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The Pamphlet Collection of Sir Robert Stout: Volume 71

Chapter XXIII. — The Effect upon Landowners Produced by the Change

Chapter XXIII.

The Effect upon Landowners Produced by the Change.

Having shown that the principal effect of the taking up of all ground rent by means of the Single Tax would be the destruction of the selling value of land, it will be necessary to show what its secondary effects would be. In considering these effects it will probably make the matter clearer if the cases of landowners and landless people are dealt with separately. The landowners consist of four principal divisions, viz., the speculator, the landlord, the working proprietor, and the owner who has borrowed on mortgage.

Take the speculator first—the man who buys land and keeps it out of use, or lets it for some inferior use, waiting for a tempting rise in value. The early effect of the introduction of the tax would be to make such a man anxious to sell out. His prospect of future profit page 48 would have disappeared. If he held on until the tax was fully imposed he would, after having been subject to an ever increasing annual payment, find that his land had no selling value. Of course he would not accept this horn of the dilemma, but would sell out early. Some fixed scheme for gradually increasing the tax over a given number of years would have to be laid down by Parliament. This would enable both buyers and sellers to calculate or estimate the present value of any holding with Sufficient accuracy for their respective purposes. Speculators would probably soon cease to obstruct the progress of useful settlement, as they do at present.

Next take the landlord—the man who has inherited or bought land which he does not personally cultivate or use, but which he lets to others for rent. The result to this class of owner would be a gradual and progressive reduction of income, until at last he would pay away to the State all the ground rent which he had received from his tenants. Of course, he could sell out at any time if he elected to do so. It may be noted, also, that the speculator could let his land, and for the future become a landlord, with an ever-decreasing rent-roll.

Let it be remembered that neither of the representative owners just dealt with is one who has added improvements to his land. But there are cases where tenants have taken improving leases, and where the improvements, wholly or in part, fall in to the landlord at the end of the term. These improvements would not form part of the assessed value, and would, therefore, not be taxed. At the end of the lease the landlord could sell these with his freehold, or re-let the whole to the same tenant or to another. He would thus get cash or derive an income from the improvements, without being subject to any deduction. This power of the landlord to "reap where he had not sown and to gather where he had not strawed," has caused great indignation even amongst those who look upon ground rent as a legitimate charge, made by a man who allows another to use his land. With how much more horror Single Taxers—who wholly deny the equity even of ground rent—view such "reaping" and "gathering" had better not be expressed in words here. In London, and most of the large towns of England, many thousands of acres have been covered by tenants with houses and other buildings, with the knowledge that they will wholly revert to, and become the property of, the ground landlord at the end of the lease. Suffice it to say that the Single Tax would effectually stop the growth of this evil system and cause it to gradually die out at the roots. But it cannot be altered in any other way.

There are other landlords who have invested capital in making improvements and erecting buildings on their land. The income arising from these would not be reduced by the new tax, nor do Single Taxers grudge the landlords a penny of it. They have no enmity to any class, however they may be named, and are prepared to recognise the value of improvements by whomsoever made, and whether they are page 49 large or small. Land and raw materials are provided by the Creator, hut buildings and other improvements are not—they don't fail from the clouds or spring up of themselves, and therefore no man can expect to get the use of them for nothing.

In the third place, take the working proprietor—the man who owns the land which he cultivates, who owns the site and building where he keeps his country store, or his town shop, office, hotel, ware-house, factory, or dwelling house. Such men are all better off under the Ballance Land Tax Act, 1891, than they were under the Property Tax, by reason of the exemption from taxation of improvements up to £3,000. Single Taxers rejoice in this reform as far as it goes; but they would go further in this direction by exempting all improvements, however large. On the other hand, they would refuse the present exemption of small properties and the deduction from moderate ones. They hold that under any circumstances, and especially where there is no plurality of votes, it is demoralising to make such a proposal. It is equivalent to offering a bribe to a numerous class of voters in these terms: "If you will keep our party in power we will impose taxation which will not touch you."

Let us consider how the Single Tax would affect these working proprietors. In the first place, it is quite clear that the selling value would, as in the other cases, be gradually taxed out of their land. Their balance-sheets would therefore show this item as a steadily decreasing asset. Their improvements would remain intact and absolutely secure to them, because they would continue to hold the title-deeds of the land on which they stood. They could sell or bequeath the whole without interference from anyone. So much for their capital accounts. Next as regards their profit and loss accounts. All taxes upon existing or future improvements would disappear from their "business charges." They would be relieved from all existing taxes of every description, except the penny in the £ on unimproved land value; from Customs duties (and consequently from the annoyance, delay, and labour entailed by the necessary "search"); from stamps on cheques, bills, receipts, and deeds; from stamp duty on land transfers, from excise, from death duties, income tax, graduated tax, tax on improvements, and from miscellaneous duties. These would be their principal credits. On the other hand, they would be called upon to pay to the State a tax of 20s. in the £1 on their annual ground rent assessment. An estimate of the amount of this value for the whole Colony is hazarded at page 58. Everyone will be able to judge for himself of the soundness or otherwise of the forecast, and can apply such a percentage as he thinks lit to his capital value as fixed by the last assessment. This will give him an approximation to the amount of his new annual charge, supposing the change to be completed at once, which is not contemplated. It will be evident that the credit under the head of Customs duties will vary in each case. It will be greater to men with large families than to those having small ones, page 50 and to bachelors. It would be greater to those who use wines, spirits, and tobacco than to the abstainers from these luxuries. Those who conduct large commercial businesses would benefit more than small traders and farmers from the remission of stamp duties.

It is impossible to give any general estimate of how the Single Tax would affect any particular class of owners, because the circumstances of its different members vary so largely. It is probable, however, that all who cultivated or used the whole of their land would receive credits fully equal to the new tax.

In the fourth place, there is a considerable number amongst all landowners who are only part owners of their land. Reference is here made to those who have borrowed a portion of their purchase money upon mortgage. There are probably more such cases amongst working proprietors than in either of the other sections. To a man of small means wishing to get the use of land, the first inducement to purchase in this way, is his desire to be able to make improvements without the fear of losing them. The second is, to make his tenure a permanent one, and by this means to escape the risk of having his rent raised. The third inducement, but a more distant and less certain one, is to ensure that any increase of selling value shall remain with himself. The first reason does not weigh with speculators or landlords at all, and the second not so much; the inducement, therefore, to buy more land than they are able to pay cash for, is not so great in their cases.

The effect of the tax upon the working proprietors who are in this position would be materially different from what it would be upon sole owners. It has already been stated that the mortgagee would be treated as part owner, both of the bare land and of the improvements, pro ratâ with the real owner. Neither would be taxed upon the improvements, but each would pay upon his respective interest in the ground rental value. This class of owner would therefore pay tax only upon the unencumbered part of his rent, and would thus be called upon to make a less sacrifice than the owner who had found the whole of the purchase money.

But, notwithstanding the foregoing explanations, Single Taxers must not be understood to base their case upon how the reform will work out in detail to the satisfaction of individuals. It is desirable to indicate its effects in the way that has been attempted, so as to make the whole proposal quite clear, but not for the sake of making converts on account of self-interest. They do not seek to make it attractive to any special class, for that would be to lay its foundation in sand. They urge its justice, the soundness of the principle upon which it is based, viz., the complete and permanent removal of all taxes, hindrances, and insecurity from industry of every kind, whether it is of the hand or the brain, and whether on a large or small scale.

Single Taxers, therefore, point out without concealment or hesitation, that it is to the landowners of the present day that they look for whatever sacrifice it may be necessary to make, in the first instance, page 51 in bringing about this great fiscal readjustment. They do not believe that these men are any worse than other classes of the community, or a whit less patriotic than their fellows, when they clearly see what is for the public good. Nor would even they be wholly losers by the reform. "In blessing others, they would themselves be blessed." To see some prospect of stopping much of the industrial strife which exists everywhere, and to greatly reduce the terrible distress which prevails amongst the lowest paid classes of all large cities, and at times amongst the unemployed, must be the desire of every humane man. To make some pecuniary sacrifice from an ample income, where it exists, would be readily assented to by nearly all, if only the prospect of real and lasting benefit was assured. Let all well-disposed men, therefore, look earnestly into the suggestions here made, and test them in every way that may suggest itself. They are put forward as possessing a direct value in themselves, but if this is an error, they may yet be the means of suggesting some better theory. No one who has the ability to read and think, can excuse himself for neglecting to look into economic questions when such astounding facts are everywhere staring him in the face. Let him consider the fact that the bulk of mankind in civilised countries is still living in a condition far below a desirable standard, in spite of the fact that our productive power is many times greater than it was fifty years ago. Let him set alongside of this the abnormal growth of great fortunes, and if it does not strike him that there must be some wrong principle at work, his reasoning powers require the stimulus of collision with other men's thoughts. The facts ought to be enough to induce him to seek this by reading a few books that will show where mens ideas and hopes are tending. The exercise will be sure to do him good.