THE STATE AND THE LAND

Sun (Christchurch), Volume I, Issue 75, 5 May 1914, Page 6

THE STATE AND THE LAND

SOME FALLACIES CONCERNING MONOPOLY. Specially written for THE SUN. VIII. The leasehold land policy of the | Liberal Party in New Zealand was in the main a well meant attempt to give legislative effect to land nationalist and single tax ideas, popularised during the latter part of the 19th century by the writings of A. E. Wallace, Henry George, and others. i These ideas are still shared by very many persons. There are thousands throughout the Dominion still firmly imbued with the notion that the extinction of private ownership in land is an essential preliminary to an improved economic condition of the people; there are tens of thousands who have accepted the hypothesis of the "unearned increment," and believe the so-called "com-munity-created value of land" should be made the basis of the national revenue, and should be taken for the benefit of the people as a whole by means of a tax that would be equal to the rental value of the land. THE SINGLE TAX FALLACY. The fallaciousness of the '' Unearned increment'' theory has been demonstrated time and again. No reputable authority on economies at the present time, nor indeed any well-in-formed person accepts Henry George's conclusions concerning the justice, or expediency of the single tax. But in spite of these facts, the demand that the landowner shall be sacrificed for the good of the community, is so deeprooted that it is, perhaps, sheer waste of good paper and ink to try and controvert it. Yet as long as the people believe in the existence of an "unearned increment" in respect to land that differs in soine mysterious way from an appreciation in the value of any other form of property, just so long will it be impossible to get the land question viewed in the light of common sense and reason. The task of clearing away misapprehensions is made more difficult because unscrupulous newspapers, which are careful enough to avoid an actual endorsement of the single tax idea in their leading columns, encourage others to advocate it with the greatest freedom in their news columns, with the result that these journals assist in the propogation of error almost as effectively as~ if they did it with the whole weight of their editorial opinion. The truth is that the '' unearned increment'' as conceived by Henry George is a mytln The mistake he and his disciples make is in the assumption that there is some inherent difference between the growth of land values and an appreciation in the value of goods, securities, or merchandise. There is none. If the value of land is "community-created," then all values are community created and all the arguments devised by the single taxer for sharing the "commu-nity-created" value of land apply with equal force to the division of the "com-munity-created '' value of all human possessions. The law of supply and demand operates in regard to land precisely as it operates regarding anything else. HOW IT AROSE. The fallacy of the unearned increment arose in the first place from the crude and imperfect generalisations of some of the earlier economists concerning the essential elements in the production of wealth. As they understood it, there were three factors in wealth production —land, labour, and capital. In a primative state of society this may be sufficiently near the truth for all practical purposes, even though it does not stand analysis. But applied to the production of wealth in an advanced state of society such as we live in to-day, this definition of essentials is absurdly inadequate and incomplete. Wealth production to-day involves not only the command of natural resources such as are covered by,..the term "land," but many other things, including transport, patents, credit, etc., all of which may' be equally essential to production, with the result that it is quite possible for persons controlling these things to levy toll on the community even more effectively than, the mere owners of land. Yet the crank with the "communitycreated' ' land values on the brain, assuming that land is the principal factor in wealth production, becomes obsessed with the idea that if the land-owner is dispossessed, either directly by the I transfer of his land to the State or | indirectly by the transfer of the rent of it, the economic problem is solved. It is a puerile idea, and it is amazing that such high expectations should have been formed concerning its application. THE MISCHIEF THAT FOLLOWS. The mischief worked by attempts to give effect to Georgian ideas concerning the land is manifold. In the first place, it has resulted in the land-owner being regarded in the minds of the multitude as a kind of natural enemy. He may be, and frequently is, the victim of legislative harshness and injustice. Such treatment evokes no sympathy; in fact, it is more likely to be regarded as an act of political virtue. In the second place, the public is led to believe quite erroneously that the increased cost of living is due to the rise in land values and that the matter can be adjusted by expropriation and redistribution, or by the simple means of direct and graduated taxation of land. No community, however, can afford to mark down any section for spoliation and injustice. It is quite possible by legislation to deprive a man of his substance to a degree that is disproportionate to his obligations to the State, and when this is done it generally means that someone else is escaping payment of his share. But it is no"*, right, nor can it be done without introducing | undesirable elements into the political life of the country, because every victim of injustice resents it and casts about for means of retaliation. Ostensibly the objects of the laws passed in this country imposing a heavy tax on land values are (1) to induce large land owners to part with their land; (2) to secure for the community a share of the' "'unearned increment;" (3) to cheapen production by reducing

rent. The effects are these: (1) The. law operates regardless of the circumstances of individual cases, and although the community may not benefit one iota by the subdivision of certain areas of land, the owner must submit to penal taxation which robs him of the fruit of his labours, or dispossess himself as best he can. (2) The landowner has te hand over to the State - a share of his income that is out of all proportion to the taxation paid by equally wealthy persons, whose capital and investments may have appreciated in value from precisely the same causes, much faster than the land-owner's. (3) The cost of living having nothing to do with the value of land, no graduated tax can make any difference to it, unless it places such a burden on agriculturists as to drive land out of cultivation, when the cure would be more deadly than the disease. DEFECT OF THE LAND TAX. • While protesting with p erf ect justice against the operation of illadvised provisions, based on ignorance and bad economics, the landowner himself would doubtless be the first to admit that the ownership of land, like many other human institutions, requires to be supervised and regulated by the State. It is never necessary to go very far in order to discover individual instances where the expropriation of the owner and the division of his holding would be to the advantage of the community. The defect of the land tax is that it is universal in its application and is incapable of discriminating. Clearly, the State is proceeding on "wrong lines, and it is the duty of those I responsible for public administration to I devise provisions that will attain the desired end without inflicting harshness and injustice oh entirely innocent persons who are doing no one-any harm. An instance may be cited whiclv shows very clearly the injustice of the principle upon which the taxation -of land values is based. Many years ago two men whose names are well known in this part of the Dominion contemplated an extensive purchase of Bank of New- Zealand shares, which were then at a very low price. One of themy however,. changed his mind*, and bought' land instead. In,both eases the ments proved highly successful. The' same causes that have brought about a'n increase in land values, the develop-' ment of the country by improved means of transport, the growth of -population, and more important than both, the rise in the prices of produce have also con- 1 tributed to the success of the Bank of New Zealand. If the increment is ''unearned" in one case, it is certainly "unearned" in the other. . But the fortunate investor in bank shares is not taxed to make him divide up his scrip; The law does not say it is better for the community that there should be six small shareholders in the bank instead of one large one. Consequently he escapes the penal taxation levied on the owner of land, regardless of whether the land will produce as* much in large blocks as in small, and'the large landowner has to pay about six times as much in taxation as an equelly wealthy man whose income js derived from securities instead of being obtained from actual farming operations. (To be continued.)