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The Pamphlet Collection of Sir Robert Stout: Volume 71

Chapter VIII. — "Tax" is not a Strictly Correct Term

Chapter VIII.

"Tax" is not a Strictly Correct Term.

The preceding part of this pamphlet has been devoted to an explanation, positive, negative, and by contrast, of what the Single Tax proposals are, and of what they are not. It is now necessary to show that the nature of the demand proposed to be made upon all landowners is not similar to that of an ordinary tax.

As a preliminary to this argument it will he desirable to show the present position of the ground-rent fund, which it is proposed to take for the purposes of public revenue. This fund is now in complete existence; part of it is paid by the tenants to the landlords, while the remainder is received in another form by owners who use their own land. In the former case, it may sometimes form part of a payment which includes the use of buildings or other improvements, and it may be paid at different intervals in different cases. But in either case, the fact remains that rent is paid for the use of bare ground by every tenant to his landlord now. It is, therefore, not a new charge so far as tenants are concerned, and the only change proposed is to divert the fund from private to public hands.

The position as regards the landowners is different. They have inherited or bought the fee-simple of their land, and are not legally subject to any annual payment to anyone as a condition of retaining its use. They are, therefore, entitled either to use it themselves, to let it to tenants, or to sell it. The annual value may rise or fall, but they cannot be called upon to refund to anyone if it rises, and they cannot make a demand upon anyone if it falls. The demand proposed to be made upon the landowner—to pass on the annual ground rent to the community—would, therefore, be an entirely new one. The page 12 equity, or otherwise, of making such an innovation will be argued later on, and it is only desired at the moment to make clear the position of the fund and the demand upon it.

Having disposed of these facts regarding the position, the course is clear for arguing that the ground-rent payment, by whomsoever made, is different in its nature from a tax.

Look, first, at the popular idea and the popular attitude with regard to the two payments. It will be seen at once that they are viewed quite differently. It is true that everyone would like to pay less of either, just as he would like to pay less for his food and clothing; but for the ground rent which he pays he has a feeling of having received value for his money. He has no sense of having been placed at any disadvantage as compared with his tenant neighbours. If he has paid more than some of them, he is able to feel that he has occupied a piece of ground which he values at that much more than theirs. He is, therefore, in a comparative sense, content with his bargain.

Not so with his taxes, however. The very word indicates the imposition of a burden—the extracting of something. With regard to them a man nearly always feels both that they are too large in amount, and that he pays more than his fair share of them. But it will be necessary to look deeper than popular impressions and attitudes. In doing so it will be apparent that ground rent is a measure of value. It is the amount which a man is willing annually to pay for a certain piece of ground rather than take some other piece which is so poor, or so remote, that he can get it for a mere peppercorn rent. He believes that his industry, carried on upon this particular spot, will be worth that much in excess to him every year beyond what it would be if exercised upon the less favoured site. He is, therefore, satisfied that in having made such a bargain he has entered into a reasonable business transaction. If he pays more rent it is because his profits are correspondingly more, without any increase of exertion. He feels that he is, for this reason, on a par with his neighbours, and is, therefore, not disposed to complain.

But as he has only agreed to pay the equivalent of the excess value attaching to labour carried on at a particular spot, it can scarcely be affirmed that he has consented to part with any of the produce of his labour. Nor can this be affirmed in the case of any of the neighbouring tenants, or of more distant or less favourably situated tenants; for if the investigation is carried far enough afield it will reach the tenants who sit, practically, rent free. Those who pay no rent cannot, as a matter of course, be said to suffer a deduction from the produce of their industry. Their industry is less efficient, but it suffers no actual deduction. Their condition may therefore be taken as the standard one; their industry may be said to be exercised at the zero point; they receive no excess value over and above the bare value of their labour. To make assurance doubly sure, retrace these steps, page 13 and follow up the rent scale again. It will be noticed that none of the tenants pays away in ground rent any part of the produce of his industry, because, as has been shown, he only parts with the excess value which that industry acquires by reason of the advantages of his location having added efficiency to it. This is obviously his view of the case, seeing that if he did suffer such a deduction he would speedily give up his tenancy, and go further afield, where he could retain the whole. The higgling of the market is constantly and everywhere regulating the ratio of rental value on the basis of the supply of land in relation to the demand for it.

Next as to the statement that a tax does constitute a deduction from the produce of the payer's industry. This will be shown most simply and directly by first considering the case of the tenant who sits practically rent free. Directly a demand for any tax is made upon a man so situated, it amounts to a demand for a part of the produce of his industry. This is so because he has no other source from which to pay it. No equivalent advantage comes to him in connection with the imposition of the tax, such as comes to any of his rent-paying neighbours in return for their ground rent. Taxes are not optional payments, and the payer mostly disapproves of some of the objects for which they are imposed. As for the other objects on which they are spent, some do not benefit the payer at all, while from the remainder the benefit is very doubtful as compared with that which arises from the optional use of land which will be under his own control. This being so with the man who sits rent free, it is the same for rent payers. It has been shown that when they pay ground rent they part with only the excess value which has been added to their industry. It follows that when the tax is imposed upon them, it must come out of what is left after their rent is paid, i.e., out of the normal produce of their industry. Thus, a tax forms part of every man's comparatively unprofitable expenditure, and goes in reduction of the balance from which it is possible for him to make savings.

The position is, therefore, made clear to be this—that ground rent is a payment in exchange; whilst taxation is expenditure, and is mainly an addition to the cost of existence. It must therefore follow that the taking of ground rent for the purpose of public revenue, and the remission of all existing taxes, would have the effect of causing the wheels to run more smoothly. The remission of all taxation would remove the friction now caused by the constant dissatisfaction felt with the various taxes and the mode of levying and collecting them. The two systems are so diverse in their operation, that it may fairly be asserted that the word tax does not convey a correct idea of that proposed by Single Taxers.