The Dominion. THURSDAY, JULY 1, 1909. UNEARNED INCREMENT.
Tke attitude which the Government of this country , has taken up towards those who get their living directly from the land invests with special intorest for ; New Zealanders the British Government's proposal to confiscate one-fifth of the "unearned increment" of land values on every change of ownership. As it is quito possiblo that the Government may think tho British example worth following, it may be worth while glancing at the theory of this sort of taxation. The argument that is put forward in support of the singling out of land for special taxation is that land' is different from all other kinds of property;. tho special, and the only, argument advanced in favour of taking toll. of. tho "unearned increment" of land values is that "increment" is crcated by tho community. Lot us look at the first of these arguments. Land is certainly different from overy othor form of property, just as every single form of proporty" is different from every other. Nobody denies that. But what the advocates of , special taxation on land have to show is why a man whose income is dc-rivcd from land should have to pay higher taxes than the man who derives his income from something else. Why should a man who makes s.per cent, on £6000 worth of land—£3oo a ypar --be required to pay £12 10s. in taxes, when, a man who merely draws 5 per cent, from £f>QOO worth of bonds pays nothing \ Any argument forjspecial penalties on the landholder because his 'source of income has peculiarities of its own must apply to every other source of iricome that has peculiarities its own. If wo wero to say that land.should'bo. exempt-from taxation in recognition of its difference from other kinds of taxable property we would be making a. of oxactly ■ the same soundness as the proposition that that difference justifies special and extra taxation. ■ > .
As to the proposal that the "unearned increment" should be specially taxed, or partially. confiscated, on account of its having been "created by the community," the case for the opposition is equally clcar and sound. "Unearned increment", is not peculiar to land, and, the community does not "create" the unearned increment of anything except by being born round about it or settling near it.; The rise in a doctor's income through-tho 'growth .]of population; the rifee in the price of wheat oWing,to tho larger number of consumers, to the'.growth'/of the bread-eating public; the rise in tho. wages of any , class- of artisan—these and practically all other increments of. value are "created by tho community." Why should the rise in land values be specially tr.catcd? Why should one particular form .of "communitycreated" increment be singled out for confiscatory treatment ? : For, that matter, ■why should even the speculator in mining shares bo allowed to enjoy the increment of his shares untaxed while the farmer is penalised for the increase in the,value of his farm? ."Tho community" has no tnore claim to the : increment: of land values than to-the' increment of any. other value which depends upon the communityyet nobody .- suggests that the ' community should endeavour to "get'back its own" in such, cases as we have, quoted abovo. The taxcrs of "unearned increment" rely very .largely upon Mill. . They forget, however, that Mill, .in advocating the tax, insisted that the present,value: should\be treated as sacred;: And part of'the present, value of land, is the expectation of : future value. A.s, the Speciatoi'. points out,:
..There. ate risks in buying land as iiv buying anything 'olse;,, It may-fall in vallie, or it may rise; and 'if tli'6 purchaser : . is told that tho Stuto will take from him any ■ increment that accrues,'"but. will not compensate him for any decrement, then clearly'lie will not be willing to gives the same pricc as if he were allowed to set off the risk of'loss again-st' t.ho hope,' of gainV. the -confiscation of future unearned increment must diminish tho present value of tho land,, and thus do tho . very thing that Mill denounced as intolerable.
: Heney George-is the master of the advocates of tho new : tax; and he was.morc logical than his disciples. He recogniscd, as Me, W. H. Mallook points out in The rimes,:,that : his propositions would have .'little': more than a piously academicisignificance unless- they were taken in connection with a- further proposition as to fact, which alone invested them with what i he took to be a practical import. The proposition is . this; -"In • every progressive society, the rent of land not only increases absolutcjyj but also increases relatively to the entire national -income, thus tending •to absorb, as fast as they come into being, every addition to the earnings of labour and of capital aliko."; From official records Mp,. Mallock shows that, this proposition' is'grotesquely and absolutely incorrect. The rent-of land relatively" to ! the., national income has not been an increasing quantity, . but a .quantity that has steadily decreased for over a century. .In 1798, (when , the first income tax was imposed) the rent of land, if Iroland had been included,, would have been something over 40 per cent, 'of the. whole; In the year 1851 it was 22 per cent. Ia tho year 1880 it was 1,7 per cent. To-day it is'not more than. 11 per cent. The shrinkage is still more notable if agricultural land alone is considered. In time t obviously, the r(iti(j.may, bo expected to dwindle to practically, .nil, and 'then, if - ■ Henuy George's basic principle is sound, land' should be left completely free from any' kind of taxation. This line of argument j is carrying' tho war into the enemy's i camp, with a vengeance., It serves excellently to illustrate, the that lies at the, root, of a too-ready' acceptance of unsound but plausible theories. An idea is put forward ;as an economic truth, is taken up, and, repeated in parrot.fashion, possibly finds wide acceptance, but crumbles to pieces. under- the weight. of the facts and realities of life, which alone afford a' means, of testing its soundness.
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Dominion, Volume 2, Issue 548, 1 July 1909, Page 4
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1,008The Dominion. THURSDAY, JULY 1, 1909. UNEARNED INCREMENT. Dominion, Volume 2, Issue 548, 1 July 1909, Page 4
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