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Full
Employment
Mason Gaffney: Full
Employment, Growth And Progress On A Small Planet:
Relieving Poverty While Healing The Earth
George’s core ideas include a formula for achieving full employment and relieving the poverty of the landless without any need to extend the bounds of settlement nearly as far as has already occurred. It is a matter of substituting labor for land, in many respects and dimensions, as sketched above. It is not a matter of going against the market, primarily, for well-oiled markets contain their own price incentives to foster approprate technology. It is a matter, rather, of removing tax biases that presently warp the market the wrong ways. There are some crudities, errors and omissions in George’s writings, but none of them is central or powerful enough to annul the relevant core of truth. Read the whole article
Herbert J. G. Bab: Property Tax -- Cause of Unemployment ... Under the impact of spectacular advances in
technology the actual level of employment and production falls short of
the full use of our manpower and industrial capacity. ...
In view of this it would be difficult to contend that we have solved the twin problems of full employment and economic growth. The truth is that we have lived all these postwar years on borrowed time. What have these considerations to do with property taxation? The purpose of my talk is to show that the relation of property taxation to unemployment and lack of economic growth is that of cause to effect. I shall try to explain why I believe that property taxation is one of the two chief villains in the drama we are witnessing today in these United States. The other villain is the monetary policy pursued by the government, which has increased the cost of borrowing to a point where it stifles the growth of the economy. In this context however I shall be concerned only with property taxation. ... An analysis of the social and economic effects of a particular tax system would indicate the third criterion. When analysing property taxes we shall distinguish between that part of the tax which is assessed on improvements and that part which is assessed on land. That part of the tax that is assessed on buildings penalizes everybody who improves his land, his buildings or intends to construct residential, commercial or industrial property. The most serious incidence of property taxes is on new housing. When rental property or houses are newly constructed these taxes add 15 to 20% to the annual cost depending on assessment practices and tax rates. ... The ever widening gap between the level of rentals and the urban family income constitutes a rental squeeze, which has brought untold misery and hardship to families in the lower income group, especially to those belonging to minority groups. The rental squeeze has also aggravated overcrowding and slum conditions. In the press, on the radio and on television we are often warned about the threat of inflation. Hardly ever are we told, that the increase in the cost of living is to a large extent due to the increase in housing costs brought about by the housing shortage. The inflationary effects of property taxation are reinforced by the fact that property taxes themselves are included in the cost of living index and that property tax rates have the tendency to rise. To the extent that property taxes discourage residential construction and the improvement and modernization of homes they create unemployment. The housing construction industry employed about 2,200,000 people in 1962, that is about 1.4 persons per housing unit. Any change in the direction of home building employment is multiplied 2.57 times. Thus an increase in housing starts by 50% would give employment to 2.8 million persons. An increase by about 66.6% or by 2/3 would create about 3.6 million jobs. These figures do not take into consideration the investment in public utilities, streets, schools etc., that would be required to service these additional housing units. ... For these reasons increases in land values can be prevented by taxing land at an appropriate rate. Yet urban land values have increased tremendously during recent years. For instance in Los Angeles county the assessed value of land increased from $1,972 millions in 1952 to $4,002 millions in 1962, an increase of a little over 100%. The assessed values, are supposed to represent 25% of the market value. Thus the unearned increment in land values during this period amounted to not less than $8 billions. Even this figure is an understatement because it is based on assessed values and land is greatly underassessed. While land values have risen by about 10% yearly, property taxes assessed on land averaged about 1.5%. Thus a person owning vacant or underimproved land would have earned about 8 1/2% per year just by withholding land from its proper use. A higher tax on vacant or unimproved land would make it unprofitable to hold such lands. It will tax land into better use and it will lead to a spurt in construction activity. While all other taxes are deterrents to employment and economic growth, though to a varying extent, land taxes are the only genuine incentive taxes. Inflated land values must necessarily increase the cost of new homes, the cost of home-ownership and rentals. It discourages residential construction, prices many families out of the housing market and aggravates the housing shortage. ... The most serious defect in the administration of property taxation is the continuous, widespread and enormous underassessment of land. A survey made recently found that in 9 California counties, vacant lots and acreage were assessed at only 5.3% of the cash value, while residential property was assessed at 19.3% of its value. The illegal underassessment of land deprives local governments of millions of dollars of revenues. Moreover, it further aggravates the serious defects of property taxation. We have analyzed the effects of property taxation on improvements as distinguished from those caused by the incidence of these taxes on land.
The
paradox of property taxation
consists in the fact that lower rates on improvements produce the same
results as higher rates on land and conversely higher rates on
improvements produce the same results as lower rates on land.
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