Spencer Heath Archive

Item 1191

Carbon of letter from 434 West 120th St. to Clifford L. Kendal, 150 Nassau Street, New York City, care of Joseph Dana Miller

January 14, 1937

 

 

Dear Mr. Kendal:

Thanks for your note received today, in reference to Tuesday evening. I do not think I was very effective. Probably it is bad practice to try to present an extension of ideas in terms of questions predicated on contrary ideas. It is something like asking a man whether he has or has not left off beating his wife. The question carries with it an assumption contrary to what the man wants to explain.

Another thing: If we are concerned chiefly or exclusively with what happens to a particular person’s investment of a particular five thousand dollars and try to imagine all the special and particular things that might happen to him this will not give us any information of a general character. We might understand more about one man, but we will not understand any more about society in general. For the latter we must consider only those things which are typical and common to the experience of men in general. For example, if we know of or suppose an exchange transaction which resulted in a loss to one or both of the parties we must not take that as proof that exchange transactions are not the very basis of all exchange value and therefore of every social value and advantage.

I brought the discussion clearly to a point where we could see a land owner enjoying an income of ninety dollars which flowed to him automatically out of the earnings of public capital which therefore made him in effect the owner of that capital and therefore enabled him to capitalize his ninety dollar income at say, eighteen hundred dollars. He has an investment of eighteen hundred dollars into which he must have put eighteen hundred dollars in order to become the owner of the land, or he may have acquired it at a time when it was yielding less than ninety dollars net — when the public capital was earning a less income — and then he would have invested in it a less amount than eighteen hundred dollars. I am simply describing how a person purchases a part ownership in the public capital according to its income value. I am not referring to transactions in which people make bets or speculations on prospective increases or other changes in the earnings of public capital. And it should be remarked, in passing, that such speculation is the resort of persons who find conditions unfavorable for using their capital creatively as an instrument of production and employment of labor.

Considering the ninety dollars then as the income from a capital value of eighteen hundred dollars, the question that interests you is what will happen to a person who has invested eighteen hundred dollars in this land value (public capital) that yields ninety dollars. This depends on whether we take the single tax as an abolition of taxes, as Henry George taught it or whether we take it as the laying of a tax on the ninety dollars of annual land value as many of his professed followers teach it. In the latter case the ninety dollars passes from the hands of a public proprietor into the hands of a “public servant” or politician. If the politician uses the ninety dollars in ways that constitute public services, then the owner of the land who has had ninety dollars taken from him by the politician as a tax-gatherer will have ninety dollars (or more) restored to him by the politician as a public servant and his investment will still be worth eighteen hundred dollars or more. But if the politician does not use the ninety dollars to create public services but keeps it for his own use and service other than public services, then the public finds itself supporting a politician instead of a proprietor without getting any services from either of them. And this is a worse condition than before, because the politician is now the virtual owner of the land (land value ) and he, having coercive power (which the proprietor has not) will not sell the services coming to the land at a fair price in an open market but will seize the properties of the users of land without any reference to their consent or the market value of any services they receive. They will, in fact, merge rent into taxation — purchase price into tribute. There could be no longer any distinguishable revenue from public capital and therefore no public capital or land values and no person could buy any public services to a location at a market price. All would be at the whim, interest or caprice of the politician and no person could be secure in his possession and occupancy of land. Civilized society would be destroyed. This would all come from inverting the program laid down so clearly by Henry George. He said, in his “Standard” of January 21, 1888, “it is not by the mere levying of a tax that we propose to abolish poverty; it is by securing the blessings of liberty.” He proposed to abolish poverty by the abolishment of taxes and “not by the mere levying of a tax.” So, if the politician gets the ninety dollars we must suppose him to use it either for public advantage, in which case the land owner loses nothing (or even gains), or for private advantages, in which case only the politician gains, and he only for the time, for with the disappearance of rent and of security of possession, the entire fabric of social and public values will be in time dissolved. Your investor who formerly had a value of eighteen hundred dollars in the public capital will have forfeited his income to the politician and will have no capital value that he can sell.

Now let us suppose that the investor has put his eighteen hundred dollars into ownership of the public capital and we proceed after the manner proposed by Henry George, not to levy a tax but to abolish them. Suppose that instead of levying ninety dollars of taxes we abolish taxes to the amount of ninety dollars that now fall upon the occupant of the investor’s land — the occupant who is paying the market value of the public services delivered there, to wit, ninety dollars. Will not this remission of a charge of ninety dollars on the occupant increase the value of his occupancy by at least that amount? Will he not now be able to enjoy public services (and to pay for them) at least twice as much as before? Yes, unless the remission of ninety dollars taxes on the occupant has actually crippled essential public services (which it certainly need not) the rent will now rise to at least one hundred and eighty dollars and our investor will have an actual saleable capital value of thirty-six hundred dollars. However, let us suppose that coincident with the remission of the ninety dollars tax on the occupant the owner voluntarily or otherwise gives up the ninety dollars he originally received. He will still have at least ninety dollars coming to him by reason of the service to the occupant which consisted in remission of the ninety-dollar burden formerly borne by him; so the owner^’s investment is still worth at least the original eighteen hundred dollars. But if the ninety dollars which the location owner now gives up (voluntarily or otherwise) be used in such way as to create public services that are worth even no more than they cost, then the occupant will be receiving one hundred and eighty dollars worth of public services and paying one hundred and eighty dollars annually for it and the value of the land owner’s investment will be thirty six hundred dollars at the least and this will not be occasion for any loss to the land occupier and user for he will be getting at least a dollar’s worth of services at his own valuation for every dollar of rent that he pays.

From all this it should be clear that the laying of taxes destroys land value, destroys rent, whereas the remission of taxes creates land value — both rent and capital value of land — and it does this to the advantage of both the owner and the user of land and without any loss to either of them. You may wonder how these great values can come into existence by the mere remission of taxes. The answer is that it is not by any new creation but by the restoration of the vast social advantages and values that increasing taxation progressively destroys. In today^’s Herald Tribune the National Economy League shows that current Federal expenses, not counting relief are 74 per cent higher than the average for the years 1923 to 1929 and that including relief but not including any sinking fund reserves for the public debt, the Federal expenses are now more than double what they were for those years. With the Federal Government collecting seven billions annually and State and local taxation taking about six and one half billions more, there is now a standing tax charge of about thirteen and one half billions or one hundred dollars per year for each man, woman and child.

I want to thank you for your kind and patient interest in my efforts to develop the creative side of the philosophy of Henry George.

Sincerely,