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The Pamphlet Collection of Sir Robert Stout: Volume 71

Chapter XXI. — Selling Value Killed by Nationalising Ground Rent

page 45

Chapter XXI.

Selling Value Killed by Nationalising Ground Rent.

The principal effect of the introduction of the Single Tax, and of its increase until it ultimately took up the whole ground rent received or enjoyed by the owner, must be that the selling price would he practically reduced to nothing.

When the levy reached a point at which no present margin existed, and no future margin was expected, between ground rent received and tax paid, it is quite certain that landlordism and speculation would disappear. The former exists upon income from investment, and the latter upon purchases at a low value and sales at a higher. "When the hope of their gains was gone" landlords and speculators would cast about for other investments which offered a prospect of return. The only parties, therefore, in the land market of the Single Tax era would be users of land. In buying land they would be purchasing no beneficial margin, which would be equivalent to an income of itself, over and above the net profit which their business operations would yield if they were carried on upon land which could be obtained rent free. The result could not fail to be, under these new circumstances, that when a sale was desired by one party and a purchase by another the exchange of the title deeds to the land would take place in consideration of the payment for improvements only; the land itself fetching only a nominal price.

But this extinction of the selling price of land would not take place if the landlord was able to pass on the tax to the tenant by raising his rent. This is not possible; but, in order to make the fact clear, it will be necessary to call attention to the precise term used. Note, then, that the proposal is not one to tax all land, but all land values, as represented by ground rent. This is not an ingenious quibble, nor is the distinction a fanciful one. If a tax was imposed on all the land of a country the problem would be quite a different one. Before such a tax was imposed it would be possible to use land which would just afford to the user a bare living when he paid no rent. After it was imposed no land could be used which would not permit of the user paying the tax in addition to making a bare living. The universal tax would therefore reduce the total amount of available hind, while there would be the same number of people to be supported off it as before. This would alter the problem in two important particulars. In the first place, competition for land would become keener than before, and this would result in a slight increase of the rate of ground rent paid over the whole country. Rent would also start from a higher platform—viz., from the upper surface, so to speak, of the Universal tax, just as a building would be raised bodily if another course of stones was added to the foundation on which it was designed to stand. Ground rent is paid for the "extra desirability" which any piece of ground possesses beyond the most desirable piece which can be got rent free, and which will yield a page 46 living. It follows, therefore, there being a tax on even the poorest land which will do this, that the "extra desirability" ranks above this tax as its starting point. There could, therefore, be no escape for users from a universal tax, and if the landlords were called upon to pay such an one, they would add it to the rent, and would thus be enabled to retain the full selling value. Such a tax would not accomplish either of the objects sought by Single Taxers.

On the other hand, a tax on land values would not be a universal tax, because it would not fall upon land which had not acquired an annual value. Such a tax, seeing that it would not fall upon land which could be got rent free, would not throw any land out of use. The "extra desirability" principle would not in this case start upwards from a tax level but from zero. For these two reasons competition would be less keen, and would also start from a lower level than in the case of the universal tax. The landlords would be powerless to pass on the value tax, and the result would be that the selling value of their land would gradually disappear.

But a little consideration will show that the annual ground-rental value would not disappear. Preferences will always exist, as they do now, for certain localities and for land possessing good natural advantages or fertility. Ground rent will, therefore, always remain as a well understood market value, and could be as readily assessed as at present. The Single Tax must for this reason be levied upon the ground rent, which will maintain its existence, and not upon the selling value of the land, which will vanish.