Academic journal article The American Journal of Economics and Sociology

Herbert Davenport on the Single Tax: A Second Look

Academic journal article The American Journal of Economics and Sociology

Herbert Davenport on the Single Tax: A Second Look

Article excerpt

Introduction

Herbert J. Davenport (1861-1931) was one of the most active professional economists of the first two decades of this century of American economics. In 1920, he was elected president of the American Economic Association. Elsewhere I have detailed Davenport's contribution to the theory of value and cost and to capital theory (Gunning 1997a; 1997b). He also had an interest in public finance especially tax incidence theory, war finance, and the shifting of the tax burdens between generations (Davenport 1910; 1911; 1914; 1919; 1921). He wrote two papers specifically on the single tax proposal derived from Henry George's work (Davenport 1910; 1917). This paper is intended to describe his view of the proposal.

Despite a number of complimentary statements on the aims sought by the single taxers, Davenport was firmly opposed to the single tax plan because he did not believe it would work and if it did, it would be both unjust and distortionary. This is best illustrated on the last page of his second paper on the subject:

No ordinary tax is bad or good unless as part of a system . . . Ideally all ordinary incomes, property or other, should participate in contributing to the public revenue but as incomes, not as property bases of incomes. Nothing can be more unwise than the relative freedom of personal property [i.e., non-land] incomes from public burdens. The personal property tax should disappear only with the disappearance of the property tax in general (Davenport, 1917: 30).

In other words, a property tax, including a tax on land, should be no different from any other tax on income. The idea that taxes should consist totally of a single tax on land is entirely inconsistent with Davenport's conclusion. One basis for his conclusion is the principle of tax neutrality, or minimum sacrifice.

There is no such thing as justice between properties; but it is nevertheless important that investments be by taxation so equally affected in their incomes that the distribution of investment shall not by fiscal policies be fostered in some directions and impeded in others - unless, of course, it be for specific reasons desirable to discourage certain lines of investment. (Davenport: 27-8).

The purpose of this paper is to present Davenport's critique in greater detail and to assess Aaron Fuller's 1989 claim that Davenport was not a "theoretical critic" of Henry George. The paper begins by showing why one might regard Davenport as being sympathetic to the single-tax program, then it describes Davenport's criticism of the single-tax proposals. Finally, it argues that Fuller misinterpreted Davenport's meaning.

II

The Inheritance Tax and Subjective Capital

A casual reader of Davenport's works is likely to come away with the belief that Davenport had a great deal of affinity with the single-tax proposal. A prime example is Davenport's scathing attack on professional economics that ended his 1914 magnum opus. He asserted that the prevailing tendency among most economists to confuse private wealth with social wealth led them to promote policies that, in effect, justified predation and privilege.(1) Davenport estimated that roughly half to two-thirds of the wealth in the United States consisted of capitalized predation and privilege (1914: 519-21). It follows, he argued, that there are grounds for trying to conceive of government action to rectify the injustices of the past. His meager offering, however, was an inheritance tax (ibid.: 528; 1911: 331).

His argument for an inheritance tax was based partly on his analysis of three "different cases of property income iniquitous in origin and productive of innumerable abominations": (1) capitalized bounty of nature (cases "where rent is collected upon a really productive item of property; where, therefore, the only question is as to the right of receipt of the income"), (2) capitalized privilege (as in the case of a toll road or railroad franchise), and (3) capitalized predation (various legalized extortion rackets and burglary, for example) (ibid. …

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