The neoclassicals certainly did a number on Henry George by confounding  
land with capital and/or wealth. It would certainly help the dialogue  
if, instead of rent, the return to land as a separate factor of  
production is designated as "ground rent."  
  
The quotation from w of n, Book V, Chapter II, Part II, taxes upon the  
rent of houses, perhaps clarifies the point.  
  
"Ground-rents are a still more proper subject of taxation than the rent  
of houses. A tax upon ground-rents would not raise the rents of houses.  
It would fall altogether upon the owner of the ground-rent, who acts  
always as a monopolist, and exacts the greatest rent which can be got  
for the use of his ground. More or less can be got for it according as  
the competitors happen to be richer or poorer, or can afford to gratify  
their fancy for a particular spot of ground at a greater or smaller  
expence. In every country the greatest number of rich competitors is in  
the capital, and it is there accordingly that the highest ground-rents  
are always to be found. As the wealth of those competitors would in no  
respect be increased by a tax upon ground-rents, they would not probably  
be disposed to pay more for the use of the ground. Whether the tax was  
to be advanced by the inhabitant, or by the owner of the ground, would  
be of little importance. The more the inhabitant was obliged to pay for  
the tax, the less he would incline to pay for the ground; so that the  
final payment of the tax would fall altogether upon the owner of the  
ground-rent. The ground-rents of uninhabited houses ought to pay no tax.  
V.2.74   
Both ground-rents and the ordinary rent of land are a species of revenue  
which the owner, in many cases, enjoys without any care or attention of  
his own. Though a part of this revenue should be taken from him in order  
to defray the expences of the state, no discouragement will thereby be  
given to any sort of industry. The annual produce of the land and labour  
of the society, the real wealth and revenue of the great body of the  
people, might be the same after such a tax as before. Ground-rents and  
the ordinary rent of land are, therefore, perhaps, the species of  
revenue which can best bear to have a peculiar tax imposed upon them.  
V.2.75   
Ground-rents seem, in this respect, a more proper subject of peculiar  
taxation than even the ordinary rent of land. The ordinary rent of land  
is, in many cases, owing partly at least to the attention and good  
management of the landlord. A very heavy tax might discourage too, much  
this attention and good management. Ground-rents, so far as they exceed  
the ordinary rent of land, are altogether owing to the good government  
of the sovereign, which, by protecting the industry either of the whole  
people, or of the inhabitants of some particular place, enables them to  
pay so much more than its real value for the ground which they build  
their houses upon; or to make to its owner so much more than  
compensation for the loss which he might sustain by this use of it.  
Nothing can be more reasonable than that a fund which owes its existence  
to the good government of the state should be taxed peculiarly, or  
should contribute something more than the greater part of other funds,  
towards the support of that government.   
V.2.76   
Though, in many different countries of Europe, taxes have been imposed  
upon the rent of houses, I do not know of any in which ground-rents have  
been considered as a separate subject of taxation. The contrivers of  
taxes have, probably, found some difficulty in ascertaining what part of  
the rent ought to be considered as ground-rent, and what part ought to  
be considered as building-rent. It should not, however, seem very  
difficult to distinguish those two parts of the rent from one another.  
  
  
Roy Davidson