An Address of the California Tax Reform League to the Citizens and Taxpayers of California.
The California Tax Reform League is an association of citizens of California who are deeply impressed with the importance of a reform in taxation, which the members aim to bring about through a constitutional amendment. This League does not appeal to members of any political party, but to patriots of all parties, to ameliorate industrial depression, to arrest the increasing growth of widespread dissatisfaction, poverty and unpatriotic sentiments.
"Taxation shall be equal and uniform throughout the State. All property in this State shall be taxed in proportion to its value, to be ascertained as directed by law."
Comparing both instruments, the new Constitution is improved (?) by leaving out "Taxation shall be equal and uniform throughout." The improvement, however, is a questionable one. If the leaving out this declaration, that has the ring of justice, has any object, it is this: to leave the legislative door open for the purpose that taxation shall not be equal and uniform throughout. It has been argued by the friends of this part of the new Constitution, that no matter what mode of taxation be adopted, some taxpayers will complain and prove themselves unjustly taxed or doubly taxed, and it is asserted that no tax can be levied that is equal and uniform throughout; and it is further remarked that no matter where any tax is levied, it will be shifted, and finally the burden of taxation will be equally distributed; so it does not matter much who is taxed, it will be all the same.
|Value of real estate, about||$350,000,000|
|Value of improvements, about||111,000,000|
|Value of personal property, about||150,000,000|
|Value of money, about||24,000,000|
|R. R. assessed by State Board of Equalization||31,000,000|
The above figures show, that the proportion of land values to the value of the improvements thereon is about as 3 to 1, or one dollar's worth of improvements carries along over three dollars' worth of land value. But if we add personal or movable property, moneys and railroad property to improvements on land, then is the land value still greater than all other values of any and every description taken together. It is obvious that in taxing all things around alike, a concession is made to popular opinion that sees, or believes it sees, justice and fair play in "taxing property in proportion to its value," but by a more critical examination it will be clearly seen that land value is a different thing from other values. For land is there by nature, but the improvements are there by men. And land value is the result, of which the other values are the cause. For land values would be nothing, if improvements and the men that cause and maintain improvements were not there. Land values are like the fruit of a tree, of which the roots are human enterprise, labor and human virtue. And as cutting the roots withers the branches and stunts the fruits, so does the page 4 taxing of improvements diminish production and land values. In order to maintain seeming justice and apparent fair play, values are intended to be "taxed in proportion" by law, and owners have been, in almost all cases, their own assessors at pleasure, under oath, of course. But flagrant perjury, it must be confessed, has been the result. Successful perjury, never punished. Those whose consciences trouble them not, escape their legal share of burden, increasing thereby the burden that weighs heavier on those citizens, who are too proud to lie and too honest to steal. So does the present tax work, as a tax on conscience; but as a tax on values, it fails. The yearly and enormously diminishing amounts of taxable moneys prove, if other signs do not, that fraudulent swearing is on the increase—it is a consummate farce. And what else but a faulty system of taxation is the cause of educating, nay compelling, citizens to perjury? What a sight! A race of men, driven to perjury by law! These are the results taxation in proportion to values. A tax not in proportion to values, is a license tax on any business, or on any attempt to make a living outside of daily wages, exempting, however, farmers and gardeners (a parallel to growing crops) in which exemption orchards and vineyards are not included. What the polltax is, can best be judged by referring to San Francisco's municipal reports. They show from ninety to one hundred thousand persons, one-half white, the other Chinese, liable to $2 each polltax. The sums collected from this source average $56,645 for five years ending with 1883, or not one-third the due amount. The collector pockets fifteen per cent commission of this sum, and besides charges the page 5 cost of collection to the city. The business of hunting up personal property, of trivial value, and the other business of permitting the greater values to slip through undervalued (often for a private commission), requires about one hundred deputies. The annual average cost of gathering the taxes for San Francisco during five years ending with 1883 is, so far as municipal reports enable us to state, about $220,000.
From the facts at hand, it is safe to venture the assertion that about one-twentieth, or five per cent only, of this cost of assessing and collecting, is required for taxes derived from land values. No losses occur in land taxation, while the other taxes are not only expensive to gather; they are also very uncertain.
Having briefly reviewed what the present tax is intended to be, and what it really is, let us contrast the requirements of an ideal tax.
First. It should not diminish production, because production is the source that ultimately supplies the payment of any and every tax.
Second. It should be cheaply collected.
Third. It should be certain, without tyranny or fraud.
Fourth. It should bear equally, and be just to all.
An ideal tax is no leveling or cinching contrivance by which fortunes, right or wrong, shall be cut down. A tax is a burden imposed upon all, for benefits enjoyed by all.
In conformity to these premises the Tax Reform League of California proposes the entire abolition of all taxes on farming, stock-raising, or any agricultural pursuit, mining, manufacturing, transportation by water page 6 or by land, on merchandise, on imaginary values, coins; in fact on all that represents individual enterprise, labor and frugality. The Tax Reform League of California further demands the abolition of all licenses and poll-taxes. It is safe to infer from assessed values, as reported and previously stated, that the deficiency so caused will be about forty per cent of the present collection, but will be brought down, by saving in the cost of collection, to less than thirty-five per cent. This deficiency is to be made up by a proportionate increase in the tax on the rental or market value of the land. This simple and single tax completely fills the before mentioned requirements of an ideal tax. By removing the tax from farming, not from growing crops only, but from everything on the farm or other agricultural venture, except the tax on the market value of the naked land and natural attributes; farming, as distinguished from land-holding, will become more profitable. New fields will be opened for labor and capital at enhanced remuneration. If there is a tax on farming as now; on fences, ditches, buildings, stock, machinery, etc., such tax will be shifted by the farmer on those who consume farm products; but while so shifted it at the same time diminishes production and diminishes the net return to the farmer. Different is the result when all improvements and personal property is exempt, and the market value only of the land is taxed. It matters not who the owner and the user of the soil may be, whether united in the same person or otherwise, the effect to the community is alike. A tax on the rental value is not shifted and cannot be shifted. It must be paid by the owner. But while so paid this tax does not diminish produc- page 7 tion, unless the tax exceeds the entire rental value. If any one disputes the correctness of these statements, then must he overthrow the undisputed law of rent, which is: "The rent of land is determined by the excess of its produce over that which the same application can secure from the least productive land in use." In other words, the land-holder does not, and cannot, take what he would like. He takes what he can get. He does not wait for higher taxes that he may demand higher rents. He takes all he can get now. To illustrate the above, let us assume a tract of land yielding forty bushels of wheat per acre, of which the land owner takes twenty bushels for rent; the other twenty bushels go to merely maintain the farmer and laborers. If, now, a tax of one bushel were imposed on the farmer, he would be compelled to give up farming, since he could not labor at a loss; hence diminished production or entire cessation of farming. But if a tax of twenty bushels per acre were imposed upon the land owner, he would have to pay all or renounce ownership; and while he was paying twenty bushels, it would not interfere with the production of wheat. If the land owner would attempt to reimburse himself from the farmer he would stop farming, besides disabling himself from paying any tax. Thus the law of rent will be comprehended. To tax farming will increase the cost of production, and it will either suppress farming or it will raise the price of the product. Taxing rent, taking all of it if so decided, does not interfere with the economy of the State. In a like manner, any and every other occupation must be affected. Shipping and transportation more than any other venture affect page 8 the general prosperity of a country. For this reason, a removal of taxes on shipping would not only infuse new life, such as has not been witnessed by the present generation, into this withering branch of our industries, but every department of production would indirectly be benefited. If railroads were exempted from taxation on thirty-one million dollars of franchise, road-bed, rolling stock, etc., and carrying charges were regulated accordingly, who doubts that this tax so lost, would be saved in the shape of freights and fares to the people? And if the reported estimate of the San Francisco Emigrant Aid Association of 25,000,000 acres of land owned by the railroads of the State is nearly correct, and also its estimated value of $40,000,000, now untaxed, were levied upon, then the State treasury would not lose, the travelers and shippers would not lose, nor would the railroads lose. For if the continued holding of their taxed lands would become hopelessly unprofitable, they could dispose of them at market value to settlers, ready to cultivate and pay for them, as originally designed.
In the minds of many it is an axiom, that no good can come to any one class, without working a corresponding evil to another class. No greater fallacy exists. The burden taken from enterprise and labor will instantly stimulate production, and while land values are taxed higher, land value will rise in proportion to enhanced production, and will be proportionally better able to carry the increased burden. This statement is applicable to the lands of the State collectively. But it must be admitted that improved lands are more benefited than lands unimproved. For instance, the owner of an page 9 improved piece of agricultural or building land has his tax removed from improvements, whatever their value; it is certain his land will have to pay more; but there are many lands not improved, which will also pay more, according to value. Now, when the entire tax collection for the State is the same, and the owners of unimproved lands pay a greater share than at present, there remains no other possibility but that the owners of improved lands must pay less than at present. To the extent, then, that taxpayers are more interested in improvements or improved lands, than they are interested in unimproved lands, it is to their interest that all improvements or all personal property should be entirely exempted from taxation. To make this demonstration still more clear, imagine two adjoining pieces of land, be it building or farming land, it is immaterial. Say they are each assessed $3,000. One piece is vacant, and the other bears $2,000 worth of improvements. There is together $8,000 valuation, of which, at 2 per cent, the owner of the unimproved land has been paying $60 taxes per annum. The same amount has been paid by the owner of the improved land, and $40 more for his improvement, or $100 for one man and $60 for the other, together $1.60. Now we entirely remove the tax from the improvement, and put the deficiency on the land, which imposes on each piece (being of equal value), $80. The owner of the improved land now pays less, and every owner of improved land in the State would pay less, were this tax reform inaugurated. A few figures will assist to show how this new taxation would work. It is beyond dispute that lands and other values are equally profitable, since nobody is hindered page 10 from investing his funds where most profitable. Referring again to the Reports of 1880, we have $350,000,000 land, values at 6 per cent, returning to their owners $21,000,000, while $316,000,000 of all other taxed values, not land, return $18,960,000. Assuming all taxes to be about 2 per cent per annum, the proportion of taxes on land values is $7,000,000, while taxation on all other values, not land, is $6,320,000. Deducting the respective taxes from incomes, there remain, net income from land values, $14,000,000, and from all other values, $12,640,000. But the proposed mode of taxation would leave net to land investment $7,680,000, and to other investments, $18,960,000.
|Present Taxation.||Future Taxation.|
|Land Values.||Land Values.|
|$350,000,000 at 6 per cent return $21,000,000. Deducting 2 per cent for taxes, leave $14,000,000 net to landowners.||$350,000,000 at 6 per cent return $21,000,000. Deducting 2 per cent for taxes, leave $14,000,000. From this amount is further to be deducted $6,320,000, the amount of taxes that formerly was paid from all other values not land value, which leave $7,680,000 net to land-owners.|
|All other values not land, $316,000,000, at 6 per cent, return $18,960,000. Deducting 2 per cent for taxes, leave $12,640,000 net per annum to the owners of all values not land.||The owners of improvements and personal property retain now from $316,000,000 the entire income at 6 per cent, or $18,960,000, that is, 50 per cent more than formerly under the old mode of taxation, which was $12.640.000.|
What 50 per cent more of net profits in business means, can be better imagined than described. Nor is this exemption from taxation a new theory; it has long been known and acted upon. Many a municipality has invited industries by promising them freedom from tax- page 11 ation, well pre-calculating the results from such tax exemption. By her Constitution, the State of Louisiana has from 1879 for a period of ten years exempted most of her industries from license and taxation. Mississippi followed the example in 1882. Georgia also exempts her industries from taxation.
The object of such legislation has been very definite, and the results are positive. The increase in the number of factories there has been phenomenal, and, while many of the New England mills are reported to be idle or running on short time, the mills in these States are reported busy. "But," says a friend of workingmen, "see the enormous quantities of stored-up farm and factory productions, and no purchasers! and you want the tax taken from labor to produce still more? Don't you start from the wrong end? Can't you see we suffer from over-production?" No, we don't see over-production, when looking on badly fed, insufficiently clothed and ill-housed persons, very willing and quite able to work, but enforced to idleness by hard times, all caused by oppressing enterprise and labor on one side, and on the other by encouraging land speculation, that withholds land from better use. We see no over-production, but we see under-consumption, induced by poverty and fear of poverty.
"I have paid for my nigger!" has often been exclaimed, and now it is said: "One man puts his money in one thing, and another puts it in land; what is the difference?" implying, that the fact of purchase with honestly acquired money settles further question. Well, there is no difference in the money, if it be good, and as to the other thing, it always represents labor, ser- page 12 vices rendered or to be rendered, whatever that be, and paid to the owner, the right man. But as to land, nobody puts his money in land, properly speaking; he puts it in future rents, in advantages that nature and the collective labor of men have conferred upon a certain piece of land, and the Tax Reform League holds that if a person wants to enjoy these things to the exclusion of any one, we have no objection, if such person pays any where near what they are worth; but what we insist on is, that any one should pay to the right man, to whom these advantages of nature and collective labor belong. One should pay for what he buys to the right man; that is the difference. It is constantly reiterated: "We must put down our monopolists, so they charge only cost for services rendered. No more extortion! We need more immigration, and in order not to be robbed by our manufacturing monopolists, we must above all have free trade; we must buy in the cheapest market as we require to sell in the dearest. Let us start with a good example!" Such are the opinions of millions of voters, backed by influential speakers and law-makers. Another equally large number of voters, headed, by eminent men, supposed to be no less honest and able, hold just the opposite opinion. They ask for a higher protective tariff. It alone, it is said, solves the problem, by not only excluding the products of pauper labor, but also such laborers as work for pauper wages. Then, they say, our working people will command decent wages, and be able to properly pay for home manufactures; all will be relieved from ruinous competition. Now, whatever truth there may be in these conflicting opinions, expressed with the utmost vehemence by the page 13 highest authorities, certain it is, they must cause distrust in either or both the intelligence or honesty of the disputing parties.
To arrive at the truth of the matter in question, it is best for the interested to judge for themselves, and leave the opposing disputants for awhile to themselves.
The Tax Reform League does not intend to decide here which of the two policies, if carried out to its extremes, or to a certain limited degree only, would be preferable. For, whatever the immediate and the after effects may be, that result from free trade or from protection, the Tax Reform League are irrefutably convinced that, whatever prosperous turn might result from the adoption of either policy, land holders would not be slow to profit by good times, and take in the future, as in the past, by law and custom, all they could get—the result of collective labor, for services not rendered. In this manner, any spell of prosperity would, by force of inexorable law, gradually relapse again to the customary level of business stagnation.
Before applying the test of an ideal tax to either system of taxation, a few words must be said with regard to the future requirement, touching upon the equality and justice of the proposed measure. The term market value having in this paper been repeatedly used, its meaning must be explained to avoid misunderstanding. The market value of a certain piece of land is its value in open market without improvements. It is, in a rising country like ours, generally less than the speculative or prospective value, and is less than what such a piece of land may be worth to an exceptionally enterprising and intelligent occupant. Now it is clear page 14 that the market value of a given piece of land is not the result of what has been done upon such land by the owner or renter, but what has been done around such land by others. The market value of land is the result of collective or associate labor. Land is there by nature, but its increased value results from the kind and the number of men inhabiting such land.
Starting now from the accepted doctrine that slavery is wrong, and that a man belongs to himself, we must admit that the fruits of his labor belong also to himself, and to no one else without his consent. This reasoning leads us on to the democratic idea of the rights of men, the equal rights to opportunities. And since we are bound to equal duties—to sacrifice life even, if demanded—what is more reasonable than that we also should have equal rights? This idea of equal rights we must consider the specific American idea. The separation merely from England was never an important affair; it was the cutting loose from European principles and English oppression that raised and held high the hopes of the aspiring and the oppressed. Nowhere since historical times has this idea found a more emphatic expression than on this continent. Not only do we call ours the land of the brave and the home of the free, but the world still believes such to be the fact. Because so many lives have been sacrificed for the establishment of this principle, it is fairly ingrown into the life and blood of the people. To crush this idea would require more lives than it has cost to establish the same. To crush this principle means to crush civilization. Upon the basis of justice we lay our claim that a man is entitled not only to the fruits of his indivdual labor, but he page 15 is also entitled to the fruits of his collective labor. If, for instance, a man joins with four others a partnership, let it be for working a mining claim, and such five partners clear $25 per day, while each one, were they working independently could only clear $3 a day, is he not entitled to his equal share that results by and from his association? to his $2 above what he could clear alone? What is he a partner for? To be responsible for the debts of the concern, only? Not entitled to his share of all the profits? Which of the other partners has a better right to his share? Have not all invested, risked and worked alike? To this plain and simple principle on a small scale, the greatest of all partnerships, the State, is no exception. The land being the inalienable trust of all the people, and its increased value being the result of all, who has a better claim to such land and such values than all the people of the land? Like Archimedes of 2,000 years ago, we are convinced, and say again, "Give us whereupon to stand, and we will move the world from its bearings." Not having whereupon to stand, what will anybody, what will a people move?
The infamous land distribution of England has often been commented upon. In 1873 the English Parliament investigated the facts about land which are now well known. A legislative committee of this State in 1874 ascertained from the Board of Equalization the distribution of lands in California, and reported to the Speaker the facts, and so a comparison showed that the average holding of the English lord was two and one-half square miles, while the California land owner possesses eleven and one-fifth square miles. According to the U. S. Census of 1880, the increase of over-1,000-acre page 16 farms is enormously preponderating over that of small farms. There is no reason to assume that California is an exception to this rule. We care not for the twenty million and more acres, equal in extent the State of Indiana, which have been alienated, belonging now to foreign lords. We care not for the nationality of the lords: it is of no importance to us; but we view with the utmost concern the irreconcilable conflict between alienated land and inalienable rights. What are the rights, without the land? Will American citizens continue to pride themselves upon their inalienable rights while they are struggling to pay for the permission to make a living upon their alienated land?
In consideration of all the above stated facts, the Tax Reform League of California requests the voters of this State to abandon in future all issues that lead not to the goal, and to elevate this tax question to the test question of the policy of the future, by making it incumbent on all candidates for legislative offices to remove from individual enterprise and labor the taxes that now oppress it and impoverish the country by diminishing production, lowering wages and interest on capital—in short, bring about hard times, and to bind such candidates to cause the funds that are required for collective needs to be gathered from the results of collective labor, to the end that peace and plenty may come, that justice be done, and American principle prevail forever.
Adress: Califormia Tax Reform League, P. O. Box 2469, San Francisco.