Spencer Heath Archive

Item 1417

Carbon of a letter from Heath at 102 West 85th Street, New York City, to John S. Codman, 222 Summer Street, Boston MA. Important for Heath’s explanation of Henry George’s quote about abolishing taxes “..save on land.”

January 30, 1943

 

 

Dear Mr. Codman:

     I was delighted to hear from you personally by your letter of last December 31st and the more so to learn that you were giving serious thought to some of the truth that I am trying to make clear — as Henry George would say.

Your “practical conclusions” which I repeat below are substantially correct:

“1. All taxes of every kind, even those on ‘land values’, and all licenses to do business will be expressly prohibited.

“2. The owners of title to land will collect the full ground rent, out of which they will defray the expense of public service, which service they will administer, and will receive their compensation from the increased ground rent resulting from their administration.”

     However, (1) it is not contemplated that taxes will ever be or need to be expressly prohibited but rather that taxation will fall out of use when land owners concern themselves with the needs, interests and protection of their customers (tenants) to give them the “quiet pos­session” without which no values can be sustained, or production maintained, nor rent continue to be paid. Only those who are benefitted by and protected in the use of any property can be able, even if willing, to pay its owners the full worth of that benefit and protection.

     It is only necessary for land owners (not in iso­lation but in association) to discover that all taxes, whether “necessary” or not, are liens against production and therefore against all income, including rent. They will then, as a public service, not only continue making land peaceably available on equal terms to all, but, further, procure the abandonment of at least some of the unnecessary taxation that supports palpably unnecessary expenses.

     This will so liberate production — the productive employment of land, capital and labor — that producers can maintain themselves on their earnings without sub­sidy or dole. Because of this new private income, pub­lic burdens will be lifted and yet more of the existing expense and taxation become unnecessary and their abandonment procured for the sake of the still further revival of production and creation of income and values, especially land income and land values (for they fall quickest when production is depressed and rise fastest when it revives). This process can continue indefinitely or until there becomes an insufficiency, instead of the customary sur­plus, of public capital facilities (public works) to balance the enormous growth of private capital facilities.

     At this point the land-owning interest, as a public service organization (or corporation) will prudently and therefore profitably lay out portions of its enor­mous income to maintain and increase the public facilities as aids to the private production and exchange. This public investment out of rent (public income collected privately by the members of a public service organization) being prudently made, will find its ample reward and return in the further general productivity thus brought about as this flows into new rents and creates new public (land) values.

     In this process taxation of land owners will not be forbidden, for it will be rendered unnecessary and outgrown, just as private robbery was outgrown through its abandonment in favor of trade and exchange, as the owners of private properties gradually learned to avail themselves of free contract and exchange relationships and thus enormously increase their productivity and thus their private incomes and values.

     The transition from public robbing and ruling of a population to giving it public services in exchange for public reward (ground rent) cannot come through any legislation or other power that commands or forbids, or through any sudden change or event, but by a process of learning and growth (right action following right thinking) that continues and expands upon the income and values that itself creates.

     Your conclusion numbered 2 is correct, except in its suggestion that a title (as distinguished from the property it describes) can be owned. Titles are only evidences of ownership that have been made (through formal recording of them) more conclusive (against claimants not otherwise fully informed) than most other circumstances. The final proof of ownership of any property is always in the circumstances surrounding it, of which title is only one, and that not always conclusive.

     For convenient reference in answering your six questions, I repeat them as follows:

(a)  How will the duties and responsibilities

of land owners connected with administration be appor­tioned among them?

2. Will they administer as a body, or will they delegate the administration to some official or representative body elected by them?
3. Will the reward to land owners be appor­tioned as a dividend based on the amount of ground rent each has contributed toward the expenses of administration?
4. Will the land owner be required to con­tribute all the ground rent he collects?
5. If the land owner does not rent his land, either because he uses it himself or because he prefers to leave it unused, will he be required to contribute the amount estimated as equivalent to the ground rent he could collect if he had a tenant. In other words, will the land owner be required to contribute what­ever may be the amount of ground rent collectible, rather than the amount actually collected?
6. Will titles to land continue to sell in open market at price determined by the expectation of reward in increased ground rent? And if so, will there be speculation in land titles resulting in withholding of land from proper use?

     The questions you ask me are all based, and very properly, on your number 2 conclusion. They refer exclu­sively to the details of the formation and the interior relations and adjustments between its members, of an organization of the land owning interest as a public service organization. Frankly, I cannot with precision predict all these details. What I can with certainty predict, upon the basis of existing knowledge that only a few now have, is abandonment of the present coercive and essentially servile relationship between the govern­ment and those governed through the growth of relations of contract and consent between a thereby truly public service organization of public owners and the general public whom, as its patrons and customers, such an organization or corporation will serve. It will operate, in many of its details and in its principle, precisely as the organized owners of a public house or hotel, or any other “private” community property, administer their property (usually through a corporation) scrupulously in the interest of its inhabitants as measured and gauged by the revenue which, by their individual free contract and consent, arises from the inhabitants, defrays all expenses of the community enterprise and suitably rewards its owners, and through them its employes, all in accordance with their honor and excellence with which they carry it on.

     Precise details cannot be predicted in advance, and they will be modified as the enterprise grows. But there are now operating many community enterprises that are successful, so far as present restrictions permit. In these we may find, in terms of probability at least, the answers to most of your questions of detail as follows:

(a)  The duties of land owners, as regards routine
services, will be delegated probably to officers and through
them to the employes of the organization. Officers are likely to be elected by votes in proportion to each member’s gain-or-loss participation; employes appointed and dismissed by the officers. Original authority will rest wholly with owners; delegated authority with officers elected by them. Responsibility will be apportioned automatically according to ownership. He who owns most must respond most, must answer for most, whether in loss or gain.

(b)  Whether the owners will administer the public
enterprise directly or through a representative body will
depend probably on how numerous they are. A small community

with few owners might well be administered directly.

3. It is probable that each owner will contribute towards the expenses of community administration in pro­portion to the rent he receives. The percentage he re­ceives back by way of dividend may then be based on either his gross rent or what he contributes or what he retains — it would come to the same thing — the actual amount being of course dependent on the efficiency of the administration.
4. It will work out to the same and whether or not the land owner contributes all he collects to the expenses of general administration, so it is a sufficient amount. His net contribution will be what he contributes, less dividend returned.

 

3. This is a question much mooted and hard for many to understand, — so accustomed are we to thinking that if anything is idle, unemployed or dis-employed, especially land, such idleness is due to the willfulness of its owner and to nothing else. That was once thought of labor — that its idleness was due to the sloth or willfulness of its owner. Many today believe that when capital is idle, disemployed, that is due to the sloth, willfulness or cupidity of its owners. Very few today can realize that idle, disemployed land has no present use and therefore no present revenue and therefore no present value not because its owner is willful but because there is already being produced, from land already in use or still being used, more products and services than, under present and prospective restrictions, can be profitably and without loss exchanged. Ignorance of the true cause of unemploy­ment of land or anything else, namely, taxation and other restrictions on exchange, is the cause of so many persons supposing that taxing the owners can force idle lands into use, just as they once thought that head-taxes could force idle labor into use — if only to pay the tax. The fact is that the more any land is taxed and not served the less it can be used — for the less profitable its use becomes.

     No owner of land (barring an occasional rare freak) wishes his property to be idle and unproductive and there­fore a burden or expense without income. Even speculation is less hazardous if the property yields an income, and all speculation must end with income — or disaster.

     This question, then, comes down to this: whether the land owner who is also the land user will be dealt with the same as though another person were in possession and paying him rent. That, very probably, is the way it would be worked out between the land owners themselves, it being assumed that the land is actually in market demand, the bidding being as high as the offering is low.

     But the land owners’ organization probably would not exact any contribution from an owner whose land would yield no present income from other occupants, even though he occupied it himself, supposing he would want to do so. The amount of rent actually received by him will doubtless be the basis on which the organization will deal with its individual members, but where the owner is his own tenant of land for which there is actual present demand he will be dealt with on the basis of the worth of his occupancy, equivalent to such rent, if any, as he clearly could collect from another person were that other his tenant. No doubt the basis will be the amount actually collectible and therefore actually collected as rent or as the worth of a valuable self-occupancy. If it were otherwise the situation might be comparable to that of a fourth-interest owner of a hotel corporation being quartered in one-fourth of the hotel property without paying anything for it — on the theory that he was his own tenant.

(f)  No, titles to land (literally) will not continue to be sold, for they are not now or ever sold. Only the land itself is sold; never the title or any other circum­stance that merely identifies the owner of it. But doubt­less the land itself will continue to be bought and sold. It will be bought by those who foresee higher possibili­ties of revenue from it and feel themselves (risk money on it) more capable of its profitable administration. It will be sold by those who have less confidence in its future revenue and who feel that they are qualified by personal taste, skill or other capacity to own and admin­ister some other kind of property or other land — or no property. In any case, the operation of the land market tends to eliminate from land ownership and administration those persons of lesser vision, taste and capacity for it and bring into it those persons having greater qualifications for such ownership and public administration.

     Yes, there will be foresight or speculation by those who come into land ownership and administration but such speculation will not then, as it does not now, prevent land from coming into its proper use. On the contrary, it will result in the land being owned by the kind of persons who have the vision and, through their organiza­tion as a public service agency, the ability to make the land of their community most inhabitable, most pleasant and most profitable to occupy and who by selecting highest bidders and otherwise most desirable tenants will cause the sites and resources of the community to be prudently and productively used. Free trade in land will be a sifting process to sift out from the whole population as public administrators those persons having highest gifts and capacities of this kind, — able to make the community most fortunate and rich in its public services and thereby most free and productive in its private enterprises, and its land values, in consequence, most high.

     We now come to the apparent contradictions to which you very courteously refer; — and all of your quotations of me are correct:

     When Henry George proposed to abolish all taxation “save that on land value” the context shows that it was his thought and intention not to abolish taxation as such, but to transfer the burden of it entirely to those persons who own land. His prescription therefore, in its intent though not in its form, was just as much a proposal to lay taxes as it was to abolish them, and this is the “compulsive technique,” “the same evil — taxation”, that, here as elsewhere, and contrary to his “philosophy of freedom” and of the free market, he urged.

     But as sometimes happens, he “builded better than he knew,” for his noble prescription, in its terms and without context, does propose to abolish all kinds of taxation save one. Now, I dare say you wonder how I can on page 6 refer to this excepted taxation (excepted from being abolished) as “the same evil, — taxation, the abolition of which his sound and practical prescrip­tion proposed” after having said on page 5 that the excep­tion was well taken.

     Now, often the hidden, even unconscious assumption read into a proposition is what begs the question. George assumed that the only way to abolish taxation would be by legislative enactment (or repeal). In his term “abolish” he proposed this legislative technique as to all other taxes but not thus to abolish the taxes on land owners, as such. That was his exception. It did not occur to him that such abolition would be unnecessary, and yet taxes on land ownership disappear.

     But such abolition is unnecessary and that is why his exception was “well taken” and that is why on page 5 I followed my endorsement of his exception with the brief explanation as follows — I quote the whole passage:  “The exception was well taken. (for) It is not necessary to abolish the taxes on land value. (for) Such taxation abolishes itself, once labor and capital are made free.” (Free by abolishing their taxation)

     You may be wondering now just how land value taxa­tion can “abolish itself.” The answer is:  By transforma­tion.

     This takes place in the social organization as in other things that grow, develop, evolve. The single celled amoeba abolishes itself when it becomes two daughter cells. Pollen spore and ovary are both abolished when they become a seed. The acorn abolishes itself when it unfolds into an oak. The tadpole abolishes itself when it becomes a toad; the child when it becomes a man; the tribe when it becomes a community, a Society. Piracy and robbery abolish themselves by becoming commerce and trade. Tax­ation abolishes itself when it changes from its anti­social character as compulsion and force into voluntary payment of the operating costs of a public community by its owners out of the gross income from it that they receive.

     Henry George knew full well that whatever benefited and improved a community raised its rents and values. But he did not see the converse truth — that the “tax­ation which drains the wages of labor and the earnings of capital as the vampire bat is said to suck the life blood of its victims” also ruined rent. To him, rent going to land owners was the “dragon in the way” that swallowed up everything and never grew less. He did not see that rent suffers all the vicissitudes of the market and that, in the long run, like all other free assignments of the market, it varies directly with production and inversely as taxation. For want of this clear thinking, he proposed violent action against land owners instead of instructing them of their natural obligation and golden opportunity “to abolish all taxation save that on land values” and become so well rewarded in new rents and land values that their former forced contributions would become changed into voluntary payment of necessary costs of the community business out of enormously rising revenues from it.

     When land owners, united for the purpose, so serve their tenants by the abolishment of taxation on them, then their rent incomes will have so risen that what they formerly were forced to contribute to the largely waste­ful, when not venal, operations of political persons is now applied voluntarily to the efficient administration of the community business by the responsible community owners.

     In view of having asked me six “man-size” questions and put me to the test of explaining other things, I hope you will forgive me for the very great length of this letter.

     With very best wishes and high personal regards, I am,

Cordially yours,

 

I am sending you with this copy of a single chapter, with chart, — A Hypothetical Distribution of National Income under Proprietary Public Service Administration — taken from the 300-odd page volume I have just completed. Please let me know when you have finished with it. I enclose also Specimen Pages and Glossary.