Denmark

American Journal of Economics and Sociology, The,  Dec, 2000  by Ole Lefmann,  Karsten K. Larsen

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OLE LEFMANN [*]

KARSTEN K. LARSEN [**]

DENMARK WAS THE first country in Europe to put into practical operation the taxation of land values, and the first country in the world that had a political party of national influence whose chief aim was to make land value the principal and, if possible, the only source of tax revenue in the country.

I

Historical Background

THE PRACTICE OF land-value taxation is deeply rooted in Danish history, going back at least to the reign of Valdemar the Great (1157-1182), and possibly even antedating the Viking king, Sven Forkbeard (985-1014). [1] However, after the Valdemar kings, who ruled until the middle of the 13th century, it seems to have fallen into disuse until the statesman, Hannibal Sehested, restored the national finances in the early 1660s after the disastrous war with Sweden. A key instrument in this restoration was the so-called "hartkorn tax," based on potential agricultural yield. In 1685, all land values were registered.

Yet, as in Europe generally, the vast bulk of the rural population was landless, and, moreover, subject to a form of serfdom. This situation obtained almost to the eve of the French Revolution, when the seizure of the regency in 1786 by Crown Prince Frederick (later Frederick VI) set in motion a series of sweeping and systematic reforms that, within just a few decades, not only did away with hereditary landed servitude, but created a class of independent smallholders numbering in the hundred thousands. At the same time, the modernization of agricultural techniques was encouraged, making for a shift toward dairying and the production of high-quality processed foodstuffs. In this, the celebrated "folk schools," or adult high schools, first established in the 1840s through the leadership of Bishop Severin Grundtvig, played a major role, for they helped the farmers gain intellectual and technical skills that enabled them to turn out superior products, and to compete successfully in overseas markets.

In 1802, the state minister, Count Christian Detlev Reventlow, submitted a memorandum to the king, calling, in language that anticipated Henry George, for a new hartkorn tax levied on top of the old one and broadened to include land under manor houses, which had hitherto been exempt. [2] Although the full implementation of the proposal took more than forty years, it was eventually accomplished. The tax at times accounted for more than fifty percent of the national revenues, and constituted more than half of the total land rent. [3] It was abolished in 1903 by the governing Liberal Party, which had once stood for enlightened policies, but had gradually come to represent the interests of the large landowners. The hartkorn tax was replaced by a combination of progressive income taxes and general property taxes, which greatly discriminated against the small farmers, with their highly productive holdings, typically intensively improved, not only with well-kept buildings but with sophisticated agricultural and proc essing machinery.

Thus was the stage set for the enthusiastic reception of Georgism by the smallholders, just as they were organizing to oppose the Liberals. The vehicle whereby this occurred was the agricultural folk high schools. Persons associated with the folk school movement were, in fact, the first Scandinavians to learn about and promote George's ideas. The young agriculture teacher, Jakob E. Lange, had become acquainted with these ideas while studying in England, and urged them vigorously among his colleagues in the folk school organ, Hojskolebladet. The Norwegian folk school principal and later president of Parliament, Viggo UlIman, produced the first Danish-Norwegian translation of Progress and Poverty. With the formal adoption in 1902 of the concepts of land-value taxation and free trade by the leading agricultural cooperatives, Danish Georgism acquired the needed critical mass for political action. After 1910, thanks to generous donations by the American soap manufacturer, Joseph Fels, it also acquired the financia l means to support an institute to propagate its doctrines.

The new movement split off from the now conservative Liberal Party, to help form the Radical Liberals. By 1915, after earlier experimental legislation of a temporary nature, the Radical Liberals were able to push through a law providing for a general reappraisal of all real property, with separate valuation of land and improvements. In 1922, the national general property tax was separated into two taxes, one on the value of the land alone, and the other, at a lower rate, on the value of improvements. Shortly thereafter, the local general property tax was similarly divided, and at corresponding rates.

Meanwhile, an explicitly Georgist political party, the Justice Party, had been formed in 1919, chiefly by disaffected Radicals who advocated a bolder and more ideologically uncompromising stand.

Seven years later, it was represented in Parliament. By 1948, Georgist ideas had attained sufficient influence that the Government appointed a commission to consider the full taxation of land values with corresponding reduction of taxes on industry, which issued a favorable report in 1954. In 1957, the Justice Party joined the Socialists and Radicals in a coalition known as the "Ground Duty Government." Although very much the junior partner in terms of the number of its parliamentary seats, it held three cabinet ministries, and was able to obtain a considerable increase in land-value taxation, with more or less concurrent decrease in other taxes.