This brings me to the last, and in my opinion the most important branch
of the Land Question, that relating to the reform of our system of
rating and taxation. I am myself an ardent supporter of the policy which
I think has been rather unfortunately named the Taxation of Land
Values. The vital point about this policy is not so much that we should
tax land values, as that we should leave off taxing buildings and other
improvements of land. The policy would be better described as the Relief
of Improvements from Taxation. Its economic merits seem to me so obvious
as hardly to require examination. It is only because the present system
has been in force for over 300 years that it can find any supporters. If
any one were to propose as a useful means of encouraging the steel trade
or the boot trade, or as a desirable method of taxation, that a tax of,
say, 50 per cent. should be imposed upon the value of every ton of steel
or every pair of boots turned out in our factories, he would be rightly
and universally denounced as a lunatic. Yet this is the system which
ever since the days of Queen Elizabeth has been in force with regard to
the building trade and all other industries which result in the
production of improvements upon land.
As long as land remains unused it pays no rates or taxes, whatever its
immediate potential value. But the moment it is brought into use, as
soon as a house, a factory, or a railway is built upon it, or it is
drained or planted--rates and taxes, which in these days often exceed 50
per cent. of its improved value, have to be paid, without regard even to
the question whether its use is successful in yielding profits or not.
Familiarity with this system, instead of breeding the contempt which it
deserves, has bred a kind of passive acquiescence which is exceedingly
difficult to shake. Even such a champion of our land system as the Duke
of Bedford years ago in his book, _The Story of a Great Agricultural
Estate_, perceived the absurdity, although he was apparently blind to
the remedy and to the application of it to some of his estates which are
not agricultural. He converted an ordinary arable field into a fruit
garden, and discovered that his rates were promptly trebled by reason of
his expenditure. Striking, but, nevertheless, everyday examples may be
found if we see how the system works out in urban districts. If a new
factory is built, rates and taxes are immediately levied on the full
annual value of the building, which is a direct charge upon production,
and has to be paid before a single person can be employed in the
factory. It therefore not only restricts the possibilities of
employment, but has to be added to the price at which the goods can be
sold.