Chapter XII.

Labour and the Land Tax.

1. Whatever stimulates the use of land calls for more labour-The structure of the industrial system rests upon land. No industry is independent of its service. Labour cannot exert itself apart from land, even in manufactures. Throughout all branches of its effort, it must have land to work upon. The higher the price it has to pay for the use of land, the greater the impediment to its productive energy. Cheap land is beneficial to production. The dearer the land, the heavier the toll upon industry. Now, land is cheap when it is abundant. Anything which increases its abundance lowers its price, or value, or rent. A substantial Land Tax renders it unprofitable to hold land out of use for speculative purposes. Since a Land Tax cannot be shifted from the shoulders of the landowner, he cannot afford to retain his land except by making it productive. Mere speculators become eager to sell their land. This operates in the same way upon price as an increase in the supply of land. More land is available for those who want it for use and occupation. A landowner cannot continue long to pay a heavy Land Tax unless his land is yielding him a revenue; it cannot yield him a revenue unless it is put to some productive or useful purpose; consequently the landowner must use his land, or sell it to someone who will. In other words, all the land idle, vacant, and disused before the Tax will, by the powerful incentive operating on the minds of its owners, be brought under cultivation or under occupation. Necessarily incident to this process is a keener demand for Labour. To bring land into use, hitherto held by speculators, is, perforce, to stimulate this demand. Furthermore it has the same effect in cheapening land as an increase in its supply—which, indeed, it is—and cheap land always leads to greater industrial activity. Thus industry is quickened and the employment of Labour increased.

2. There are three agents of production—Land, Labour, and Capital. The only source from which these agents can obtain page 100 reward for their services is the total product of their combined operation. To increase the total product—the output of the nation's industries—is to enlarge the fund from which wages are drawn. A Land Tax stimulates production by relieving producers at the expense of the owners of a gift of Nature and by opening up land withdrawn and closed off from industry. Besides.) Land Tax. by promoting industrial activity, must of necessity increase the national output. More employment is found for Labour; that which is employed is discouraged less by taxes on its energy; hence the total output is greater, and this alone is the fund from which Labour can be paid.

3. The total product of the factors of production being increased, how does the Land Tax affect its distribution among those factors? There is an augmented fund for division. Will Labour secure a share of the increase? The whole product is divided into rent, wages, and profits. Rent, and wages, and profits equal the total output. A Land Tax will lessen rent, or the share of the landlord. In the first place, he will have to pay the tax himself. That alone will reduce his rent. Besides paving the Land Tax, he will find that the tax, by bringing more land on to the market, lessens the value of his land, and therefore still further lessens his rent. It thus appears that, although there is more to be divided the landlord will get less than formerly. Consequently, either the labourer or the capitalist or both must benefit. If the landlord gets a diminished return from an augmented product the gain to the other agents must be considerable.

The gain to the labourer is clear. He will pay less as rent for his house. He will pay less in taxes to the Government, the landlord contributing to the revenue what formerly was a charge upon commodities and industry. In addition to this, there is a larger fund to be divided.

The effect upon the remuneration of Labour of land taxation will appear most clearly from taking an extreme case. Suppose the Land Tax superseded all the other taxes and became the Single Tax, that all the revenue of the State was drawn from this tax, and that the land was taxed up to its full annual value. In this case, the profits of the private ownership of land would be wholly taken away. Land would have completely lost its selling value. The landlord would be not better off than a tenant. He would have to pay to the Government in taxes the equivalent of the rent he formerly obtained before any tax was imposed. Ownership apart from occupation would be rendered impossible. The State would practically be the universal landlord, and the tax would be the rent paid by occupiers and cultivators. The very name "Single Tax" assumes that the yield of the tax would be sufficient to meet the needs of Government, and that all other taxes are remitted. The gain to the labourer is obvious. In page 101 the form of a tax he would pay his rent to the State and be relieved entirely from all other burdens. In New Zealand the revenue derived from Customs taxation is £3 4s 3d a head. This constitutes a heavy load on the resources of large families, which has to be borne in addition to the burden of rent. Great relief would follow the remission of that taxation alone.

As a matter of fact, the total expenditure for the administration of State affairs in New Zealand for the year 1906 was £7,774,926. The unimproved value (economic or unearned value) of the land of the Dominion for the same year was £146,682,465. Calculating the annual value of this at 5 percent., we obtain the sum of £7,334,123. This is the amount the Single Tax aims at appropriation for public purposes. It comes short of meeting expenditure by £440,803.

Now, the Postal and Telegraph Service and Stamp Department of the Dominion cost £617,270, and yielded a revenue of £1.365,727. If this item is eliminated from the revenue and expenditure account, there remains an expenditure of £7,157,656 to provide for. This would be amply met by £7,334,123 drawn from land values by the Single Tax, and £748,457, the excess of revenue over expenditure in the Postal Service. Indeed, there would be a surplus of £924,924. Therefore, allowing for a depreciation of a million pounds sterling in the unimproved value of land as a result of the imposition of the tax, the Single Tax would yield sufficient to meet the expenses of all the departments of State except the Stamp Department. That means that incomes might be free from taxation; that death dues, fees on registration of the transfer of land, and all Customs duties might be abolished, and that the public railways might be as free as the public roads.^*

The gain to Labour would be tremendous. It would pay rent to the State and pay for posting of its letters and the sending of its telegrams, but every other Government service would be absolutely free, and all the commodities it consumed would be as cheap as unrestricted trade and untaxed production could make them

The New Zealand Official Year Book estimates the revenue received per head of population at £8 12s 6d. This is what each citizen pays on the average to the State. The estimate is easily page 102 verified by a glance at the statistics of population and revenue. The population of the Dominion is less than a million, and the revenue is considerably over £7,000,000. Deducting the revenue obtained from stamps, we have an average contribution, then, by each person of £7 2s 6d, which the Single Tax would remit.

The saving can now be calculated. Take a man with a wife and five children. The family, if an average one, pays under the present system, out of its earnings, £49 17s 6d to the State. Tim payment being rendered unnecessary by the Single Tax, there would be a saving to the family of nearly £1 a week. It would be a clear gain. Rent, it is true, would have to be paid to the State to make up the revenue that had been foregone, but this would simply involve paying to the State what formerly had been paid to the private landlord.

The above, however, is a low and inadequate estimate of the saving. As we have already seen, one of the charactcristic evils of indirect taxation is that it takes out of the pockets of the people more than it brings into the public coffers It is costly to collect and the middlemen and retailers get the ordinary rate of profits on the taxes paid. The gross payments by the public as the result of Customs duties must be at least 25 per cent, greater than the ner receipts of the Government. From this cause alone the abolition of indirect taxation would effect a saving to our average family of £5 5s a year.

But we are still far from having arrived at an adequate estimad of the gain. Land values would certainly decline under the impostion of the Single Tax. If they dropped in the aggregate £1,000,000 the revenue from the tax and the postal service would still sufficient to meet expenditure. This diminished value of land would make the amount payable to the State as tax less than the rent payable before the tax. Here would be a further saving.

The great gain, however, has yet to be accounted for. There would be an amazing vigour imparted to industry. The productive ness of Labour would be increased beyond calculation.

The remission of the taxes on improvements and the produets of industry, coupled with the forcing of all land into use, would give such a stimulus to industry, would so quicken the demand for Labour as not only to absorb the unemployed but to raise the rate of wages. The demand for Labour being keener, wages would rise. Now, if we take the "Single Tax" as a rent, we arrive at the following conclusion: The effect of its incidence would be to charge wages, and at the same time immeasurably to lessen the charge upon wages. First, the aggregate produce to be divided would be page 103 greater. Second, the proportionate share of that accruing to Labour would be greater. On a low estimate, the gain tc real wages could not be much less than 50 per cent.

To show the benefit of a Land Tax to Labour needs no further argument. To the extent that the Land Tax supersedes taxes, the advantages that have been enumerated will other follow. The tendency of its operation is, uniformly, to promote industry and augment its products, to increase wages, and to furnish abundant employment to Labour.