able difficulties have been encountered so far. The information necessary to ascertain the increase in value, so far as it was not given in documents already at hand, has for the most part been easily secured by sending out a formal schedule of questions. Above all it is particularly noteworthy that all prophecies regarding the destructive effect of the new tax on the sale of real estate have turned out as false. In reality the real estate market has not been demonstrably affected in any way by the tax, indeed it has hardly ever shown greater strength. On the other hand, to be sure, the hope that the new tax would exert a restraining influence upon the increase of land values has, up to the present time, not been realized to any perceptible degree.'

The experience of other cities from which reports are obtainable is also favorable in the main. Of course, many diverse opinions prevail regarding the possible development of the unearned increment tax. Brunhuber enthusiastically says it is "the land tax of the future, its principle of taxing profits (Gewinnbesteuerung) will be the general tax principle of the future. "33 Kumpmann is more conservative; the new tax, he thinks, will not supplant the continuous direct taxation of land, but it will form an important part of the general financial and housing policy which cities must pursue.34 Nearly all writers agree that the solution of the housing question in cities must be sought by the variety of means besides taxation, as, for instance, by improvements in transportation, reform of building regulations, attempts to cheapen cost of construction, the opening up of credit on easy terms to prospective builders, increase of wages, etc. Pohlmann35 boldly suggests that if all other means should fail to break up land monopoly the cities themselves should undertake the business of opening new tracts of land in their environs for building purposes. By controlling local transportation facilities and the supply of municipal services generally (gas, water, sewers, etc.), the success of such enterprises, he thinks, would be beyond question. His argument, of course, rests upon the assumption of a technical efficiency and incorruptibility hardly to be expected in American cities.

33 Op. cit., p. 113.

"Op. cit., p. 123.

"Unsere Stellung zu den Terraingesellschaften in Deutsche Volksstimme, p. 470, No. 16, Aug. 20, 1906.

Up to the present time, of course, German experience is scarcely extensive enough to justify a positive answer to the question as to how far the new tax is applicable to our own conditions. Moreover, certain broad differences of practice enter to complicate the question. Thus our large employment of special assessments is to a considerable extent an anticipation of the unearned increment tax. Apparently there was no legal barrier to the development of the principle of special assessments in Germany and occasional instances of its use occur.36 One wonders that they are not more frequent, for in addition to the usual circumstances which lead to its use in the United States two forms of public improvements common abroad would seem to suggest it very strongly. These are (1) the large projects frequently undertaken for the construction of new streets and avenues in the tortuous central sections of old cities, and (2) the removal of walls and fortifications to a greater distance from the center of growing garrison cities whose expansion they had been retarding. Most of the German authorities agree, however, that the unearned increment tax is vastly superior to the betterment plan, first, because it takes hold of the whole increase of land value due to general circumstances rather than the increase due to a special improvement alone, and, second, because it is more easily administered and at least in the indirect form more easily borne. A comparison of the unearned increment tax with the single tax proposed by Henry George would be of considerable interest in this place, but limitations of space preclude anything more than the mention of one or two points. First, the unearned increment tax does not attempt to take the whole value of the economic rent of land; what it does take is the capitalized value of a part of the economic rent. Second, unearned increment is a much more readily comprehensible concept than pure land rent; it is, indeed, a matter of everyday notice, and its nature as essentially unearned gain is very readily demonstrable. It would seem, therefore, much more easy to make propaganda for the unearned increment tax than for the single tax.

"Kumpmann, p. 38; Jahrbuch der Bodenreform, 1905, p. 209; 1906, pp. 44, 131, and 201.

In all the discussions of the new tax by German writers their thought regarding unearned increment on land is evidently very closely, if not exclusively, connected with the increase of value that emerges during the transition period from agricultural to building uses. The reason, of course, is that German building regulations which forbid the erection of skyscrapers also prevent the increase of the value of centrally-located realty to the enormous figures with which we are familiar. Unearned increment taxes in our cities would probably strike two main areas, the periphery and the business section. Thus we would have the advantage of two main sources as against one in German cities.

The most striking single difference between German and American municipal finance, however, is the relative unimportance of the regular land tax there, and its overwhelming importance here. At present the income tax is the backbone of the finances of German cities. In the larger Prussian cities the land and building tax contributes only about one-fourth of the total municipal income from taxation.37 Under these circumIstances it is not strange that the agitation in favor of laying heavier burdens on city real estate should be sweeping over Germany like a tidal wave. A similar movement would have far less justification in America. Nevertheless there would seem to be great possibilities for the development of the unearned increment tax within our system in two directions. First, it might be used as a substitute for and an improvement upon special assessments. Second, it could be employed as a means of readjusting the burdens of our land tax, laying them more heavily upon property of rapidly increasing value and diminishing them on other property.

Swarthmore College.

ROBERT C. BROOKS.

7 Statistisches Jahrbuch deutscher Städte, 1906, p. 376.

AN AGRICULTURAL BANK FOR THE PHILIPPINES.

CONTENTS.

The Philippines preeminently an agricultural country, p. 262; agricultural credit facilities at present altogether inadequate, p. 263; high interest rates prevailing on agricultural loans, p. 264; popular demand for an agricultural bank, p. 267; character of proposed bank, p. 270; enabling act passed at last session of Congress, p. 276; the concession should be a valuable one, p. 277; remarkable success of Agricultural Bank of Egypt presumptive evidence of a favorable outcome of Philippine experiment, p. 277.

TH

'HE only piece of constructive legislation concerning the Philippine Islands enacted at the recent session of the Fifty-ninth Congress was the act1 authorizing the Philippine government to guarantee interest on private capital invested in an agricultural bank. It will be the object of this paper to show the reasons which have led the Philippine government for the past two years to seek the authority granted by this act, and to show in a general way the character of the institution which it is expected will be established.'

The Philippine Islands are preeminently an agricultural country, and their economic future depends most importantly upon the development of their agricultural resources. Nature has endowed them with an abundance of rich soil suitable for raising a great variety of valuable agricultural products, such as hemp and other fibers, sugar, tobacco, rice, copra, coffee, and rubber. Of the total area of the islands about seven million acres, or nine and a half per cent., is classified by the Philippine Census as agricultural land. About forty-six per cent. of this land is under cultivation." For the calendar year 1906 ninety

four per cent. of the islands' exports were agricultural products,

1 Public Act, No. 243, Fifty-ninth Congress, second session, approved by the President March 4, 1907, and entitled "An Act to provide for the establishment of an agricultural bank in the Philippine Islands."

Cf. Jenks, The Agricultural Bank for the Philippine Islands, in Annals of the American Academy of Political and Social Science, XXX (July, 1907), pp. 38-44. 3 Census of the Philippine Islands (1903), IV, pp. 181, 182. Cf. Hearings on Revenue for Philippine Islands in Senate Documents, No. 277, Fifty-ninth Congress, first session, Vol. XXII, pp. 192, 193.

while only thirty-five per cent. of the imports consisted of articles of food and animals.'

Agricultural conditions in the Philippines during recent years have been unusually bad. During the insurrection cattle were destroyed, fences torn down, farm buildings burned, and thousands of acres of rich soil reclaimed by the tropical jungle. Draught animals have since died in large numbers as the result of the ravages of rinderpest and other cattle diseases, much destruction has been wrought in many parts of the islands by locusts and floods, while through the niggardliness of the American Congress, under the influence of a few representatives of American sugar and tobacco interests in the United States Senate, the Philippines have been denied the scant justice of an American market for their products, and have at the same time been deprived of their previous Spanish market. Philippine agriculture at its best is in a very backward condition. Now that peace has been established throughout the civilized parts of the islands, and the most destructive cattle and plant diseases have been either eliminated or largely brought under control by the excellent work of the government's scientific bureaus, agricultural conditions are improving, but, in the absence of good markets and of adequate transportation facilities, progress is necessarily slow.

The facilities for agricultural credit in the Philippines up to the present time have been altogether inadequate. The statement of the Schurman Commission still holds true, that "lack of proper capital and the high price asked for loans constitute another obstacle, which stupefies industry, augments the cost of production, and restrains, in consequence, its benefits." There is no bank in the Philippines that makes a business of loaning money on landed security. Three of the four banking establishments with their sub-agencies are branches of foreign banking corporations and limit their operations very largely to foreign exchange. Two of these banks are prevented by their 1 Quarterly Summary of Commerce of the Philippine Islands, October-December, 1906, p. 121.

1

The Philippines, though containing about two and one-half times the area of New York State, have only 200 miles of railroad in operation. Something like 700 miles, however, are now in process of construction.

Report of the Philippine Commission, 1900, IV, p. 7.