Book V, Chapter II, 3

Because the tax is payable in money, the valuation of the land is also stated in money. Since that valuation was established, the value of silver has remained fairly steady, and the standard of coinage has not changed in weight or fineness. Had silver risen considerably in value, as it seems to have done during the two centuries before the discovery of the mines of America, the fixed valuation might have been very oppressive to the landlord. Had silver fallen considerably in value, as it certainly did for at least about a century after the discovery of those mines, the same fixed valuation would have greatly reduced this branch of the sovereign's revenue. Had the monetary standard changed substantially, either by lowering or raising the denomination assigned to the same amount of silver—had an ounce of silver, for example, been coined not into five shillings and two pence but into coins denominated as little as two shillings and seven pence or as much as ten shillings and four pence—the proprietor's revenue would have suffered in the first case, and the sovereign's in the second.

Under circumstances somewhat different from those that have actually prevailed, then, this fixed valuation might have caused great inconvenience either to the contributors or to the commonwealth. Over the ages, such circumstances must occur sooner or later. Yet though empires, like all other human works, have so far proved mortal, every empire aspires to immortality. Any constitutional arrangement meant to last as long as the empire itself should therefore be suitable not merely under particular conditions but under all conditions. It should suit not those that are passing, occasional, or accidental, but those that are necessary and therefore always the same.

A tax on land rent that changes whenever the rent changes, rising and falling as cultivation improves or is neglected, is recommended as the fairest of all taxes by the French school of thinkers who call themselves the economists. They maintain that all taxes ultimately fall on the rent of land and should therefore be levied evenly on the fund that must finally pay them. It is certainly true that all taxes should fall as evenly as possible on the fund that must finally pay them. But without entering the disagreeable debate over the metaphysical arguments supporting their ingenious theory, the following review will sufficiently show which taxes finally fall on land rent and which fall on some other fund.

In the Venetian territory, all arable land leased to farmers is taxed at one-tenth of its rent. [Memoires concernant les Droits, p. 240, 241.] Leases are entered in a public register kept by revenue officers in each province or district. When the proprietor cultivates his own land, it is valued according to a fair estimate, and he is allowed a reduction of one-fifth of the tax. He thus pays only eight instead of ten per cent. of the estimated rent on such land.

A land tax of this kind is certainly more equal than England's land tax. It might, perhaps, be somewhat less certain, and assessment might often cause the landlord considerably more trouble. Collection might also be considerably more costly.

It might nevertheless be possible to design a system of administration that would largely prevent this uncertainty and contain the expense.

For example, the landlord and tenant might be required jointly to record their lease in a public register. Suitable penalties could be enacted for concealing or misrepresenting any of its terms; if part of a penalty went to either party who reported the other's concealment or misrepresentation and secured a conviction, the two would be effectively deterred from conspiring to defraud the public revenue. Such a record would sufficiently disclose all the terms of the lease.

Instead of raising rent, some landlords take an upfront payment for renewing a lease. In most cases this is the expedient of a spendthrift, selling a future revenue worth far more in exchange for ready money. It therefore usually harms the landlord, often harms the tenant, and always harms the community. It frequently takes so much of the tenant's capital, diminishing his ability to cultivate the land so greatly, that he has more difficulty paying a small rent than he would otherwise have had paying a large one. Anything that diminishes his capacity to cultivate necessarily holds the most important part of the community's revenue below what it might otherwise have been. Taxing these upfront payments considerably more heavily than ordinary rent could discourage this harmful practice, to the considerable benefit of all parties: landlord, tenant, sovereign, and the entire community.

Some leases require the tenant to follow a prescribed mode of cultivation and sequence of crops throughout the lease. This condition, generally born of the landlord's conceit that he knows better—a conceit usually quite unfounded—should always count as additional rent: rent paid in service rather than in money. To discourage this generally foolish practice, such rent could be assessed rather highly and consequently taxed somewhat more heavily than ordinary monetary rent.

Some landlords demand rent in kind instead of money—in grain, cattle, poultry, wine, oil, etc.—while others demand rent in service. Such rents always harm the tenant more than they benefit the landlord. They either take or keep more from the former's pocket than they put into the latter's. Wherever such rents prevail, tenants are poor and destitute, largely in proportion to their prevalence. Assessing these rents rather highly too, and consequently taxing them somewhat more heavily than ordinary monetary rent, might sufficiently discourage a practice harmful to the whole community.

If a landlord chose to cultivate part of his own land, its rent could be valued through a fair appraisal by neighboring farmers and landlords, and he could receive a modest reduction in the tax, as in the Venetian territory, provided the rent of the land he occupied did not exceed a certain sum. Encouraging the landlord to cultivate part of his own land is important. His capital is generally greater than the tenant's, so even with less skill he can often raise more produce. The landlord can afford to experiment and is generally inclined to do so. Failed experiments cause him only a moderate loss; successful ones advance improvement and better cultivation throughout the country. Yet it might be important for the tax reduction to encourage him to cultivate only up to a certain limit. If most landlords were tempted to farm all their own lands, the country would be filled not with prudent and industrious tenants, whose own interest compels them to cultivate as well as their capital and skill permit, but with idle and dissolute bailiffs. Their abusive management would soon degrade cultivation and reduce the annual produce of the land, diminishing not only their masters' revenue but the most important part of the revenue of society as a whole.

Such a system of administration might remove from this kind of tax any uncertainty that could cause oppression or inconvenience to the contributor. It might also introduce into ordinary land management a policy that would substantially advance the country's general improvement and good cultivation.

Collecting a land tax that changed whenever rents changed would undoubtedly cost somewhat more than collecting one assessed on a fixed valuation. There would necessarily be extra expense both for the register offices that should be established in the country's different districts and for occasional valuations of land a proprietor chose to cultivate himself. Yet all this could cost very little, and far less than the collection of many other taxes yielding very little revenue compared with what could easily be raised from a tax of this kind.

The discouragement that a variable land tax might give to improving land seems the strongest objection to it. The landlord would certainly be less inclined to improve when the sovereign, contributing nothing to the expense, would share in the profit. Perhaps even this objection could be overcome by allowing the landlord, before starting his improvements, to establish the current value of his land jointly with the revenue officers, through a fair appraisal by an equal number of neighboring landlords and farmers chosen by each party; he could then be taxed on that valuation for enough years to repay his costs in full. One of the principal advantages claimed for this sort of land tax is that the prospect of increased revenue would direct the sovereign's attention to improving the land. The period allowed for repaying the landlord should therefore not be much longer than necessary, lest the distant prospect of gain weaken that attention too much. Better, however, for the period to be somewhat too long than in any respect too short. No incentive to the sovereign's attention could ever offset the slightest discouragement to the landlord's. At best the sovereign's attention can amount only to a broad and vague consideration of what might improve the cultivation of most of his dominions. The landlord's attention is a specific and detailed consideration of the most profitable use of every inch of ground on his estate. The sovereign's principal concern should be to encourage in every way he can the attention of both landlord and farmer: allowing each to pursue his own interest in his own way and according to his own judgment; giving both the fullest security that they will enjoy the whole reward of their industry; and obtaining for both the widest market for every portion of their produce by establishing the easiest and safest routes throughout his dominions, by land and water alike, as well as the most unrestricted freedom to export to the dominions of all other princes.

If such a system of administration could ensure that this tax not only failed to discourage land improvement but actually encouraged it, the tax seems unlikely to cause the landlord any other inconvenience apart from the unavoidable obligation to pay it. Through every change in society's condition, every improvement or decline in agriculture, every change in the value of silver, and every change in the coinage standard, such a tax would readily adjust itself to actual circumstances without government intervention, remaining equally just and equitable throughout. It would therefore be much more suitable as a permanent, unalterable regulation—or what is called a fundamental law of the commonwealth—than any tax always collected according to a fixed valuation.

Instead of the simple and obvious expedient of registering leases, some states have resorted to the laborious and expensive procedure of surveying and valuing all the country's land. They probably suspected that landlords and tenants might collude to hide the real terms of a lease and defraud the public revenue. Doomsday-book seems to have resulted from a very careful survey of this kind.

In the king of Prussia's original dominions, the land tax is assessed by an actual survey and valuation, reviewed and revised from time to time. [Memoires concernant les Droits, etc. tom, i. p. 114, 115, 116, etc.] Under this valuation lay proprietors pay from twenty to twenty-five per cent. of their revenue, and ecclesiastics from forty to forty-five per cent. The survey and valuation of Silesia were carried out by order of the present king, reportedly with great accuracy. Under that valuation, the lands belonging to the bishop of Breslaw are taxed at twenty-five per cent. of their rent; the other revenues of ecclesiastics of both religions at fifty per cent.; the commanderies of the Teutonic order and of that of Malta at forty per cent.; land held by noble tenure at thirty-eight and one-third per cent.; and land held by base tenure at thirty-five and one-third per cent.

The survey and valuation of Bohemia are said to have taken more than a hundred years. They were not completed until after the peace of 1748, by order of the present empress queen. [Id. tom i. p.85, 84.] The survey of the duchy of Milan, begun under Charles VI., was not completed until after 1760. It is considered one of the most accurate ever made. The survey of Savoy and Piedmont was carried out under the orders of the late king of Sardinia. [Id. p. 280, etc.; also p, 287. etc. to 316.]

In the dominions of the king of Prussia, church revenue is taxed much more heavily than the revenue of lay proprietors. Most church revenue is a burden on land rent. Seldom is any part of it devoted to improving land or otherwise employed to increase the revenue of the great body of the people. His Prussian majesty probably thought it reasonable for that reason that it contribute substantially more toward meeting the state's needs. In some countries church lands are exempt from every tax; in others they are taxed more lightly than other lands. In the duchy of Milan, lands held by the church before 1575 are assessed for tax at only a third of their value.

Because the tax is paid in money, the land’s assessed value is stated in money too. Since that value was first set, silver’s value has stayed fairly stable. The standard weight and purity of the coinage have not changed either. If silver had risen considerably in value, as it seems to have done during the two centuries before the discovery of America’s mines, the fixed assessment could have been very oppressive to landlords. If its value had fallen considerably, as it certainly did for at least about a century after that discovery, the same fixed assessment would have greatly reduced this source of sovereign revenue. A major change in the standard of money would also matter, whether the same amount of silver were given a lower or a higher denomination. For example, suppose an ounce of silver were coined into pieces totaling two shillings and seven pence or ten shillings and four pence, rather than five shillings and two pence. The lower denomination would hurt the landowner’s revenue; the higher one would hurt the sovereign’s.

Under conditions somewhat different from the ones that actually occurred, a fixed assessment could therefore have caused great inconvenience to either taxpayers or the commonwealth. Given enough time, such conditions will arise. Empires, like all human works, have so far proved mortal. Yet every empire aims to last forever. Any tax arrangement meant to last as long as an empire should therefore work under all conditions, not just particular ones. It should fit conditions that are necessary and always the same, rather than temporary, occasional, or accidental conditions.

A group of French scholars who call themselves the economists recommend a tax on land rent that changes whenever rent changes, rising and falling with the improvement or neglect of cultivation. They consider it the fairest tax of all. They claim all taxes ultimately fall on land rent, so the taxes should be imposed evenly on the source that must ultimately pay them. Taxes certainly should fall as evenly as possible on the source that ultimately pays. But we need not enter the unpleasant debate over the abstract arguments supporting their ingenious theory. The following review will show which taxes ultimately fall on land rent and which fall on other sources.

In Venetian territory, all arable land leased to farmers is taxed at a tenth of the rent. [Memoires concernant les Droits, p. 240, 241.] The leases are entered in a public register kept by revenue officers in each province or district. When an owner farms his own land, its rental value is fairly estimated. He then receives a reduction of one-fifth in his tax, paying only eight instead of ten per cent. of the estimated rent.

This kind of land tax is certainly more equal than England’s. It might be less certain, however, and its assessment might often cause the landlord much more trouble. It might also cost much more to collect.

Still, a system of administration could perhaps largely prevent that uncertainty and keep collection costs down.

For example, landlords and tenants could be required to register their leases together. There could be appropriate penalties for concealing or misrepresenting any terms. If part of the penalty went to either party who reported and proved the other’s deception, the two would be effectively discouraged from joining forces to cheat the public revenue. The record would reveal all the lease’s terms clearly enough.

Some landlords charge a lump sum for renewing a lease instead of raising the rent. Usually this is what a spendthrift does: he takes cash now in exchange for future revenue worth much more. The practice usually hurts the landlord, often hurts the tenant, and always hurts the community. It often takes so much of the tenant’s capital that he becomes less able to cultivate the land. As a result, he may find it harder to pay a low rent than he would otherwise have found it to pay a high one. Anything that reduces his ability to cultivate holds the community’s most important source of revenue below its potential. Taxing these lump sums considerably more heavily than ordinary rent could discourage this harmful practice. The landlord, tenant, sovereign, and whole community would all benefit substantially.

Some leases require a tenant to use a specified method of cultivation and crop rotation throughout the lease. Usually this requirement comes from the landlord’s belief that he knows better, a belief that is usually unfounded. It should always count as extra rent paid in services rather than money. To discourage this generally foolish practice, such rent could be valued rather high and taxed somewhat more heavily than ordinary money rent.

Some landlords demand produce rather than money as rent: corn, cattle, poultry, wine, oil, and so on. Others demand services. These kinds of rent always harm the tenant more than they benefit the landlord. They either take more from the tenant or prevent him from receiving more than they add to the landlord’s income. Wherever they are common, tenants are poor and destitute, roughly in proportion to how common they are. Valuing such rents rather high, and so taxing them somewhat more heavily than ordinary money rents, might sufficiently discourage a practice that harms the whole community.

When a landlord decides to farm part of his own land, its rent could be fairly assessed by neighboring farmers and landlords acting as arbitrators. He could then receive a modest reduction in the tax, as in Venetian territory, as long as the assessed rent on the land he farms stays below a set sum. It matters that landlords be encouraged to cultivate some of their own land. Their capital is generally greater than tenants’ capital, so they can often raise more produce even with less skill. A landlord can afford to experiment and is generally inclined to do so. Failed experiments cost only him a modest amount; successful ones help improve cultivation throughout the country. Still, it could matter that the tax reduction encourage him to farm only up to a certain point. If most landlords were tempted to farm all their own lands, the country would have idle, reckless estate managers instead of steady, hardworking tenants. The tenants’ own interests drive them to cultivate as well as their capital and skill allow. The managers’ abusive practices would soon damage cultivation and reduce the land’s yearly produce. This would cut not only their masters’ revenue but also the most important part of the whole society’s revenue.

Such a system might remove enough uncertainty from this tax to prevent inconvenience or oppression to the taxpayer. At the same time, it could introduce a land-management policy that would do much to improve cultivation throughout the country.

A land tax that changed whenever rents changed would undoubtedly cost somewhat more to collect than one based on a fixed assessment. There would have to be extra spending on registration offices in the country’s various districts and on occasional assessments of land its owner chose to farm himself. But these costs could be quite modest. They could be far less than the cost of collecting many other taxes that bring in very little revenue by comparison with what this kind of tax could easily bring in.

The strongest objection to this variable land tax seems to be that it might discourage land improvements. A landlord would certainly be less willing to improve his land if the sovereign, who paid none of the costs, shared in the gains. But perhaps even this objection can be met. Before beginning an improvement, the landlord could agree on the land’s current value with revenue officers. An equal number of local landlords and farmers chosen by each side would assess it fairly. For enough years to let him fully recover his costs, his tax would be based on that value. One main proposed advantage of this land tax is that rising revenue would give the sovereign an interest in improving the land. So the period allowed for the landlord to recover his costs should not be much longer than necessary, or the distant prospect of a revenue increase might weaken the sovereign’s interest too much. Yet a period slightly too long is better than one at all too short. No incentive for the sovereign to pay attention could outweigh even the slightest discouragement to a landlord. At best, the sovereign can only form a broad, imprecise judgment about what might improve cultivation in most of his dominions. A landlord can closely consider the best use of every inch of his estate. Above all, the sovereign should encourage both landlords and farmers to give their land this attention. He should let them follow their own interests in their own way and according to their own judgment. He should give them complete security that they will receive the full reward for their work. And he should give them the widest possible market for all their produce. He can do that by establishing the easiest, safest transport routes by land and water throughout his dominions, and allowing completely unrestricted exports to the dominions of every other prince.

If administration like this could make such a tax encourage land improvements rather than discourage them, the only inconvenience it would seem to cause landlords is the unavoidable need to pay it. It would automatically adapt to the actual situation as society changed, whether agriculture improved or declined, silver changed in value, or the coinage standard changed. No action by government would be needed. It would remain just and fair throughout those changes. It would therefore be much more suitable than a tax based permanently on one assessment for enactment as a permanent, unalterable rule, or what is called a fundamental law of the commonwealth.

Instead of simply registering leases, some states have taken the laborious, costly route of surveying and assessing all land in the country. They probably feared that landlords and tenants might conspire to hide the true terms of a lease and cheat the public revenue. Doomsday-book appears to have resulted from a very careful survey of this sort.

In the king of Prussia’s old dominions, the land tax is based on an actual survey and assessment, revised and changed from time to time. [Memoires concernant les Droits, etc. tom, i. p. 114, 115, 116, etc.] Under that assessment, lay landowners pay from twenty to twenty-five per cent. of their revenue, and clergy pay from forty to forty-five per cent. The present king reportedly ordered a very careful survey and assessment of Silesia. Under that assessment, land belonging to the bishop of Breslaw pays twenty-five per cent. of its rent. Other clergy revenues, from both religions, pay fifty per cent. The estates of the Teutonic order and the order of Malta pay forty per cent. Land held by noble tenure pays thirty-eight and one-third per cent.; land held by base tenure pays thirty-five and one-third per cent.

Bohemia’s survey and assessment reportedly took more than a hundred years. It was completed only after the peace of 1748, by order of the present empress queen. [Id. tom i. p.85, 84.] A survey of the duchy of Milan began under Charles VI. but was not finished until after 1760. It is considered one of the most accurate ever made. The late king of Sardinia ordered the survey of Savoy and Piedmont. [Id. p. 280, etc.; also p, 287. etc. to 316.]

In the king of Prussia’s dominions, church revenue is taxed much more heavily than lay landowners’ revenue. Most church revenue is a charge on land rent. Hardly any of it is used to improve land or otherwise raise the revenue of most people. His Prussian majesty probably thought that for this reason it ought to contribute considerably more toward the state’s needs. In some countries church lands pay no taxes. Elsewhere they pay less than other land. In the duchy of Milan, church lands acquired before 1575 are assessed for tax at only a third of their value.