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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.
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).
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.
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?
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 speechWinston 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.
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,
Everett Gross: Explaining Rent
William F. Buckley, Jr.: Home Dear Home
Bill Batt: Painless Taxation
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.
I. Historical overviewMichael Hudson: The Lies of the Land: How and why land gets undervalued
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.
These "capital gains" for households are part of the new phenomenon that has been popularized as "labor capitalism." As Margaret Thatcher's crowd has put it, "Sorry you've lost your job; I hope you've made a killing on your Council House or home in the real estate market." The free lunch.
For the two-thirds of America's and Britain's populations who are home owners, this free lunch from asset-price inflation of land has proved to be a silver lining in the post-industrial economy. For the remaining third of the population, however, the price of access to home ownership is receding rapidly. Today it hardly is possible for most renters to earn the money to acquire their own homes. The entry price has been bid up too high by those hoping to gain from asset-price inflation even as labor's earnings have been declining.
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
Nic Tideman: Using Tax Policy to Promote Urban Growth
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:
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.
The efficiency argument for social collection of the rent of land has two parts.
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.
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.
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
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
Association of Property Taxation and Land Improvement
It is a common belief that property tax relief is "good for farmers." It certainly raises the private share of economic rent. That in turn raises the investment grade of farmland and encourages its purchase as a store of value, a place to park slack money. This may be at odds, however, with using it as a vehicle for enterprise and an outlet for workmanship. Lower farm property taxes are associated with lower ratios of capital to land, and labor to land, both over time and among states. They are also associated with bigger mean farm size and less equal distribution of farm sizes.
In the sections that follow, I first document the rise of inequality in the distribution of farmland that followed a sharp drop in farm property tax rates after 1930. Then I show, by cross-sectional analysis, a positive relationship between higher property tax rates and more intensive use of farmland, which in turn is associated with more equal distribution of farmland. Conversely, I find property tax relief associated with underuse and underimprovement of land.
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,
The combination means the agricultural ladder has been pulled up. Entry is nearly impossible for farmers lacking outside finance; exit and latifundiazation proceed apace. These changes accompanied and followed a 40 percent drop in farm property tax rates. ...
THE LESSER IMPROVEMENT OF BIGGER FARMS
A result of rising concentration is the separation of land from capital. With some exaggeration, American latifundia are now lands without buildings, but buildings cluster on smaller farms, many without enough land. This implies at least three points.
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
The yield per acre of most crops stays level or rises with harvested acres per farm. At the same time, sales per dollar of real estate fall somewhat. (21) The most likely reason is that the quality of harvested land rises with quantity. There is, to be sure, a trade-off between quality and quantity, but there is also a bond. Whoever can afford more can afford better. Which effect is stronger? The question must be resolved by data. ...
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 1940 Census of Agriculture was the last to separate $L from $B, overall. In 1940 the building share of real estate value ($B/[$L+B], or BSREV) was .69 in the lowest acreage bracket, .31 for all farms, and .12 for farms of 1,000 acres and over. (36)
(36) 1940 Census of Agriculture, Vol. 3:80. An earlier insightful article on the subject is D. Weeks, "Factors Affecting Selling Prices of Land in the 11th Federal Farm Loan District," Hilgardia 3, no. 17 (1929):459-542.
AELOS (1988) gives no comparable comprehensive data, but it does give two series that test the point and have the advantage of disaggregation. One is for "owner-operators" and one for "landlords with debt." For the owner-operators, ranked by acres per farm, BSREV was .63 for farms under 10 acres; .29 for all farms; and .12 for farms of 2,000 acres and over. (37) Building values are much more equally distributed among these farms than land values. ...
The inverse relationship between PTR and GR is particularly consistent and noteworthy. ...
One may at least firmly conclude that large farm units are less improved and less peopled than small and medium-sized farms. There are two possible interpretations. One is that big farms are more efficient, getting more from less, but that is refuted by their getting less output per $L. The other is that Veblen was right, many of them are oversized stores of value, held first to park slack money and only secondly to produce food and fiber, and complement the owner's workmanship. The Florida 9 [the high LSREV states] may represent a home grown rural "third world" of large, underutilized landholdings that preempt the best land and force median farmers onto small farms on low-grade land.
The issue cannot be settled in a few words, but the implications for tax policy are the same either way. If large units are more efficient, they can bear heavier taxes. If they are less efficient, heavier PTRs will induce them to release surplus land for others, which will tend at the margins to equalize factor proportions, moving more states from the Florida toward the Wisconsin model. Read the whole article
Mason Gaffney: The Red and the Blue
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 articleMason Gaffney: Who Owns Southern California?
1. HOLDINGS BY ALIENS ... Non-resident aliens own about 75% of the "major" buildings in the L.A. CBD west of Broadway ...Jeff Smith: Sharing Natural Rents to Sustain Human Society
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.
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
Nic Tideman: Land Taxation and Efficient Land Speculation
Jeff Smith: Subsidies at Their Worst: Privileges
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:
a. direct cash outlays, such as cash to corporations for advertising overseas,
Land titles are the granddaddy of all privileges. Historically, titles preceded all others and created a class of elite owners with the power to win the six other indirect subsidies, along with the more direct ones – grants, contracts, and tax favors. To undo and reverse this history, it's necessary to collect and share the natural rents from all seven inconspicuous privileges.
For these pieces of paper, government should charge full market value. ...
Getting a Citizens Dividend would not only eliminate poverty, it'd also erase any rationale for subsidies - direct or indirect - to the poor or to the privileged. Repealing the free ride of privileges would be like repealing capitalism. Without those subtle detours imposed upon public revenue, owners would have to work to amass a fortune, and work is one of the worst ways known to strike it rich.
What you can do: Dry up the milkmaid state. Dispense with the notion that the state must meddle in enterprise. Dispense the notion from others, too. Focus government on its lone raison d'etre - defend rights. Demand your right to a fair share of natural revenue. ... Read the whole articleWeld Carter: An Introduction to Henry George
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
Bill Batt: Stemming Sprawl: The Fiscal Approach
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper