Chapter 63 Appendix VII: The Taxation Scope of Local Taxes and Some Opinions on Related Policies

Section 1 The final scope of local tax collection depends on whether the residents are mobile or not, and depends on paid or unpaid taxes, which are very different.Dramatic changes in conditions made accurate foresight impossible. We have seen that the new local tax on the printing industry differs from the national tax mainly in that it removes certain easily transferable parts of the printing industry outside the scope of the local tax.Those customers who needed to print locally paid a relatively high printing fee; typesetting workers also began to leave, until the remaining people could only maintain the previous wage level in local employment; some printing establishments turned to other industries.The general local tax on immovable property follows in some respects a different course.The power of tax evasion is an important factor here, as is the local tax on printing.But perhaps even more important is the fact that most local taxes go toward directly improving the welfare of local residents and workers who might otherwise leave.Here we need two terms.A gratuitous tax is a tax that provides no compensating benefit to the taxpayer.A tax on the interest on the borrowing of a municipal government to engage in an enterprise which fails and has to be abandoned is an extreme example of a non-repayable tax.The main poverty tax levied on the rich is also a typical example.Of course, gratuitous taxes have a tendency to drive out taxpayers.

Compensatory taxes, on the other hand, are taxes spent on lighting, drainage, and other uses in order to provide the taxpayer with certain conveniences and benefits in life that cannot be provided more cheaply than by local governments of.Such a tax, if well administrated, benefits the tax-payer; its increases attract inhabitants and industries, instead of driving them away.A tax may, of course, be free to one class of the population and paid to another class.High tax rates on well-run primary and senior primary schools can attract skilled households and repel well-to-do households. "National services" are "generally free of charge", while "local services generally give taxpayers direct and special benefits that are more or less commensurate with their burdens."

However, the term "taxpayer" must be interpreted differently for different kinds of local expenditures.Taxes for the washing of the streets are paid to the householder, while those for permanent improvements, of course, furnish him only a part of the return, the greater part of which ultimately goes to the landlord. The householder regards the taxes charged to him generally as forming part of his total rent; but he also takes into account the welfare of life which is due to the payment of local paid taxes, that is to say, ceteris paribus, He has a tendency to choose areas with lower total rents and unpaid taxes.There are, however, great difficulties in estimating the extent to which such considerations actually govern migration.It is perhaps less thwarted by ignorance and indifference than is generally supposed, but it is much more thwarted by individual demands.The low tax rates in Devon would not attract anyone who liked London life there; certain industrialist classes had really little choice as to where they settled.In addition to personnel and business relationships, tenants are hindered by the toil and expense of relocation.If this toil and expense amount to two years' rent, unless his gain is calculated at the rate of 10 per cent for thirty years, he must be lost by removal.However, when a person emigrates for some reason, he will probably give due consideration to the present and future tax rates in the various districts where he lives.

The working class is in some respects more mobile than the middle class; but, if the tax rate is heavy, it sometimes creates resistance on the part of the tenant, and defers passing this new burden on to him.The industrialist is often as much affected by his labour-house tax as by his own.Though high rates of taxation may have been one of the causes of causing some industrialists to leave the great towns, it is doubtful whether they would have had this effect, if employed economically.For the greater part of the new expenditures of this tax, if well employed, will, from the point of view of the workmen, if not of the industrialists themselves, greatly increase the local welfare, or reduce the local inconveniences.Furthermore, while there is a tendency under the right to suggest that tenants are thinking carefully about the present and future of local taxation, they cannot predict very far and seldom even do so.

The analysis of the sphere of taxation must be regarded as referring to general trends rather than to actual facts.The reasons which make these tendencies unforeseeable are similar to those which prevent mathematical reasoning from being used to calculate the trajectory of a ball on the deck of a ship rocking in headwind.If the ship is tilted to one side, the motion of the ball can be calculated.But before any trend has had time to produce many results, it must stop, and subsequent trends cannot be predicted.As such, although the general tendency of tax shifting was once resolved by economists almost a century ago; yet the relative pressures of unpaid taxes everywhere tend to vary so rapidly that a tendency is arrested by unforeseen changes, Even before the reversal, it will be interrupted.

Section 2. The "architectural value" of a property and the value of its foundations add up to its total value, if the building is proportionate to the foundation, and otherwise. We have seen that the rent which a builder is willing to pay for any foundation is determined by his estimate of the added value of that foundation to the building.Before the lease, his capital and the capital he borrowed for the building are "circulating" capital and appear as money; the expected return on his investment also appears as money.On the one hand he lists his building costs, on the other he lists the difference between the rental value of the building and its foundations and the ground rent he is about to pay, and he calculates the discounted (perhaps subjective) value of this difference for a ninety-nine-year lease Rough estimates, not explicit mathematical calculations).Finally, if he sees that there is considerable profit to be made, and no better opportunity lies before his enterprise, he rents the ground.

He endeavors to make the foundation and the house (or other building) built on it will always correspond to each other; and if he can do this, the rent of the estate at any future period will be equal to the sum of its annual foundation value and annual building value.He expects this sum to provide a full profit on his outlays, plus the premium for a rather risky enterprise.The second part of the rent is commonly called the (annual) construction value or the construction rent of the house, though this may not be the exact name. The purchasing power of money may change in the course of time; the class of houses on which the foundations are suitable may vary; and the technique of building must necessarily improve.The total subsequent annual value of the estate therefore includes a profit on its annual foundation value and the cost of building a house which affords the same conveniences as the then existing house.But all this is subject to the prerequisite that the general nature of the house is always commensurate with its foundations.If it is not proportionate, there is no precise account of the relationship between total value, foundation value and building value.If, for example, a warehouse or a house of an entirely different nature were to be built in order to develop the full potential of the foundation, the total value of the estate might be less than its foundation value, since the foundation cannot be improved without demolishing the old and building a new one. value.The value of the old materials on the original house may be less than the cost of removing them, plus the time delay and loss suffered as a result.

Section 3. Gratuitous taxes on the value of foundations are borne primarily by the owner of the foundation; or, if not known in advance, by the lessee. Of two houses equally suitable in other respects, the householder will pay to the one in the better position an annuity equal to his special interest; he does not care which part of this sum goes to rent and which goes to taxes.Hence there is a tendency for the unpaid tax on the value of the ground to be deducted from the rent received by the landlord or lessee.Thus this tax, if it can be reversed, will be deducted from the rent which the builder (or anyone else) is willing to pay for the right to build.Paid local taxes are paid by the householder in the long run, but are not a real burden on him. The condition "in the long run" is important.For example, urban improvements, which will clog traffic for years to come, without being fruitful, will pay nothing to the householder, if he pays taxes, on the sinking fund and interest on such improvements.As far as justice is concerned, this tax should be deducted from his rent; for when the improvement is completed, and especially when the debt is paid, and the tax is abolished, the proprietor of the estate will receive the free repayment which was levied on the original occupants for the improvement. tax benefit.

Section 4 However, the unpaid tax on the value of buildings (which is consistent across the country) is mainly borne by households.The particularly heavy local free tax, even if it is levied on the value of the building, is mostly paid by the owner (or lessee). Taxes on the value of buildings are in a different position.If the taxes were spread throughout the country, they could not change the differential advantage of favorable sites; thus, they could not, or at least not directly, make builders or others unwilling to pay high rents for good sites; They will indeed reduce the value of all land for building, while the value of particular foundations will fall with the decline of other foundations.But their influence in this respect is so slight that there is no great error in thinking that a flat tax on the value of buildings is not borne by the landlord.If the builder anticipates such taxes, he can adjust his plans according to them.He seeks to build such a costly house that it can be rented to tenants at a rent that affords him a normal profit; and the tenants are taxed.Of course he could be wrong.But in the long run builders as a class, like all other merchants, are almost infallible.In the long run the tax on building value falls on the occupant, or finally on his employer, if he uses the house as a business, and his competitors pay the same tax.

But in the case of particularly high free local taxes on the value of buildings, the situation is quite different: here comes the main difference between state and local taxes on immovable property.The paid expenditure of this tax increases the welfare of life more than its cost equivalent, and of course cannot drive out the householder.The portion of it levied on the value of the building is paid by him, but is not a real burden on him, as we saw in the case of the paid tax on the value of the ground. However, the unpaid portion of the building value tax over other regions is not mainly borne by the households.Any additional burden will remove them out of its bounds by a sufficient number to reduce the demand for houses and other buildings in the place, until this additional tax on the value of buildings is borne by the lessees or landowners.The builders, therefore, must, if they can foresee the future, deduct this additional building value tax and various ground value taxes from the ground rent they are willing to pay.

However, those occasions where such deductions are very large are not many and are not important.For the long-term inequalities of unpaid taxes, though great, are smaller than is commonly supposed, and many of them are due to unforeseen events, such as the failure of certain magistrates.There is indeed a significant and perhaps permanent cause, foreshadowed, of the tendency of the rich to migrate from the lively quarters to the empty and fashionable suburbs, thereby burdening the working class with an undue share of the national tax on the poor. .But before this evil becomes evident, the tax districts are enlarged by legislation, or otherwise brought under the same budget as the districts of the poor and the rich. What is more important, it should not be forgotten that the extra gratuitous tax on the value of buildings, although it tends in the districts where it is imposed to reduce ground rents and ground rents at renewals, is not as burdensome to all landowners as it might at first appear. as serious as it seems, because a large part of the construction business, which is restrained by this tax, is not destroyed, but is diverted to other regions, and the competition for new building rights is increased there. Section 5. If the original tax is collected from households, the distribution of its burden is rarely affected by it. However, the sharp increase of unpaid taxes is a serious burden on households, especially shopkeepers, under the current levy system. The old tax, which was levied on households and not on landowners, had very little effect on its extent, though it was greatly affected by the proportion of the ground-value tax to the building-value tax.On the other hand, in the first few years, the extent to which the non-reimbursable tax increase is collected is strongly influenced by the method of collection.The increase borne by the household is greater than if part of the tax were charged to the landowner, or a part of the tax was deducted from his rent.This only applies to those surrounding areas that are being developed.Where population has declined and construction has ceased, unpaid taxes tend to be borne by the landowners.But in these places, the economic resistance is generally great. It seems probable that the total burden of gratuitous taxes on the enterprises of building speculators, and other middlemen, is not very great;But changes in the tax have increased slightly those enormous risks which the construction industry takes, so that society inevitably pays for these risks more than their real equivalent.All this points to the serious disadvantages of the rapid increase of taxes, especially of those houses whose value is high in relation to the net income of the households. A merchant, especially if he is a shopkeeper, in any case, if the commodities he deals in are not readily available at a distance, will often be able to transfer part of the taxes borne by him to his employer.But the shopkeeper's tax is great in proportion to his income; and some of these expenses, which in the eyes of the wealthy resident are paid, are in his view gratuitous.His work is of the type in which economic progress raises supply more and demand less.Not so long ago his pay was artificially high at the expense of society.But now it was sinking to lower, perhaps more reasonable levels, and he did not readily acknowledge reality.He loved the real injustice which the sharp increase in taxes had caused him; and attributed to it some of the pressures upon him which were actually caused by deeper causes.His sense of injustice was sharpened by the fact that he could never bargain with his landowners on fairly fair terms.For, apart from the cost of fixtures and general relocation expenses, he would lose most of his customers even if he moved to similarly suitable premises nearby.But it must not be forgotten that the shopkeeper does sometimes move, he is vigilant, and takes due account of the tax; and thus, after a few years, he shifts the burden of the unpaid tax onto the landowners and patrons more than any man in any class. More thorough (hotel owner, apartment owner is the same as shop owner here). Section 6. The taxation of empty building foundations according to their capital value and the partial transfer of the building value tax to the value of the foundations are generally beneficial if they are carried out gradually and accompanied by strict regulations concerning the height of the building and the space to be left before and after it. Regulation.Land near a boomtown still used as farmland may offer little net rent, but it may be a valuable estate.Because its future rent is already included in its capital value.Besides, the possession of the land will probably furnish, besides money rent, a satisfactory income.In this case, even if it were taxed at its full rental value, it would easily be taxed less; and therefore it arose whether it should be taxed at some percent of its capital value rather than at some percent of ground rent. Tax is such a question. Such an approach would speed up construction and thus tend to clog the construction market. As a result, rents tend to fall, and builders may not be able to rent building foundations with high rents.Such a change may thus transfer to the common people a part of the "common value" which is now attributed to the owner of the land on which a house is already built, or which is more likely to be built.Unless the city authorities take effective measures to plan the development of the city as it should, there will be a lot of buildings of poor quality; a mistake for which future generations may pay a great price in loss of beauty or even health. The principles upon which such plans are based are open to wide application.We may speak of a radical proposal which has lately attracted attention, to the effect that in the future the value of foundations should be taxed mainly or even entirely, with little or no reference to the value of buildings.Its immediate effect is to raise the value of some estates at the expense of others.In particular it raises the value of tall and luxurious buildings in high-tax districts even more than in low-tax districts.Because it can reduce the larger burden.But it lowers the value of low, old buildings on large foundations in heavily taxed districts.Before long, the amount of building on a site will, within the limits of building regulations, generally be in proportion to its positional advantages, and not, as it is now, partly, partly inversely proportional to taxes.This increases the degree of concentration and tends to increase the total foundation value in the favorable area.But it would also increase the total outlay of this tax, which, as it is borne by the value of the ground, the pure ground value would probably be very low.In general, it is difficult to judge whether the population concentration has increased.Since a great deal of construction may take place in the suburbs, vacant land there no longer escapes heavy taxes.Much depends on building regulations: concentration can be greatly reduced by strict regulations requiring large open spaces in front of and behind tall buildings. The seventh section discusses the agricultural tax again. We have already spoken of the general working relationship between tenant and landlord in English agriculture.Competition in the countryside does not work as well as in the cities.But on the other hand, the landlord's investment in farm capital construction is flexible and often changes due to the oppression of the environment.This adjustment blurs the fate of the agricultural tax, just as a whirlwind tends to make snowflakes fly over a house, and it suppresses rather than eliminates the tendency of gravity.Hence the general statement that if there is great competition for the farm, the farmer will pay his part and the landlord's share of the agricultural tax, and if the landlord has reason to fear that the farm will be locked up, he will pay the whole agricultural tax. But the gratuitous taxes borne by rural dwellers are perhaps less than is commonly imagined.They have benefited from the improvement of public security and the abolition of tolls, and are increasingly enjoying the benefits of taxes in neighboring cities, which they do not contribute to and which are generally much higher than their own. many.If the tax is paid at present, it is not a mere burden to him, though the householder pays it.But the agricultural tax forms a very large part of the farmer's net income; and on those rare occasions when the unpaid agricultural tax increases sharply, he is often overburdened.As has been pointed out, a gratuitous tax on a regional scale appears to be more oppressive to local landowners and farmers than a general gratuitous tax on a national scale. Section VIII provides some practical suggestions.The permanent limitation of the supply of land, and the enormous contribution of collective action to its present value, necessitates its inclusion in a separate item for taxation purposes. This book is mainly engaged in scientific research, but it also deals with practical problems of economic research interest.Some discussion of the policy of taxation seems expedient here, since all economists agree that land in early developed countries is in many respects the same as other forms of wealth, and in others it differs; In some of the controversial literature, there is a tendency to relegate the differences to a secondary position and bring the similarities to the primary position.If only those similarities are of great significance for pressing practical problems, it may be wise to place some weight on this aspect.But the opposite is true, and it therefore seems necessary to consider some major issues of financial administration in which those other forms of wealth are largely absent and where landownership characteristics play an important role.But first a word must be said about the principle of fairness. Where a special tax is levied for a particular purpose, and where the public authorities do not interfere with existing ownership (as, for example, in the construction of land drainage systems), it may be appropriate to impose a "share principle" on estate beneficiaries. According to this principle, those who benefit more pay more, and those who benefit less pay less.Every such tax, just or unjust, must be judged separately.On the contrary, all free taxes, fair or not, must be judged on the whole.Almost every gratuitous tax, for its part, unduly oppresses some class or other; differences occur simultaneously.If this difficult condition is satisfied, the tax system can be said to be fair, although it is not fair in any part of it. In the second place, it was agreed that the system of taxation should be regulated according to the income of the people, or, better, according to their proper classes, according to their expenditure.For that part of a man's income which he saves, again helps to fill the treasury until it is spent.When, therefore, we consider the fact that our present system of taxation (general and local) burdens housing very heavily, it must never be forgotten that a great house costs a great deal.Expenditure taxes in general, and class expenditure taxes in particular, present great technical difficulties for taxpayers.Moreover, they cost the consumers, directly or indirectly, much greater than they bring in to the treasury.The house tax is simple and easy to implement, the collection fee is low, it is not easy to miss, and it is easy to classify. Third, this argument, however, does not apply to buildings other than dwellings.For this reason it would perhaps be just, as far as the new tax is concerned, to impose a lower tax on shops, warehouses, and factories, etc., than on houses.The old taxes have been passed on from the occupants of the establishments, partly to their landlords, partly to their customers.The transfer is ongoing.The merchant classes of the towns, therefore, would feel no great pain if they were once collected one farthing out of every penny of the new tax, and some or all of the other three fares were collected thereafter in small percentages from year to year.This approach may be necessary if municipal government funding is increasing rapidly. All these considerations compel us to reiterate the opinion that a discerning statesman, whether in an early or a new country, will feel less for future generations when he legislates land more than any other form of wealth. There is a greater responsibility; from an economic and an ethical point of view the land must always be demarcated everywhere as a thing in itself.If the state had at first kept the real rent in its own hands, the vigor and accumulation of industry would not necessarily have been impaired, although in a few cases emigration to newly developed countries was slightly delayed.But the same can never be said of those revenues derived from artificial industries.But in discussing the fairness of the common value of land, the public interest involved is so great that it is especially necessary to bear in mind that the State suddenly seizes for itself the income of those estates whose private titles it once sanctioned. , would undermine security and shake the foundations of society.Reckless and extreme measures are unfair.Partly for this reason (rather than entirely), such measures are unwise, even foolish. Vigilance is necessary.But the reason why the value of the ground is so high is due to the concentration of population, which threatens to create a serious shortage of fresh air, sunlight, and places of activity, and to destroy the physical strength and happiness of the younger generation.Great private interests are thus not only produced by causes of a social (rather than individual) nature, but at the expense of a major form of public wealth.Getting fresh air, sunlight, and a place to play is costly.And the most proper source of these funds and expenditures seems to be those extreme rights of private ownership of land, which have been formed almost imperceptibly from the time when the king representing the state was the sole proprietor of the land.Private individuals are only landholders, obliged to serve the public welfare.They have no legal right to compromise that welfare with overcrowded buildings. The ninth section continues. A few practical suggestions, therefore, seem to be made: With regard to the old tax, a sudden change of taxpayers seems undesirable.But the new tax, so far as may be expedient, should be imposed on its last bearer; unless, as with the income tax under Schedule I, when it is imposed on the tenant, it is stated that it will be deducted from his rent. The reason for this is that almost all of the old taxes levied on the public or foundation value of the land have already been paid to the owners (including the lessees, and as far as these taxes are old, they are in the process of signing the lease. not foreseen); the rest is almost entirely borne by the tenants or their customers.This result would not be much disturbed by having the tenant deduct from his rent some, or even the whole, of his taxes, though such a law would risk transferring to the lessee a part of the owner's estate, they made Those old taxes were expected at the time of the lease.On the other hand, the provision of sharing in the new tax (that is, the increased tax) has great advantages: the tenant, whether farm, shop, or house, deducts one-half of the new tax from his rent; his immediate landlord (or Landlord) is deducted proportionally from his payment to his superior landowner (or landlord); and so on.In addition, the new local taxes on various establishments, as mentioned above, cannot be collected in full at first, and will increase year by year thereafter.By these provisions, farmers, shopkeepers, and other merchants will be freed from that occasional injustice, and the constant apprehension of it, which now and suddenly unduly increases the public burden on particular classes. associated. As regards the value of foundations, it may be stipulated that all land (whether technically urban or not) which, without counting buildings, can be sold at a moderate price, say, two hundred pounds per acre, shall be Deemed to have special foundation value.The general ground tax is imposed on its capital value, and, moreover, a "fresh air tax" to be concentrated by the local government on the above-mentioned ports.This "fresh air tax" would not be a heavy burden on the owners, since most of it would be returned to them in the form of an increase in the value of the remaining building foundations. In fact, the spending of private groups like the Capital Parks Association, and most of the building value tax collected for municipal construction, is actually a free fortune for those owners who are already lucky. In towns and country alike alike, the best means of obtaining the remaining necessary funds, besides the original land tax, is perhaps the real estate tax, supplemented by some local dues imposed by the local authorities.The residence tax may be banned, unless it is used to collect new and huge funds like pensions, and the main tax rate may be divided into grades like the present residence tax; be taller.For it would not be proper for a man not to bear the tax at all, where he has the right to vote on its collection and use.But it is proper and reasonable to reward him or his children with such benefits as his tax dollars (such as increased health and energy, and no tendency to political corruption).