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With minima established, the income feature would soon disappear and we should have a system based upon external indicia employed at the discretion of the assessors. With our attitude toward government and with all the difficulties involved, it is believed that the Ontario system of business taxes based upon rentals, with all its shortcomings, is more satisfactory than any system would be, based upon net income.

As to the personal income tax, which rests upon a different argument, several of our commonwealths have tried it without much success. We must agree with Professor Adams, however, that this failure signifies little or nothing with reference to the possibilities of an income tax levied under a law properly framed and enforced, rather than put in the form of a slight supplement to the general property tax, as it usually has been, and left to the local assessors to apply as they pleased or to ignore. Professor Adams's tax would have an independent position and it would be somebody's business to enforce it. Moreover, a strong central commission would render the local assessors and the public the great assistance which would be within its power. Use would be made of records of dividends, of interest payments, etc. Finally, the habitation tax is suggested to establish minima. All of these features are new and would doubtless cause the the personal income tax to work much more successfully or much less unsuccessfully than it has in the past. Moreover, as we became accustomed to the tax, it might be more favorably regarded and the administration might become less difficult, as has been the case in Great Britain. Such an income tax could not be worse than the best habitation tax and would be much better than a poor one. It is in point to note that in France the habitation tax has generally not been imposed as provided by law, but as the assessors saw fit in their efforts to improve upon the law and eliminate some of the great injustices which would otherwise be involved. Yet, with the education we have had in tax evasion, with the slight use which can be made of stoppage at the source, with deductions and allowances which must be made to ascertain taxable income, it is doubtful whether justice would be more nearly attained than with a reasonable business tax, a heavy inheritance tax, good corporation taxes, and the taxation of the unearned increment in its various forms, without an income tax. It should be pointed out also, that the specific measure advocated by Professor Adams offers unusual facility for evasion in that it is

not to be employed in agricultural districts. With most kinds of personal property not subjected to taxation, it seems to me that every inducement, even with a low tax rate, would be given to persons whose incomes are large, to migrate to a country place, for presumably nearly all of their tangible and taxable property would retain its situs unchanged.

If an income tax is to be employed, it seems to me that it should be employed by the federal government. The federal government needs the revenue in case of emergency. The revenue could be used in reforming the customs system. Moreover, though the federal government is farther removed from the citizen and a federal income tax would appeal less to the taxpayer than one used by a state or local government, it can employ stoppage at the source more extensively. Finally, state income taxes would lead to migration from jurisdiction to jurisdiction just as the taxation of personal property has. Professor Adams's contention that there would be insufficient motive is not well taken, for the reduced rate of the property tax to which he refers would still apply to most tangible property left behind when a residence was changed, and if the income tax really amounted to anything its burden would undoubtedly be greater than the tax imposed upon any personal property actually assessed at a new residence gained. The income tax is for these reasons preferably a federal tax. Nor can it well serve as a source of both federal and state revenue without either causing the rates to become too high, or the receipts to be fiscally unimportant.

In expressing the opinion that the income tax (as distinguished from a business tax) is preferably a source of federal revenue, I would not be understood as advocating its use by the federal government at the present time. The federal government should have the power to employ it in emergencies. Until our conditions change materially, however, I am of the opinion that justice in taxation will be more nearly realized in other ways; and certainly revenue for the ordinary needs of the federal, state, and local treasuries can be secured with more certain results from taxes presenting fewer administrative difficulties.

MAURICE H. ROBINSON: It does not need argument to prove the feasibility of a tax on unimproved land values, when considered from the practical point of view. Land is valued for commercial purposes in the real estate market every day in many

cities and in many countries. It is also being valued by public authorities for purposes of taxation in several countries with a degree of accuracy that has been found impossible in many other lines of properties. If such taxation is unconstitutional, even constitutions may be changed whenever public opinion demands.

The question of land taxation then may be considered upon its merits, that is, its effects upon the social welfare. It is often affirmed, that the land is the free inheritance of society, and, therefore, that its income as such belongs to all in their associated capacity. That this was the original condition may be admitted without in any way affecting the assertion that such is not the condition today. Almost without exception the larger proportion of the land originally held by the government has been transferred to individuals, with one reservation only, namely, the right to take a portion for public uses, or all on proper compensation. Without breaking faith with the present holders, therefore, the unearned increment accumulated in the past, must be left in private hands. No guarantee has, however, ever been made that the present proprietors may remain in possession of the future unearned increment. Why, then, should they be permitted to reap, it is asked, where they have not sown.

It may be observed, in the first place, that a portion of the rental value of land is due, not to locations or to intrinsic fertility, but to certain conditions contributed by those who are living in the particular locality. Such value, while socially created, is not created by the city as a political unit, or by the state. To whom, then, should the income accrue?

In the second place, an increase in land values may be caused either by the increase in population within certain limits, as, for example, New York City, or by an influx of population from outside the boundary. In the former case, the enhanced value from the economic standpoint belongs to the city. In the latter cease, before the city can justly claim the increase in value, it must compensate those other communities that suffer a corresponding loss. The above cases are cited not to prove that the taxation of land values to the full extent of the annual increment is undesirable, but to show that such action must be justified, if at all, upon social rather than economic grounds. When the problem is considered in this light, certain questions arise of which the following are particularly relevent.

1. If the annual increment in land values is taken annually by

society, shall the unearned increment in other lines be permitted to remain in private hands?

I shall pass over this point with the observation that while I am unable to agree with Professor Davenport's conclusions as to the extent of the unearned increment in other fields, I see no reason for taking one class and omitting the others, provided they are all equally permanent.

2. If confined to land values, should the increase in all values be taken or only those arising from superior location?

Agricultural land in this country is, as is well known, generally held by those who cultivate it, while city land on the other hand is quite generally owned by absentee proprietors. As a result, the economic rent of agricultural lands is being fairly evenly distributed among the agricultural population. If owing to fundamental economic laws or unwise social regulation the bulk of the agricultural lands show a tendency to become concentrated in the hands of a few, a new problem will arise, which may well be left for the future to solve.

In the second place, it is now generally recognized that soil, contrary to the opinion formerly held, is subject to rapid deterioration and rapid exhaustion, unless the constituent elements taken by the crops are replaced by some form of plant food. The owner who cultivates his own land has every incentive to maintain its fertility. The renter, unless actuated by higher social ideals than those which usually prevail, has an even stronger incentive to wear the soil out within the period during which he occupies it. Location values, on the other hand, are not subject to this kind of depreciation, and consequently their taxation would not result in the waste of the social capital.

In addition to the location and soil values, there is a third division of great importance, namely, the mineral deposits. Owing to their adventitious character and the fact that they can be successfully exploited only by large aggregations of capital, mineral wealth, above all other objects, is a fitting subject for public ownership or taxation to the full extent of the unearned increment.

3. Shall all the increased value thus arising be taken annually by the state, or shall it become a joint landlord with private owner?

It may be found well worth the while of theorists and of the public authorities to consider the profit sharing principle in this

connection. Society as a whole has a large share in creating the so-called unearned increment in land values. On the other hand, the intelligent utilization by individuals of both location and fertility value, is a factor not to be neglected. A sharing of the annual income arising from these sources may prove of large practical importance in solving this problem, by giving the state a larger income to use for educational and other purposes, while at the same time furnishing a sufficient incentive for maintaining a widely diffused individual ownership in land.

4. And finally, may not the state, by social regulation, universal education, improvements in transportation facilities, sanitary and housing conditions, and possibly the limitation of the amount of land that may be held by one individual or one organization, together with the policy of assisting individuals to become proprietors of a small portion of the land, accomplish the objects aimed at by the advocates of land nationalism, without assuming burdens that seem impracticable, if not impossible, under present social, economic, and educational conditions?

The field of social regulation, of public education, and improvements in transportation facilities in the interests of social welfare, is as yet, almost untouched. Every improvement in transportation, whereby persons and products are more cheaply and more expeditiously moved from place to place, is a powerful force in leveling location values, and thus diminishing the unearned increment arising from this source. A system of universal education would destroy many kinds of the predatory unearned increment. The improvement of public health and of public sanitation would in themselves remove many others; and consequently, with an enlightened and healthy citizenship, social regulation would have a much less serious problem than under present conditions.

The above considerations, together with others of equal significance which might be added, lead to the following conclusions: 1. No program of economic reform founded upon the basis of sharing the unearned increment, arising from ignorance, helplessness, fraud and treachery, unsanitary conditions of a public nature, special privileges not granted by the state, monopolies, etc., between the recipients and the state through taxation, can for a moment be defended from either the economic or the moral point of view.

2. Wherever the unearned increment is due to permanent and

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