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The Pamphlet Collection of Sir Robert Stout: Volume 71

Chapter XVII. — Land Value is not a Colonial Asset

Chapter XVII.

Land Value is not a Colonial Asset.

It is probable that most people consider that land value is one of the assets of the Colony and of its people, taken collectively—that in making up a statement of its balance-sheet an estimate of the capital value of all the land within its boundaries should be set down amongst its collective public and private assets. This was, at any rate, the opinion of Sir Julius Vogel, when, as Colonial Treasurer, he made his financial statement in May, 1887. The Colony was then in a declining position; a deficit was announced by the Treasurer, and a proposal made to increase the taxation. Towards the conclusion of his statement he devoted two pages to a consideration of the "Wealth of the Colony," in which he showed (to his own satisfaction) that the assets gave a surplus over the liabilities of an amount equal to £223 for each man, woman, and child (exclusive of Maoris) in the Colony. No doubt this was very comforting to his hearers and the Colony generally, but unfortunately it was founded on a misapprehension so serious as to render the assurance valueless. It may seem presumptuous, in the eyes of many for a private individual to challenge an ex-Colonial Treasurer's dictum upon such a vital principle; nevertheless, the writer is obliged to do so, and to state most emphatically that the Treasurer was wrong, inasmuch as he included in his list of collective public and private assets the capital value of the land of the Colony. It is quite correct for a private individual to include in his balance-sheet the value of the land which he owns. What was not correct was for the Treasurer to add together the land and other assets of individuals, and the estimated value of the Crown lands and of other public property, and to say that the total represented the Colony's collective assets. What is here asserted is that land value is merely a domestic matter, applying to the financial arrangements between individuals only. A few paragraphs will be devoted to establishing this position.

It will be recognised by most persons—and is plainly asserted by landowners when they denounce the Single Tax—that if all ground rent was taken by the State the selling value of the land would disappear. When it disappeared it would fall out of the Treasurers page 39 list of assets. If that had taken place no one surely would say that the Colony collectively was many millions poorer than it is now, or that its real assets had been reduced. The land would be there still, and it has been shown that it would be more thoroughly used than at present; therefore the community, as such, could not be poorer, but would, on the other hand, be better off. No individual, however, would continue to put down land value in his balance-sheet as an asset. This being so, neither could a Colonial Treasurer of the future put it down, even if he followed Sir Julius Vogel's method, because, as already shown, the amount would not appear in the private balance-sheets. Neither could he set it down on any other assumption—such as, for instance, that the capital value had been transferred from the owners to the Colony—seeing that the Single Tax would perform no such operation. Nor could it be set down on the plea that the ground rent, which had been transferred to the State, might be capitalised as an additional income received. This would not have constituted an increase of the income of the State. Upon the receipt of the ground-rent fund it would have given up the other sources of revenue from taxation. What, then, is the explanation of the fact that the killing of the land value could take place without reducing the collective Colonial assets? Single Taxers say that the reason is that the inclusion of land value amongst these assets having been always a purely fictitious operation, its falling out could make no difference.

The total land value is merely the capitalised ground-rent fund. This fund is the total sum which all the users of land are prepared to give annually, or to buy, up for a lump sum, for the land which they use. Up to the present time they have paid this as a "tribute" to private individuals. It is not proposed to annihilate the fund, but to transfer it to the State. It is apparent that no reduction of the collective Colonial income can be effected by making a mere transfer between sections of it; but it is also evident that when the State receives the ground-rent fund no buyer will give more than a nominal sum for the purchase of any piece of land. As long as a private individual receives the ground rent, he holds an income-producing right which is saleable; when he passes the rent on to the State he will no longer have a capitalised value to offer for sale; but the land will not, as a consequence, lose any of its value for use, and that is the only value which, according to Single Taxers, it ever ought to have had for anyone. As a matter of fact, it never had any other value to any community as a whole. The reason that it has now a capital value to certain members of the community is found above, in the fact that they have obtained the legal power to charge other members for permission to use it. That which has been the gain of the few has been the loss of the many; or, to put it more precisely, the gain to landownership has been a loss to the rest of the community. If the income of a section is contributed by the rest, then the capital value thereof, if credited to the one, must be debited to, and form a liability of, the other section.

page 40

To put the problem in a different way: let it be supposed that a privilege is conferred upon certain idle individuals, enabling them to place toll-bars upon all the roads of the country, to take a fee from the passers, and to treat the proceeds as private income. No one would contend that the value of the roads of the country had been increased by the operation, or that an addition had been made to the country's gross income. The collective income would be as great before as after the institution of the toll-bars, because it would be the produce only of the industrious inhabitants. The fees paid to the toll-keepers would be taken from this income, and could in no wise be mistaken for an addition to it. The only value of the roads to the people, as a whole, is their usefulness in aiding production and distribution. They had been made and maintained by taxes upon the whole people, and if, after this had been provided for in the country's expenditure, the toll-bar concession had been granted, it is obvious that all production and distribution would be saddled with it as a private charge. The industrious section of the people would be rendered poorer as a result of the granting of the concession, because they would receive no equivalent. But for all that the toll-bar owners would have a saleable interest and therefore an assest, varying according to the amount of income derived, or expected to be derived, from their concession. But this selling value would not constitute an addition to the collective assets of the country, and could not, therefore, be put down by its Treasurer as such. Its disappearance, caused by a subsequent abrogation of the concession, would not reduce the Colonial assets. Yet, upon Sir Julius Vogel's theory, it would be included.

This supposed case is the parallel, in all salient features, of land-ownership. The income received from the travellers on the roads is analogous to the ground rent derived from tenants by landlords: neither of the receivers confers any benefit in return. In the one case the making and maintaining of the roads, and in the other the carrying on of public services, and met by taxation levied upon all the people. The selling value in each case is determined by the same consideration—viz., a concession to levy a private toll. Neither of them represents Colonial, or any true form of, wealth, but only the capitalised value of private charters authorising their owners to make mere impositions upon their fellows for their own personal benefit.

It can hardly be necessary to say more in proof of the contention that land value is not a Colonial asset.