Wealth and Want theme: Barriers to Entry

Our young people face tremendous barriers to entry. Houses require large downpayments and/or large mortgage payments. Budding entrepreneurs need good locations to work their business plans, but rents are prohibitively high. And in addition to the mortgage or rent payment, they still owe taxes on their income and on many of their purchases. The underlying cause of the high housing prices and high commercial property rents is something few of us think about, but it is rather straightforward, and, fortunately, easy to reverse.

California, with its Proposition 13, is a particularly serious case, both for those who seek to buy homes and for those who would open a business. But the same situation occurs in most cities. It is not a new phenomenon: Henry George saw it in his travels in San Francisco, New York City and elsewhere,130 years ago. Why has it taken the rest of us so long to recognize its causes and agitate for change?

Not only must our young people pay huge amounts for property, but in California they pay property taxes that are large multiples of what their long-owning neighbors are asked to pay. Is this any way to run a society of equals?

Similarly, our potential entrepreneurs, of all ages, seeking to live out the portion of the American dream that involves opening one's own business, also face high barriers to entry, unless their business plan can be carried out with no location other than a desk in their bedroom. The high price of land is probably the largest barrier to entry. This means that our existing businesses, large and small, have fewer competitors, keeping wages low and prices high. Who wins in this situation? He who has the land, of course! How do we correct it? Collect the economic value of the land from those who hold it, on the basis that it is our common treasure, not the product of the private effort of its current owner (individual or corporate).

When a man makes a fortune by the rise of real estate, as in New York and elsewhere many men have done within the past few months, what does it mean? It means that he may have fine clothes, costly food, a grand house luxuriously furnished, etc. Now, these things are not the spontaneous fruits of the soil; neither do they fall from heaven, nor are they cast up by the sea. They are products of labor – can be produced only by labor. And hence, if men who do no labor get them, it must necessarily be at the expense of those who do labor. — Henry George: The Land Question (1881)

The elder Mirabeau, we are told, ranked the proposition of Quesnay, to substitute one single tax on rent (the impôt unique) for all other taxes, as a discovery equal in utility to the invention of writing or the substitution of the use of money for barter.

To whosoever will think over the matter, this saying will appear an evidence of penetration rather than of extravagance. The advantages which would be gained by substituting for the numerous taxes by which the public revenues are now raised, a single tax levied upon the value of land, will appear more and more important the more they are considered.

This is the secret which would transform the little village into the great city.*

With all the burdens removed which now oppress industry and hamper exchange, the production of wealth would go on with a rapidity now undreamed of.

This, in its turn, would lead to an increase in the value of land — a new surplus which society might take for general purposes.

And released from the difficulties which attend the collection of revenue in a way that begets corruption and renders legislation the tool of special interests, society could assume functions which the increasing complexity of life makes it desirable to assume, but which the prospect of political demoralization under the present system now leads thoughtful men to shrink from.

*At the beginning of Book IX of the complete Progress & Poverty, Henry George quotes from Themistocles: "I cannot play upon any stringed instrument, but I can tell you how of a little village to make a great and glorious city."

Consider the effect upon the production of wealth.

To abolish the taxation which, acting and reacting, now hampers every wheel of exchange and presses upon every form of industry, would be like removing an immense weight from a powerful spring. Imbued with fresh energy, production would start into new life, and trade would receive a stimulus which would be felt to the remotest arteries. The present method of taxation operates upon exchange like artificial deserts and mountains;

it costs more to get goods through a custom house than it does to carry them around the world.

It operates upon energy, and industry, and skill, and thrift, like a fine upon those qualities.

If I have worked harder and built myself a good house while you have been contented to live in a hovel, the taxgatherer now comes annually to make me pay a penalty for my energy and industry, by taxing me more than you.

If I have saved while you wasted, I am mulct, while you are exempt.

If a man build a ship we make him pay for his temerity, as though he had done an injury to the state;

if a railroad be opened, down comes the tax collector upon it, as though it were a public nuisance;

if a manufactory be erected we levy upon it an annual sum which would go far toward making a handsome profit.

We say we want capital, but if any one accumulate it, or bring it among us, we charge him for it as though we were giving him a privilege.

We punish with a tax the man who covers barren fields with ripening grain,

we fine him who puts up machinery, and him who drains a swamp.

How heavily these taxes burden production only those realize who have attempted to follow our system of taxation through its ramifications, for, as I have before said, the heaviest part of taxation is that which falls in increased prices.

To abolish these taxes would be to lift the whole enormous weight of taxation from productive industry. The needle of the seamstress and the great manufactory; the cart horse and the locomotive; the fishing boat and the steamship; the farmer's plow and the merchant's stock, would be alike untaxed. All would be free to make or to save, to buy or to sell, unfined by taxes, unannoyed by the taxgatherer. Instead of saying to the producer, as it does now, "The more you add to the general wealth the more shall you be taxed!" the state would say to the producer, "Be as industrious, as thrifty, as enterprising as you choose, you shall have your full reward! You shall not be fined for making two blades of grass grow where one grew before; you shall not be taxed for adding to the aggregate wealth."

And will not the community gain by thus refusing to kill the goose that lays the golden eggs; by thus refraining from muzzling the ox that treadeth out the corn; by thus leaving to industry, and thrift, and skill, their natural reward, full and unimpaired? For there is to the community also a natural reward. The law of society is, each for all, as well as all for each. No one can keep to himself the good he may do, any more than he can keep the bad. Every productive enterprise, besides its return to those who undertake it, yields collateral advantages to others. If a man plant a fruit tree, his gain is that he gathers the fruit in its time and season. But in addition to his gain, there is a gain to the whole community. Others than the owner are benefited by the increased supply of fruit; the birds which it shelters fly far and wide; the rain which it helps to attract falls not alone on his field; and, even to the eye which rests upon it from a distance, it brings a sense of beauty. And so with everything else. The building of a house, a factory, a ship, or a railroad, benefits others besides those who get the direct profits.

Well may the community leave to the individual producer all that prompts him to exertion; well may it let the laborer have the full reward of his labor, and the capitalist the full return of his capital. For the more that labor and capital produce, the greater grows the common wealth in which all may share. And in the value or rent of land is this general gain expressed in a definite and concrete form. Here is a fund which the state may take while leaving to labor and capital their full reward. With increased activity of production this would commensurately increase.

And to shift the burden of taxation from production and exchange to the value or rent of land would not merely be to give new stimulus to the production of wealth; it would be to open new opportunities. For under this system no one would care to hold land unless to use it, and land now withheld from use would everywhere be thrown open to improvement.

The selling price of land would fall; land speculation would receive its death blow; land monopolization would no longer pay.* Millions and millions of acres from which settlers are now shut out by high prices would be abandoned by their present owners or sold to settlers upon nominal terms. And this not merely on the frontiers, but within what are now considered well settled districts.

* The fact that a tax on the rental value of land cannot be shifted by landowners to tenants, though recognized by all competent economists, is sometimes a stumbling block to persons untrained in economics. The reason such a tax cannot be shifted is that it cannot limit the supply of land. Landowners are presumably, before the tax is laid, charging all the rent they can get. There is nothing in a tax on the rental value of land to make tenants willing to pay more or to make land more difficult to hire. On the contrary, more land will be on the market, because of such a tax, rather than less, since the tax puts a heavy penalty on holding land out of use and unimproved for mere speculation. The competition of former vacant land speculators to get their land used will make land cheaper to rent rather than more expensive. And since only the net rent remaining after the tax is subtracted is capitalized into salable value, land will be very much cheaper to buy. H.G.B.

And it must be remembered that this would apply, not merely to agricultural land, but to all land. Mineral land would be thrown open to use, just as agricultural land; and in the heart of a city no one could afford to keep land from its most profitable use, or on the outskirts to demand more for it than the use to which it could at the time be put would warrant. Everywhere that land had attained a value, taxation, instead of operating, as now, as a fine upon improvement, would operate to force improvement. Whoever planted an orchard, or sowed a field, or built a house, or erected a manufactory, no matter how costly, would have no more to pay in taxes than if he kept so much land idle.

The monopolist of agricultural land would be taxed as much as though his land were covered with houses and barns, with crops and with stock.

The owner of a vacant city lot would have to pay as much for the privilege of keeping other people off of it until he wanted to use it, as his neighbor who has a fine house upon his lot.

It would cost as much to keep a row of tumble-down shanties upon valuable land as though it were covered with a grand hotel or a pile of great warehouses filled with costly goods.

Thus, the bonus that wherever labor is most productive must now be paid before labor can be exerted would disappear.

The farmer would not have to pay out half his means, or mortgage his labor for years, in order to obtain land to cultivate;

the builder of a city homestead would not have to lay out as much for a small lot as for the house he puts upon it*;

the company that proposed to erect a manufactory would not have to expend a great part of its capital for a site.

And what would be paid from year to year to the state would be in lieu of all the taxes now levied upon improvements, machinery, and stock.

*Many persons, and among them some professional economists, have never succeeded in getting a thorough comprehension of this point. Thus, the editor has heard the objection advanced that the greater cheapness of land is no advantage to the poor man who is trying to save enough from his earnings to buy a piece of land; for, it is said, the higher taxes on the land after it is acquired, offset the lower purchase price. What such objectors do not see is that even if the lower price of land does no more than balance the higher tax on it, (and this overlooks, for one thing, the discouragement to speculation in land), the reduction or removal of other taxes is all clear gain. It is easier to save in proportion as earnings and commodities are relieved of taxation. It is easier to buy land, because its selling price is lower, if the land is taxed. And although the land, after its purchase, continues to be taxed, not only can this tax be fully paid out of the annual interest on the saving in the purchase price, but also there is to be reckoned the saving in taxes on buildings and other improvements and in whatever other taxes are thus rendered unnecessary. H.G.B.

Consider the effect of such a change upon the labor market. Competition would no longer be one-sided, as now. Instead of laborers competing with each other for employment, and in their competition cutting down wages to the point of bare subsistence, employers would everywhere be competing for laborers, and wages would rise to the fair earnings of labor. For into the labor market would have entered the greatest of all competitors for the employment of labor, a competitor whose demand cannot be satisfied until want is satisfied — the demand of labor itself. The employers of labor would not have merely to bid against other employers, all feeling the stimulus of greater trade and increased profits, but against the ability of laborers to become their own employers upon the natural opportunities freely opened to them by the tax which prevented monopolization.

With natural opportunities thus free to labor;

with capital and improvements exempt from tax, and exchange released from restrictions, the spectacle of willing men unable to turn their labor into the things they are suffering for would become impossible;

the recurring paroxysms which paralyze industry would cease;

every wheel of production would be set in motion;

demand would keep pace with supply, and supply with demand;

trade would increase in every direction, and wealth augment on every hand. ... read the whole chapter

When it is first proposed to put all taxes upon the value of land, all landholders are likely to take the alarm, and there will not be wanting appeals to the fears of small farm and homestead owners, who will be told that this is a proposition to rob them of their hard-earned property. But a moment's reflection will show that this proposition should commend itself to all whose interests as landholders do not largely exceed their interests as laborers or capitalists, or both. And further consideration will show that though the large landholders may lose relatively, yet even in their case there will be an absolute gain. For, the increase in production will be so great that labor and capital will gain very much more than will be lost to private landownership, while in these gains, and in the greater ones involved in a more healthy social condition, the whole community, including the landowners themselves, will share.

It is manifest, of course, that the change I propose will greatly benefit all those who live by wages, whether of hand or of head -- laborers, operatives, mechanics, clerks, professional men of all sorts.

It is manifest, also, that it will benefit all those who live partly by wages and partly by the earnings of their capital -- storekeepers, merchants, manufacturers, employing or undertaking producers and exchangers of all sorts from the peddler or drayman to the railroad or steamship owner -- and

it is likewise manifest that it will increase the incomes of those whose incomes are drawn from the earnings of capital.

Take, now, the case of the homestead owner -- the mechanic, storekeeper, or professional man who has secured himself a house and lot, where he lives, and which he contemplates with satisfaction as a place from which his family cannot be ejected in case of his death. He will not be injured; on the contrary, he will be the gainer. The selling value of his lot will diminish -- theoretically it will entirely disappear. But its usefulness to him will not disappear. It will serve his purpose as well as ever. While, as the value of all other lots will diminish or disappear in the same ratio, he retains the same security of always having a lot that he had before. That is to say, he is a loser only as the man who has bought himself a pair of boots may be said to be a loser by a subsequent fall in the price of boots. His boots will be just as useful to him, and the next pair of boots he can get cheaper. So, to the homestead owner, his lot will be as useful, and should he look forward to getting a larger lot, or having his children, as they grow up, get homesteads of their own, he will, even in the matter of lots, be the gainer. And in the present, other things considered, he will be much the gainer. For though he will have more taxes to pay upon his land, he will be released from taxes upon his house and improvements, upon his furniture and personal property, upon all that he and his family eat, drink and wear, while his earnings will be largely increased by the rise of wages, the constant employment, and the increased briskness of trade. His only loss will be, if he wants to sell his lot without getting another, and this will be a small loss compared with the great gain. ... read the whole chapter

Henry George: The Land Question (1881)

Even if universal history did not teach the lesson, it is in the United States already becoming very evident that political equality can continue to exist only upon a basis of social equality; that where the disparity in the distribution of wealth increases, political democracy only makes easier the concentration of power, and must inevitably lead to tyranny and anarchy. And it is already evident that there is nothing in political democracy, nothing in popular education, nothing in any of our American institutions, to prevent the most enormous disparity in the distribution of wealth. Nowhere in the world are such great fortunes growing up as in the United States. Considering that the average income of the working masses of our people is only a few hundred dollars a year, a fortune of a million dollars is a monstrous thing – a more monstrous and dangerous thing under a democratic government than anywhere else. Yet fortunes of ten and twelve million dollars are with us ceasing to be noticeable. We already have citizens whose wealth can be estimated only in hundreds of millions, and before the end of the century, if present tendencies continue, we are likely to have fortunes estimated in thousands of millions – such monstrous fortunes as the world has never seen since the growth of similar fortunes ate out the heart of Rome. And the necessary correlative of the growth of such fortunes is the impoverishment and loss of independence on the part of the masses. These great aggregations of wealth are like great trees, which strike deep roots and spread wide branches, and which, by sucking up the moisture from the soil and intercepting the sunshine, stunt and kill the vegetation around them. When a capital of a million dollars comes into competition with capitals of thousands of dollars, the smaller capitalists must be driven out of the business or destroyed. With great capital nothing can compete save great capital. Hence, every aggregation of wealth increases the tendency to the aggregation of wealth, and decreases the possibility of the employee ever becoming more than an employee, compelling him to compete with his fellows as to who will work cheapest for the great capitalist – a competition that can have but one result, that of forcing wages to the minimum at which the supply of labor can be kept up. Where we are is not so important as in what direction we are going, and in the United States all tendencies are clearly in this direction. A while ago, and any journeyman shoemaker could set up in business for himself with the savings of a few months. But now the operative shoemaker could not in a lifetime save enough from his wages to go into business for himself. And, now that great capital has entered agriculture, it must be with the same results. The large farmer, who can buy the latest machinery at the lowest cash prices and use it to the best advantage, who can run a straight furrow for miles, who can make special rates with railroad companies, take advantage of the market, and sell in large lots for the least commission, must drive out the small farmer of the early American type just as the shoe factory has driven out the journeyman shoemaker. And this is going on today. ... read the whole article

Henry George: Why The Landowner Cannot Shift The Tax on Land Values (1887)

A VERY common objection to the proposition to concentrate all taxes on Land Values is that the landowner would add the increased tax on the value of his land to the rent that must be paid by his tenants. It is this notion that increased Taxation of Land Values would fall upon the users, not upon the owners of land, that more perhaps than anything else prevents men from seeing the far-reaching and beneficent effects of doing away with the taxes that now fall upon labor or the products of labor, and taking for public use those values that attach to land by reason of the growth and progress of society.

That taxes levied upon Land Values, or, to use the politico-economic term, taxes levied upon rent, do not fall upon the user of land, and cannot be transferred by the landlord to the tenant is conceded by all economists of reputation. However much they may dispute as to other things, there is no dispute upon this point. Whatever flimsy reasons any of them may have deemed it expedient to give why the tax on rent should not be more resorted to, they all admit that the taxation of rent merely diminishes the profits of the landowner, cannot be shifted on the user of land, cannot add to prices, nor check production. ...

But while the Taxation of Land Values cannot raise rents, it would, especially in a country like this, where there is so much valuable land unused, tend strongly to lower them. In all our cities, and through all the country, there is much land which is not used, or not put to its best use, because it is held at high prices by men who do not want to, or who cannot, use it themselves, but who are holding it in expectation of profiting by the increased value which the growth of population will give to it in the future. Now the effect of the Taxation of Land Values would be to compel these men to seek tenants or purchasers. Land upon which there is no taxation even a poor man can easily hold for higher prices, for land eats nothing. But put heavy taxation upon it, and even a rich man will be driven to seek purchasers or tenants, and to get them he will have to put down the price he asks, instead of putting it up; for it is by asking less, not by asking more, that those who have anything they are forced to dispose of must seek customers. Rather than continue to pay heavy taxes upon land yielding him nothing, and from the future increase in value of which he could have no expectation of profit, since increase in value would mean increased taxes, he would be glad to give it away or let it revert to the State. Thus the dogs in the manger, who all over the country are withholding land that they cannot use themselves from men who would be glad to use it, would be forced to let go their grasp. To tax Land Values up to anything like their full amount would be to utterly destroy speculative values, and to diminish all rents into which this speculative element enters. ...

To put the matter in a form in which it can be easily understood, let us take two cases.

The one, a country where the available land is all in use, and the competition of tenants has carried rents to a point at which the tenant pays the landlord all he can possibly earn save just enough to barely live.
The other, a country where all the available land is not in use and the rent that the landlord can get from the tenant is limited by the terms on which the tenant can get access to unused land. How, in either case, if the tax were imposed upon Land Values (or rent), could the landlord compel the tenant to pay it? ....

Hence a tax on Land Values, instead of enabling the holder of land to charge that much more for his land, gives him no power to charge an additional penny. On the contrary, by making it more costly to hold land idle, it tends to increase the amount of land which owners must strive to secure tenants or purchasers for. Thus the effect of a tax on Land Values is not to increase the rent that the tenant must pay the owner for the use of the land, but rather to reduce it. And since the tax must be paid out of what the land will yield the owner, its effect would be to reduce the price for which the land could be sold outright.

Here, let us say, is a lot on the principal select street of a city having an annual or rental value of $10,000. Such a lot would now command a selling price of some $250,000. An increased tax upon Land Values would not reduce its rental value, except as it might have an effect in forcing into use unoccupied land at a greater distance from the center of the city. But as less of this rental value could be retained by the owner, the selling price would be diminished. And if a tax on Land Values could be imposed with such theoretical perfection that the whole rental value would be taken by the community, the owner would lose both his income from its present value and any expectation of profit from its future increase in value. While it would be still worth as much as before to the user, it would be worth nothing at all to the mere owner. Instead of having a selling value of $250,000, it would not sell for anything, since what the user paid for the privilege of using it would go in full to the community. Under a tax of this kind, even though it could not be imposed with theoretical nicety, the mere owner of land would disappear. No one would care to own land unless he wanted to improve or use it. ... read the whole article

Henry George: The Crime of Poverty (1885 speech)

... Nature gives to labour, and to labour alone; there must be human work before any article of wealth can be produced; and in the natural state of things the man who toiled honestly and well would be the rich man, and he who did not work would be poor. We have so reversed the order of nature that we are accustomed to think of the workingman as a poor man.

And if you trace it out I believe you will see that the primary cause of this is that we compel those who work to pay others for permission to do so. You may buy a coat, a horse, a house; there you are paying the seller for labour exerted, for something that he has produced, or that he has got from the man who did produce it; but when you pay a man for land, what are you paying him for? You are paying for something that no man has produced; you pay him for something that was here before man was, or for a value that was created, not by him individually, but by the community of which you are a part. What is the reason that the land here, where we stand tonight, is worth more than it was twenty-five years ago? What is the reason that land in the centre of New York, that once could be bought by the mile for a jug of whiskey, is now worth so much that, though you were to cover it with gold, you would not have its value? Is it not because of the increase of population? Take away that population, and where would the value of the land be? Look at it in any way you please. ...

Now, supposing we should abolish all other taxes direct and indirect, substituting for them a tax upon land values, what would be the effect?

In the first place it would be to kill speculative values. It would be to remove from the newer parts of the country the bulk of the taxation and put it on the richer parts. It would be to exempt the pioneer from taxation and make the larger cities pay more of it. It would be to relieve energy and enterprise, capital and labour, from all those burdens that now bear upon them. What a start that would give to production!
In the second place we could, from the value of the land, not merely pay all the present expenses of the government, but we could do infinitely more. In the city of San Francisco James Lick left a few blocks of ground to be used for public purposes there, and the rent amounts to so much, that out of it will be built the largest telescope in the world, large public baths and other public buildings, and various costly works. If, instead of these few blocks, the whole value of the land upon which the city is built had accrued to San Francisco what could she not do? ... read the whole speech

Henry George: The Crime of Poverty (1885 speech)

We talk about over-production. How can there be such a thing as over-production while people want? All these things that are said to be over-produced are desired by many people. Why do they not get them? They do not get them because they have not the means to buy them; not that they do not want them. Why have not they the means to buy them? They earn too little. When the great masses of men have to work for an average of $1.40 a day, it is no wonder that great quantities of goods cannot be sold. Now why is it that men have to work for such low wages? Because if they were to demand higher wages there are plenty of unemployed men ready to step into their places. It is this mass of unemployed men who compel that fierce competition that drives wages down to the point of bare subsistence. Why is it that there are men who cannot get employment? Did you ever think what a strange thing it is that men cannot find employment? Adam had no difficulty in finding employment; neither had Robinson Crusoe; the finding of employment was the last thing that troubled them.

If men cannot find an employer, why cannot they employ themselves? Simply because they are shut out from the element on which human labour can alone be exerted. Men are compelled to compete with each other for the wages of an employer, because they have been robbed of the natural opportunities of employing themselves; because they cannot find a piece of God's world on which to work without paving some other human creature for the privilege. ... read the whole speech

Winston Churchill: The People's Land

The drag on enterprise It is monopoly which is the keynote, and where monopoly prevails, the greater the injury to society the greater the reward of the monopolist will be. See how all this evil process strikes at every form of industrial activity.

The municipality, wishing for broader streets, better houses, more healthy, decent, scientifically planned towns, is made to pay, and is made to pay in exact proportion, or to a very great extent in proportion, as it has exerted itself in the past to make improvements. The more it has improved the town, the more it has increased the land value, and the more it will have to pay for any land it may wish to acquire.
The manufacturer proposing to start a new industry, proposing to erect a great factory offering employment to thousands of hands, is made to pay such a price for his land that the purchase price hangs round the neck of his whole business, hampering his competitive power in every market, clogging him far more than any foreign tariff in his export competition, and the land values strike down through the profits of the manufacturer on to the wages of the workman.
The railway company wishing to build a new line finds that the price of land which yesterday was only rated at agricultural value has risen to a prohibitive figure the moment it was known that the new line was projected, and either the railway is not built or, if it is, is built only on terms which largely transfer to the landowner the profits which are due to the shareholders and the advantages which should have accrued to the traveling public. ...

Tax on capital value of undeveloped land But there is another proposal concerning land values which is not less important. I mean the tax on the capital value of undeveloped urban or suburban land. The income derived from land and its rateable value under the present law depend upon the use to which the land is put, consequently income and rateable value are not always true or complete measures of the value of the land. Take the case to which I have already referred of the man who keeps a large plot in or near a growing town idle for years while it is ripening -- that is to say, while it is rising in price through the exertions of the surrounding community and the need of that community for more room to live. Take that case. I daresay you have formed your own opinion upon it. Mr Balfour, Lord Lansdowne, and the Conservative Party generally, think that is an admirable arrangement. They speak of the profits of the land monopolist as if they were the fruits of thrift and industry and a pleasing example for the poorer classes to imitate. We do not take that view of the process. We think it is a dog-in-the-manger game. We see the evil, we see the imposture upon the public, and we see the consequences in crowded slums, in hampered commerce, in distorted or restricted development, and in congested centres of population, and we say here and now to the land monopolist who is holding up his land -- and the pity is it was not said before -- you shall judge for yourselves whether it is a fair offer or not. We say to the land monopolist: 'This property of yours might be put to immediate use with general advantage. It is at this minute saleable in the market at ten times the value at which it is rated. If you choose to keep it idle in the expectation of still further unearned increment, then at least you shall he taxed at the true selling value in the meanwhile.' And the Budget proposes a tax of a halfpenny in the pound on the capital value of all such land; that is to say, a tax which is a little less in equivalent than the income tax would be upon the property if the property were fully developed. That is the second main proposal of the Budget with regard to the land, and its effects will be,

first, to raise an expanding revenue for the needs of the State;
secondly, half the proceeds of this tax, as well as of the other land taxes, will go to the municipalities and local authorities generally to relieve rates;
thirdly, the effect will be, as we believe, to bring land into the market, and thus somewhat cheapen the price at which land is obtainable for every object, public and private, and by so doing we shall liberate new springs of enterprise and industry, we shall stimulate building, relieve overcrowding, and promote employment.... Read the whole piece

Everett Gross: Explaining Rent

Sometimes it's difficult for people to understand the meaning of "rent" as an economic concept. One way I have of explaining it doesn't use the word rent. I just use a little analogy.

I'm from Crete, Nebraska. It's a small town of 5,000 people.

Suppose a man comes to Crete, and he wants to start a business. He needs a building, but first he needs a piece of ground to build this new building on. So he looks up a real estate agent, describes what he wants, and the real estate agent shows him a parcel that's just right for his needs. The man asks the agent, "All right, now how much money do you want for this land?" The agent says, "It's worth $50,000." The man says, "Why is it worth $50,000?" And the real estate agent points out that "The school is good, the roads are good, the police department is good, the rescue crew is good and very fast, and business is good here."

So the man says "Yeah, I believe that $50,0000 is a fair price. I'll take it. How do I pay the $50,000 to the school people, and the road people, and the police department? To whom do I pay the $50,000?" And the real estate agent says, "Oh no. You don't pay it to them. You pay it to the person who owned the land before."

The man says, "But who supports the schools, and the roads, and the police, and the other good things?" And the real estate agent says, "If you build, then you'll pay for them again."

The buyer then asks, "And what will the previous owner do for me for my $50,000?" The real estate man answers, "Nothing! Nothing at all!"

Now I don't need to use the word "rent" in that explanation.

William F. Buckley, Jr.: Home Dear Home

... So why is the cost of housing so high?

We learn that the average new house nationwide now sells for nearly $300,000. The writer tells us, "I asked (a builder) what our children -- my kids are both under 8, I told him -- would be paying when they're ready to buy.

"'They're going to live with us until they're 40,' (the builder) said matter-of-factly. 'And when they have their second kid, then we'll finally kick them out and make them pay for the house that we paid for. And that house will cost them 45 to 50 percent of their income.'"

Such data are dismaying, but perspective helps. "In Britain," the builder explains, "you pay seven times your annual income for a home; in the U.S. you pay three and a half." The Brits get 330 square feet per person in their homes; Americans, 750 square feet. But choice parts of the United States face "build-out." Consider New Jersey. It currently averages 1,165 people per square mile -- denser than India (914) and Japan (835).

And we confront, finally and inevitably, the question: What is to be done about it?

Almost without exception, housing specialists concur, high home prices are owing to zoning. Twenty years ago, in many quarters of the country, one year would go by before the political authority would permit a developer to begin housing construction. In New Jersey, that interval now approaches eight years. Delays of that kind have the effect of shrinking the amount of land on which houses can be constructed. We get the inflated costs so familiar. "(Some authorities) used sample prices from 25 areas to show that the cost of housing in a metropolitan area appears to be in direct correlation to its degree of zoning ordinances," Gertner writes.

This is a politically remote source of trouble. People who have to wait for a zoning agency to change its conventions, regulations, traditions and idiosyncrasies will be very old before they acquire a new home.

Henry George, the eminent social philosopher of a century ago, turned the attention of planners and economists, however briefly, to the indefeasible factor of land scarcity. Capital and labor can increase; land cannot.... read the whole column

Bill Batt: Painless Taxation

Abstract
Real tax reform could do away with those taxes that are resented by the large proportion of our population. We could replace all taxes on wages and on interest by instead taxing economic rent. Rent is windfall income; it is income that arises not from the efforts of any person or corporation; it comes about as a surplus gain from common social enterprise. There is ample moral warrant for society to lay claim to that which it has created, as well as to that which no individual or party has earned. Analysis increasingly makes clear that economic rent in all its forms is far larger than official government figures indicate; in fact it is likely sufficient to supplant all current taxes on labor and capital (wages and interest) which are acknowledged to have so many negative effects. Recovering economic rent in all its manifestations by taxing its various bases actually can foster economic performance and yield other benefits that make it the natural source of revenue for governments. Such a tax is essentially painless. ...

The Possibility of Land (Rent) Taxation

The key to understanding how taxing various forms of land conform to sound tax theory comes with an appreciation of the importance of economic rent. Largely discarded in 20th century economic analysis, rent is the price for the use of land. Just as the price of labor is paid in wages and the price of capital is paid in interest, land rent is the unearned increment that attaches to land in the form of a surplus when its price is not paid by its users. All taxes, ultimately, come out of rent; however, by collecting revenue from other sources, the rent is left to settle in ever increasing encrustations on land sites, i.e., capitalized, ultimately raising their market price. In so doing, these land prices are distorted so that their optimal use is not secured.

Examples of such distortion are not difficult to identify. Consider, first of all, the use of locations in our urban environments, many of which are underused while prospective entrepreneurs are driven to second-best locations because titleholders opt to let the rent accrete and passively raise their market price. Land speculation is rife most of all in instances where there is a great disparity between the tax rate on these sites and the rate of rent appreciation. When the holding costs of ownership are nominal, there is no incentive for improving them or selling to others who will, and urban environments suffer as a result. Another example is rent that collects to the electromagnetic spectrum, making it attractive for owners of electronic media, communications networks and so on, to rely on returns to their investments even when the resource itself is sparsely used. So also with the time slots for take-offs and landings at airports. These opportunities are respected as private property, even while they gain in market value in response to the general traffic volume of the facility. This occurs regardless whether the particular airlines use their slots or not. London Mayor Ken Livingstone has proposed to tax the rent from Heathrow and Gatwick both for their revenue advantage and to assure their more optimal use.[7] One could go on, pointing to any number of instances where economic rent is available to be had for the support of public services in lieu of conventional taxes which we recognize as destructive in their effects.[8] It is not surprising that when pressed even conventional (neoclassical) economists are often willing to concede that the best possible tax of all is one placed on land rent.[9] ... read the whole article

While this piece speaks to housing affordability, the point could be extended to making commercial sites affordable, too:

Nic Tideman: Basic Tenets of the Incentive Taxation Philosophy

Making Housing Affordable
The implementation of our ideas would have a dramatic effect in making housing more affordable. The principal reason why housing costs have risen so much is that the price of land has risen enormously. Some increase in the price of access to land is a natural accompaniment of an increasing population.

But the very great increases of recent years, which have made it nearly impossible for young families to afford houses of their own, have additional causes. The implementation of our ideas would bring down the price of access to land in three ways.

First, much land is held off the market by speculators who may wait generations do decide to develop it. The introduction of a fee for holding land, whether used or not, equal to the rental value of the land, will induce speculators to either develop this land themselves or turn it over to someone who will.
Second, an important cause of higher prices for access to land by those who wish to build low-cost housing is zoning restrictions. These restrictions are introduced by political factions that already have their houses and do not mind if housing becomes scarcer. It just raises the market value of their homes. But if a rise in land values were accompanied by rises in the fees that existing residents had to pay for the use of the land on which their houses sit, they would have an incentive to do what they could to make land plentiful rather than scarce, and zoning restrictions could be expected to diminish.
Third, a person who wishes to own a house must borrow money to cover the price of buying the title to the land on which the house sits as well as the cost of the house itself. If the use of land required the payment of a fee equal to the rental value of land, so that the selling price of land titles became virtually zero, then the amount of money that a family would have to borrow to purchase a house would fall. ... Read the whole article

I. Historical overview
II. The problem of sprawl
III. Affordable and efficient public transport
IV. Agricultural benefits
V. Financial concerns
VI. Conclusion: A greater perspective
Appendix: "Natural Capitalism" -- A Case Study in Blindness to Land Value Taxation

While taxes on labour and capital act as a deterrent to production and employment, the unique qualities of land are such that a tax on land values encourages land to be put to its optimal use. Simply put, land holders cannot afford to hold land unused or underused, for they are compelled to pay the full LVT whether they use this scarce resource or not. The resulting compact cityscape would consume far less resources (in terms of land, infrastructure and ongoing energy costs) and would be more amenable to the provision of public transport, walking and riding.

Note that advocates of LVT, often nowadays called Geoists, call for the full collection of the LVT and not the partial and misapplied (with all manner of exemptions and thresholds) forms collected by some local, state and federal governments in Australia and elsewhere. When the land occupier is repaying his/her full dues (which is only just, as they represent the value of the amenities of the land), then land will have no market price. The improvements on the land (buildings etc.) retain their market value as they are not being taxed, so production is not penalised or discouraged. The social justice implications of having land with no market price (i.e. all humanity having their very birthright) are profound, but are again outside the domain of this paper. ... read the entire article

Turning land-value gains into capital gains
Hiding the free lunch
Two appraisal methods
How land gets a negative value!
Where did all the land value go?
A curious asymmetry
Site values as the economy's "credit sink"
Immortally aging buildings
Real estate industry's priorities
THE FREE LUNCH Its cost to citizens Its cost to the economy

THE FREE LUNCH: Its cost to citizens

The recycling of savings into new mortgage lending has fueled an economy-wide inflation of asset prices for land, homes, and commercial properties, as well as stock market and bond prices. If what rises in value is mainly the land site, then the property owners appear as passive beneficiaries enjoying a free lunch. The property is their major asset and the mortgage their major debt. While doing little to increase the value of the building beyond having picked a good location and making the normal maintenance, they ride the crest of asset-price inflation of land . Indeed, take-home earnings have drifted down over the past two decades, but house prices have soared.

Its cost to the economy
Once a building has taken all its depreciation, investors have a tax motive to sell the property and buy another. The sales price obviously will be higher if the new buyer can begin depreciating the building all over again, for the property will yield more after-tax revenue. This financial trick turns the real estate sector into a game of musical chairs, while enabling property owners to avoid income taxation. The end result is to free more of their cash flow to pledge to mortgage lenders as interest, in exchange for loans to buy more and more property that is rising in price. This is the anatomy of the dramatic increase in land-prices, called the real estate bubble. The tragedy of modern economies is this divergence of saving away from financing new direct investment and employment, to inflate a financial and real estate bubble. When the bubble bursts there will be little new tangible wealth creation to show for it, only a wave of insolvency, bankruptcy and foreclosures as the Western economies begin to look more like that of Japan since its bubble burst a decade ago. America's and Europe's largest economic expansion may similarly give way to a long depression. Its cause will remain invisible as long as the politically powerful real estate interests keep getting land undevalued and its income masked as capital gains on the national income and product accounts ... 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 of production:

the rent of land,
the wages of labor,
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.

The land that a city has is fixed (or if it changes, it does so at the expense of other administrative units). Therefore, with respect to land, socially productive urban growth means adopting policies that raise the productivity of land. Labor, on the other hand, is reasonably mobile, and capital is highly mobile. Entrepreneurship springs up and fades away with the rise and fall of opportunities. Therefore, in a market economy, the payments that must be made to attract these factors are substantially outside the control of a city. Thus the growth of a city with respect to labor, capital and entrepreneurship is achieved primarily by making the city a place that attracts more of these factors, taking the rates of wages, interest and profits that must be paid to attract them as given by market forces.

Tax policy is critical for urban growth because taxes on the earnings of labor, capital and entrepreneurship drive these factors away. A city that desires to grow should refrain from taxing wages, interest or profits and concentrate its taxes on land, which does not have the option of moving away.

Certain other sources of public revenue, in addition to the rent of land, have the characteristic of not discouraging growth. These sources of revenue involve either charging people for using scarce opportunities that no one created, as with land, or charging people for the costs that their actions impose on others.

A city that wishes to grow should confine its search for revenue to these sources. In this way it will attract more labor, capital and entrepreneurship, thereby raising the rent of land, which can be collected publicly without discouraging growth.

Additions to the stock of capital are extremely important for urban growth, because of the impact of abundant capital on wages and rents. When capital is abundant, labor and land are more productive, and the more productive they are, the higher wages and rents are. ...

... Every activity that is continued should pass a test of providing adequate value for money. Most of the worthwhile activities of local governments raise the rental value of the land in the vicinity of the activity by enough to pay a substantial fraction if not all of the costs of the activity.

Thus the rental value of land is a natural first source of financing for local public expenditures.

Making the rental value of land a principal source of local public revenue has both an equity rationale and an efficiency rationale. The equity argument for social collection of the rent of land is founded on a recognition that the rental value of land has three sources.

Part of the rental value of land is the gift of nature--the fertility of soil, the value of good rivers and harbors, the depletable value of minerals, and so on. This part of the rental value of land should be collected publicly because no individual has a just claim to more than a proportionate share of it. Public collection is just either if it is followed by an equal distribution to all citizens or by spending on activities that provide equal benefits to all.
A second part of the rental value of land comes from the provision of public services. The local agencies that provide these services can justly claim the increase in the rental value of land that results from their activities.
A third part of the rental value of any particular site arises from private activities that are conducted in the vicinity of that site. Social collection of this part of the rental value of land is particularly appropriate if this money is used to reward those private activities according to how much they increase the rental value of land.

The efficiency argument for social collection of the rent of land has two parts.

First, the rental value of land has the rare quality of being a source of public revenue that does not discourage productive activity. If people are taxed according to their labor earnings, they can be expected to work less, and to tend to move from the places that tax them. If people are taxed on their investments and savings, they can be expected to save and invest less, and to find it attractive to put their savings and investments in other places where they will not be taxed as much. But when the rental value of land is collected, no one will reduce the amount of land in existence, and no one will move his land elsewhere. Thus social collection of the rent of land does not reduce the productivity of an economy in the way that most other sources of public revenue do.
The second part of the efficiency argument is that social collection of the rent of land tends to make land more available to those who want to start new enterprises. When the rent of land is not collected publicly, those who have rights to land will tend to ignore the possibility of releasing it to someone who might make better use of it. On the other hand, if those who have rights to land are required to make annual payments equal to the market value of the rights they hold, then these continuing payments will induce people to ask themselves regularly whether they ought to release the land to someone who can make better use of it.

To achieve the potential efficiency of public revenue from land, it is important that people not be charged more for the use of land, just because they happen to be using it particularly productively. The rental value of land should be reassessed regularly, the values that are determined should vary smoothly with location, and they should be available for public inspection so that all users of land can see that they are being charged amounts commensurate with what their neighbors are being charged.

Social collection of the rent of land also facilitates the privatization of land. If every user of land is charged annually according to the rental value of the land that he or she holds, then it is possible to undertake a just privatization of land simply by passing out titles to the current users of land.

No one will be disadvantaged by not receiving land. Future generations will not be deprived by not having been awarded shares. And the community will have a continuing income from the rent of land.

The efficiency that is entailed in using the rent of land to finance public activities applies to certain other sources of public revenue as well:

1. Charges on any publicly granted privileges, such as the exclusive right to use a portion of the frequency spectrum for radio and TV broadcasts.
2. Payments for extractions of natural resources. Such payments should be set at levels that yield the greatest possible revenue of the resources, in present value terms.

3. Taxes on pollution. Every individual or enterprise that pollutes the air, water or ground should be required to pay the estimated cost of the pollution it generates. The effect of pollution on the rental value of surrounding land is one possible measure of its cost.

4. Taxes on any other activities that reduce the rental value of surrounding land.

5. Taxes on activities such as driving or parking in crowded streets, where one person's activities reduce opportunities for others. The administration of such charges may be so expensive that it is not worth implementing them, but if the administration can be handled sufficiently cheaply, these charges are efficient to the extent that they only charge people for costs imposed on others.

6. Taxes on activities, such as the consumption of alcohol, which impose costs on others (e.g., higher traffic fatalities).

7. Charges for local public services, such as water, electricity, sewer connections, etc. It is not generally desirable to make every service completely self-financing. Rather, what is desirable is that each user be required to pay the marginal cost of the service he receives. Extensions of service networks are efficient when they increase publicly collected land rents by enough to cover the costs not covered by user charges.

8. A self-assessed tax on permanent improvements to land, at a very low rate (perhaps 1/10 of 1% per year). With a self-assessed tax, each possessor of land names a price at which he would be willing to part with the land he possesses (and any immovable improvements). He pays a tax proportional to the value he names, and anyone who wishes to may take over possession at that price. The value of such a tax is that it makes it much easier to assemble land for redevelopment, and to identify appropriate compensation when land is taken for public purposes.

All of the above taxes are positively beneficial and should be collected even if the revenue is not needed for public purposes. Any excess can be returned to the population on an equal per capita basis. If these attractive sources of revenue do not suffice to finance necessary public expenditures, then the least damaging additional tax would probably be a "poll tax," a uniform charge on all residents. If some residents are regarded to be incapable of paying such a tax, then the next most efficient tax is a proportional tax on income up to some specified amount. Then there is no disincentive effect for all persons who reach the tax limit. The next most efficient tax is a proportional tax on all income.

It is important not to tax the profits of corporations. Capital moves from where it is taxed to where it is not, until the same rate of return is earned everywhere. If the city refrains from taxing corporations they will invest more in St. Petersburg. Wages will be higher, and the rent of land, collected by the government, will be higher. The least damaging tax on corporations is one that provides a complete write-off of investments, with a carry-over of tax credits to future years. Such a tax has the effect of making the government a partner in all new investments. With such a tax the government provides, through tax credits, the same share of costs that it later receives in revenues. However, the tax does diminish the incentive for entrepreneurial activity, and it raises no revenue when investment is expanding rapidly. Furthermore, the efficiency of such a tax requires that everyone believe that the tax rate will never change. Thus it is best not to tax the profits of corporations at all. If the people of St. Petersburg want to share in the profits of corporations, then they should invest directly in the corporations, either privately or publicly. The residents of St. Petersburg would be best served by refraining from taxing the profits of corporations. Creating a place where profits are not taxed can be expected to attract so much capital that the resulting rises in wages and in government-collected rents will more than offset what might have been collected by taxing profits.

The taxes that promote urban growth have at least one of two features.

The first feature that a growth-promoting tax can have is that it can serve to allocate a naturally occurring resource among competing potential users. Charges for the use of land, for the use of the frequency spectrum and for depleting natural resources share this feature.
The second feature that a growth-promoting tax can have is that of being a charge for the costs imposed on the city by the person who pays the tax. This feature is shared by taxes on pollution, taxes on other activities that reduce the value of surrounding land, taxes on imposing congestion and other costs on other residents of the city, charges for the marginal cost of publicly provided services, and a self-assessed tax on property, reflecting the hindrance to future growth represented by existing development.

A city that confines itself to these taxes can expect to attract capital rapidly, and therefore to experience rapid growth, raising the wages of its citizens and the publicly-collected rent of its land.Read the whole article

Real wage rates, meanwhile since 1955, have not risen as fast as real land prices, and they haven't risen at all since 1975. This has raised the labor-price of land (the number of days/years a person must work at the average wage rate in order to raise the price of a farm.) Coupling this with rising acres per farm, the labor-price of a farm roughly tripled, from about 6 years' wages (before payroll deductions) in 1954 to about 17 years' wages in 1987. That, of course, doesn't mean you could buy a farm in 17 years, unless you didn't eat anything and saved every penny of your wages to buy a farm. ...

In 1900 the Census Bureau began publishing farm data ranked by acres per farm. Using those data, the Gini Ratio was .58 in 1900. By 1930 the GR had gotten up only to .63. This, remember, was the peak year of property taxes, before the property tax started waning. The GR began to rise faster, and by 1950 it was up to .70. It plateaued there for 15 years and then rose again to .76 by 1987. That is a high degree of concentration. (By comparison, GRs for personal income are much lower, about .40, and are much more stable over decades.) The accelerated rise since 1930 coincided with the rise of mean acres per farm, and both followed the fall of property tax rates.

The Gini Ratio has been criticized because it deals only with the concentration among existing farms, and doesn't take into account all of the former farmers who left the business. To adjust for this, we can simply add them to the distribution of the farms as farmers with zero land. There are 4-1/2 million farms that died between 1935 and 1988. If you add in the farmers with zero acres of land to the lowest bracket, that raises GR for 1988 from .76 to .92, a radical rise of inequality since 1930 (.63). But calculating the ratio this way gives you a better sense of how concentration has shot up during and since the Great Depression. In the Great Depression (1930-1941), six million farms provided a refuge for the urban jobless and homeless. Today, that refuge is closed.

Vanishing Farmers and Unaffordable Farms
The Vanishing Middle Class; Gini Ratio
The Rise of Land Quality in Vast Farms
Rising Land Share and Rising Ratio of Price to Cash Flow
THE LESSER IMPROVEMENT OF BIGGER FARMS
National Data
Concentration of irrigated land
Land Concentration for Farms Ranked by Sales
Lack of buildings on latifundia
Lack of family labor on latifundia
Comparisons Among States
Lesser Improvement of Land in States with Larger Farms
Urban Influence
Association of Property Taxation and Land Improvement
CONCLUSION

A priori, a tax on buildings works to suppress building and to penalize smaller farmers, whose building to land ratio is higher than that of bigger farmers. The findings seem to show, therefore, a stronger countereffect, proincentive and pro-subdivision, of the other part of the property tax, the part based on land value.
...
Now, however, 34 percent of all irrigated land is in the top bracket, farms of 2,000 acres and over. (10) Control of irrigated land means control over water. Control of water gives control over arid lands roundabout. Ownership and control based on water have become highly concentrated. For farms with irrigated land, GR = .82, (11) substantially higher than the GR of .76 for all farms. ...

To sum up,

It is awkward that the 1987 Census of Agriculture defines "farm size," and ranks farms, only by acres rather than value. ...

Concentration of irrigated land

Comparing different crops, high values of GR go with crops that are mostly irrigated. For example, 85 percent of tomato acres and 14 percent of silage corn are irrigated. For tomatoes, GR = .91; for silage corn, GR = .52. (26)

(26) Those who find GR index numbers too abstract will find more meaning in these raw data. For tomatoes, the top acreage bracket contains 1.1 percent of the farms, 45 percent of the harvested acres, and 52 percent of the irrigated acres in tomatoes. For silage corn, the top bracket contains 1.0 percent of the farms, 11.3 percent of the harvested acres, and 26 percent of the irrigated acres in silage corn. ...

Lack of buildings on latifundia

The inverse relationship between PTR and GR is particularly consistent and noteworthy. ...

High land prices also raise the credit requirement for owning a business. That screens out many who otherwise would have enough capital to enter or remain in business. It forces business owners to be tenants, and look at life and politics as renters, not owners. Read the whole article

1. HOLDINGS BY ALIENS ... Non-resident aliens own about 75% of the "major" buildings in the L.A. CBD west of Broadway ...
2. AMERICANS FROM OTHER STATES ... A second kind of holder is the out-of-state American, individual or corporate.
3. CALIFORNIANS Many of our largest landholders also live in California. This is partly because the lands are here, but moreso because certain places in California are good places to live. One of the advantages of receiving property as opposed to labor income is it lets one choose his residence. California ranks after New York in the number of rich Americans (using Forbes' list) who reside here.

Also included here are California-based corporations. A corporation's "base" refers simply to the site of its headquarters: its shareholders are scattered around the world, and the major shareholders, who exercise control, are effectively screened behind layers of trusts and financial institutions, so they are impossible to identify with certainty.
4. INSTITUTIONS
Institutions acquire land for their operations and then it tends to stick to them for various reasons. It is tax free, for one, so long as they retain it (and do not use it commercially). They are not subject to corporate raids. Thus there is no mechanism whereby the current opportunity cost of land is felt by management. It never appears in their budgets; they never need compete for or justify it. College Boards are not accountable to any public body, a precedent set by Marshall's U.S. Supreme Court in Dartmouth College v. Woodward, 1819.

1. Materials - Extraction vs. Recycling

To sustain that which we love, we must transform our relationships to nature, to government, and to each other. We need to become geonomists in worldview, theory, discipline, and policy. Geonomics creates an economy that's not at war with but aligned with the natural world.... Read the whole article

Money is the mother's milk of politics. Yet the milk invested by lobbyists and those they represent is a drop in the bucket compared to the flow they get back from the public tit, thanks to the milkmaid state. Politicians grant well-connected big businesses:

Another area in which George applied these inherent differences between land and products was the field of taxation. To determine the incidence of taxation, George had to know what was to be taxed, products or the value of land. In each case he traced out the effect from the essential nature of the thing to be taxed: "...all taxes upon things of unfixed quantity increase prices, and in the course of exchange are shifted from seller to buyer, increasing as they go. ...If we impose a tax upon buildings, the users of buildings must finally pay it, for the erection of buildings will cease until building rents become high enough to pay the regular profit and the tax besides. ...In this way all taxes which add to prices are shifted from hand to hand, increasing as they go, until they ultimately rest upon consumers, who thus pay much more than is received by the government. Now, the way taxes raise prices is by increasing the cost of production, and checking supply. But land is not a thing of human production, and taxes upon...[land value] cannot check supply. Therefore, though a tax on...[land value] compels the land owners to pay more, it gives them no power to obtain more for the use of their land, as it in no way tends to reduce the supply of land. On the contrary, by compelling those who hold land on speculation to sell or let for what they can get, a tax on land values tends to increase the competition between owners, and thus to reduce the price of land."

Here, then is another derivative difference between land and products, according to George: taxation on products causes an increase in the price of products; taxation on the value of land causes a drop in the price of land. ... read the whole article

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