14 The Single Tax Issue

Amongst economists who know about the land value tax, the term is often synonymous with ‘The Single Tax’, for that was seen as the main characteristic in the early days of its manifestation.  In his book, Progress and Poverty, Henry George proposed that the Land Value Tax should be the only tax.  This single tax idea has been identified with the LVT movement ever since, and is still insisted upon by the purists, but in recent years it has been questioned more and more.                

The purists are those who will not brook any modification of what they believe to be one of George’s basic principles, as set out in Progress and Poverty, in which he explicitly proposes to ‘abolish all taxation save that upon land values.’ 1

But Henry George was not the originator of the notion of the single tax: Over a hundred years earlier, the French Physiocrats propagated the idea (see Part 2, Early History), which in the mid-18th century would have been based on an agrarian economy. Also, in 1775, Thomas Spence gave a lecture to the Newcastle Philosophical Society, in which he indicated that the land rent, paid to the parish, should be the only tax. In the introduction to his book, The Pioneers of Land Reform, written in 1920, the political historian Max Beer, makes the claim that ‘Spence must be regarded as the author of the Single Tax’.2

The idea arose again in America in the 1840s (when George was still a boy), with the advent of organised agrarian protests and the establishment of the National Reform Association, the members of which freely discussed the single-tax idea. In an interesting paper on the single tax written in 2007, Prof. Mark A Lause suggests that George was strongly influenced in his early years in San Francisco by the members of the Reform movement. He comments, ‘The idea of a single graduated tax on land emerged from reformers of that time and place.’ 3 He notes also that, despite this, after the publication of Progress and Poverty in 1879 George continued ‘to present himself as the originator of the Single Tax….’ 4  In an article published in Land and Liberty magazine, in the Summer issue 2019, Edward J. Dodson notes that in the 1888 presidential election campaign, George gave his support to the Democratic candidate who, like George, was a free-trader. For this reason he was subsequently expelled from the United Labor Party. They accused him of ‘abandoning the greater principle of the single tax for the lesser one of free trade.’ 5  This casts some doubt on the image of Henry George as the leading purveyor of the single tax––a role in which he is usually portrayed.

In any case we live in a very different world now to that of George’s time. Purely in the world of transport, for example, we can travel around the globe in a matter of hours rather than months. Information is available to us almost instantaneously, rather than through the laborious Morse code––the medium for the telegraph system of the 1870s. We have instant access to the libraries of the world on our computers, and in the world of finance great fortunes can be made in microseconds, through electronic means, by clever operators who contribute nothing to the economies within which they operate. It is unlikely that George even had access to a telephone. The first telephone exchange was not established in San Francisco until 1878, by which time he had virtually completed his book Progress and Poverty. In George’s day taxes were few in number. The only significant taxes were federal excise duties and real-estate taxes, at the state level. The majority of present-day taxes did not arrive until the 20th century. So the idea of a single tax was probably not such a drastic proposition then as it would be today. But apart from the great differences since George’s time, my own opposition to the single tax is a matter of principle, which involves the issue of site dependence.

In item 3 of Part 2 I suggest the best forms of taxation are direct taxes, and those aimed at existing wealth. LVT satisfies both of these requirements, but as the name implies, it is limited in scope to the economic relationship that society has with land, especially urban land. I hope it is made clear in the explanations of Part 2 that the bulk of any revenue derived from LVT would be from higher-value urban sites. In large part the enterprises that occupy these sites are there through necessity; dictated by the need to be close to the centre of economic activity. They are essentially ‘site-dependent’: the high street shop, the department store, the central office, the bank. All need a central site in order to operate effectively. There are, however, other enterprises and individuals who are less site-dependent, who are nevertheless able to generate high earnings through activities that have no need to be permanently located on high-value sites. In his book Daylight Robbery Dominic Frisby describes the new phenomenon of the ‘digital nomad’, who may prosper without any need of a permanent base: ‘You can work in the digital economy from anywhere.’ 6 A skilled operator can work effectively at home, or trading from a laptop in a hotel room, purely as an agent, without any need for an office, display space or close proximity to any centre of population. One thinks also of high-earning individuals in the areas of sport and entertainment, who are able to amass considerable fortunes but who are highly mobile. They take their skills with them. They do not need a fixed site. Under a single-tax system, those who are not site-dependent, though they may be high earners, would be virtually free of tax. How then, in satisfaction of the first principle cited in Part 1, would they make their contribution to the society from which they benefit? To say that they would pay tax through the site value of where they live is not sufficient; that applies to everyone. No doubt they all do useful work, but why should the burden of tax fall only on those who are site dependent?

The most site-dependent of all economic activities is that of farming, and yet, as we have seen, the agricultural sector is always at the margin in the hierarchy of land values, and would not account for any great amount of revenue in any system of LVT. At the present time some of the most lucrative economic activities have very little need of any high-value central site from which to operate successfully. The advent of the internet has enabled the creation of new enterprises such as Amazon, Google and Facebook, which have proved to be highly successful and very lucrative sources of wealth generation. For them, the use of the ether is probably more important than the use of the land. Frisby notes that ‘Amazon became the West’s biggest retailer without owning a single shop.’ 7  The CEOs of these businesses are now amongst the top ten richest individuals on the planet.8 Certainly, all these individuals ought to be well rewarded for their enterprise and initiative, but if one accepts the principle of ‘ability to pay’, it is difficult to see how a land-value tax would measure their ability to make the appropriate contribution towards the society from which their great wealth has been created. One must respect their generosity through philanthropic giving, but society should not have to be dependent on private philanthropy for its proper functioning.

In another aspect of new technology, Frisby offers an interesting explanation of the crypto-currencies, originally designed as a libertarian device to preserve the privacy of transactions and to avoid government control over taxation and regulation.9 None of these crypto-currency activities are site-dependent, but they are nevertheless capable of generating great fortunes, which would be beyond the reach of LVT. These are questions that cannot be avoided, and my own view is that there has to be some other form of tax that would address these anomalies.

The ideal would be a straightforward wealth tax, which would tax the final accumulations of wealth rather than the means of achieving them. But the difficulty with this is the age-old problem of identification and measurement: there are many clever ways that accumulations of wealth may be hidden through trusts, secret bank accounts and offshore havens. Such a wealth tax could replace income tax, capital-gains tax and inheritance tax, and it could be applied separately to individuals or companies. But all of this is a complex area, which would require much careful planning and would no doubt merit a separate book.   .

On this particular issue, the government established a Wealth Tax Commission in 2020 to examine the feasibility of introducing a wealth tax for the UK.10 In its report, in December 2020, it suggested that a one-off wealth tax was feasible but not a permanent annual wealth tax, the apparent reason being a matter of implementation. The one-off method would be easier to value and measure and would not provide the opportunity to prepare avoidance schemes. The report was about practicality; the issue of justice was barely mentioned. This amounts to the rather depressing admission that the government can always be outwitted by those having great wealth to preserve; they will always have the means to escape being proportionally taxed. It is much more practical to tax those with modest wealth, even the poor. They are the easy targets. However, I still believe it is a matter of political will; the government could figure out a way to tax the very wealthy if it really wanted to.

In the meantime we have to work with what we’ve got, and the next best thing for dealing with these accumulations, I suggest, would be some modified form of income tax. All taxes are unpopular, but income tax is generally accepted as fair, in that it is at least progressive. As a temporary measure, perhaps one could retain the income tax with an entry threshold of say £50,000. That would exempt the majority of earners, whilst dealing with the rest progressively, at the same time recognising that most private wealth accumulations arise from those on higher incomes.

There are other taxes that might also be retained; the so-called social taxes, which are designed as much to influence behaviour as to gain a source of revenue. The ‘sin taxes’ on alcohol, smoking and gambling, and the ‘eco-taxes’ on fuel and carbon emissions are amongst these, which even the LVT purists might consider keeping. So perhaps the idea of a single tax is already an anachronism.

The opponents of LVT would, I believe, jump on the term ‘single-tax’ with glee. Perhaps a better title would be ‘essential tax’ or ‘first tax’, but to insist on it being the only tax would not help in getting the idea of LVT accepted by the ordinary voter; the immediate challenge for the LVT movement is in getting LVT understood, accepted and implemented.

Many contemporary academics, politicians and influential journalists, who are otherwise supporters of the idea of LVT, baulk at the idea of the single tax, and I believe they are correct in their caution. The single-tax issue may yet be the greatest obstacle to overcome for LVT advocates, who clearly need to face up to this problem within their own ranks. The single tax may have been feasible in George’s time when economic structures were much simpler, but in the complex contemporary world 140 years later, it is in my view more realistic to accept the need for other taxes, or other means for capturing an appropriate contribution towards society from those who may create great wealth from situations that are not necessarily land-related. My own feeling is that if Henry George were with us today and able to observe the complexity and sophistication of contemporary society, he would be more than willing to modify the single-tax constraint.

On Libertarian Support for LVT                                                                                                                    It is perhaps surprising to many liberals, and those on the centre left of politics, to find that many libertarians also support the idea of a land-value tax. A possible explanation for this, I suggest, lies with the early Georgist proposal for the single tax, where all other taxes are eliminated. The most basic characteristic of libertarianism is the idea of ‘minimum government’, which generally translates as minimum taxes. When taken to its extreme expression it becomes anarchism––ideally no taxes at all. In the US, libertarians who support this version of LVT describe themselves as geo-libertarians. One of the fiercest opponents of LVT was Murray Rothbard (1926–1995), a former libertarian leader and member of the Austrian school of economics. He later went on to be a founder of the movement known as anarcho-capitalism. Todd Altman, a leading geo-libertarian in the US has written an interesting explanation of the geo-libertarian position, which also includes a refutation of Rothbard’s view of LVT.11

 

References:

(1)  On page 288 of Progress and Poverty, George explicitly proposes:  To abolish all taxation save that upon land values’

(2) Max Beer, The Pioneers of land reform. G. Bell and Sons Ltd.,1920, Introduction, p. V11, para. 2                                                                                                             

(3)  Prof. Mark A Lause, University of Cincinnati, paper: Progress Impoverished; Origin of Henry George’s Single Tax, August 2007. p.398.  https://www.researchgate.net/publication/229851153_Progress_Impoverished_Origin_of_Henry_George’s_Single_Tax

(4)  Ibid. p.395.

(5)  Edward J. Dodson, The Core of Economics and the Birth of American Labour, Land and Liberty magazine No.1247, Summer 2019.   https://www.henrygeorgefoundation.org/publications/land-liberty-magazine.html

(6)  Frisby,  Daylight Robbery, p.151.

(7)  Ibid. p.174.

(8)  Forbes Rich List, 2020.

(9)  Frisby,  pp. 162-169

(10)  https://www.ukwealth.tax/

(11)  https://sites.google.com/site/justindkeith/home/geolibertarian-faq

Also, a very useful website is:

 http://www.economicshelp.org/blog/4001/economics/tax-revenue-sources-in-uk/