ABSTRACT

The most important point to discuss concerning the subject of the direct single tax is to know whether the tax must be assessed on income or on capital. Here, however, an explanation is in order. When speaking constantly about taxation of capital, opposing always a capital tax to an income tax, it is not meant, we must realize, that the tax should be collected from capital itself. Undoubtedly, it is very well known that, in principle, any contribution whatsoever should not be collected from productive resources or from capital, but only from consumables, that is to say, from income or the price of income.iii Apparently, we also know that it would be impossible to require from a landowner a one-hundredth part of his land, from a capital-owner a one-hundredth part of his house or his ship, or from a worker a one-hundredth part || of his personal faculties. Land is capital that cannot be consumed. Most artificial capitaliv consists of capital that has a specific use, and its purpose cannot be changed without loss of a good deal of its value. Personal faculties form non-transferable capital; it cannot be separated from its owners; they can only divest themselves of their income. Thus, it is well understood that taxes will always be collected from income; although in the system of capital taxation, the tax will not be proportional to the citizen’s [403] amount of income but to the value of his capital. This idea appears important to me, and I do not hesitate to adopt it to justify it somewhat better than, I think, has been done thus far. Assume there are three citizens, each with an income of 5,000 Fr. The first is a landowner possessing land worth 200,000 Fr. The second is a capitalist possessing 100,000 Fr. invested in mortgages or deposited in a bank. The third is a civil servant receiving a salary of 5,000 Fr.: the service he fulfils assumes abilities, knowledge acquired, and intellectual and moral qualities that, from an economic point of view, can be considered together as capital with a value of 50,000 Fr. You claim to take account of the taxpayers’ wealth when distributing the tax burden; and, accordingly, under the system of income taxation, you will tax them the same amount. How can you, in all sincerity, put on a par a man who possesses 200,000 Fr. in land, an inconsumable capital whose value grows every day before his eyes, with a man possessing 100,000 Fr. that are exposed to all the bad risks of mortgage loans or unsecured loans, and to all the grievous risks of industry and commerce? Above all, how can you put on a par three men, two of whom possess 200,000 Fr. and 100,000 Fr., respectively, in material transferable capital, which their owners may sell, leave to their children, etc., whereas the third possesses || a value of 50,000 Fr. in immaterial untransferable capital that will exist only as long as he lives? Let us get to the heart of the matter and settle the question as economists. The three incomes of 5,000 Fr. cannot be declared to be equal, considering that the first remains intact, but that, regarding the second, there has to be deducted depreciation charges and insurance premiums of 2,500 Fr. per year from consumable income, and, regarding the third, of 3,750 Fr. per year. Speaking rigorously and scientifically, the 2,500 Fr., on the one hand, and the 3,750 Fr., on the other, are not part of income, but are part and parcel of capital. If these three citizens [404] each spend 5,000 Fr. per year, evidently it pleases the latter two to

do so, or they are forced to eat their capital. – From this it follows that the socalled tax on capital is, in truth, a tax on income, and that the so-called income tax is in reality a tax on capital. I repeat: in my opinion, proportional insurance is not the ideal from the point of view of either justice or economics; but, nevertheless, if one must take account of the taxpayers’ wealth in the distribution of the tax burden, I ask at least that the income be considered after deduction of the depreciation charges and insurance premiums; in other words, I ask for a tax that is proportional to capital. That is a first point with respect to which it is impossible for me not to show my sympathies in favour of the direct single tax on capital. But this is still not all, and I am going to try to explain another element of the system that is much more praiseworthy. I am going to shed light on an idea that is really just, really democratic, that has been applied perhaps unknowingly and surely without explanation of the principle involved.1 Justice has unexpected demands; when you decide to consult it, it turns out that it takes you much further than you || thought would happen. Let us go back to our three taxpayers: the owner of a piece of land worth 200,000 Fr., a capitalist possessing 100,000 Fr., and a civil servant with personal capital of 50,000 Fr. You believe you have done everything possible to bring about equity if you have taxed the three citizens in proportion to their capital as just defined? You are now going to see, by looking at the situation a little more closely, how much you are mistaken. In principle, we tax all incomes; that is to say, the productive services rendered by each capital. What is the income in kind of [405] land? It is the service of land: let us tax the service of land. What is the income of artificial capital? It is capital services: let us tax capital services. What is the income [productive service] of personal faculties? It is work, you are going to say. – But wait a moment: the income of personal faculties is work to the workers, but it is also leisure to the idle rich. We are taxing work. Hence, leisure should also be taxed; and if we do not tax leisure, work should not be taxed either. I introduce to you a civil servant, and two persons of independent means, one of whom is a landowner, and the other a capitalist. The civil servant possesses a personal capital from which he gets an income; this income is his time, his work, and his efforts. The two gentlemen of independent means, however, also possess a capital and draw an income from it: this income is their time, their leisure, and their pleasure. The civil servant’s work is paid 5,000 Fr. Why should we not value the landowner’s and capitalist’s leisure at 5,000 Fr.? You tax the worker for having a capital of 50,000 Fr. Why not value the personal faculties of the idle persons of independent means at 50,000 Fr. and tax them accordingly? – Or, if you wish, do not tax at all the landowner and the capitalist for having an unproductive income from a virtual capital that is difficult to measure. I agree, but

then you should not tax the civil servant for productive income from a real capital that you can easily measure. || Therefore, in the special case we are dealing with, exempt the civil servant’s 5,000 Fr. income from taxes; and, in general, exempt all wages from taxes. This proposition must look important to you. Allow me to consider it again and to develop it. The total amount of social incomev is the sum of the total amounts of income of the different types of capital. To measure the monetary value of social income completely, the income of land, of artificial capital, and of personal faculties should be completely calculated. This can be achieved by knowing [406] the prices that these different incomes have when they are sold and bought on the market, or, briefly, when they are exchanged. In this respect, however, the incomes are divided into two kinds, because there are among them incomes that are exchanged and incomes that are not exchanged. There are incomes the value of which is determined when they are brought to market; and there are incomes that are not brought to market, the value of which can only be determined by comparing them with the incomes of similar or analogous types of capital. The incomes of the second kind are those consumed directly by the owners of the capitals that produce them. Examples are:

1 The income from a public garden, where neither corn nor beets are cultivated, but where paths, ponds, and lawns have been laid out.