that it appeals not only to the sense of justice, but to the self-interest of the farmer. It not only unlocks land held for speculation, and promotes close settlement, but lessens the amount of his payments to the exchequer, even if he be the owner of the land he farms unencumbered by mortgage. On an average each man, woman, and child contributes £8 12s 6d to the general revenue. Farmers generally have larger families than city dwellers. Take one with a wife and six children. If the family is an average one he will pay £69 a year in the aggregate to the State. In this death amount, of course, are included railway fares and freights, death dues, etc., as well as the proceeds of ordinary deficiencey of assume Single Tax to be in operation. Without any deficiency of revenue, all these payments except those for the use of the postal and telegraph service could be remitted. Excluding the revenue from this service, the revenue of the New Zealand Governm represents a payment of £7 2s 6d per head of population. Our typical farmer, therefore, would have a saving of £57 to set off against the land tax. The saving would in reality be much more since no account is here taken of the middleman's profits on the Customs duties. What would be the farmers payment under page 107 Tax? It would depend on the unimproved value of his If he belonged to the 10,000 owners of land under £100 in unimproved value, he would pay less than £5 a year calculated at the rate of 5 per cent.—this as against £57. If his land, apart from improvement, was worth £200, he would pay £10, as against £57; if £300. he would pay £15; if £400, he would pay £20. If he belonged to the great majority of country landowners and owned a farm whose prairie value was less than £500, he would pay owned a £25 a year, as against £57. He would require to have got into the wealthy minority of farmers and own land worth in its proved state moie than £1,000 before the Single Tax would draw as much from him as the present system of taxes.

If such would be the relief afforded to the farming comunity by the Single Tax, any land tax in substitution of some tax indirect tax would contribute to the same end. A general tax of 1d in the £ would yield about £420,000 to the State. A reduction of Customs of Customs duties accordingly would lessen the burden of taxation by at least 10s per head of population. Our farmer with six children would be relieved to the extent of £4 a year. But he With would have to pay the land tax. If apart from improvemnts his land was worth £100, he would pay 8s 4d; if £200, 16s 8d; id £300. 25s; if £400, 33s 4d; if £500 (with the majority of farmers the value is less than this), 41s 8d; if £600, 50s; if £1,000, £4 3s 4d. Land taxation demonstrably is a relif to the working farmer as well as to the working man.

But the question hers meets us, would the revenue be main tained? Land taxation destroys the profits of gambling in the probabilities of social progress, takes away the fictitious value of land, and constrains large proprietors to cut up their estates. It might be that this would lead to a very substantial reduction of unimproved value, or what is the sane thing, a contraction of the source from which revenue from land taxation is drawn. If it had this effect of cheapening land, and throwing large areas of land on the marker for close settlement at low prices, the stimulus to settlement would be an unmixed blessing to the community in general and the farmers in particular. Whether we look at the land tax from its effect in cheapening land or relieving the weight of taxation the benefit to the farmers is clear. It would indeed have a measure of both effects. Land taxation opens land for settlement and lessens the contribution of the small farmer to the revenue.