When people first learn about Land Value Taxation, one of their first reactions is often "wouldn't it be extremely tough on farmers?" It turns out that this is not the case, for a couple of reasons.

First, farm land is not particularly valuable land relative to urban land or even land in the center of a small town.

Second, compared to residential and commercial property, it turns out that farms tend to have a lower share of their total value in land, because (a) farming requires a number of different kinds of buildings; and (b) farming requires a lot of equipment, which may be subject to property taxes.

Land value taxation asks us each to pay our share of taxes based on our land value's share of total land value within the taxing entity. It says that the value of the improvements we or previous owners have made to the land are inherently private, but that the land value, which the individual owner can't claim credit for, is fair game for taxation.

Land value taxation is good for farmers in another important way: it acts to slow, and even reverse, urban sprawl. By providing the incentives to put centrally located land to its highest and best use, land value taxation prevents the premature development of land on the fringe. Farmland stays farmland. Wilderness stays wilderness. We don't end up with checkerboard development and long commutes.

H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty: 12. Effect of Remedy Upon Various Economic Classes (in the unabridged P&P: Part IX: Effects of the Remedy — Chapter 3. Of the effect upon individuals and classes)

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. ...

And so with the farmer. I speak not now of the farmers who never touch the handles of a plow, but of the working farmers who constitute such a large class in the United States -- men who own small farms, which they cultivate with the aid of their boys, and perhaps some hired help, and who in Europe would be called peasant proprietors. Paradoxical as it may appear to these men until they understand the full bearings of the proposition, of all classes above that of the mere laborer they have most to gain by placing all taxes upon the value of land. That they do not now get as good a living as their hard work ought to give them, they generally feel, though they may not be able to trace the cause. The fact is that taxation, as now levied, falls on them with peculiar severity. They are taxed on all their improvements -- houses, barns, fences, crops, stock. The personal property which they have cannot be as readily concealed or undervalued as can the more valuable kinds which are concentrated in the cities. They are not only taxed on personal property and improvements, which the owners of unused land escape, but their land is generally taxed at a higher rate than land held on speculation, simply because it is improved. But further than this, all taxes imposed on commodities, and especially the taxes which, like our protective duties, are imposed with a view of raising the prices of commodities, fall on the farmer without mitigation.

The farmer would be a great gainer by the substitution of a single tax upon the value of land for all these taxes, for the taxation of land values would fall with greatest weight, not upon the agricultural districts, where land values are comparatively small, but upon the towns and cities where land values are high; whereas taxes upon personal property and improvements fall as heavily in the country as in the city. And in sparsely settled districts there would be hardly any taxes at all for the farmer to pay. For taxes, being levied upon the value of the bare land, would fall as heavily upon unimproved as upon improved land. Acre for acre, the improved and cultivated farm, with its buildings, fences, orchard, crops, and stock, could be taxed no more than unused land of equal quality. The result would be that speculative values would be kept down, and that cultivated and improved farms would have no taxes to pay until the country around them had been well settled. In fact, paradoxical as it may at first seem to them, the effect of putting all taxation upon the value of land would be to relieve the harder working farmers of all taxation.*

*Let us remember that fertility elements put into the soil -- or maintained through constant renewal -- are in the economic sense, capital rather than land, and under Henry George's plan would not be taxed. The farmer who builds up, or maintains, the fertility of his land, would not have to pay any higher tax than if he kept it in run-down condition and with no buildings, orchards or other improvements on it. H.G.B

But the great gain of the working farmer can be seen only when the effect upon the distribution of population is considered. ...

...In short, the working farmer is both a laborer and a capitalist, as well as a landowner, and it is by his labor and capital that his living is made. His loss would be nominal; his gain would be real and great. In varying degrees is this true of all landholders. Many landholders are laborers of one sort or another. This measure would make no one poorer but such as could be made a great deal poorer without being really hurt. It would cut down great fortunes, but it would impoverish no one. ... read the whole chapter

Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)

Q53. How would the single tax effect the farmer?
A. It would greatly reduce his taxes. His buildings, stock, and crops would be exempt. His land is at present assessed at nearly twice its proper unimproved value, while town and city land is often valued at less than one half its actual value, thus subjecting him to a more than fourfold disadvantage. ... read the whole article

Alanna Hartzok: Earth Rights Democracy: Public Finance based on Early Christian Teachings

100 years ago, American Georgists made a big point that city land outvalues rural land many times over. One implication is that taxing city land is taxing the rich, and we can ignore farmland. Some land-taxers counsel that farmers are easily misled to oppose us, so leave them alone and convert the cities. But rich city folks also own choice rural lands.

• The Hearst palace at San Simeon sits amid 82,000 manorial acres, including miles of prime shoreline, "improved" with just one home per 82,000 acres. This home, jammed with imported treasures, had become a white elephant even before Citizen Kane uttered his final "Rosebud." The heirs were glad to fob it off onto the taxpayers of California, deducting its alleged value from their taxable incomes, while they kept the 82,000 acres.
• Craig McCaw, who made his billions by amassing spectrum licenses, turned some of the pile into a spread of many thousands of acres stretching north from Big Sur -- land he never got around to using.
• The O'Neill families and Donald Bren of Orange County,
• the Newhall family of Ventura County,
• the Chandler family that owns the Tejon and Boswell empires that spread over several counties,
• Ted Turner who owns over a million acres around the U.S.;
• the Koch brothers of Kansas with all their oil wells,
• the Kleberg tribe with their million-acre King Ranch in Texas;
• the Southern Pacific Railroad (now Catellus Co.),
• Standard Oil:

The privilege of use-value assessment stretches even beyond farmlands, vast as they are. Timberland in most states gets the same preferred treatment, only better. About 1/3 of the privately owned land in the U.S. is in timber. In California, owners (mostly huge corporations) may put the land into the "TPZ" class. The standing timber is then exempt, and taxed only at harvest, at 2.9%, much too low a rate to make up for a 60-year lifetime of exemption. County assessors have to value the land separately on its putative value for growing timber, following a State-legislated formula that is tailored drastically to understate even that low value (California Revenue and Tax Code, Section 434.5). Much of that land, though, has alternative uses, e.g. for retirement and vacation homes and resorts, the outliers and pioneers of urban sprawl. There are also mineral values, hunting, fishing, rifle ranges, grazing, campsites, tourism, rights of way, lumber camps, loading sites, water sources, lakes, log storage, landings - there are many things to do with 1/3 of a nation's land. Those uses are all declared "compatible" with timber, hence land values derived therefrom are tax-exempt.  Read the whole article

Mason Gaffney -- Cannan's Law

Mason Gaffney:  The Power of Neo-classical Economics (Introduction to The Corruption of Economics, London: Shepheard-Walwyn, 1994)

Mason Gaffney: The Relationship Between Property Taxation and the Concentration of Farm Land Ownership

Mason Gaffney:  Rising Inequality and Falling Property Tax Rates

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.

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.

• rising acreages mean there are fewer farms overall.
• Rising labor prices per farm mean aspiring farmers who lack prior wealth can no longer buy in.
• Rising Gini Ratios mean acreage is less equally shared among a given number of farms.
• Rising Gamma factors mean the higher quality land is moving into bigger farms.
• The Gamma data are confirmed by rising shares of cropland and irrigated land in vast farms.
• Rising P/C ratios reflect a higher LSREV, and they mean it is harder for a newcomer to acquire any farm acres.

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.

• First, building wealth is more equally distributed than land wealth.
• Second, the property tax would be more progressive if changed to a pure land tax, exempting buildings.
• Third, many latifundia are not being used to their potential, while capital on some small farms is undercomplemented with land. I support the case first using national data, and then by comparing states.

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.  ...

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. ...

CONCLUSION

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

Bill Batt: Stemming Sprawl: The Fiscal Approach

Just as recovering the costs of transportation service equilibrates costs and benefits on one side of the equation, recovering the economic rent accruing to land value facilitates efficient space configurations on the other side. Figure 10.2, again conceptually, portrays how the collection of various transportation user fees as well as the recovery of land rent corrects the economic distortions that today result in sprawl development. The shaded area indicates the pricing correctives necessary to ensure that neither urban nor rural land sites are disadvantaged in travel or location choices that individuals make for either residential or commercial purposes.

As it happens, collecting land rent is a relatively simple operation: It involves a small computer adjustment in the assessment base of what is now the local real property tax. The real property tax to an economist is really two separate taxes: that put on land value and that put on improvement values. A gradual phaseout of the tax on the improvement component, shifting totally to a tax on the land, recovers economic rent in a way that satisfies all the principles of sound tax theory.[35] It is efficient, neutral, equitable, administrate, stable, and simple. It is also absolutely foolproof: One cannot hide land or take it to a remote tax haven. It relieves poor households (who typically own no land) of any tax burden and rewards those titleholders who use their sites efficiently. High-value sites are induced to construct high-value improvements, and low-value sites are left alone. In this way, central locations, where commercial enterprises typically locate, pay according to their intensity; home owners, who typically locate at the periphery of a neighborhood community, pay moderately; and agricultural land and forestlands pay little if anything. By an automatic and natural process, the centrifugal forces of sprawl development are reversed, and investment is encouraged in core locales. The higher density resulting affords the necessary ten to twelve households per acre (or the commercial equivalent) that makes public transportation service economically viable, lessening the prospect of automobile dependency.[36] ... read the whole article

Charles T. Root — Not a Single Tax! (1925)

Under the normal system which this article advocates, the user of land would pay substantially the same economic rent as now, for the reason that economic rent is fixed by the payer and not by the payee; but it would be paid to the credit of the community instead of for the benefit of the individual landowner. And the economic rent is all the land user would have to pay; no taxes on industry or personal product and no other forced contribution for governmental purposes.

It follows that, under the normal system, the holder of unimproved land would usually contribute more than at present toward the expenses of government, while the holder of well improved property would contribute, in most instances, less than the total of his present taxes.

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 to 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 drawing 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 the first.

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. ... read the whole article

Karl Williams:  Land Value Taxation: The Overlooked But Vital Eco-Tax