REAL PROPERTY IN AMERICA.
AVERY significant item of intelligence, of much interest both to politicians and financiers, reaches us this week from the United States. Americans have repeatedly assured us that there is one point at which their system of govern- ment presses severely upon property-holders, and that is in the violently democratic principle accepted in State taxation. Each State and Municipality provides for its expenses in the main through a single tax—a rate, as we should call it—levied upon all property. All that a man has is valued by official valuers, and then a per-centage is taken for the State needs. This system, though it seems fair, and while the taxes are low is acceptable to all classes, begins, as ex- penses rise and taxes with them, to press terribly upon a single class, the owners of realised wealth. They have to pay the whole of the State demand, the wage-receivers not being touched by State taxation, except so far as it may in- crease rent. The tendency, therefore, as the poor rule the polls, is to very severe imposts, made much heavier by the clumsiness and in some cases the dishonesty of the valuing. The officials are naturally anxious to get as much as they can without raising the nominal per-centages taken for taxation, and they therefore screw up values to their highest level, and are most unwilling to let them down again. This is especi- ally notable in the case of " City lots,"—that is, spaces of building-ground, the price of which fluctuates to an extent scarcely known in Europe. The American cities grow and grow ; there are few investments so popular as house property —the Astors at one time hardly held . anything else—and whenever a cycle of prosperity arrives, valuations are run up to a high figure, which when the "cycle of shrinkages " supervenes, it is very difficult or impossible to reduce. Build- ings stop, tenants disappear, " plots " are •Insold, but the demands of the tax-gatherer must be met., or the properties are put up to auction, and sold at ruinous loss. So severe sometimes becomes the pressure, that an American gentleman of the highest reputation assured us a few weeks ago that he paid $8,000 a year in taxes on property in New York and Pennsylvania which never had yielded a shilling, and perhaps never would. Being rich, he held on nevertheless, partly in hope of a rise, partly from a natural reluctance to be so despoiled, but poorer men were crushed by the system every day.
We thought as we heard the statement that there must be ex- aggeration somewhere, but the Tribune of June 14th contains facts which show that there is none. That journal contains in a "leader" the following statement :—" The Chicago Journal of Monday last publishes the annual list of delinquent taxes and special assessments in Cook County for the year. 1877 and pre- vious years. The publication fills one hundred and twenty- five pages and two columns of an edition of the Journal, or one thousand one hundred and tiventg -seven columns in all. From a count of a few columns we average the number of lots adver- tised at sixty to the column, or a total of nearly seventy thousand lots. The small amount of tax in a large majority of instances shows that the lots are unimproved, and they are doubtless mainly owned by land speculators who are unable to carry their pur- chases. In Chicago the spirit of speculation in the days of inflation ran as high as anywhere in the country, and the depression of the last few years has almost entirely stopped the sale of outlying lots, which might in easier and more pros- perous times have found purchasers among those hopeful of the future growth of the city. Application for judgment against the delinquents is to be made on July 8th in the County Court, and the sale is to take place on August 19th." The Tribune, while admitting that similar facts could be related of many other cities, and notably of New York, seems to see no harm in the matter, and does not perceive that it describes a system of the grossest injustice which, if carried far, would kill the possi- bility of accumulation. A good many things are obscure in fiscal legislation, but this at least is clear, that to levy a tax on a non-existent article is utterly unjust. A bit of land which yields nothing is just such an article, and to assume that it will yield something by-and-by is to assess taxa- tion by a mere guess. This would be seen at once, if the taxed article were not real property, and therefore visible to the eye. Suppose, for example, a duty of ten per cent. were imposed on iron from England, and the tax were levied whenever the importer had made his English contracts, what would the Iron Trade say ? Or suppose every young man "with expectations" were taxed on those expectations, what would just men say ? Yet even this latter preposterous sug- gestion conveys no greater injustice than is apparently com- mitted in the United States every day. A man buys a piece of land, the demand for such pieces falls, and still, because he has expected to sell it, the taxes are levied on it, till at last he resigns his property, rather than pay them any longer. It would be as fair to exact a municipal revenue from the owners of Cannock Chase, because some day or other a town may be built there for the accommodation of military officers.
It is possible that some argument may be offered in defence of a system which at first sight appears to injure the American character for keenness, but the Chicago story tallies with so much we have recently beard that we believe the evil to be real, and it is one about which many of our fiscal reformers should inquire. They are all wanting to make property the sole basis of taxation, and they have help from men of the professional class, who should know better, but who feel the injustice of our present method of levying taxes on income. They may study with advantage the evidences offered by the American cities that electors will not insist on economy when taxation falls on property, and that such taxes exaggerate fiscal burdens by increasing the difficulty of assessment. The valuer feels that if an exemp- tion be once allowed on property temporarily valueless or re- duced in value, he will be met with excuses which will whittle away the whole revenue ; and he therefore goes on valuing, until in the end the owner chucks his property to the State in despair. He finds his capital diminished by State demands at the very moment when it has ceased to yield, and of course, unless a very rich man, gives up his property and his hopes together, with this further aggravation,—that he gives them up at the precise minute when their surrender will benefit nobody. It is because the market is glutted that the property is sold to pay taxes. How much is the State ever likely to obtain from the sale all at once of seventy thousand pr3- perties, rejected by their owners because they are too expen- sive to be kept?
We are quite aware that in the Chicago case much of the property sold is in "weak hands,"—that is, in the hands of men who bought on speculation, and never intended to wait for more than a year or two ; but that does not alter the main fact that a tax is levied not on a profit but on a non-existent property. A city lot which cannot be utilised, is no more a subject for taxation than a wheat crop still beneath the soil, or coal still undug from the mine. To tax it is to tax capital while still raw material, and gradually to destroy the very springs of energy, and it is to that result that a tax on property must almost necessarily come. It falls so heavily on every form of infructuous wealth, that it prevents accumulation. If we understand the American system, a house like Mentmore would in a few years be taxed out of existence, because Baron Rothschild's collections of majolica, and pictures, and jewellery would all be taxed just as if they were Consols or Bank shares. No civilisation can stand taxation of that sort when it is high, and taxation im- posed by the Have-nots upon the Haves has, in the very nature of things, no tendency to keep low.
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