Domain and taking land for public purposes
The Supreme Court decision in the Kelo case created a lot of public outrage
and controversy. But while the justices in the majority may not have been
conscious of what
most Georgists would say are the fundamental issues (and most Georgists
seem to be as outraged as those who aren't as focused on land's importance),
a good case can be made that the decision they reached was sound.
Urban land, even in a blighted city like New London, Connecticut,
is our most valuable natural resource, far more valuable than gold or
have been located on choice sites — where rivers meet oceans, or
where they meet other rivers or large lakes, or where falling water could
power mills and hydro plants, or in climatologically choice locations.
Under most circumstances, it makes no sense to abandon a city. We've invested,
over decades and usually over centuries, using local tax money, state tax
money and often federal money, in creating infrastructure. Yes, infrastructure
needs to be maintained — like all things manmade, it is continuously
depreciating. But the natural advantages of some locations generally
continue to be advantages.
Other locations are valuable specifically because of infrastructure. New
Canaan, Connecticut, is a good example of this. Without the commuter train
and highway system that connect it to New York City, it would simply be
lovely, level farm land.
Over time, a piece of land that was once wilderness becomes farm land.
Farm land, depending on its location, may be developed into residential
or sometimes commercial property, depending on the infrastructure that
serves it. Single family residential, just as in the game of Monopoly,
may yield to multi-family housing or commercial uses.
But what happens when someone decides that they have no intention of
leaving the home they love, or the business site they are used to, even
most objective measures, single family housing or single-story
commercial is no longer the appropriate use for the site? Should the
rest of the city's
residents, who do have a stake in good land use, tolerate the extreme
underuse of a piece of land, or a whole neighborhood, that, given the
the community has made or is prepared to make, now should be developed?
Suppose the alternative is for the city's center to move elsewhere,
to sprawl out in one, or two or three or four directions, so that those
property owners can stay on the land they love? Suppose it means
that jobs just aren't created in the town, or are created out on the
fringes, where it costs both employers and employees -- not to mention
customers -- more to get there?
Should that be something we make it easy to afford? What is in the interest
of the common good? Is land really something we all need? Is it right
for some of us to be able to monopolize such a resource? What kinds of
property do we have rights to, and which rights are limited by the rights
of our neighbors and communities?
Henry George: The Condition
of Labor — An Open Letter to Pope Leo XIII in response to Rerum
Your use, in so many passages of your Encyclical, of the inclusive term “property” or “private” property,
of which in morals nothing can be either affirmed or denied, makes your
meaning, if we take isolated sentences, in many places ambiguous. But
reading it as a whole, there can be no doubt of your intention that private
property in land shall be understood when you speak merely of private
property. With this interpretation, I find that the reasons you urge
for private property in land are eight. Let us consider them in order
of presentation. You urge:
1. That what is bought with rightful property is rightful property.
(RN, paragraph 5) ...
2. That private property in land proceeds from man’s gift of reason.
(RN, paragraphs 6-7.) ...
3. That private property in land deprives no one of the use of land.
(RN, paragraph 8.) ...
4. That Industry expended on land gives ownership in the land itself.
(RN, paragraphs 9-10.) ...
5. That private property in land has the support of the common opinion
of mankind, and has conduced to peace and tranquillity, and that it is
sanctioned by Divine Law. (RN, paragraph 11.) ...
6. That fathers should provide for their children and that private property
in land is necessary to enable them to do so. (RN, paragraphs 14-17.)
7. That the private ownership of land stimulates industry, increases
wealth, and attaches men to the soil and to their country. (RN, paragraph
8. That the right to possess private property in land is from nature,
not from man; that the state has no right to abolish it, and that to
take the value of landownership in taxation would be unjust and cruel
to the private owner. (RN, paragraph 51.) ...
8. That the right to possess private property in land is from
nature, not from man; that the state has no right to abolish it, and
take the value of landownership in taxation would be unjust and cruel
to the private owner. (51.)
This, like much else that your Holiness says, is masked in the use of
the indefinite terms “private property” and “private
owner” — a want of precision in the use of words that has
doubtless aided in the confusion of your own thought. But the context
leaves no doubt that by private property you mean private property in
land, and by private owner, the private owner of land.
The contention, thus made, that private property in land is from nature,
not from man, has no other basis than the confounding of ownership with
possession and the ascription to property in land of what belongs to
its contradictory, property in the proceeds of labor. You do not attempt
to show for it any other basis, nor has any one else ever attempted to
do so. That private property in the products of labor is from nature
is clear, for nature gives such things to labor and to labor alone. Of
every article of this kind, we know that it came into being as nature’s
response to the exertion of an individual man or of individual men — given
by nature directly and exclusively to him or to them. Thus there inheres
in such things a right of private property, which originates from and
goes back to the source of ownership, the maker of the thing. This right
is anterior to the state and superior to its enactments, so that, as
we hold, it is a violation of natural right and an injustice to the private
owner for the state to tax the processes and products of labor. They
do not belong to Caesar. They are things that God, of whom nature is
but an expression, gives to those who apply for them in the way he has
appointed — by labor.
But who will dare trace the individual ownership of land to any grant
from the Maker of land? What does nature give to such ownership? how
does she in any way recognize it? Will any one show from difference of
form or feature, of stature or complexion, from dissection of their bodies
or analysis of their powers and needs, that one man was intended by nature
to own land and another to live on it as his tenant? That which derives
its existence from man and passes away like him, which is indeed but
the evanescent expression of his labor, man may hold and transfer as
the exclusive property of the individual; but how can such individual
ownership attach to land, which existed before man was, and which continues
to exist while the generations of men come and go — the unfailing
storehouse that the Creator gives to man for “the daily supply
of his daily wants”?
Clearly, the private ownership of land is from the state, not from nature.
Thus, not merely can no objection be made on the score of morals when
it is proposed that the state shall abolish it altogether, but insomuch
as it is a violation of natural right, its existence involving a gross
injustice on the part of the state, an “impious violation of the
benevolent intention of the Creator,” it is a moral duty that the
state so abolish it.
So far from there being anything unjust in taking the full value of
landownership for the use of the community, the real injustice is in
leaving it in private hands — an injustice that amounts to robbery
And when your Holiness shall see this I have no fear that you will listen
for one moment to the impudent plea that before the community can take
what God intended it to take — before men who have been disinherited
of their natural rights can be restored to them, the present owners of
land shall first be compensated.
For not only will you see that the single tax will directly and largely
benefit small landowners, whose interests as laborers and capitalists
are much greater than their interests as landowners, and that though
the great landowners — or rather the propertied class in general
among whom the profits of landownership are really divided through mortgages,
rent-charges, etc. — would relatively lose, they too would be absolute
gainers in the increased prosperity and improved morals; but more quickly,
more strongly, more peremptorily than from any calculation of gains or
losses would your duty as a man, your faith as a Christian, forbid you
to listen for one moment to any such paltering with right and wrong.
Where the state takes some land for public uses it is only just
that those whose land is taken should be compensated, otherwise some
would be treated more harshly than others. But where, by a measure affecting
all alike, rent is appropriated for the benefit of all, there can be
no claim to compensation. Compensation in such case would be a continuance
of the same in another form — the giving to landowners in the shape
of interest of what they before got as rent. Your Holiness knows that
justice and injustice are not thus to be juggled with, and when you fully
realize that land is really the storehouse that God owes to all his children,
you will no more listen to any demand for compensation for restoring
it to them than Moses would have listened to a demand that Pharaoh should
be compensated before letting the children of Israel go.
Compensated for what? For giving up what has been unjustly taken? The
demand of landowners for compensation is not that. We do not seek to
spoil the Egyptians. We do not ask that what has been unjustly taken
from laborers shall be restored. We are willing that bygones should be
bygones and to leave dead wrongs to bury their dead. We propose to let
those who by the past appropriation of land values have taken the fruits
of labor to retain what they have thus got. We merely propose that for
the future such robbery of labor shall cease — that for the future,
not for the past, landholders shall pay to the community the rent that
to the community is justly due.
... read the whole letter
Mason 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 ...
2. AMERICANS FROM OTHER STATES ...
A second kind of holder is the out-of-state American, individual or
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
"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
The Riverside Press-Enterprise. In most cities, the dominant
paper is the largest downtown landowner. The Riverside Press-Enterprise
owns its site from 14th to Prospect Streets, and Olivewood to Orange
Grove, right next to a Freeway interchange. Like Rohr Industries, it
benefited before 1991 by the exemption of most of its power from the
city utility user tax, and still enjoys quantity discounts. Just across
the Freeway, using the Cridge Street overpass, is its Vine Street
garage, with land for its fleet of 265 trucks, vans, and cars. (TPE, 19
June 86) The City recently eased its fleet operations by stopping
traffic from 14th Street, giving the right-of-way to Kane Street, the
stub connecting the Press-Enterprise to the 91 Freeway on-ramp.
The City has also loaned its
eminent domain to the Press-Enterprise, helping it acquire the land
along Olivewood by condemning private homes. Newspaper support
is valuable when one runs for public office. About this same time,
however, the Press-Enteprise shifted the focus of its news coverage
from the City that shelters it to the whole suburban county. The
families were evicted and the houses razed several years ago, but, as
of October, 1994, the land is still vacant and derelict, not even used
for parking. It is held for - what? The possibility of future need? Did
this warrant condemning homes? Politicians are so loathe to use eminent
domain to expand parks or schools, but the possible future expansion of
a newspaper, that's different! ...
Institutions acquire land for their operations and then it tends
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. Read
the whole article
Lindy Davies: Ownership and
President Bush's announcement of his vision for an "ownership society"
met with thunderous cheers at the Republican Convention, and much
eye-rolling elsewhere. The Bush Administration would like to start by
encouraging private ownership of our retirement funds and our
health-care decisions. They want to get the heavy hand of government
out of such things and unleash the tremendous efficiency of millions
upon millions of Self-Interested Individual Actors, the husky,
brawling, broad-shouldered capitalism that made this country great.
Prosperity depends on the security of private property and the potency
of individual initiative! This is the self-evident truth that has been
obscured by Hollywood Socialists, Democratic Girlie-men and purveyors
of the Homosexual Agenda.
We should realize, however, that this is hardly a new initiative. It is
really just the latest wave of an argument that has raged throughout
the history of the United States, about just what -- if anything -- and
on what basis -- if any -- the government can require us to surrender
what we possess. There are some people out there -- and actually a fair
number, after all -- who don't view the Bush Administration's
privatization proposals as extremist at all -- but, rather, too soft.
Unfortunately, though, the law is not at all clear. Thomas Jefferson
fudged the topic in the United States Declaration of Independence,
inserting "the pursuit of happiness" where people expected the more
loaded term "property". The Bill of Rights, however, is strong on
property rights. It provides for security of "persons, houses, papers,
and effects," that "private property shall not be taken for public use
without just compensation" and that rights not specifically prohibited
are reserved to the states or to the people. In fact, the US
Constitution was so bullish on property that it provided for private
property in human beings, a principle made explicit in Dred Scott vs.
Sandford and many other cases.
Slavery was made unconstitutional by means of the 13th Amendment
1865. This, however, left much to be resolved, and the Congress had a
very difficult job -- perhaps, in strictly logical terms, an impossible
job -- in drafting Amendment number fourteen. ...
The 14th amendment reaffirms the rights of life, liberty and property,
and binds the states to the same due process and equal protection
restrictions as the federal government. However, it places the
Constitution's first limit on the right of property, stating that the
United States or any state shall not pay "any claim for the loss or
emancipation of any slave". This could be seen as somewhat fishy in
terms of the Fifth Amendment. After all the 13th amendment had taken
the slaveholders' property three years before. Had not the Supreme
Court ruled that slaves were property and had to be returned to their
owners, even if they escaped to non-slaveholding states?
Although it would have been impracticable (to say the least) to enforce
the Takings Clause to the tune of the market value of some four million
human beings, that was what the Constitution required the government to
The next amendment to the Constitution following the Reconstruction
Amendments was another milestone in the debate over property rights.
The 16th Amendment, ratified in 1913, allows Congress to “lay and
collect taxes on incomes, from whatever source derived” -- contravening
the restriction of this practice that had been laid out in Article I.
The “from whatever source derived” part has been making people scream
bloody murder ever since. ...
The original advocates of the income tax (many of them Single Taxers)
sought to tax accumulation, not industry and initiative. They saw that
the massive concentration of wealth among a privileged few was harmful
to the nation, and they persuaded the states to accept a progressive
tax that would compel robber barons to pay for public goods while
letting entrepreneurs gain from their contributions to overall
prosperity. And yet, over
the years, a tax on income “from whatever
source derived” came, one loophole at a time, to be a tax on exactly
those productive, hardworking, middle-class people that it was designed
to help. ...
In most people's minds, after all, land is the most solid and important
kind of property; in fact, the word "property" in general conversation
most often means "land". However, it has long been recognized that
sometimes privately-held land must be taken for public purposes. The
principle of eminent domain is not (particularly) controversial. If the
state wants to put a highway through your house, it must pay you the
fair market value of your property. ...
This decision was important because it extended the Takings doctrine
beyond physical seizure to the taking of value -- but it was also
relatively uncontroversial in that the state legislature had removed
all of the parcel's market value. ...
If government were to be held liable for every single action that took
away a portion of real estate value, it could scarcely do anything at
all. That might be how some of the most strident militia-folk would
like it. However, it would certainly not suit real estate owners in
general -- who, while they might not enjoy paying for government, do
benefit from the things that government does.
What the property-rights folks are forgetting (or disregarding) is that
if a piece of land has a market value, that means that the net benefits
conferred upon it by the community (which includes the government) are
greater than the net costs. Location value is far and away the most
important component of land value -- and location value is almost
entirely the result of services and infrastructure that the government
It's no accident that the issue of "regulatory takings" is such a stew
of contradictions. Indeed, the terms of the argument deny the
possibility of coherence (in much the same way as they did in 1868).
Land is not the fruit of
human labor, and its value is not the result
of any actions taken by its owner. Therefore, private property in land
is an entirely different sort of phenomenon than private property in
the products of labor -- and as long as the law fails to recognize this
fact, it cannot hope to make sense of the issue of "regulatory takings".
It could be suggested that "the conditions of the grant" could, without
doing any violence to the secure right of private property, require the
payment to the community of the land's rental value, to cover the cost
of the community's expenses which, it turn, provide the land's value in
the first place. That would, of course, require a clearer definition of
the moral basis of property that the United States has ever been able
to come to. Yet -- think of
it for a moment -- what would have happened
if the original Bill of Rights had articulated the individual's
absolute right to property only in the products of labor -- and the
community's right to the community-created value of the land?
It would have saved us an awful lot of trouble. True, the "slavery"
states would have balked at joining the union under those rules. But
under them, the nation would have been so prosperous that they would
quite soon have seen the advantage of joining. We would have avoided
the Civil War, and probably even World War I -- it is dazzling to think
about how different -- and vastly better -- our history would have
been, had the Framers taken the brave step of setting forth the moral
basis of property along these lines.
It's interesting that we use the word "own" to mean two different
things: the sense of possession, and the sense of personal
acknowledgment, as in "owning up" to one's responsibilities. The
relationship between the two was once closer than it now seems to be;
the word "ought" is an archaic past participle of "owe". As we consider
how to arrange our "ownership society", we'd do well to remember what
we "ought" -- and bring the two senses of the word back together.
Read the whole article
Winston Churchill: The
Now let the Manchester Ship Canal tell its tale about the land. It has
a story to tell which is just as simple and just as pregnant as its
story about Free Trade. When it was resolved to build the Canal, the
first thing that had to be done was to buy the land. Before the
resolution to build the Canal was taken, the land on which the Canal
flows -- or perhaps I should say 'stands' -- was, in the main,
agricultural land, paying rates on an assessment from 30s. to L2 an
acre. I am told that 4,495 acres of land purchased fell within that
description out of something under 5,000 purchased altogether.
Immediately after the decision, the 4,495 acres were sold for L777,000
sterling -- or an average of L172 an acre -- that is to say, five or
six times the agricultural value of the land and the value on which it
had been rated for public purposes.
Now what had the landowner done
the community; what enterprise had he shown; what service had he
rendered; what capital had he risked in order that he should gain this
enormous multiplication of the value of his property! I will tell you
in one word what he had done. Can you guess it! Nothing.
But it was not only the owners of the land that was needed for
the Canal, who were automatically enriched. All the surrounding land
either having a frontage on the Canal or access to it rose and rose
rapidly, and splendidly, in value. By the stroke of a fairy wand,
without toil, without risk, without even a half-hour's thought many
landowners in Salford, Eccles, Stretford, Irlam, Warrington Runcorn,
etc., found themselves in possession of property which had trebled,
quadrupled, quintupled in value.
Apart from the high prices which were paid, there was a heavy
compensation, severance, disturbance, and injurious affection where no
land was taken -- injurious affection, namely, raising the land not
taken many times in value -- all this was added to the dead-weight cost
of construction. All this was a burden on those whose labour skill, and
capital created this great public work. Much of this land today is
still rated at ordinary agricultural value, and in order to make sure
that no injustice is done, in order to make quite certain that these
landowners are not injured by our system of government, half their
rates are, under the Agricultural Rates Act, paid back to them. The
balance is made up by you. The land is still rising in value, and with
every day's work that every man in this neighbourhood does and with
every addition to the prosperity of Manchester and improvement of this
great city, the land is further enhanced in vaIue. ... Read the whole piece
Charles T. Root — Not a Single Tax! (1925)
To illustrate simply, let us suppose a state which has never parted with
its natural income but is supported by its own economic rent. A farmer wishes
take up a tract or [sic] government land in this state and offers an economic
rent of fifty cents per year per acre in its raw condition. The government
(i.e., the community) accepts this rent, subject to re-adjustment every
five years. The farmer then gets his deed without other cost than that of
and recording the instrument, or a nominal price of, say, one dollar an acre.
He works his new property vigorously, clears, fences, drains and plants it,
and puts up his buildings and stocks them. He has no taxes to pay, and at the
end of his first five-year period he is making $10 per acre per year. Will
his economic rent for the next five-year period be raised because he has prospered
or because he has invested money in buildings and improvements? Not a penny.
All the results of his own capital and labor belong to him and not to the community.
If the neighborhood has not grown much, and fifty cents an acre is still all
that is bid as economic rent for the same kind of raw ground as our farmer
originally took, then his rent for the second five years will be the same as
But suppose that during the second five years something of a boom has set in,
and a community is growing up. Land is in demand, and for the lessening area
in the hands of the government two dollars per acre is freely offered as
economic rent. Now our typical farmer must come up to the market price and
pay two dollars an acre for his third five years, irrespective of whether
he is making more or less out of his place.
In his third five years the boom continues, and the community grows so fast
that before the close of that period one corner of our friend's farm finds
itself near the middle of a flourishing town. Five acres of it are needed for
a public park, and five acres adjoining are wanted to cut up into building
lots. As building lots, this part of the land will command a voluntary offer
of a hundred dollars per year per acre of economic rent; and this fact establishes
the land-value of the adjoining five acres needed for park purposes.
In this situation what shall our farmer do?
He has two courses open to him. If he doesn't want to relinquish his land,
and can afford to withhold it from further improvement, he can pay the hundred
dollars per acre per year of economic rent which these ten acres will now command,
and keep his farm intact. If this appears to him too costly a luxury, he can
signify his willingness to sell to the town the five acres wanted for the park,
and the other five to individual builders.
Now, what price should he get for it? He did not pay the government much for
his title deed, but he has worked on this land for fifteen years, and deserves
some compensation when he transfers it. By his labor and also, in part, by
reason of his clearing, draining and fencing, he has been able to make twelve
dollars an acre from his ground, while his economic rent had not until now
gone above five dollars an acre. Furthermore, he has built on these parcels
a barn and two storehouses.
The method of computing the proper selling price under such circumstances
would have to be the result of experience, but that price would certainly include
the present value of the improvements and probably some lump sum besides, as
compensation for loss of farming opportunity. But just as certainly it would
not include, (as it would do under our present conditions), the increased location
value which the town itself has created by its own growth and public works,
and which in all justice belongs to the town or community and not to the individual.
This principle of economic rent applies to all the users of land, including
mining, use of waterpower, and rights of way over or under its surface. Had
this principle always been recognized, and the economic rent always been
retained by the community, taxation would never have been heard of. When
the economic rent is reclaimed by the community, the need of taxation will
Let us roughly restate the proposition: All members of the community having
a joint right to the income which the social advantages of the land will command,
they are all partners in this income.
Therefore, when one of their number wishes to take for his private use a parcel
of this land, he should buy out his partners, i.e., the rest of the community,
by paying regularly into the common treasury the economic rent of that parcel,
instead of paying, as at present, the purchase price, i.e., the right to collect
the economic rent, in a lump, to some other individual who has no more original
right to it than himself.
But before this time the reader, unless he has given previous attention
to the subject, is full of objections to the above doctrine: "How about the
law?" he is asking. "Hasn't a man the right to buy a piece of land
as cheaply as he can, to do what he pleases with it, and hold on to it till
he gets ready to sell?" The answer is that at present he certainly
has this statutory right, which has been so long and so universally recognized
that most people suppose it to be not only a legal, but a real or equitable
right. A shrewd man, foreseeing the direction of growth of population in
city, for example, can buy a well-located block at a moderate figure from
some less far-seeing owner, can let it grow up to weeds, fence it off against
comers and give it no further attention except to pay the very small tax
usually imposed upon vacant land.
Meantime the increasing community builds up all around it with homes, banks,
stores, churches, schools, paving and lighting the streets, giving police and
fire protection, etc., and at last comes to need this block so urgently that
the owner is fairly begged to sell it, at three or ten or fifty times what
it cost him. Quite often the purchaser at this enormous advance is the very
community which has through its presence and the expenditure of its taxes created
practically the whole value of the land in question!
It was said above that an individual has a statutory right to pursue this
very common course. That was an error. The statement should have been that
he has a statutory wrong; for no disinterested person can follow the course
of land speculation as almost universally practiced, without feeling its rank
injustice. ... read the whole article
Clarence Darrow: How to Abolish
Unfair Taxation (1913)
Fundamentally, all law recognizes the right to eminent domain, to take the
portion of any human being for the welfare of the public — that no
man's claim to any portion of the earth shall stand in the way of the common
This is a common law, but in practice it only applies where a rich railroad
wants to get the land of some poor widow.
Everybody who works is poor; nobody would work if they were not poor, and
nobody can get rich working. I never tried it, but I have seen others try
it. The land boomer comes along and gets good car service to this poor man's
and then charges him ten dollars per month instead of five. A lot of reformers
are trying to get parks laid out in the slums, which only make the poor
move, for they cannot pay the increased rent. The greater the population,
the worker gets. As the land becomes valuable, more and more goes to rent.
The bigger the city, the deeper the poverty; the bigger the city the more
degradation, there are the almshouses and gaols filled to overflowing. It
is better for
the men who own the earth to have big cities — but for no one else.
Every man, woman, and child adds to the wealth of the land owner; the others
secure land upon which to live, and they must bid with each other for the
right to live. ... read the whole speech
Wyn Achenbaum: Eminent Domain and Government Giveaways
It seems to me that there are better ways than eminent domain to provide the
incentives that will lead the private sector to develop
choice land. ...
While at one time this area might have been an appropriate place for a neighborhood
of single family homes, it appeared to me that that time had passed a decade
or so ago. It seemed to me that the path of progress would -- if the incentives
were logical and the market responsive to signals -- have caused the private
sector to have redeveloped that site. Such re-development might have been painful
to the residents of the neighborhood, but would have put now-choice land to
a higher and better use than single-family homes.
But our system wasn't designed to send signals all that well -- Connecticut law
required properties to be reassessed once every decade (and I've heard that once
in early '70s and once in the late 80's was construed to satisfy that requirement).
Now assessments are required every 4 years (though my town decided it didn't
like the 2003
revaluation and is keeping the 1999 for a few more years).
But if the properties had been reassessed on a regular basis, with market-based
values assigned first to the land and the residual being assigned to the existing
buildings, the homeowners themselves would have been in a position to make their
own rational decisions on whether it was worth it to them to continue to occupy
extremely valuable land (and pay the taxes on it), or more to their advantage
to accept an offer from someone who was prepared to put it to a higher and better
use, and take that equity and buy elsewhere. ...
Our land, particularly the best-located land, is a common asset on which
we are all dependent. Allowing individuals or corporations to occupy it without
compensating the rest of us for its value is the underlying problem, and
that problem through good assessment and rational (that is, land value)
taxes is the way to solve it. When we do that, a lot of problems will begin
away. Read the whole article
Nic Tideman: Using
Policy to Promote Urban Growth
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
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.
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
- 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
- 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
Henry George, author of Progress and
Poverty, argued that, while some forms of wealth are produced
by human activity, and are rightly the property of the producers
(or those who have obtained them from the previous owners by voluntary
gift or exchange), land and natural resources are bestowed by God
on the human race, and that every one of the N inhabitants of the
earth has a claim to 1/Nth of the coal beds, 1/Nth of the oil wells,
1/Nth of the mines, and 1/Nth of the fertile soil. God wills a society
where everyone may sit in peace under his own vine and his own fig
The Law of Moses undertook to implement this by making the ownership
of land hereditary, with a man's land divided among his sons (or, in
the absence of sons, his daughters), and prohibiting the permanent
sale of land. (See Leviticus 25:13-17,23.) The most a man might do
with his land is sell the use of it until the next Jubilee year, an
amnesty declared once every fifty years, when all debts were cancelled
and all land returned to its hereditary owner.
Henry George's proposed implementation is to tax all land at about
99.99% of its rental value, leaving the owner of record enough to cover
his bookkeeping expenses. The resulting revenues would be divided equally
among the natural owners of the land, viz. the people of the country,
with everyone receiving a dividend check regularly for the use of his
share of the earth (here I am anticipating what I think George would
have suggested if he had written in the 1990's rather than the 1870's).
This procedure would have the effect of making the sale price of a
piece of land, not including the price of buildings and other improvements
on it, practically zero. The cost of being a landholder would be, not
the original sale price, but the tax, equivalent to rent. A man who
chose to hold his "fair share," or 1/Nth of all the land,
would pay a land tax about equal to his dividend check, and so would
break even. By 1/Nth of the land is meant land with a value equal to
1/Nth of the value of all the land in the country.
Naturally, an acre in the business district of a great city would
be worth as much as many square miles in the open country. Some would
prefer to hold more than one N'th of the land and pay for the privilege.
Some would prefer to hold less land, or no land at all, and get a small
annual check representing the dividend on their inheritance from their
Note that, at least for the able-bodied, this solves the problem of
poverty at a stroke. If the total land and total labor of the world
are enough to feed and clothe the existing population, then 1/Nth of
the land and 1/Nth of the labor are enough to feed and clothe 1/Nth
of the population. A family of 4 occupying 4/Nths of the land (which
is what their dividend checks will enable them to pay the tax on) will
find that their labor applied to that land is enough to enable them
to feed and clothe themselves. Of course, they may prefer to apply
their labor elsewhere more profitably, but the situation from which
we start is one in which everyone has his own plot of ground from which
to wrest a living by the strength of his own back, and any deviation
from this is the result of voluntary exchanges agreed to by the parties
directly involved, who judge themselves to be better off as the result
of the exchanges.
Some readers may think this a very radical proposal. In fact, it is
extremely conservative, in the sense of being in agreement with historic
ideas about land ownership as opposed to ownership of, say, tools or
vehicles or gold or domestic animals or other movables. The laws of
English-speaking countries uniformly distinguish between real property
(land) and personal property (everything else). In this context, "real" is
not the opposite of "imaginary." It is a form of the word "royal," and
means that the ultimate owner of the land is the king, as symbol of
the people. Note that English-derived law does not recognize "landowners." The
term is "landholders." The concept of eminent domain is that
the landholder may be forced to surrender his landholdings to the government
for a public purpose. Historically, eminent domain does not apply to
property other than land, although complications arise when there are
buildings on the land that is being seized.
I will mention in passing that the proposals of Henry
George have attracted support from persons as diverse
as Felix Morley, Aldous
Huxley, Woodrow Wilson, Helen Keller, Winston
Churchill, Leo Tolstoy, William
F Buckley Jr, and Sun Yat-sen. To the Five Nobel
Prizes authorized by Alfred Nobel himself there has been
added a sixth, in Economics, and the Henry George Foundation
claims eight of the Economics
Laureates as supporters, in whole or in part, of
the proposals of Henry George (Paul Samuelson, 1970; Milton
Friedman, 1976; Herbert A Simon, 1978; James Tobin,
1981; Franco Modigliani, 1985; James M Buchanan, 1986;
Robert M Solow, 1987; William
S Vickrey, 1996).
The immediate concrete proposal favored by most Georgists today is
that cities shall tax land within their boundaries at a higher rate
than they tax buildings and other improvements on the land. (In case
anyone is about to ask, "How can we possibly distinguish between
the value of the land and the value of the buildings on it?" let
me assure you that real estate assessors do it all the time. It is
standard practice to make the two assessments separately, and a parcel
of land in the business district of a large city very often has a different
owner from the building on it.) Many cities have moved to a system
of taxing land more heavily than improvements, and most have been pleased
with the results, finding that landholders are more likely to use their
land productively -- to their own benefit and that of the public --
if their taxes do not automatically go up when they improve their land
by constructing or maintaining buildings on it.
An advantage of this proposal in the eyes of many is that it is a
Fabian proposal, "evolution, not revolution," that it is
incremental and reversible. If a city or other jurisdiction does not
like the results of a two-level tax system, it can repeal the arrangement
or reduce the difference in levels with no great upheaval. It is not
like some other proposals of the form, "Distribute all wealth
justly, and make me absolute dictator of the world so that I can supervise
the distribution, and if it doesn't work, I promise to resign." The
problem is that absolute dictators seldom resign. ... read
the whole article