By Ole Lefmann
21st March 2019
IN THIS ESSAY I describe how I – now 90 years old – have experienced the societies in which I have lived, first 67 years in Denmark where I was born, brought up and worked, and then 23 years in London, England, where I am living as a pensioner.
My experiences about society began vaguely as a child in Copenhagen in the 1930s when I realised that all grown up males in the family were shop owners who made it a point of honour to be self-employed, able to pay for satisfaction of their own wants and the wants of their closest relatives, not being a burden to anybody else, definitely not burdening the society.
They urged for what then was called Free Trade: trade free from governmental restrictions and customs tariffs, and they disliked taxes. The elder members of the family had all grown up in straitened circumstances and they believed that like themselves everyone in the society could make a fair living by using their natural talents. “Everyone is the smith of his own fortune” was a motto frequently heard those days.
When in 1940 in the age of 11 years I asked my dad, how the public authorities should be able to pay school teachers, fire fighters, policemen, soldiers, and other civil servants if they could not collect taxes, he told me that all citizens pay rent of the land they use for housing or for business, and that the size of the rent of land they pay relates to advantages they can enjoy from the site they use and its surroundings.
And my father continued that advantages of the sites are not provided by individual citizens, but by Nature or by the Society – all citizens in common – who therefore should dispose of the values of the advantages of sites. He was convinced, he said, that most problems in the society would be much easier to solve if the Government, on behalf of all citizens would collect the rent of land from all landowners and stop taxing working people’s income.
That explanation was too complicated to me at that time. I found that teachers, policemen, fire fighters and presumably other public servants were needed, and I accepted that when I would earn some income I should contribute to the expenses of the society by paying taxes.
However, when in the late 1950s, as a newly married husband in his late 20s, I worked long extra hours for my employer and earned extra money away from home where my wife disliked being alone in the evenings, I one day became aware that the tax authorities took 70% of my extra income.
70% Income Tax
The 70% tax on extra income became clear to me when in 1959 I did my tax declaration for 1958, and became aware that in my tax-declaration for the previous year, 1957, I had made a mistake by summing up a column of figures to a sum that wrongly was Danish Crowns 1,000 higher than it should be.
I told the tax authorities about my mistake and they agreed to pay me back DCr. 700.
That made me understand that extra income was taxed 70%.
I found that 70% tax of extra income was out of proportion and complained to my father who repeated his above-quoted answer. Then I became determined to find out how it could be possible to get rid of or avoid the Income Tax System.
Those days’ Danish supporters of the Income Tax system were not happy with it either; but their problem was that it could not collect enough revenue to pay for the modern society’s expenses. Every six months Danish politicians had to pass new tax laws through Parliament and so they did, until in the mid of the 1960s the Danish Government introduced a new tax called MOMS, being the same as the English VAT (value added tax). It was collected when people used the remaining part of their already taxed income. In the beginning the MOMS was collected by 5% of all purchases, but over a few years it was increased to 25% on all purchases of goods and services. To politicians the most important advantage of the MOMS system was, that it was self-regulating: when market prices increased, also the revenue of MOMS/VAT increased; so politicians would no longer have to pass new tax laws every half year.
77½% Tax on Income plus Consumption
When a Danish taxpayer earned an extra income he/she had to pay 70% tax of it PLUS when he/she used the remaining 30% of it, he/she was taxed 25% VAT of the purchases.
Thus, the total tax claimed from producers’ extra income was 70% PLUS (25% of 30% =) 7½%, leaving the producer with a purchasing power of only 22½% of his/her extra income.
Earlier – in the years 1942-1944 – in my age of 13-15 years I joined a scout troop that had a log cabin at a site next to a forest called Hareskoven,12 kilometres north of Copenhagen. In weekends the scouts rode their bicycles to the log cabin or they went there by an old-fashioned railway (Slangerupbanen) from the then outskirts of Copenhagen. Walking from the railway station in Hareskoven to the log cabin we went through a residential area of detached one-family houses with gardens. I liked this area and hoped one day to be the owner of a house with garden like these.
In the mid-1940s (before common use of television, computers and mobile phones) I read all the books in my parents’ bookshelves and became enthusiastic about one written by the American philosopher, journalist and economist Henry George, translated into Danish. I do not remember the book’s title, but it threw bright light over several problems I had been pondering over for a long time, such as unemployment, taxation, free trade, sharing the results of cooperation, etc.
It made me start studying these themes thoroughly. I read writings and listened to lecturers of Danish philosophers, social critics, political innovators, and other idealists such as Jakob E. Lange, Sophus Berthelsen, Kr. Kolding, C. N. Starcke, J. L. Bjørner, C. Lambek, Viggo Starcke, Knud Tholstrup and many others, and I joined the youth group of the Danish Justice Party that urged for public collection of the Rent of Land instead of taxes on production, producers and products, and for Free Trade.
*
In the beginning of 1958 I became aware that an empty building site was for sale in the area I liked, and soon thereafter my wife and I had bought the empty plot on conditions of mortgages we could afford. We expected that after 10 years’ time we would have paid up the mortgages and then we hoped to be able to pay a builder for building a house on it; and after the ten years we reckoned that the old-fashioned railway line might have been replaced by an extension of the Copenhagen metro.
However, less than two years later I was called by phone by the owner of the one-family house next to our building site. He wanted to buy our site and offered a good price that we accepted. The amount that remained in our hands when we had repaid the mortgages and paid estate agent and lawyer and taxes, had the size of the salary I could earn (before tax) for one years’ work. That was the outcome of a less than two years’ investment in a down payment and a few instalments + interests.
Then – late in 1959 – we found a house for sale (10 km west of Copenhagen) that was near to the house of my parents-in-law, which suited my wife’s and my demands. My wife was pregnant, and her mother would look after our soon new born child when my wife and I went to our respective working places on weekdays. So we used the profit from selling the empty building site as down payment for the house near my wife’s parents, and took mortgages for the rest. It was a detached single-storeyed one-family house, but small (104 m²), with a comparatively big garden. We lived there for 10 years. Then our daughter needed a bigger room, and my wife and I would prefer to live nearer to the centre of Copenhagen where we both went daily to our working places, and our daughter went to school.
So, in 1968 we found a building site for sale in the outskirt of the Borough of Copenhagen and bought it and asked a building company to build a big standard house (160m² + 90m² basement) that had all the qualities we had dreamt of plus a very big garden. We paid the down payment with the profit from sale of the smaller house 10 km west of Copenhagen and took mortgages for the rest. We lived there for 15 years. Then our daughter in her age of 24 years had moved from home, and we in our late fifties felt that the big garden was now more a burden than the pleasure it used to be.
We then bought a big flat – without a garden – in a block of flats near the row of lakes round the inner Copenhagen, but in a short distance to public parks including Copenhagen’s Tivoli. When our ‘dream house’ was sold we had more money at our disposal than we had ever dreamed of.
In 1995 we moved to a four-bedroom house in the northern part of London that our daughter who had settled down there with her husband had bought for us for £72,000. The market price of that house was in 2015 assessed by Estate Agents to £630,000.
So, IT IS NOT TRUE when some people try to impress on other people that
“You cannot get anything without working for it
– or stealing it, which is a criminal act you definitely should not do”,
or that
“There is not such a thing as a Free Lunch”.
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I experienced that people got work-free income when they owned things whose values increased because of increased demand, or because of decreased supply. It happened to services, to stocks of goods, bonds, shares, livestock, real estate or other monopolies, or whatever. The reason for increased demand or decreased supply could differ from case to case, such as failing harvest, blockade, war, new technology, successful sales promotion, lower taxes, increased population, withdrawn restriction on trade, progress in the society’s economy, etc. However, sometimes values decreased because the demand slowed down, or because the supply increased.
Values of Real Estate (landed properties) were most of the time increasing because the development of society escalated; but sometimes set in an economic crisis that decreased values of Real Estate.
Experiences have proved that that has happened through centuries approximately every 18th year (so the next crisis may be around 2026). The events that triggered these backlashes differed from crisis to crisis, but they have happened anyway approximately every 18 years. It is bad luck if you have to sell your property when its market-value is low. If you don’t have to sell, you may expect that the value will regain later. If you are well off you might take advantage of the depression and buy a cheap property.
The seriousness of the crises seems to escalate from one 18 years’ period to the next (so the 2026-one will probably be really bad), and always the people who don’t own things of value – comprising most young people – and only live of what they earn by their work, or of a pension that have been reduced by taxes and by other unavoidable expenses claimed by powerful claimants, are among those who suffer most, unless they are gifted with or have developed strongly sought-after abilities.
*
I find it excellent when talented and skilled and hardworking people earn great money by their productive exertions (physical or intellectual) that make the community a better and a more enjoyable place to live. But I – urging for equal possibilities to all human beings – don’t like and am very much annoyed with and against that the Government allows and protects some people to absorb for their private satisfaction gifts of nature and society that could have been natural free gifts to all mankind.
I agree that landowners must have exclusive right to use their land, but they don’t need and should not be allowed to keep the Rent of Land created by Nature and by the Society, and other monopolists should not be allowed to keep the Extra monopoly-profits they charge on top of the prices they would have been satisfied with had they not had the monopolies.
Monopolies are approved and protected by the Government and the extra Monopoly-Profits should go to the public and be used to the benefit of people in general. Then dead-weight taxes on productive people could be reduced, maybe abolished.
Landless people and people without any monopoly, who are unable to absorb anything of the free gifts of nature and society, are cheated every day, month after month, year by year, by the system that lead the values of nature and society to a few holders of monopolies and economic privileges.
As long as a Government maintains such a system, I accept that individual citizens seek to get a share of the free gifts of nature one way or another in order to reduce the cheating they would else suffer every day. I sympathise with those who – in order to diminish the cheating they were else exposed to – urge for getting a house and its today privatised rent of land; but I become sad when such people care for themselves only, and ignore that their fellow citizens – working but landless – are cheated daily for advantages they could have of public collection of publicly created values and public use of it to the benefit of people in general.
As long as the technological development of societies are progressing, the market will provide producers with reasonable market wages – even when the gap between landowners and landless people expands. However, if we keep the system as it is to-day, when the technological progress has to stop (because of climate change, pollution, or whatever) the market wages will sink towards minimum existence.