Spencer Heath Archive

Item 1219

Carbon of letter from Heath in New York to Clifford Kendal

February 17th, 1937

Dear Mr. Kendal:

Your Question Number One:

With 100% ground rent taken in lieu of all taxation, will land still have a capital or exchange value?

Ground rent cannot be taken in lieu of taxation. Ground rent is the market price or exchange value of public services. It exists only when and where the exchange is being made — where the services are received and paid for. When rent is seized it is no longer rent: it becomes taxes, and, being paid as taxes (seized), it is no longer a payment for services because it is a forced payment, and it cannot be paid for services because the value of the services has been canceled out by the imposition of the tax. Seizure had abolished exchange and destroyed value; hence no rent. Without exchange there can be no value, for all value is exchange value. (See Progress and Poverty.) Taxation is not exchange because taxes are not paid by agreement nor for value received. There is no market because there are no competing offers of services on the supply side and no competing bids for them on the demand side. It is only where there are offers and bids that there can be any market or exchange values. It is because taxation destroys the market for public services that it destroys their market value which is rent — the only actual, present-existing land value that there is. When rent, as a voluntary payment, is destroyed all use and occupancy will be at the whim or worse of the tax-gatherers and their political associates. There will be no security of possession and therefore no civilized society.

With rent degraded into taxation there could be no capital or exchange value in land or anything else, for the absence of rent points to the absence of any public services having any value, and without the protection of public services there could be no peaceable markets in which to carry on exchanges and no social values (exchange values) of any kind could arise. Since tax collectors and spenders could not sell services the only things they could sell would be privileges and immunities — exemptions of some to the detriment of others. These are the universal concomitants of taxation, increasing as taxes increase and ending only in social dissolution and a return to barbarism.

For the benefit of those who may be so naive as to suppose that with increasing taxation predatory public servants can continue to give back in services the equivalent of what they have seized as taxes, let it be supposed, for a moment, that they actually do this. Then the value that they have destroyed by taxation they will have restored by public services. If this could happen, then rent would not be destroyed by taxation and land value would remain the same as before the taxation of rent was imposed. Land-owners might then collect as much rent after taxation as before, and the capital or exchange value of the land would remain unimpaired. But increasing taxation, every kind of taxation, finally destroys all demand for land, all ability to use and pay for public services, and therefore all of their capital or exchange value. The answer to your Question Number One is, NO. When all rent is abolished by turning it into taxes, land will not continue to have a capital or exchange value. Neither will there be any security of possession.

Your Question Number Two:

Would taking 100% of ground rent on occupied and rent-paying land destroy the capital or exchange value of all land or would it be necessary to make similar levies on vacant and unused lands in order to destroy their speculative value?

We have seen under Question Number One that taking ground rent in lieu of taxes would turn it into taxes. This would destroy it as a payment in exchange for services because it would substitute seizures without any quantum control instead of exchange at a rate controlled by the market. Taxing rent fully would therefore destroy all rent, and therefore all capital or exchange value, without any attempt being made to levy on the owners of unoccupied lands that yield no rent. Moreover, an established policy of confiscating all rent by taxation would destroy all speculative land values by destroying all expectation of rent ever being paid without being confiscated.

Besides all this, any levy on unused lands in addition to a levy on rent would throw more land out of use, instead of into use, because, after rent is confiscated, a further levy on unused lands could not be a charge against rent, and would therefore necessarily be a charge against private labor and capital and would have to come out of wages and interest. This would reduce the production of wealth and therefore the demand for and the ability to pay for the use of land. More land would thus be thrown out of use,

Your Question Number Three:

Is fertility or other natural deposit or advantage a factor in ground rent?

The answer is, NO. Rent is paid only for public services. Populations, with labor and capital, will gather at and show preference for locations affording natural advantages. This concentrates the demand for public services, and therefore their value, at such locations. The services have highest value where there is most demand for them and no value where there is no demand for them. Moreover, employment of natural advantages increases the volume of production. This increase in supply is reflected in price, which is the ratio of exchange with other things, and thus all the advantages coming from natural resources are distributed over the entire exchange system, — so far as the exchange system is not clogged by taxation.

What is necessary is that men (and groups of men in organizations for production or services) be permitted to create values by exchanging services with each other. To do this effectually they must embody most of their services in materials which they draw from the earth. Their services enter into and modify the materials and put them into the system of exchange. Such materials, before they have any services impressed upon them, are properly called land. As land, they have no human services embodied in them; they are not modified, they are not in the course of exchange, and they have no value. When they come into the course of exchange, either by being themselves exchanged or by serving as instruments to facilitate exchange, they are properly called capital, roughly classified as moving capital and fixed capital. When they reach the end of the exchange process they are no longer capital but are properly called consumers’ goods. Their function is no longer to receive services but to yield services in the form of satisfactions. Just as they gain value while they are receiving services, so do they lose value as the services are transformed into satisfactions. When they can no longer yield satisfactions they can have no value and have become again, as they were in the beginning, land. This creative process is carried on by reason of the associative nature of men which prompts them to serve each other by exchanging services and thus create values and derive satisfactions. Nothing can restrain them from this process but brute force. Unhappily, men are not yet fully integrated as men. Besides their social nature, they have also an animal nature which prompts them to use brute force upon one another and destroy or seize from one another. Wherever there is any public service (government) adequate to restrain private violence there can be no employment of violence except it be on the part of the public servants themselves. All public violence rests upon taxation, which is itself a violation of the exchange relationship and which gives rise to every other form of public violence, including wars.

Most men desire to exchange. But because some men desire to get goods and services without giving goods and services in return, and some of them are disposed to use force to that end it is necessary to have the primary services of government as a public service to prevent this. Without such public service it would not be possible to establish and practice a system of exchange. It happens, however, that public servants are not content with restraining and punishing anti-social, anti-exchange, activities; they also restrict and restrain, and with increasing effect destroy, the very processes and instruments of exchange itself. Thus, by the seizure of private property and by the anti-social use of the property after it has been seized, political power not only fails to assist but is directed against the fundamental social technique and all civilized values are finally destroyed. This is because the exchange technique that is carried on by the use of prices democratically determined in open markets has been brought into use only as affecting the exchange of private services and has not been extended to include public services. A successful society awaits and depends upon government being brought within the democratic social process of exchange. This alone is true socialization. Most of the economic functions formerly carried on within the family organization have been socialized in this way. Increasing trade and division of labor brought them out from the arbitrary control of the family head and brought them within the democratic market control of the general system of measured exchanges. It remains to bring the services of government within the same system. It is not that society must be governmentalized but that government must be socialized. Only when this is done can there be a free and efficient system of production and exchange. All private services have been socialized, so far as they can be while under governmental restrictions, by adoption of the principle of exchange. The last refuge of force and tyranny in human relations, the last citadel of arbitrary power, is government by seizures and restrictions, by what is so often miscalled “social control.” To tame such government into a technique of service by measured exchanges through the mechanism of rents paid to public owner-administrators is the true task of all constructive statesmanship, the only effectual patriotism, the only fundamental philanthropy. To extend the scope of such governments as now exist is treason to society, the betrayal of mankind.

Henry George refused to make common cause with those who proposed to abolish private property in land. He stood for private ownership as opposed to nationalization or state ownership. Prophetic insight led him to preserve at least the form of private ownership because he perceived whether clearly or not, that there were indispensable social functions necessary to be carried on within that form and that could be carried on successfully in no other way. He therefore proposed to abolish not ownership and not rent but, “To abolish all taxation save that on land values.” And he tells us that this would in effect abolish all taxation for all payments would then be made on the basis of value received. He made his saving proviso only because he had not yet fully perceived that with taxation abolished all rents would freely flow into the public services that create them.

Sincerely as ever,

Spencer Heath.

New York, February 17, 1937