Spencer Heath Archive

Item 1257

Carbon of a letter from Heath to C. L. Kendal, Editor, Land and Freedom, 150 Nassau Street, New York NY. Pencil drafts are in originals envelope 1124.

July 27, 1939

Dear Mr. Kendal:

Mr. Harrington’s “marginal” farmer, in order to be of any value for purposes of illustration, must be an average farmer or, at least, an average marginal farmer, for, as he rightly says, in his seventh paragraph, “For we must use the word ‘average’ in applying the laws of economics to our millions of citizens and our millions of acres, each different from the others.”

Mr. Harrington’s “farmer on marginal land” must also be a capitalist for, as he says, he is “applying the usual amount of labor and capital.” He is, therefore, a functioning member in an exchange system, for capital, as Henry George so well defined it, consists in the instruments of production and exchange, including all “wealth in the course of exchange.” So our “marginal” farmer, as capital user and exchanger, must have whatever it takes to carry on the production and exchange of products and services. He must have security of possession, of property, and of person. He must have the public services of a police power that will maintain his, or his lessor’s, private ownership of the land. Lacking this, he can have no security of possession as against either superior brute force or against the arbitrary decree of unbridled political power. He must, in fact, have all the social, public, or community services that are essential for carrying on trade and exchange, including rights of way, with improvements thereon and the policing thereof, as necessary means of transportation and communication. The fact that he, as an average example of his class, is a user, producer and exchanger of capital is, of itself, proof that what he receives for his products must be sufficient (on the average) to maintain and pay the cost of all the community services and security that he uses and enjoys, and leave him a better living than he could obtain (on the average again) in a place lacking these public services without which exchange of products and the use of capital could not be carried on.

But if all this is true, how comes it that he gets only a marginal living, only a slave’s portion, on which to subsist? Why cannot he make profitable use of the community services and advantages that appertain to his direct ownership or other secure possession of the land?

The tragic answer is that when he tries to employ his twenty-five bushels of corn as capital by exchanging it, he is permitted to own and exchange only about half of it, the other half (or its equivalent) being taken from him by taxation. This makes him a slave; not a chattel slave, but a tax slave. This so limits the return from his toil that it cancels out all of the advantages to him of the public services and security of possession that his ownership or his tenancy of the land would otherwise afford, and he has no land value upon which either to collect or to pay any rent. And all this is well confirmed, for it is almost notorious that few farms have any market value at all beyond the bare replacement cost of the capital with which they now stand improved. Thus does tax slavery destroy land value by rendering useless and of no service to the land user all the public facilities and services that are supplied to the land and even security of possession itself.

Nor will the situation be changed if the “incidence of taxation” be lifted from the produce of the land, and laid on the land itself, for the taxes will still be collected by taking either the corn itself or something that has been obtained by its exchange. It matters not how they be laid (except that the more indirect taxes are the more injurious), the value of the land is destroyed either way.

So our “marginal” farmer will gain the social securities of possession, of property, and of person (subsistence) both as land user and as land owner, only in proportion as taxation declines, and if the land owner is apart from the land user, he, too, will make the same gains. And out of the gains thus made, the land owner will find it a great profit to employ a part in obtaining further reduction of taxation and, thereby, the creation of higher and still higher rents and land values until taxation is no more and then, out of these magnificent incomes and values to finance and properly administer the public services that he sells to the users of land, just as any useful and profitable business is financed and administered — just as the owners of an indoor community, such as a hotel, finance and administer all the community services which they sell to the users of the spaces possessed by the hotel and supplied with its accommodations,

No “careful business man with money to invest” will buy the marginal farm.

A “careful business man” is one who so manages his capital to the advantage of others that his service of merchandising it and of the services of it, brings him an income. (Otherwise, it will not be capital, there being no income to capitalize.) Let us say he merchandizes services in the form of soap and sausage. A day comes when these are so taxed that he feels that he could more advantageously merchandise social security in the form of security of possession, and access to public advantages. He enters into an exchange transaction with a land owner. Result: Our erstwhile land owner is now no longer a merchandiser of social security and advantages but a vendor of sausages, and the erstwhile vendor of sausages has become the merchandiser of social security — security of possession, property and person. Each is still giving services to his community, but in a different way; the open and voluntary market still awards him income by way of measured recompense, and if his recompense in the market is still depleted by taxation, both will continue to suffer as they did before.

Of course, so long as taxation makes land idle and keeps it idle by penalizing its use, the land owner can perform no merchandising services with respect to any security of possession that he may have, and he receives no recompense. And, likewise, so far as a land owner is taxed out of his security of ownership, he has no security of possession to merchandise to a land user. He then can perform no merchandising services, nor receive any compensation therefor, and the land user must be without security of possession or any means of obtaining it justly.

It is said of the land owner that, “in spending his ground rent, he is only a consumer of goods (and services) produced by others.” This is true. But it is also true that he is a performer of services sought by and conferred upon others, and that these others value these services by the land owner as being the equivalent of the goods and services, of the rent, which they render, without any compulsion, to him.

Very truly yours,

Spencer Heath

P. S.  I expect to write you something about Mr. Wilcox. See additional page annexed.

 

/Additional page:/

I know you want me to write “briefly, so I am giving you an additional page, as follows:

Do land owners pay taxes?

The answer is, that, apart from taxation, all economic wealth and services are the recompense received in exchange for other wealth and services. Taxation is the seizure (or diversion) of wealth (and services) from those whom it would otherwise recompense. All those persons who perform services, or store them up in commodities as wealth, receive out of a diminishing gross production a recompense depleted by the total amount taken by taxation. The distribution of this total loss among producers of wealth, including those who perform services as such, takes place in accordance with what, in their exchange transaction, men are willing to give and receive, in their exchanging with each other, out of the tax-depleted gross or total production.

Howsoever taxes may be laid and collected, they diminish total recompense, and the exchange system allocates the loss among all those whose services entitle them to recompense. Among these stands the land owner who, even though he should pay no direct tax, would still suffer taxation in the diminution of his recompense that he receives for socializing, by his merchandising services to land user, such security as he still has. And the value of his merchandising services is attested by the fact and measured by the amount of the recompense wherewith the free and open market rewards him.

The land owner, like any other owner who puts either commodities or services of any kind into the exchange system, must suffer from taxation. It is so ordered that if one member suffers, all the members suffer; that is the economic and social law.

Spencer Heath