factor, is as nothing compared with checking the infinite number of accounts involved in sales tax schemes. It would be "out of the frying pan into the fire" with a vengeance. One of the requisites of a good tax is ability to check the returns. This could not be done adequately with the enormous number of accounts involved. Only recently a gentleman who has just come back from France stated that while there he purchased 30,000 francs' worth of merchandise, and that he did not pay any sales tax.

Consider the farmer. His gross overturn is approximately $20,000,000,000; a tax of one per cent would be $250,000,000. We know how much could be added to the price of our grain, or cattle, or dairy products if a gross turnover tax were paid each time the farmer's products changed hands. As much of the farmer's overturn is without profit, this tax on the farmer would have to be paid out of capital.

THE TARIFF

Most people can remember when agriculture received some consideration in framing our tariff laws. Both the manufacturers and labor are interested in agriculture, primarily as a supply of food and raw materials. They wanted them cheap. Practically all the duties were taken off and the farmer left to compete with cheap beans from Manchuria, cheap wool from Australia, and cheap labor the world over, while the factory demanded protection and got it.

The result was that the farmer was left to sell in a free-trade market, and buy in a protected market. He has no protection on wool, but the cloth his coat is made of has a protection of 35 per cent. The dairy farmers have to compete with Canadian milk and cheese, with butter from Denmark, and

with condensed milk from the world. These results have been brought about largely because business and labor are organized and speak with authority, and the farmer has had no organization with sufficient weight and authority to present his side of the argument. The time has come when all genuine farmers' organizations should unite in demanding a square deal and the consideration for agriculture that is befitting the basic industry of the country. A large share of the consumption taxes can appropriately be collected through the tariff, but we should not be so carried away with the idea of a protective tariff as to allow taxes on tea, coffee and sugar, and other articles to be substituted for income taxes. If this is done, the farmer and the wage-earner will pay the bill.

There are many other minor suggestions offered that would make up part of the revenue lost by the repeal of the excess profits tax, such as to increase the normal corporation tax from ten per cent to sixteen per cent and abolish the $2,000 exemption. This is wrong, primarily because it is a flat tax and bears hardest on those with least incomes. One of the strong

points in favor of the progressive taxes is that they help to equalize the final earnings of the strong and weak, and thus prevent monopoly. Other suggestions are the following:

Increase the stamp taxes.

Increase the first-class postal rate to three cents.

Place taxes on tea, coffee, sugar and other items of wide use.

Increase the rates on tobacco, cigarettes and many other non-essentials. (They should not be substituted for income or the excess profits tax.)

A careful study of the present tax system will be convincing to show that the framers of the present law did a

That all persons, firms, associations and corporations owning land in excess of ten thousand dollars whether in possession or leased to others shall be subject to an excise tax upon the privilege of the use and enjoyment of such excess at the rate of one per centum. It shall be the duty of every owner where the value of the land itself excluding improvements exceeds ten thousand dollars to report his interests before March the first of each year to the Commissioner of Internal Revenue.

The bill concludes with sections covering the administration and the enforcement of the act.

Let us see what this proposed law would mean. Suppose Mr. Brown owns a farm worth $35,000. Let us assume his house, barn, shed, fences and other improvements or capital to be worth $10,000. This would make the value of the land itself $25,000. As there is an exemption feature of $10,000 Mr. Brown would have to pay a tax upon $15,000 worth of unimproved land value. At one per cent his yearly tax bill under this law would be $150. It must be remembered, however, that this tax is a new federal tax independent of and in addition to the existing local or general property tax, which covers buildings as well as land value.

It is estimated that the RalstonNolan Bill will yield an annual revenue of one billion dollars or one-fourth of the total needs.

Mr. W. I. King, in his study of "The Wealth and Income of the People of the United States," attempts an analysis of the distribution of the national income among the factors of production. Because of the anticipated gains from a rise in land value he capitalizes rent at the rather low rate of four per cent. On the basis of figures for 1910 he estimates rent at $2,673,900,000. Capitalized at his rate, the value of our natural resources for 1910 was $66,847,500,000. The

Ralston-Nolan Bill proposes a tax of one per cent on land values. This would yield annually in the above figures a little over half a billion dollars. Land values have increased since 1910 but the estimated yield of one billion dollars on the part of the advocates of this bill seems excessive. It represents, moreover, the invasion of a new field by federal taxation. The general property tax in this country is usually regarded as within the sphere of the local governments of the individual states. It required a special amendment to our federal constitution to give Congress the power "to lay and collect taxes on incomes from whatever source derived without apportionment among the several states and without regard to any census or enumeration."

Disregarding the constitutionality of the law, from an economic point of view the differentiation between land itself and the improvements upon it is very important. Unimproved land including all natural resources is a distinct element in production from the improvements upon land which are the result of labor and represent a third element, namely, capital.

This theoretical distinction is beset with certain practical difficulties. Improvements upon land are of such a permanent nature that they tend to become part of the land. Witness the labor expended in clearing or draining a piece of land for farming. Shall we say that a stream is a natural resource but that an irrigation ditch of the same size is capital? How can fertilizer be classified? The practical difficulties of differentiating between land itself and the improvements upon it are very great. City real estate assessors find it difficult to apportion the value of a building between the value of the building itself and the site or land value.

It would seem that the small farmer

would have little to fear. The advocates of the Ralston-Nolan Bill estimate that ninety per cent of the farmers of the country would be untouched. The measure is designed to hit at large holdings of our natural resources which are frequently alleged to be under monopolistic control. It seeks to prevent speculation in land values. The bill makes no distinction between idle land and that in use. Indeed, one of its avowed objects is to tax idle natural resources and productive land held out of cultivation and thus to force it into use. Such a tax would also discourage large holdings in favor of the smaller. Such forms of taxation are not new to the American farmer, nor, as is frequently alleged, is he as hostile to such proposals. The Farmers' National Congress at its annual convention in Indianapolis in October of 1916 adopted the following: Resolved that this Congress view with alarm the increase in farm tenancy, recommends that the several states adopt a gradual land tax adapted to their peculiar conditions in order to promote more and better farm homes, farm citizenship and country life in general.

The National Grange at its annual convention in Washington endorsed the so-called Crosser Bill, introduced

before a former session of Congress

with somewhat similar aims. The Farmers' Non-Partisan League of North Dakota, which elected a singletax governor, had a land value tax in its platform.

There are certain elementary economic principles contained in the RalstonNolan Bill which require examination. In the first place a tax on land values is a direct tax. A tax upon economic rent can not be shifted. It is the opinion of most economists that such a tax can not be passed on to the tenant, nor can its final burden rest

upon the consumer in the form of higher food prices. Rent in its economic sense is due to the superior productivity or location of various pieces of land. If one acre of ground equally accessible to markets will produce with the same amount of labor and capital an average yield of ten dollars' worth more of potatoes than another acre of land, it will yield ten dollars more in rent to its owner. If the rents paid for different pieces of land afford an accurate measure of their varying degrees of productivity, the tenant is already paying what the land is worth. He can not and will not pay more rent because of the new tax, provided there is no change in the value of his land due to other economic conditions. A general attempt to shift the tax in the form of higher rents will bring poorer sites and uncultivated land into operation. They tend to fix prices of commodities, for rent due to superior qualities of certain pieces of land is in the nature of a surplus going to the Unless there is fortunate owners.

some other economic cause a tax upon land values can not be shifted by the owner to the renter or to the consumer in the form of higher food prices.

If a tax upon land values is permanent it can not be shifted to the next

purchaser, because he will discount the value of the property by the value of the tax. Suppose a piece of farm land talized at six per cent, its value would to be yielding a rent of $6,000. Capibe $100,000. If a one per cent tax is placed upon it, this would amount to $1,000 a year. The rent must remain $6,000, for we have attempted to show that a tax on land value can not raise rent. The yearly income from this piece of land is now only $5,000 ($6,000 rent minus $1,000 tax). Capitalizing his now diminished income of $5,000 at the same rate of six per cent, the investment value of the same farm

is but $8,333.33. No future buyer will pay more than that sum because of the new tax. By becoming a silent partner to the extent of one per cent in all the future earnings of the given piece of land, the government at one stroke has taken $16,666.66 from its investment value.

It may be asked if this does not amount to something like confiscation. The answer depends upon one's theory of taxation. Of these theories there are many, as for example the ability to pay theory, of which the income tax is supposed to be an illustration. Another is the benefit theory by which an individual should contribute in proportion to the benefits he receives. Again, the taxes might be based upon special privileges. Is the ownership of land and other natural resources a special privilege? Single-taxers reaffirm that “the earth is the Lord's and the fulness thereof." They lament the appropriation of large tracts of land and the seizure of especially valuable natural resource by private individuals. The owners should at least contribute in taxes in proportion to their ownership of natural resources, such as land, which rightfully belong to society in general. Thus a tax upon land values is defended by the so-called special privilege theory of taxation. Whether just or unjust, however, society has given its assent for centuries to the private ownership of land. An individual with $100,000 invested in a piece of unimproved land would find $16,666.66 sliced off the value of his investment by such a tax on land values as the proposed Ralston-Nolan Bill. A similar sum invested in buildings would not be so much affected by that law.

It must be remembered, however, that there are other laws which have precisely the same effect upon the value of securities. The income tax has sliced similarly the investment

values of stocks and bonds to many individuals. To some owners the surtaxes, by taking a greater proportion of their income, have reduced the investment value of their securities to a far greater extent. Professor Seligman in his "Essays upon Taxation," written some years ago, was inclined to agree to the oft-quoted statement that the farmer was taxed more heavily in proportion to his ability to pay than most other classes. It is doubtful whether this is still true. The war has brought a flood of new taxes, resting more heavily upon other factors in production than upon land. Thus, the excess profits tax, if it is to be permanent and not merely for the period of war-inflated prices and profits, will represent a new burden, just or unjust, upon business enterprise. To prove quantitatively that the owners of natural resources are now less heavily taxed than formerly in comparison with owners of other forms of wealth would of wealth would reopen the whole problem of the incidence of taxation.

The proof is made more difficult by the overlapping of taxes as in the case of the income and the excess profits tax. Theoretically, the base of the income tax is income and the base of the general property tax is wealth, but naturally income arises from wealth. The problem is still further complicated by the fact that current taxes are based upon not only economic wealth, but upon certificates of ownership or property rights, e. g., bonds, mortgages, etc. Such a solution is made more difficult by the overlapping of federal and state taxation. Many individual states have income taxes. The general property taxes differ in the forty-eight states. The base is both real and personal property, but the frequent evasion of the tax upon personal property represents another difficulty.

The Statistics of Income compiled