TAXATION OF UNEARNED INCREMENT IN GERMANY

IT is a well-known fact that the taxation of the unearned increment of land was advocated, as a corollary of David Ricardo's Theory of Rent, by the two disciples of this theory, James Mill and John Stuart Mill. The former discussed the question in his Elements of Political Economy (1821). His son, who is the more widely read of the two to-day, worked out the idea in greater detail in his Principles of Political Economy, with some of their applications to Social Philosophy (1848). He says: "Suppose that there is a kind of income which constantly tends to increase, without any exertion or sacrifice on the part of the owners, constituting a class in the community whom the natural course of things progressively enriches consistently with complete passiveness on their own part. In such a case it would be no violation of the principles on which private property is grounded if the State should appropriate this increase of wealth, or part of it, as it arises. This would not properly be taking anything from anybody; it would merely be applying an accession of wealth, created by circumstances, to the benefit of society, instead of allowing it to become an unearned appendage to the riches of a particular class. Now this is actually the case with rent. The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords . . . they grow richer, as it were in their sleep, without working, risking, or economising." (Book V., Ch. 2., ? 5.) These words of John Stuart Mill's would appear to be directed against Ricardo himself. For the latter, in the Dissertation on Adam Smith (Principles of Political Economy and Taxation, third edition, 1821, Ch. 14), says: "The burdens of the State should be borne by all in proportion to their means; this is one of the four maxims mentioned by Adam Smith, which should govern all taxation. Rent often belongs to those who, after many years of toil, have realised their gains and expended their fortunes in the purchase of land or houses; and it certainly would