Spencer Heath Archive

Item 3157

Typed pages by Heath at the home of his daughter, Lucile MacCallum, in Waterford, Virginia

November 1955

WHAT PART OF A GIVEN TAX RELIEF FOR LAND USERS

IS PASSED ON TO LAND OWNERS

IN HIGHER LAND VALUES (RENTS)?

There is an abstract principle which normally operates in the free market and determines the over-all distribution of any gain or of any loss that falls upon the market from any cause whatever.  Whoever be the person or the class of persons causing the increase, the gain or loss is automatically distributed over all participants in the market in proportion to their respective contributions. This general law determines, among other things, the ultimate incidence of taxation. The market adjusts itself to every burden as it does to every gain. Allowing the necessary interval for this adjustment, any tax, any loss or gain, affects the value of the capital properties in the market in the same proportion according to the market value of their various kinds of properties. Those properties or services which are most in supply relative to demand will be lowest rated.  If these be depleted, as by a tax, they will come into a higher rating, which means that everything else in the market will fall relative to them, and thus the depletion will not fall upon those who directly suffer from it, but will fall upon the owners of all other capital goods or services in the market in proportion to the market rating of them, that is, in proportion to the market value of their respective contributions.

Keeping in mind that profit is the market recompense for administrative services — to the administration of property as capital — and remembering that ground rent is the recompense earned by the administration of the public capital, we can see that when there is a depletion of private capital, its market value rises (its unit value; not of the whole), and the unit value of public capital (land) correspondingly falls. Since the rate and return on both kinds of capital tends to equalize itself, the depletion by loss of value spreads itself over both kinds and falls on both in proportion to their respective market values. The converse is true with respect to gain that falls primarily upon one kind of capital and not on the other. For example, if the public capital, that is, land, owners, should cause a tax exemption of their land users in the amount of, say, one dollar, then the market would adjust this gain to land users by lowering the value of private capital due to its increase in relation to the public capital, which was not similarly increased. If the respective amounts of the two kinds of capital should be equal, as they always are or tend to become under present administration, then the market will so adjust the gain to private capital that it will accrue equally to the public capital as well.