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
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