A HISTORY OF THE THEORY OF LAND-VALUE TAXATION
Terence Dwyer B.A. (Hons) B.Ec. (Hons) (Sydney) M.A. Ph.D. (Harvard), Dip. Law (Sydney)
CHAPTER 26
THE ARGUMENT THAT ALL TAXES FALL ON LAND
The prevailing opinion today regarding the doctrine of the Physiocrats that all taxes fall upon land would probably not much differ from the judgment of J. B. Say: “The economists were quite correct in their position, that a land or territorial tax falls wholly on the net product, and consequently, upon the proprietors, but they were wrong in extending the doctrine so far as to assert, that all other taxes were defrayed out of the same fund.”[1]
I shall endeavour to show that perhaps a kinder judgment is in order: that if the Physiocrats were not entirely correct they were by no means entirely wrong either, and that their attempt to trace the shifting of taxes to surplus and the identification of that surplus as land rent still has practical significance.
One obvious difficulty presents itself in regard to Say’s judgment: if all taxes were “defrayed” from rent anyway, why were the Physiocrats so emphatic about the desirability of their “impôt unique”?
The answer is obvious from the previous discussion of classical approaches to tax incidence theory—the Physiocratic belief was that other taxes not only were defrayed out of rent but also diminished it.
This will become clear in a review of the historical development of the argument that all taxes fall upon land.
The first notable proponent of this idea is John Locke.[2] His argument starts with the suggestion that “When a nation is running to decay and ruin, the merchant and monied man, do what you can, will be sure to starve last: observe it where you will, the decays that come upon, and bring to ruin any country, do constantly first fall upon the land.”[3] Locke’s reason for this is that capital can emigrate or be held in sterile hoards and he proceeds to argue that
“This by the way, if well considered, might let us see that taxes, however contrived, and out of whose hands soever immediately taken, do, in a country, where their great fund is in land, for the most part terminate upon land … perhaps it will be found that those taxes which seem least to affect land, will most surely of all other fall the rents … A tax laid upon land seems hard to the landholder, because it is so much money going visibly out of his pocket: and therefore, as an ease to himself, the landholder is always forward to lay it upon commodities. But, if he will thoroughly consider it, and examine the effects, he will find he buys this seeming ease at a very dear rate: and, though he pays not this tax immediately out of his own purse, yet his purse will find it by a greater want of money there …”[4]
How will a commodity tax cause rents to fall? Locke argues that merchants will simply raise the price of their goods, in turn the labourer must receive more wages to maintain his subsistence and then the farmer, to compensate for the higher wage bill, must reduce the rent he pays. The farmer cannot recoup these costs by increased prices because the excise has lowered the net price he, the producer, receives while simultaneously raising the gross price to the consumer with the foregoing effects.[5]
Locke’s conclusion is that
“the gentry will, but the worst way, increase their own charges, that is, by lessening the yearly value of their estates, if they hope to ease their land, by charging commodities. It is vain, in a country whose great fund is land, to hope to lay the public charge of the government on any thing else; there it will terminate. The merchant (do what you can) will not bear it, the labourer cannot, and therefore the landholder must … A country may thrive, the country gentlemen grow rich, and his rents increase … whilst the land is taxed: but I challenge any one to show me a country, wherein there is any considerable public charge raised, where the land does not most sensibly feel it, and, in proportion, bear much the greater part of it.”[6]
There are some comments worth making about Locke’s views:
(1) He does not deny that others can be made eventually to bear some tax burdens, but he does assert this cannot be done without causing rents to fall.[7]
(2) In contrast, a direct tax on rent in no way causes rents to fall. The sum of the publicly and privately appropriated shares remains the same.[8]
(3) He has assumed that labour earns a subsistence wage and capital is mobile and very elastic. There seems to be little producers’ surplus to capital or labour which taxation could appropriate.
Locke’s views were widely cited in the eighteenth century English debates over Walpole’s excise scheme[9] and there were not wanting landholders such as Sir William Wyndham who argued that landholders’ rents would suffer less from being directly taxed than from attempts to place the burdens on labour, industry and trade.[10] It is, however, at the hands of the Physiocrats that Locke’s argument receives much fuller treatment.[11]
The essence of the Physiocratic argument is that a tax on costs of production must be shifted to net revenue or surplus. Now all labour and capital costs are costs of production, the only surplus is, in fact, agricultural rent[12] and therefore all taxes must fall upon it.[13]
It is certainly not, however, a matter of indifference whether rent is taxed directly or indirectly by this sort of shifting. Taxes on labour and capital will diminish their supply, reducing not only the very factor incomes they seek to tax but also reducing land rent, the only true net revenue available to be taken.[14] For how can rent arise, without the application of capital and labour to land?
It may be thought that the Physiocratic argument depends on the assumption that labour and capital are in infinitely elastic supply at certain natural wage rates and interest rates, which in turn are determined by a subsistence theory of wages[15] and international mobility of capital. Obviously, in this case, any attempt to tax labour and capital would lead to their total disappearance from the national economy and there would be no wages, no profits, no rent and no tax revenue. If this is so, then the Physiocrats “proved” their conclusion that all taxes reduce land rent by the simple expedient of assuming away any producers’ surplus to capital and labour.
In fact, however, the Physiocrats did not assume there were no producers’ surpluses enjoyed by capital and labour.[16] All they assumed, and all they needed to assume, was that labour and capital were not inelastic with respect to their returns. It is true that a subsistence theory of wages was advanced but it should also be pointed out that emigration of labour and capital was also mentioned[17] as was the obvious fact that higher wages might induce more work effort.[18] Obviously the more elastic in supply labour and capital were, the more serious would be the impact of the withdrawal of labour and capital upon rent.
Were then the Physiocrats perfectly correct in the contention that, as Say put it, all taxes were “defrayed” out of the rent fund?
In an obvious sense they were clearly wrong, if it is thought that they meant to argue that the net returns to labour and capital would be unaffected by taxation and that labour and capital could without loss throw the entire burden onto the landowners. Unless perfectly elastic in supply, labour and capital must suffer a reduction in net returns since there is in that case some producers’ surplus which can be tapped even if some of it is partially destroyed by the effects of taxation on marginal factor supply.
However, I am not convinced that this is what the Physiocrats were really trying to say. If, for example, they really believed that wages were fixed by a subsistence standard they would not have been so concerned about the impoverishment of the peasantry: it would have been illogical. The real point of the Physiocratic argument seems to be as follows:
(1) There are three factors of production; land, labour and capital.
(2) The supply of labour and capital is dependent upon their earnings and therefore upon taxation of those earnings.
(3) The rent of land depends on the amount of capital and labour expended on it.
(4) Hence, taxation of labour and capital will have several effects:
(a) it may reduce their net earnings;
(b) which will, in turn, reduce the supply of labour and capital; and, thus –
(c) reduce the rent of land.
In contrast, a tax on rent will only reduce the privately appropriated share of rent and in no way reduce either the gross rent itself or the revenues received by labour and capital.
There is nothing wrong in theory with this Physiocratic argument;[19] in practice, however, the damaging effects attributable to taxation of labour and capital do depend on their long run elasticities of supply. The Physiocrats obviously thought these elasticities were considerable.
When we turn to Adam Smith, we discover, as several writers have noticed before,[20] that his theory of incidence implies a large acceptance of the doctrine that all other taxes will reduce the rent of land.[21] Smith basically accepted the Physiocratic notion that a tax upon costs will be shifted so as to reduce surplus and that, conversely, a tax on surplus would not be shifted. He also agreed that the process of shifting would be destructive. His only real difference was that Smith thought rent was not the only surplus available for taxation,[22] even if it was the only true producers’ surplus.[23]
We have seen that Ricardo objected to Smith’s acceptance of much of the Physiocratic doctrine that all taxes fall on rent[24] and argued instead that taxes would fall on profits or wealthy consumers. However, Senior and J.S. Mill were able to argue against this Ricardian conclusion within the terms of the model itself. They pointed out that taxes on profits would lead to an earlier arrival at the stationary state with lower population and lower rents.[25]
Parallel with the type of reasoning which suggested that all burdens on labour and capital would cause rent to fall went another line of reasoning which argued the converse proposition: that economic progress and all boons to labour and capital would cause rents to rise. We have seen this view expressed by Adam Smith.[26] The argument is that all local subsidies, public goods or favourable externalities will be captured by land rents in the favoured area since capital and labour there are subject to competition from less favoured capital and labour.[27]
This argument need not be interpreted to mean that only rent gains any benefit from such things, any more than the argument that all taxes on labour and capital depress rent must be taken as meaning that capital and labour suffer no loss thereby. All that both arguments require is that labour and capital are sensitive to their rates of return in a particular locality or nation and that the productivity of land increases with the capital and labour employed upon it.
Returning to the argument that all taxes fall on rent, in modern times it has been reformulated by writers such as H.G. Brown in his discussion of the effects of a general tax on capital. Brown noted that
“In proportion, however, as a tax on capital, by diminishing the net income of capital, discourages capital accumulation, the owners of capital shift the burden upon other classes … the marginal productivity of capital and hence the interest on capital (including the part collected as tax) rises relatively to the marginal productivity of labour and wages and relatively to the marginal productivity of land and economic rent. The tax then tends to be shifted, to some extent, upon workers and landowners.
If the bearing of a part of this burden by workers, in the form of lower real wages … tends to reduce population and so make the supply of labour smaller, real wages tend upward and the tax falls in relatively larger proportion upon the owners of land. The demand for land is reduced … On the assumptions here made as to the effect of taxing capital on capital accumulation and as to the effect of a burden on wages upon population, we should arrive at something like the Physiocratic doctrine that all taxes must finally fall upon the owners of land, in the form of diminished rent. But we should need to include among landowners the owners of urban and other non-agricultural land, whose status the Physiocratic theory seems to have overlooked. And, also, we should need to distinguish between such indirect taxation of land … taking all their rent from the owners of near-marginal land while only taking a small proportion of their rent from the owners of superior land, and a direct tax upon land rent, which would take the same per cent.”[28]
It is, of course, now commonly accepted that in an open economy from which capital and labour can migrate we can regard the wage rate and interest rate as exogenously fixed so that any tax on capital and labour must necessarily lead to emigration of these factors till after-tax rewards are restored. Ignoring any depressing effect the migration of capital and labour may have on their rewards elsewhere, it is quite clear that the effect in the taxing jurisdiction will be a fall in rents. This does not necessarily mean, however, a fall in the relative share of rent in output since output, capital stock and labour force will have all fallen.[29]
In a closed economy, capital can “emigrate” as Brown noted by dissaving while labour can “emigrate” by lower population, lower work effort or the choice of leisure and untaxed household production. In this case, however, net wage rates and interest rates after tax are endogenous and we would expect them to fall with a corresponding fall in capital and labour supplied. In this sense, we can say that capital and labour can be made to bear the burden of taxation. However, as Brown observed, even in this case the marginal productivity of the fixed factor (land) must fall so that we are back with the result that taxes on capital and labour must cause rents to fall.
It is, therefore, correct to argue, as Locke and the Physiocrats did, that taxes on capital and labour will cause rents to fall, in contrast to a direct tax on rents which would only alter their division between owner and government. It is not, however, correct to argue (I leave open the question whether anyone ever did) that capital and labour cannot be made to suffer a fall in net returns as a result of taxation and that a fall in rents is the only result of such taxation.
So far I have implicitly confined this discussion of Physiocratic tax doctrine to a three factor model of land, labour and capital under the classical assumptions that land is physically fixed in supply whereas the other two factors are not. There were, however, some writers who suggested that a more micro approach to tax incidence theory be adopted in which it would be seen that rent is not the only surplus. This approach characterizes the views of Seligman, Hobson and Lerner[30]and is closely allied to modern attempts to generalize the rent concept.[31]
The basic propositions common to these authors are that:
(1) A tax on surplus cannot be shifted.
(2) All other taxes, which are taxes upon costs of production, will be shifted till they fall ultimately upon surplus.
(3) However, the process of shifting may well involve the destruction of some surplus.
These propositions clearly parallel those of the Physiocrats – the obvious question they raise is whether there are other producers’ surpluses than land rent and. if so, are they capable of being isolated for the purposes of taxation?
There have been several suggestions of other surpluses:
(1) Wages above subsistence levels. This idea goes back to Ricardo and J. S. Mill. The obvious objections are that different jobs have different disutilities and different incomes are therefore necessary to elicit workers for harder jobs. Moreover, labour has the choices of leisure or emigration.[32] Again, if “subsistence” is a social concept, labour may choose not to reproduce in order to keep accustomed or reach desired living standards.[33]
(2) Quasi-rents.[34] The Marshallian objection to taxation of these is obvious.
(3) Monopolistic advantages.[35] It was recognized, early and correctly, by Adam Smith that the profits of monopoly were uniquely suitable for taxation but surely the first best solution is to abolish artificial monopolies and tax, if one wishes, the natural monopoly – land.[36]
(4) Pure profits, disequilibrium surpluses and speculative gains.[37] The objection to regarding these as surpluses is that they are self-eliminating; in fact, they serve the very useful purpose of guiding the allocation of resources towards equilibrium. To tax them is, therefore, to reduce the incentive for economic adjustment.
(5) Special and rare talents such as those exhibited by opera singers, baseball stars, doctors, lawyers, etc. The objection to calling these surplus incomes is that, to the extent they are due to barriers to competition those barriers were better eliminated. In any case, such occupations exhibit uncertain prospects of success,[38] demand much practice and human capital investment in training and substantial risks of loss of income through injury.[39]
(6) Bequests and gifts.[40] These are surpluses only from the point of view of the recipient, not from the point of view of the donor. One could argue that taxes on bequests could in fact deter capital formation aimed at providing such bequests.
(7) Finally, it may be suggested that even homogeneous capital and labour in a three factor model could generate aggregate producers’ surpluses. Now this may well be true but the question then becomes whether such surpluses can be isolated for taxation. The problem arises from the fact that we cannot speak of the “marginal product of the 39th man” but rather must speak of the “marginal product of 39 men.” Every unit of capital or labour when it is homogeneous is equally marginal[41] – we cannot isolate “a surplus earned by a particular[42] part of a factor of production over and above the minimum earnings necessary to do its
work.”[43] In contrast, the rent of particular units of land can be isolated for taxation. Consequently, attempts to tax surplus components of interest and wages would seem to be impossible.[44]
In summary, there do seem to be good reasons for thinking that surpluses other than land rent are either not surpluses at all or are not capable of being isolated for purposes of taxation.[45] Consequently, the modern proposition that all taxes fall on surplus does not seem for practical purposes much of an advance on the arguments of Locke and the Physiocrats. The general conclusion of the history of doctrine in this area would seem to be:
(1) All taxes on factors in variable supply will lead to lower returns for factors in fixed supply. This will occur through excise effects which reduce surplus, by rendering some activities sub-marginal.
(2) If the factors in variable supply are not infinitely elastic, they too will suffer from an inefficient indirect taxation of their aggregate surplus.
(3) In contrast, taxes levied directly on surplus will not reduce its amount but simply alter its division between individuals and the State.
(4) In practice, the only fixed factor in the long run is land and the only surplus which can be clearly isolated is land rent. It would therefore seem to be a practical proposition to assert that taxes on labour and capital do, in fact, cause land rents and values to fall.
Consequently, the substitution of land value taxation in lieu of taxes on capital and labour may create an induced rise in land values which may offset the fall in land values caused by tax capitalization.[46] The strength of any such compensating rise in land values obviously depends on the elasticity of supply of capital and labour.[47] The practical relevance of the argument that all taxes on labour and capital reduce land rents should by now be obvious. One argument against land value taxation has been that landholders are entitled to compensation. That question can be pursued elsewhere and refuted on its own premises but we can now see that there is a possibility there will be no loss to landholders anyway, so long as land value taxation is in lieu of other taxes.[48] Just as the capitalization doctrine furnishes one argument for the ultimate burdenlessness of land value taxation per se,[49] so the doctrine that all taxes reduce rent furnishes another argument for the immediately burdenless nature of land value taxation when substituted for other taxes. A gradual transition to land value taxation could, by creating a higher, even if terminable, stream of rents largely compensate landowners for the loss of a perpetual stream of rents depressed by alternative taxes.
Aaron, H J. 1974. “A New View of Property Tax Incidence.” American Economic Review (Papers and Proceedings), 64, pp. 212-21.
Brown, Harry Gunnison. 1924. The Economics of Taxation.
Collier, Charles Frank. 1975. “Henry George’s System of Economics: Analysis and Criticism.” Duke University: Durham, North Carolina.
Dodd, A F. 1904. “Taxation of Land Values in Australasia.” Economic Journal, 14, pp. 401-12.
Ellickson, Donald L. 1966. “A History of Land Taxation Theory.” University of Wisconsin: Madison.
Fillebrown, C B. 1917. The Principles of Natural Taxation: Showing the origin and progress of plans for the payment of all public expenses from economic rent. Chicago: A.C. McClurg.
Gaffney, Mason. 1970. “Adequacy of Land as a Tax Base,” in The Assessment of Land Value. Daniel M Holland ed. Madison: University of Wisconsin Press, pp. 157-212.
George, Henry. 1879. Progress and Poverty.
Groves, Harold M and D J Curran, editor. 1974. Tax Philosophers. Madison: University of Wisconsin Press.
Harriss, C. Lowell ed. 1973. Government Spending and Land Values: Public Money & Private Gain. Madison: University of Wisconsin Press.
Higgs, Henry. 1897. The Physiocrats: Six Lectures on The French Economistes of the 18th Century. London.
Hobson, John A. 1919. Taxation in the New State. London: Methuen.
Johnson, Edgar H. 1909-10. “Method of Taxing the Unearned Increment.” Quarterly Journal of Economics, 24, pp. 759-62.
Lerner, Abba P. 1952. The Economics of Control. New York.
Locke, John. 1692. “Some Considerations of the Consequences of the Lowering of Interest, and Raising the Value of Money,” in Works of John Locke Vol 5. London, pp. 1-117.
Lynn, Arthur D, Jr. 1976. “Adam Smith’s Fiscal Ideas: An Eclectic Revisited.” National Tax Journal, 29, pp. 369-78.
Marshall, Alfred. 1890-1920. Principles of Economics.
Morton, Walter. 1955. Housing Taxation. Madison: University of Wisconsin Press.
Orr, John. 1912. Taxation of Land Values: As It Affects Landowners and Others. London: P.S. King.
Polinsky, A Mitchell and Rubinfeld. Daniel L. 1974. “The Long-Run Incidence of a Residential Property Tax and Local Public Services: Harvard Institute for Economic Research Discussion Paper No. 354.”
Quesnay, Francois. 1759. Tableau Economique.
Ricardo, David. 1817-21. The Principles of Political Economy and Taxation. London.
Robinson, Joan. 1954. The Economics of Imperfect Competition. Macmillan.
Rotwein, Eugene ed. 1970. David Hume: Writings on Economics. Madison: University of Wisconsin Press.
Say, Jean-Baptiste. 1821. A Treatise on Political Economy.
Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation.
Smith, Adam. 1776-1784. An Inquiry into the Nature and Causes of the Wealth of Nations.
Thomas, M. W. ed. 1964. A Survey of English Economic History. London: Blackie & Son Ltd.
Turgot, A R J. 1763. “Plan for a Paper on Taxation in General, on Land Taxes in Particular, and on the Project of a Land Register,” in The Economics of A.R.J. Turgot. P D Groenewegen ed. The Hague: Martinus Nijhoff, pp. 96-108.
Turgot, A R J. 1767a. “Observations on a Paper by Saint-Peravy on the subject of Indirect Taxation,” in The Economics of A. R. J. Turgot. P D Groenewegen ed. The Hague: Martinus Nijhoff, pp. 109-22.
Turgot, A R J. 1767b. “Observations on the Paper by Graslin in favour of the Indirect Tax, to which the Royal Agricultural Society of Limoges has given an honourable mention,” in The Economics of A. R. J. Turgot. P D Groenewegen ed. The Hague: Martinus Nijhoff, pp. 123-32.
Turgot, A R J. 1788. “Reflections on the Formation and Distribution of Wealth,” in Turgot on Progress, Sociology and Economics. R L Meek ed. New York: Cambridge University Press.
Endnotes
[1] Say, Jean-Baptiste. 1821. A Treatise on Political Economy., III, viii, p. 468 n.
[2] Cf. Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation., I, v, pp. 101-103.
[3] Locke, John. 1692. “Some Considerations of the Consequences of the Lowering of Interest, and Raising the Value of Money,” in Works of John Locke Vol 5. London, pp. 1-117. at pp. 54-55.
[4] Ibid., pp. 55-56. Rather than using an obnoxious “(sic)” in quoting from John Locke, an author far greater than the present writer, I have simply modernized the spelling in quoting from Locke but left the syntax as printed.
[5] Ibid., pp. 57-58.
[6] Ibid., pp. 60-61.
[7] Ibid., pp. 60-61.
[8] Ibid., pp. 56-57.
[9] Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation., pp. 106-108.
[10] See Orr, John. 1912. Taxation of Land Values: As It Affects Landowners and Others. London: P.S. King., pp. 1-6.
[11] It appears that the Physiocrats were probably in fact familiar with Locke’s specific argument. Cf. Higgs, Henry. 1897. The Physiocrats: Six Lectures on The French Economistes of the 18th Century. London., pp. 15, 29, 46, 134. A good discussion of the Physiocratic view of incidence can be found in Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation., pp. 126-142.
[12] But Turgot also favoured the taxation of urban rents as a true surplus income. See Turgot, A R J. 1767a. “Observations on a Paper by Saint-Peravy on the subject of Indirect Taxation,” in The Economics of A. R. J. Turgot. P D Groenewegen ed. The Hague: Martinus Nijhoff, pp. 109-22. at p. 114, n. 8.
[13] See Turgot, A R J. 1763. “Plan for a Paper on Taxation in General, on Land Taxes in Particular, and on the Project of a Land Register,” in The Economics of A.R.J. Turgot. P D Groenewegen ed. The Hague: Martinus Nijhoff, pp. 96-108. at p. 98.
[14] E.g., see Quesnay, Francois. 1759. Tableau Economique., pp. 1-2, 4-5; Turgot, A R J. 1763. “Plan for a Paper on Taxation in General, on Land Taxes in Particular, and on the Project of a Land Register,” in The Economics of A.R.J. Turgot. P D Groenewegen ed. The Hague: Martinus Nijhoff, pp. 96-108., at pp. 98, 100-101, 102, 104-105; also see Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation., pp. 126-142.
[15] This view can be supported. For example, see Turgot ‘ s letter to David Hume (25 March 1767), at pp. 210-212 in Rotwein, Eugene ed. 1970. David Hume: Writings on Economics. Madison: University of Wisconsin Press. See also Turgot, A R J. 1788. “Reflections on the Formation and Distribution of Wealth,” in Turgot on Progress, Sociology and Economics. R L Meek ed. New York: Cambridge University Press.,VI, p. 122.
[16] Cf. Turgot, A R J. 1788. “Reflections on the Formation and Distribution of Wealth,” in Turgot on Progress, Sociology and Economics. R L Meek ed. New York: Cambridge University Press., L, p. 146; C, p. 181.
[17] Quesnay, Francois. 1759. Tableau Economique., p. 13 n. It may also be noted that the condition of France at the beginning of the eighteenth century would have suggested to any observer that population growth is influenced by economic conditions. See Higgs, Henry. 1897. The Physiocrats: Six Lectures on The French Economistes of the 18th Century. London., pp. 5-11.
[18] Turgot, A R J. 1767b. “Observations on the Paper by Graslin in favour of the Indirect Tax, to which the Royal Agricultural Society of Limoges has given an honourable mention,” in The Economics of A. R. J. Turgot. P D Groenewegen ed. The Hague: Martinus Nijhoff, pp. 123-32. at pp. 126-127. Contrast Arthur Young’s remark that “Everyone but an idiot knows that the lower classes must be kept poor or they will never be industrious.” quoted in Thomas, M. W. ed. 1964. A Survey of English Economic History. London: Blackie & Son Ltd. at p. 222.
[19] Clearly, I do not accept the common interpretation that the Physiocratic doctrine of incidence rests on “the sole productivity of agriculture.” as, for example, in Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation., p. 141). See Chapter 5 of this thesis.
[20] E.g., William Spence in 1808 (Higgs, Henry. 1897. The Physiocrats: Six Lectures on The French Economistes of the 18th Century. London., p. 138); Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation., p. 142; Lynn, Arthur D, Jr. 1976. “Adam Smith’s Fiscal Ideas: An Eclectic Revisited.” National Tax Journal, 29, pp. 369-78., at pp. 374-375.
[21] See the discussion of Smith’s tax analysis in Chapters 22 and 23 above.
[22] Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation., p. 146; see above, Chapter 20 at notes 11, 12 and 13.
[23] See Chapter 5 above at notes 6 to 10.
[24] See Chapter 23 above at notes 27 to 35.
[25] See Chapter 23 above at notes 33, 42 and 43.
[26] See Chapter 3 at note 9 and Chapter 16 at note 1. See also Ricardo, David. 1817-21. The Principles of Political Economy and Taxation. London., XXIV, pp. 334-336.
[27] See Chapter 16 above; also Marshall, Alfred. 1890-1920. Principles of Economics., Appendix G, pp. 794-798. A book which gives interesting examples of the capitalization of subsidies into increased land values is Harriss, C. Lowell ed. 1973. Government Spending and Land Values: Public Money & Private Gain. Madison: University of Wisconsin Press.
[28] Brown, Harry Gunnison. 1924. The Economics of Taxation., pp. 192-194; see also pp. 146-147. Brown’s argument is reflected in Ann Friedlander’s comments on Aaron, H J. 1974. “A New View of Property Tax Incidence.” American Economic Review (Papers and Proceedings), 64, pp. 212-21. at p. 232 seq. and Polinsky, A Mitchell and Rubinfeld. Daniel L. 1974. “The Long-Run Incidence of a Residential Property Tax and Local Public Services: Harvard Institute for Economic Research Discussion Paper No. 354.” at p. 5, where it is accepted that in an open economy taxes on capital will fall on land.
[29] Landowners could be relative gainers, even if absolutely suffering from reduced rents.
[30] Hobson, John A. 1919. Taxation in the New State. London: Methuen., p. 65; Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation., pp. 393-394; Lerner, Abba P. 1952. The Economics of Control. New York., p. 230.
[31] See Chapters 7 to 10 above, as well as Chapter 18. Another critical view of attempts to generalize the rent concept is given by Ellickson, Donald L. 1966. “A History of Land Taxation Theory.” University of Wisconsin: Madison., pp. 191-199.
[32] E. g., the British “brain drain” after World War II and the emigration of professionals from poorer countries to the Western nations since the 1970s.
[33] Ricardo, David. 1817-21. The Principles of Political Economy and Taxation. London., V, pp. 96-97. The joke sometimes heard about taxpayers supporting “a wife, 2.4 children and 2 bureaucrats” does perhaps suggest that wage-earners do consider after-tax incomes in deciding on the sizes of their families.
[34] Hobson, John A. 1919. Taxation in the New State. London: Methuen., p. 32.
[35] Ibid., pp. 33-36; cf. Groves, Harold M and D J Curran, editor. 1974. Tax Philosophers. Madison: University of Wisconsin Press., pp. 136-137.
[36] Cf. George, Henry. 1879. Progress and Poverty., VIII, 3, pp. 410-413.
[37] Land values taxation would, of course, tax gains in land values as they accrue.
[38] Cf. Adam Smith’s remarks on lawyers et al., in Smith, Adam. 1776-1784. An Inquiry into the Nature and Causes of the Wealth of Nations., I, x, b, 19-25, pp. 122-124. Moreover, new talents are always being born to compete with established celebrities; new land, however, is not being created daily.
[39] Medical risks for sportsmen are notorious and singers face the inevitable loss of their voices. Ellickson, Donald L. 1966. “A History of Land Taxation Theory.” University of Wisconsin: Madison. at pp. 197-198, also objects to these candidates for “surplus” incomes.
[40] Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation., p. 393; J.S. Mill perhaps originated the view that these are surpluses, cf. Groves, Harold M and D J Curran, editor. 1974. Tax Philosophers. Madison: University of Wisconsin Press., p. 125.
[41] Collier, Charles Frank. 1975. “Henry George’s System of Economics: Analysis and Criticism.” Duke University: Durham, North Carolina., at pp. 213-215, raises this same point in criticizing the Paretian concept of rent.
[42] My emphasis; see Chapter 8 above.
[43] Robinson, Joan. 1954. The Economics of Imperfect Competition. Macmillan., pp. 102-103, quoted in Ellickson, Donald L. 1966. “A History of Land Taxation Theory.” University of Wisconsin: Madison. at p. 123.
[44] Hobson and Lerner could only suggest progressive income taxes. Adam Smith’s suggestion of taxing luxuries may have as much practical merit.
[45] Cf. Ellickson, Donald L. 1966. “A History of Land Taxation Theory.” University of Wisconsin: Madison., pp. 127-128, 195; also see Groves, Harold M and D J Curran, editor. 1974. Tax Philosophers. Madison: University of Wisconsin Press., pp. 130, 138.
[46] See Gaffney, Mason. 1970. “Adequacy of Land as a Tax Base,” in The Assessment of Land Value. Daniel M Holland ed. Madison: University of Wisconsin Press, pp. 157-212. at pp. 188-192; such an expectation was Quesnay’s reason for thinking the landowners foolish in opposing the single tax; cf. Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation., p. 131.
[47] Abba Lerner doubted whether these elasticities were very great, see Lerner, Abba P. 1952. The Economics of Control. New York., pp. 235-237. The Physiocrats obviously thought otherwise, as did Henry George, who was ridiculed for “his claim that the application of the single tax would increase land values”: Johnson, Edgar H. 1909-10. “Method of Taxing the Unearned Increment.” Quarterly Journal of Economics, 24, pp. 759-62. at pp. 759-760.
[48] Several writers have noted that the introduction of the Australasian land value taxes did not necessarily lower market land values. See Dodd, A F. 1904. “Taxation of Land Values in Australasia.” Economic Journal, 14, pp. 401-12., at p. 409; also Orr, John. 1912. Taxation of Land Values: As It Affects Landowners and Others. London: P.S. King., p. 3.
[49] Seligman, Edwin R A. 1927. The Shifting and Incidence of Taxation., pp. 133, 137; 219-225; Fillebrown, C B. 1917. The Principles of Natural Taxation: Showing the origin and progress of plans for the payment of all public expenses from economic rent. Chicago: A.C. McClurg., pp. 138-49; cf. Morton, Walter. 1955. Housing Taxation. Madison: University of Wisconsin Press., pp. 106-109 for a dissent based on a “burden of debt” type argument.