for Other Countries
Sometimes it is easier to visualize
something different from what one is used to by envisioning how it
would work in another country. As you read these pieces, some of
which were written when the former Soviet Union was at a point of opportunity
last decade, think not just of the country under discussion, but also
of Iraq and of the US.
succeed in producing a democratic society in Iraq, but fail to make
Iraq's land and natural resources the common property of all its
people, have we accomplished anything important? If the
land and natural resources remain the revenue source for a few, the remainder
of Iraq will be their subjects, even under putative democracy.
And in America, can we really claim to be the society that is a beacon
for the world if a few own the lion's share of the corporate stock and
the privately held businesses that control America's choicest land and
natural resources? Taxing land and natural resources offers us
1. Common Property in Land is
Compatible with the Market
2. The Net Product of Land is the Taxable Surplus
A. To socialize the taxable
surplus, land rent,
effectively, you must define
and identify it carefully, and structure your taxes to
home in on it.
B. Taxable surplus is also what you can tax without
driving land into the
C. To tax rent we must be sure there is rent to tax, and
we must adopt public
policies to husband and maximize it, and avoid policies
that lower and dissipate it.
i. Avoid "perverse subsidies."
ii. Avoid letting lessees of public land conceal
iii. Avoid letting lessees or taxpayers pad their
costs to understate
their net revenues.
iv. Avoid dissipating rent by allowing open access to
v. Avoid trying to distribute rents to consumers by
below the market.
D. Raising output by removing
E. Maximizing public revenue.
F. Sustaining the tax base
3. Taxing the Net Product of
Land Permits Untaxing Labor
4. Taxing the Net Product of Land Permits Untaxing Capital
5. Taxing the Net Product of Land Provides Ample Public
Revenues: a Master Solution to Many Problems
A. Public revenues will support
B. Your public credit will, of course, recover to AAA rating
when lenders see that there is a strong flow of revenue to pay public
C. Never again need you bend to any "advice" or commands from
alien lenders, nor endure patronizing, humiliating homilies from alien
bankers, nor beg any foreign power for aid.
D. If you again feel the need (as I hope you will not) to
rebuild your military, you will of course require strong revenues.
E. Strong national revenues are required to unite Russia, and
keep it one nation.
Common Property in Land is Compatible with the Market
You can enjoy the benefits of a market economy without
sacrificing your common rights to the land of Russia. There is no need
to make a
hard choice between the two. One of the great fallacies that western
and bankers are foisting on you is that you have to give up one to
enjoy the other.
These counselors work through lending and granting agencies that seduce
loans and grants to learn and accept their ideology, which they
Neo-Classical Economics, or "monetarism," or "liberalization." It is
glitter to distract you and pave the way for aliens to acquire and
To keep land common
while shifting to a market economy,
you simply use the tax system. ...
Not only can you have both
common land and free markets, you can't have one without the other.
They go together, like love and marriage. You need market prices
to help identify land's taxable
surplus, which is the net product of land after deducting the human
costs of using it. At
the same time, you must support government from land revenues to have a
market, because otherwise you will raise taxes from production, trade,
capital formation, interfering with free markets. If you learn
point, and act on it, you will have a much freer market than any of the
OECD nations that
now presume to instruct you, and that are campaigning vigorously to
all nations in the world "harmonize" their taxes to conform with their
systems. ... Read the
Mason Gaffney: Privatizing
Land without Giveaway
An Emphasis on Synthesis
Reasons to Socialize Land Rent
Financial Reasons to Reserve Rent as a Tax Source
1. An entire nation cannot be
sold off quickly at other than fire-sale prices. Mass privatization
is a way of securing the worst possible bargain for the public selling
Functional Reasons for Taxing Land Rent
2. In a massive general land sale, most land would be bid up by a
small number of buyers with surpluses of "patient money," many of them looking
toward use or resale in the distant future. These buyers are the kind stigmatized
as "land speculators," for their traditional indifference to highest and
best current use of land.
3. A government selling land, even at fire-sale prices, would be swamped
with cash flow
4. Governments need revenues in perpetuity.
5. Private wealth being scarce in most Soviet republics, wealthy aliens
would prevail in bidding for much of the best land.
6. The land market works better, on an ongoing basis, if land remains
subject to regular taxes or other charges in perpetuity.
7. Counterproductive rent-seeking behavior, in the most primal sense,
is maximized when land is simply privatized without the state's reserving
substantial servitudes, especially tax power.
8. Local governments, traditionally undernourished and weak in much
of the Soviet Union, also need revenues in perpetuity.
9. A means is needed gently to pry loose surplus land from state agencies
like ministries in charge of production.
10. Public acquisition of lands for such uses as rights-of-way (r.o.w.),
schools, reservoirs, air bases, parks, and watershed protection becomes much
more costly when all land is privatized first.
1. Taxing land allows us to avoid
taxing functional activities like production, exchange, work, saving,
Ethical Reasons for Taxing Land Rent
Political Reasons for Taxing Land Rent
2. Taxing land holds down its purchase price, thus easing and democratizing
3. Taxing land drains cash from sleeping owners of surplus land, arousing
them in the most compelling way to the otherwise overlooked opportunity cost
of their surpluses.
4. Taxing land motivates sellers and moves the otherwise torpid land
5. Taxing land promotes markets by pushing central urban land into
commercial uses yielding high cash flows.
6. Taxing land discourages the motives, currently powerful and dominant,
to hold land mainly as a store of value and hedge against inflation.
7. It is arguable that taxes on bases other than land are largely
shifted to - that is, are drawn from - land rent anyway.
Methods of Collecting Land Rent
Leasing vs. Taxation
Fixed Cash Payment vs. Participation
A Supplemental Tax on Land Gains?
Non-standard Resources and Their Rents
Modifying the Credit System
Banking without Land as Collateral
The Hazards of Public Credit
Starting up the Market
Summary and Conclusion
A geonomy respects the freedom of individuals, the limits of the environment,
and the claims of future generations. Individuals must be free to organize
their economic lives as they wish, within bounds determined by the equal
freedom of others and the recognition that land, natural resources and
environmental amenities are the common
heritage of all generations.
For an economy emerging from central control, the first principle of geonomics
is free enterprise. Individuals must be free to set up new enterprises,
to charge whatever prices they and their customers mutually agree, and
to pay whatever wages they and their workers mutually agree. Free enterprise
requires free trade and freedom to use internationally valued currencies.
There should be no taxes or other restrictions on what can be imported
or exported and no restrictions on the use of foreign currencies. ... read
the whole article
The optimal timing of development is an important allocative function
that can be either enhanced or degraded by the impact of land taxes on
land speculation. This paper discusses four types of
taxes on land:
taxes on the rental value of land,
taxes on the sale value of land,
taxes on realized income from land, and
taxes on realized gains from the sale of land.
All four taxes reduce incentives for speculation in land, which is generally
beneficial. The third and fourth produce distortions with respect to incentives
to develop land, while the first and second do not. All four taxes have
some beneficial effect of mitigating imperfections in capital markets.
All permit reduction or elimination of taxes with significant dead-weight
losses, such as those on improvements.
As formerly centralized economies move to adopt market practices, it will
be very important for them to develop markets for land. People with good
ideas for new businesses cannot implement their ideas unless there is some
place where they can do so. It will not work to require every potential
entrepreneur to convince a government official that his or her idea deserves
an allocation of land. People who want to use land must be able to buy
the right to use land from those who have that right. Land rights must
be transferable to achieve a well-functioning market economy.
Of course, land will not be transferred by those who have the right to
use it unless some payment is made. The possibility of payments for transferring
the right to use land raises the specter of land speculators receiving
large undeserved profits while holding economic development hostage. Is
land speculation an unavoidable concomitant of a market economy?
This paper describes systems for assigning rental value to land through
markets for the use of land that are created and managed by government
officials. The central idea of the paper is that the full rent of land
can be collected while achieving an efficient allocation of land if the
rent for improved sites is revised annually, based on offers for the use
of similar unimproved sites for the current year. The efficient allocation
of land requires neither the sale of land nor leases of long duration at
Two systems for assigning rental value to land are presented. One system employs a market in which land is actually
turned over to bidders for their use, while the other employs a market
in options to use land.
While these systems are applicable in
many settings, they are particularly applicable to current conditions
in the Soviet Union, where land is being transferred from public to private
management. The new manager of each site will receive the profit or bear
the loss from production on that site. The main question under consideration
concerns the process to be used to determine how much must be paid for
the use of each site. ... read
the whole article
Constitutions must be amendable, to allow for the possibility of incorporating
new moral insights into them. This impinges on the protection of expectations,
including those regarded as property. Protection of property rights is
achieved by constitutional restrictions on the ability of voters and legislators
to reduce the value of property by regulation, taxation or expropriation.
But such restrictions also prevent voters and legislatures from reflecting
new moral insights in legislation, if those insights would reduce the value
of property. There have been times in the past when moral development has
compelled societies to change laws in ways that reduced the value of property
(e.g., elimination of slavery). We cannot guarantee that there will be
no future advances in our moral evolution that would require similar changes
in laws, reducing or eliminating the value of what we now consider property.
Looking forward to the possibility of such moral advances, we should design
constitutions that permit amendments to reflect new moral insights, while
prohibiting legislators (or voters in referenda) from passing laws that
redistribute in ways not explicitly sanctioned by the constitution. ...
When respect for a newly understood moral
truth requires the dissappointment of previously protected expectations,
those who would push their fellow
citizens to incorporate that truth into the governmental process should
be obliged to have their ideas reviewed in a constitutional amnedment
process that will ensure that they will be adopted only if a broad consensus
them is achieved. When people are ready to see a new moral truth, that
truth can overcome such a
hurdle. ... read the whole article
One of the reasons that the debate is so fierce between the advocates
of rental and the advocates of private ownership of agricultural land is
that each position has important strengths as well as important weaknesses.
This paper argues that there is a third possibility between rental and
private ownership that retains the strengths of both while avoiding the
weaknesses of both. The third
possibility is private possession of land. ...
Private possession of land is a form of land privatization that combines
the attractive features of rental and private ownership without their disadvantages.
The private possessors of land are entitled to possess and use as much
land as they wish for as long as they wish and to transfer it to whomever
they wish on whatever terms are mutually agreed. This provides incentives
for efficient improvements to land. As a condition for continuing use of
land, the private possessors are required to pay its assessed rental value
in an unimproved condition to the local government. This keeps the price
of titles of possession down to amounts approximating the sale value of
improvements, eliminates the profit from land speculation, and provides
a source of public revenue. The public collection of the rental value of
land gives expression to the idea that land is the common heritage of all
generations. The rental value of land would be determined by assessors,
who would follow rental agreements and relate the value of each parcel
to agreed rental prices of near-by, similar land, adjusted for the contribution
of improvements to rental value. Before an effort is made to measure the
rental value of agricultural land, there should be agricultural reforms
to eliminate all restriction on what farmers grow, who they sell it to,
or what prices they receive. And food should not be imported when it is
available domestically at a lower price.
Payments for the use of land would be classified not as taxes, but rather
as compensation for the use of common resources. Therefore these payments
would not be affected by the law specifying that farmers are not required
to pay taxes for five years. There could, however, be an exemption for
a modest amount of rental value of land. read
the whole article
Both for reasons of social justice and for reasons of economic efficiency,
site value rating deserves a continued place in the programme of the Liberal
The case for site value rating in terms of
social justice is founded on two understandings: first, that the value
of land in the absence of economic
development is the common heritage of humanity, and second, that
increases in the rental value of land arising from economic development
expenditures should be collected by governments to finance those
activities. What is meant by "land" is the unimproved value of sites
and the value of extractable natural resources such as North Sea oil.
While there may someday be institutions capable
of implementing a recognition of land as the heritage of all humanity on
a worldwide basis, in the absence
of such institutions each nation should implement a recognition that
land within its boundaries is the common heritage of its citizens. This
not by making the nation a gigantic Common or by instituting government
management of all land, but rather by requiring all persons and corporations
that are granted the use of land to pay a fee or tax equal to what
the rental value of the land they control would be if it were in an unimproved
condition. ... read the whole article
Urban growth is desired because it raises peoples' incomes. In a market
economy, incomes can be divided into components derived from four factors
the interest received from owning capital, and
the profits of entrepreneurship (the activity of choosing investments
and organizing production).
Thus a successful urban growth strategy in a market economy must either
increase the amounts of land, labor, capital and entrepreneurship that
are used in a city or increase the payments that are made per unit of each
factor, or both. ... read the whole article