When we build infrastructure — roads, sewage systems,
shared water supplies, schools, libraries, hospitals, highways, public
transportation, bridges, etc. — we build communities. We make the
land served by those amenities far more valuable than it would be in
those amenities. Shopping centers and office buildings seldom get built
far away from infrastructure.
Who should pay for infrastructure? How should they pay for it?
Does it make sense to pay for infrastructure through taxes on wages?
Does it make sense to pay for infrastructure through taxing capital?
Or does it make sense to pay for infrastructure by taxing land value? This website
argues that the legitimate way to pay for infrastructure spending is
by taxing land value. If we tax land value fully, and that still isn't
enough to pay for all the infrastructure we feel it appropriate to build
and maintain, then, yes, it may be desirable to supplement taxes on land
value with taxes on work or on trade. But don't tax them first!
Think, too, about the effects of building infrastructure in other countries.
Who benefits? All the residents? Mostly those who own their own homes and
business places? How about the tenants? Do they benefit, or is it their landlord,
because they simply end up paying their landlords more rent for the
Henry George: The Condition of
Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)
God’s laws do not change. Though their applications may alter with
altering conditions, the same principles of right and wrong that hold when
men are few and industry is rude also hold amid teeming populations and complex
industries. In our cities of millions and our states of scores of millions,
in a civilization where the division of labor has gone so far that large
numbers are hardly conscious that they are land-users, it still remains true
that we are all land animals and can live only on land, and that land is
God’s bounty to all, of which no one can be deprived without being
murdered, and for which no one can be compelled to pay another without being
robbed. But even in a state of society where the elaboration of industry
and the increase of permanent improvements have made the need for private
possession of land wide-spread, there is no difficulty in conforming individual
possession with the equal right to land. For as soon as any piece of land
will yield to the possessor a larger return than is had by similar labor
on other land a value attaches to it which is shown when it is sold or rented.
Thus, the value of the land itself, irrespective of the value of any improvements
in or on it, always indicates the precise value of the benefit to which all
are entitled in its use, as distinguished from the value which, as producer
or successor of a producer, belongs to the possessor in individual right.
To combine the advantages of private possession with the justice of common
ownership it is only necessary therefore to take for common uses what value
attaches to land irrespective of any exertion of labor on it. The principle
is the same as in the case referred to, where a human father leaves equally
to his children things not susceptible of specific division or common use.
In that case such things would be sold or rented and the value equally applied.
It is on this common-sense principle that we, who term ourselves single-tax
men, would have the community act.
We do not propose to assert equal rights to land by keeping land common,
letting any one use any part of it at any time. We do not propose the task,
impossible in the present state of society, of dividing land in equal shares;
still less the yet more impossible task of keeping it so divided.
We propose — leaving land in the private possession of individuals,
with full liberty on their part to give, sell or bequeath it — simply
to levy on it for public uses a tax that shall equal the annual value of
the land itself, irrespective of the use made of it or the improvements on
it. And since this would provide amply for the need of public revenues, we
would accompany this tax on land values with the repeal of all taxes now
levied on the products and processes of industry — which taxes, since
they take from the earnings of labor, we hold to be infringements of the
right of property.
This we propose, not as a cunning device of human ingenuity, but as a conforming
of human regulations to the will of God.
God cannot contradict himself nor impose on his creatures laws that clash.
If it be God’s command to men that they should not steal — that
is to say, that they should respect the right of property which each one
has in the fruits of his labor;
And if he be also the Father of all men, who in his common bounty has intended
all to have equal opportunities for sharing;
Then, in any possible stage of civilization, however elaborate, there must
be some way in which the exclusive right to the products of industry may
be reconciled with the equal right to land.
If the Almighty be consistent with himself, it cannot be, as say those socialists
referred to by you, that in order to secure the equal participation of men
in the opportunities of life and labor we must ignore the right of private
property. Nor yet can it be, as you yourself in the Encyclical seem to argue,
that to secure the right of private property we must ignore the equality
of right in the opportunities of life and labor. To say the one thing or
the other is equally to deny the harmony of God’s laws.
But, the private possession of land, subject to the payment to the community
of the value of any special advantage thus given to the individual, satisfies
both laws, securing to all equal participation in the bounty of the Creator
and to each the full ownership of the products of his labor. ...
Nor do we hesitate to say that this way of securing the equal right to the
bounty of the Creator and the exclusive right to the products of labor is
the way intended by God for raising public revenues. For we are not atheists,
who deny God; nor semi-atheists, who deny that he has any concern in politics
It is true as you say — a salutary truth too often forgotten — that “man
is older than the state, and he holds the right of providing for the life
of his body prior to the formation of any state.” Yet, as you too perceive,
it is also true that the state is in the divinely appointed order. For He
who foresaw all things and provided for all things, foresaw and provided
that with the increase of population and the development of industry the
organization of human society into states or governments would become both
expedient and necessary.
No sooner does the state arise than, as we all know, it needs revenues.
This need for revenues is small at first, while population is sparse, industry
rude and the functions of the state few and simple. But with growth of population
and advance of civilization the functions of the state increase and larger
and larger revenues are needed.
Now, He that made the world and placed man in it, He that pre-ordained civilization
as the means whereby man might rise to higher powers and become more and
more conscious of the works of his Creator, must have foreseen this increasing
need for state revenues and have made provision for it. That is to say: The
increasing need for public revenues with social advance, being a natural,
God-ordained need, there must be a right way of raising them — some
way that we can truly say is the way intended by God. It is clear that this
right way of raising public revenues must accord with the moral law.
It must not take from individuals what rightfully belongs to individuals.
It must not give some an advantage over others, as by increasing the prices
of what some have to sell and others must buy.
It must not lead men into temptation, by requiring trivial oaths, by making
it profitable to lie, to swear falsely, to bribe or to take bribes.
It must not confuse the distinctions of right and wrong, and weaken the
sanctions of religion and the state by creating crimes that are not sins,
and punishing men for doing what in itself they have an undoubted right to
It must not repress industry. It must not check commerce. It must not punish
thrift. It must offer no impediment to the largest production and the fairest
division of wealth.
Let me ask your Holiness to consider the taxes on the processes and products
of industry by which through the civilized world public revenues are collected — the
octroi duties that surround Italian cities with barriers; the monstrous customs
duties that hamper intercourse between so-called Christian states; the taxes
on occupations, on earnings, on investments, on the building of houses, on
the cultivation of fields, on industry and thrift in all forms. Can these
be the ways God has intended that governments should raise the means they
need? Have any of them the characteristics indispensable in any plan we can
deem a right one?
All these taxes violate the moral law. They take by force what belongs to
the individual alone; they give to the unscrupulous an advantage over the
scrupulous; they have the effect, nay are largely intended, to increase the
price of what some have to sell and others must buy; they corrupt government;
they make oaths a mockery; they shackle commerce; they fine industry and
thrift; they lessen the wealth that men might enjoy, and enrich some by impoverishing
Yet what most strikingly shows how opposed to Christianity is this system
of raising public revenues is its influence on thought.
Christianity teaches us that all men are brethren; that their true interests
are harmonious, not antagonistic. It gives us, as the golden rule of life,
that we should do to others as we would have others do to us. But out of
the system of taxing the products and processes of labor, and out of its
effects in increasing the price of what some have to sell and others must
buy, has grown the theory of “protection,” which denies this
gospel, which holds Christ ignorant of political economy and proclaims laws
of national well-being utterly at variance with his teaching. This theory
sanctifies national hatreds; it inculcates a universal war of hostile tariffs;
it teaches peoples that their prosperity lies in imposing on the productions
of other peoples restrictions they do not wish imposed on their own; and
instead of the Christian doctrine of man’s brotherhood it makes injury
of foreigners a civic virtue.
“By their fruits ye shall know them.” Can anything more clearly
show that to tax the products and processes of industry is not the way God
intended public revenues to be raised?
But to consider what we propose — the raising of public revenues by
a single tax on the value of land irrespective of improvements — is
to see that in all respects this does conform to the moral law.
Let me ask your Holiness to keep in mind that the value we propose to tax,
the value of land irrespective of improvements, does not come from any exertion
of labor or investment of capital on or in it — the values produced
in this way being values of improvement which we would exempt. The value
of land irrespective of improvement is the value that attaches to land by
reason of increasing population and social progress. This is a value that
always goes to the owner as owner, and never does and never can go to the
user; for if the user be a different person from the owner he must always
pay the owner for it in rent or in purchase-money; while if the user be also
the owner, it is as owner, not as user, that he receives it, and by selling
or renting the land he can, as owner, continue to receive it after he ceases
to be a user.
Thus, taxes on land irrespective of improvement cannot lessen the rewards
of industry, nor add to prices,* nor in any way take from the individual
what belongs to the individual. They can take only the value that attaches
to land by the growth of the community, and which therefore belongs to the
community as a whole.
* As to this point it may be well to add that all economists
are agreed that taxes on land values irrespective of improvement or use — or
what in the terminology of political economy is styled rent, a term distinguished
from the ordinary use of the word rent by being applied solely to payments
for the use of land itself — must be paid by the owner and cannot
be shifted by him on the user. To explain in another way the reason given
in the text: Price is not determined by the will of the seller or the
will of the buyer, but by the equation of demand and supply, and therefore
as to things constantly demanded and constantly produced rests at a point
determined by the cost of production — whatever tends to increase
the cost of bringing fresh quantities of such articles to the consumer
increasing price by checking supply, and whatever tends to reduce such
cost decreasing price by increasing supply. Thus taxes on wheat or tobacco
or cloth add to the price that the consumer must pay, and thus the cheapening
in the cost of producing steel which improved processes have made in
recent years has greatly reduced the price of steel. But land has no
cost of production, since it is created by God, not produced by man.
Its price therefore is fixed —
1 (monopoly rent), where land is held in close monopoly,
by what the owners can extract from the users under penalty of deprivation
and consequently of starvation, and amounts to all that common labor
can earn on it beyond what is necessary to life;
2 (economic rent proper), where there is no special monopoly, by what the
particular land will yield to common labor over and above what may be had
by like expenditure and exertion on land having no special advantage and
for which no rent is paid; and,
3 (speculative rent, which is a species of monopoly rent, telling particularly
in selling price), by the expectation of future increase of value from
social growth and improvement, which expectation causing landowners to
withhold land at present prices has the same effect as combination.
Taxes on land values or economic rent can therefore never
be shifted by the landowner to the land-user, since they in no wise increase
the demand for land or enable landowners to check supply by withholding
land from use. Where rent depends on mere monopolization, a case I mention
because rent may in this way be demanded for the use of land even before
economic or natural rent arises, the taking by taxation of what the landowners
were able to extort from labor could not enable them to extort any more,
since laborers, if not left enough to live on, will die. So, in the case
of economic rent proper, to take from the landowners the premiums they
receive, would in no way increase the superiority of their land and the
demand for it. While, so far as price is affected by speculative rent,
to compel the landowners to pay taxes on the value of land whether they
were getting any income from it or not, would make it more difficult
for them to withhold land from use; and to tax the full value would not
merely destroy the power but the desire to do so.
To take land values for the state, abolishing all taxes on the products
of labor, would therefore leave to the laborer the full produce of labor;
to the individual all that rightfully belongs to the individual. It would
impose no burden on industry, no check on commerce, no punishment on thrift;
it would secure the largest production and the fairest distribution of wealth,
by leaving men free to produce and to exchange as they please, without any
artificial enhancement of prices; and by taking for public purposes a value
that cannot be carried off, that cannot be hidden, that of all values is
most easily ascertained and most certainly and cheaply collected, it would
enormously lessen the number of officials, dispense with oaths, do away with
temptations to bribery and evasion, and abolish man-made crimes in themselves
But, further: That God has intended the state to obtain the revenues it
needs by the taxation of land values is shown by the same order and degree
of evidence that shows that God has intended the milk of the mother for the
nourishment of the babe.
See how close is the analogy. In that primitive condition ere the need for
the state arises there are no land values. The products of labor have value,
but in the sparsity of population no value as yet attaches to land itself.
But as increasing density of population and increasing elaboration of industry
necessitate the organization of the state, with its need for revenues, value
begins to attach to land. As population still increases and industry grows
more elaborate, so the needs for public revenues increase. And at the same
time and from the same causes land values increase. The connection is invariable.
The value of things produced by labor tends to decline with social development,
since the larger scale of production and the improvement of processes tend
steadily to reduce their cost. But the value of land on which population
centers goes up and up. Take Rome or Paris or London or New York or Melbourne.
Consider the enormous value of land in such cities as compared with the value
of land in sparsely settled parts of the same countries. To what is this
due? Is it not due to the density and activity of the populations of those
cities — to the very causes that require great public expenditure for
streets, drains, public buildings, and all the many things needed for the
health, convenience and safety of such great cities? See how with the growth
of such cities the one thing that steadily increases in value is land; how
the opening of roads, the building of railways, the making of any public
improvement, adds to the value of land. Is it not clear that here is a natural
law — that is to say a tendency willed by the Creator? Can it mean
anything else than that He who ordained the state with its needs has in the
values which attach to land provided the means to meet those needs?
That it does mean this and nothing else is confirmed if we look deeper still,
and inquire not merely as to the intent, but as to the purpose of the intent.
If we do so we may see in this natural law by which land values increase
with the growth of society not only such a perfectly adapted provision for
the needs of society as gratifies our intellectual perceptions by showing
us the wisdom of the Creator, but a purpose with regard to the individual
that gratifies our moral perceptions by opening to us a glimpse of his beneficence.
Consider: Here is a natural law by which as society advances the one thing
that increases in value is land — a natural law by virtue of which
all growth of population, all advance of the arts, all general improvements
of whatever kind, add to a fund that both the commands of justice and the
dictates of expediency prompt us to take for the common uses of society.
Now, since increase in the fund available for the common uses of society
is increase in the gain that goes equally to each member of society, is it
not clear that the law by which land values increase with social advance
while the value of the products of labor does not increase, tends with the
advance of civilization to make the share that goes equally to each member
of society more and more important as compared with what goes to him from
his individual earnings, and thus to make the advance of civilization lessen
relatively the differences that in a ruder social state must exist between
the strong and the weak, the fortunate and the unfortunate? Does it not show
the purpose of the Creator to be that the advance of man in civilization
should be an advance not merely to larger powers but to a greater and greater
equality, instead of what we, by our ignoring of his intent, are making it,
an advance toward a more and more monstrous inequality? ...
But worse perhaps than all else is the way in which this substituting of
vague injunctions to charity for the clear-cut demands of justice opens an
easy means for the professed teachers of the Christian religion of all branches
and communions to placate Mammon while persuading themselves that they are
serving God. Had the English clergy not subordinated the teaching of justice
to the teaching of charity — to go no further in illustrating a principle
of which the whole history of Christendom from Constantine’s time to
our own is witness — the Tudor tyranny would never have arisen, and
the separation of the church been averted; had the clergy of France never
substituted charity for justice, the monstrous iniquities of the ancient
régime would never have brought the horrors of the Great Revolution;
and in my own country had those who should have preached justice not satisfied
themselves with preaching kindness, chattel slavery could never have demanded
the holocaust of our civil war.
No, your Holiness; as faith without works is dead, as men cannot give to
God his due while denying to their fellows the rights be gave them, so charity
unsupported by justice can do nothing to solve the problem of the existing
condition of labor. Though the rich were to “bestow all their goods
to feed the poor and give their bodies to be burned,” poverty would
continue while property in land continues.
Take the case of the rich man today who is honestly desirous of devoting
his wealth to the improvement of the condition of labor. What can he do?
- Bestow his wealth on those who need it? He may help some who deserve
it, but will not improve general conditions. And against the good he may
do will be the danger of doing harm.
- Build churches? Under the shadow of churches poverty festers and the
vice that is born of it breeds.
- Build schools and colleges? Save as it may lead men to see the iniquity
of private property in land, increased education can effect nothing for
mere laborers, for as education is diffused the wages of education sink.
- Establish hospitals? Why, already it seems to laborers that there are
too many seeking work, and to save and prolong life is to add to the pressure.
- Build model tenements? Unless he cheapens house accommodations he but
drives further the class he would benefit, and as he cheapens house accommodations
he brings more to seek employment and cheapens wages.
- Institute laboratories, scientific schools, workshops for physical experiments?
He but stimulates invention and discovery, the very forces that, acting
on a society based on private property in land, are crushing labor as between
the upper and the nether millstone.
- Promote emigration from places where wages are low to places where they
are somewhat higher? If he does, even those whom he at first helps to emigrate
will soon turn on him to demand that such emigration shall be stopped as
reducing their wages.
- Give away what land he may have, or refuse to take rent for it, or let
it at lower rents than the market price? He will simply make new landowners
or partial landowners; he may make some individuals the richer, but he
will do nothing to improve the general condition of labor.
- Or, bethinking himself of those public-spirited citizens of
classic times who spent great sums in improving their native cities,
shall he try
to beautify the city of his birth or adoption? Let him widen and straighten
narrow and crooked streets, let him build parks and erect fountains, let
him open tramways and bring in railroads, or in any way make beautiful
and attractive his chosen city, and what will be the result? Must it not
be that those who appropriate God’s bounty will take his also? Will
it not be that the value of land will go up, and that the net result of
his benefactions will be an increase of rents and a bounty to landowners?
Why, even the mere announcement that he is going to do such things will
start speculation and send up the value of land by leaps and bounds.
What, then, can the rich man do to improve the condition of labor?
He can do nothing at all except to use his strength for the abolition of
the great primary wrong that robs men of their birthright. The justice of
God laughs at the attempts of men to substitute anything else for it. ... read the whole letter
Henry George: The Wages of
Take Rome, or Paris, or London,
or New York, or Melbourne.
Consider the enormous value of land in such cities as compared with the
value of land in sparsely settled parts of the same countries. To what
is this due? Is it not due to the density and activity of the
populations of those cities – to the very causes that require great
public expenditure for streets, drains, public buildings, and all the
many things needed for the health, convenience, and safety of such
great cities? See how with the growth of such cities the one thing that
steadily increases in value is land; how the opening of roads, the
building of railways, the making of any public improvement, adds to the
value of land.
... read the whole article
Henry George: The
Increasing Importance of Social Questions (Chapter 1 of Social
 In the rude beginning, each family produces its own food, makes its
own clothes, builds its own house, and, when it moves, furnishes its own
transportation. Compare with this independence the intricate interdependence
of the denizens of a modern city. They may supply themselves with greater
certainty, and in much greater variety and abundance, than the savage; but
it is by the cooperation of thousands. Even the water they drink, and the
artificial light they use, are brought to them by elaborate machinery, requiring
the constant labor and watchfulness of many men. They may travel at a speed
incredible to the savage; but in doing so resign life and limb to the care
of others. A broken rail, a drunken engineer, a careless switchman, may hurl
them to eternity. And the power of applying labor to the satisfaction of
desire passes, in the same way, beyond the direct control of the individual.
The laborer becomes but part of a great machine, which may at any time be
paralyzed by causes beyond his power, or even his foresight. Thus does the
well-being of each become more and more dependent upon the well-being of
all — the individual more and more subordinate to society.
 In a simpler state master and man, neighbor and neighbor, know each
other, and there is that touch of the elbow which, in times of danger, enables
society to rally. But present tendencies are to the loss of this. In London,
dwellers in one house do not know those in the next; the tenants of adjoining
rooms are utter strangers to each other. Let civil conflict break or paralyze
the authority that preserves order and the vast population would become a
terror-stricken mob, without point of rally or principle of cohesion, and
your London would be sacked and burned by an army of thieves. London is only
the greatest of great cities. What is true of London is true of New York,
and in the same measure true of the many cities whose hundreds of thousands
are steadily growing toward millions. These vast aggregations of humanity,
where he who seeks isolation may find it more truly than in the desert; where
wealth and poverty touch and jostle; where one revels and another starves
within a few feet of each other, yet separated by as great a gulf as that
fixed between Dives in Hell and Lazarus in Abraham's bosom — they are
centers and types of our civilization. Let jar or shock dislocate the complex
and delicate organization, let the policeman's club be thrown down or wrested
from him, and the fountains of the great deep are opened, and quicker than
ever before chaos comes again. Strong as it may seem, our civilization is
evolving destructive forces. Not desert and forest, but city slums and country
roadsides are nursing the barbarians who may be to the new what Hun and Vandal
were to the old.
 The evils that begin to appear spring from the fact that the application
of intelligence to social affairs has not kept pace with the application
of intelligence to individual needs and material ends. Natural science strides
forward, but political science lags. With all our progress in the arts which
produce wealth, we have made no progress in securing its equitable distribution.
Knowledge has vastly increased; industry and commerce have been revolutionized;
but whether free trade or protection is best for a nation we are not yet
agreed. We have brought machinery to a pitch of perfection that, fifty years
ago, could not have been imagined; but, in the presence of political corruption,
we seem as helpless as idiots. The East River bridge is a crowning triumph
of mechanical skill; but to get it built a leading citizen of Brooklyn had
to carry to New York sixty thousand dollars in a carpet bag to bribe New
York aldermen. The human soul that thought out the great bridge is prisoned
in a crazed and broken body that lies bedfast, and could watch it grow only
by peering through a telescope. Nevertheless, the weight of the immense mass
is estimated and adjusted for every inch. But the skill of the engineer could
not prevent condemned wire being smuggled into the cable. ...
read the entire essay
Winston Churchill: The
enterprise only undertaken after the land monopolist has skimmed the
cream off for himself It does not matter where you
look or what examples you select, you will
see that every form of enterprise, every step in material progress, is
only undertaken after the land monopolist has skimmed the cream off for
himself, and everywhere today the man or the public body who wishes to
put land to its highest use is forced to pay a preliminary fine in land
values to the man who is putting it to an inferior use, and in some
cases to no use at all. All comes back to the land value, and its owner
for the time being is able to levy his toll upon all other forms of
wealth and upon every form of industry. A portion, in some cases the whole, of
every benefit which is laboriously acquired by the community is
represented in the land value, and finds its way automatically into the
landlord's pocket. If there is a rise in wages, rents are able
to move forward, because the workers can afford to pay a little more.
If the opening of a new railway or a
new tramway or the institution of
an improved service of workmen's trains or a lowering of fares or a new
invention or any other public convenience affords a benefit to the
workers in any particular district, it becomes easier for them to live,
and therefore the landlord and the ground landlord, one on top of the
other, are able to charge them more for the privilege of living there.
absorbs a share of almost every public and private benefit
- Some years ago in London there was a tollbar on a bridge across the
Thames, and all the working people who lived on the south side
river had to pay a daily toll of one penny for going and returning from
their work. The spectacle of these poor people thus mulcted on so large
a proportion of their earnings appealed to the public conscience, an
agitation was set on foot, municipal authorities were roused, and at
the cost of the ratepayers the bridge was freed and the toll removed. All
those people who used the bridge were saved sixpence a
a very short period from that time the rents on the south side of the
river were found to have advanced by about sixpence a week, or
amount of the toll which had been remitted.
- And a friend of mine was
telling me the other day that in the parish of Southwark about L350 a
year, roughly speaking, was given away in doles of bread by charitable
people in connection with one of the churches, and as a consequence of
this the competition for small houses, but more particularly for
single-roomed tenements, is, we are told, so great that rents are
considerably higher than in the neighbouring district. All goes back to
the land, and the landowner, who in many cases, in most cases, is a
worthy person utterly unconscious of the character of the methods by
which he is enriched, is enabled with resistless strength to absorb to
himself a share of almost every public and every private benefit,
however important or however pitiful those benefits may be.
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
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 value. ... Read the whole piece
Charles B. Fillebrown: A Catechism
of Natural Taxation, from Principles of
Natural Taxation (1917)
Q3. What is meant by economic rent?
A. Gross ground rent -- the annual site value of land -- what land, including
any quality or content of the land itself, is worth annually for use -- what
the land does or would command for use per annum if offered in open market
-- the annual value of the exclusive use in control of a given area of land,
involving the enjoyment of those "rights and privileges thereto pertaining" which
are stipulated in every title deed, and which, enumerated specifically, are
as follows: right and ease of access to
* water, and
* health inspection,
* fire protection,
* steam and electric railway service,
* gas and electric lighting,
* telegraph and telephone service,
* public schools,
* private schools,
* public buildings --
utilities which depend for their efficiency and economy on the character
of the government; which collectively constitute the economic and social
advantages of the land which are due to the presence and activity of population,
and are inseparable therefrom, including the benefit of proximity to, and
command of, facilities for commerce and communication with the world -- an
artificial value created primarily through public expenditure of taxes. For
the sake of brevity, the substance of this definition may be conveniently
expressed as the value of "proximity." It is ordinarily measured
by interest on investment plus taxes.
Q18. You would not say that the supply of land can be increased?
A. No; but fresh demand is constantly requiring not only an increase in the
public equipment of land already in use, but also the constant extension
of such equipment to new area.
... read the whole article
Everett Gross: Explaining Rent
Sometimes it's difficult for people to understand the meaning of "rent" as
an economic concept. One way I have of explaining it doesn't use the
word rent. I just use a little analogy.
I'm from Crete, Nebraska. It's a small town of 5,000 people.
Suppose a man comes to Crete, and he wants to start a business. He needs
a building, but first he needs a piece of ground to build this new building
on. So he looks up a real estate agent, describes what he wants, and the
real estate agent shows him a parcel that's just right for his needs. The
man asks the agent, "All right, now how much money do you want for this
land?" The agent says, "It's worth $50,000." The man says, "Why is it worth
$50,000?" And the real estate agent points out that "The school is good,
the roads are good, the police department is good, the rescue crew is good
and very fast, and business is good here."
So the man says "Yeah, I believe that $50,0000 is a fair price. I'll
take it. How do I pay the $50,000 to the school people, and the road people,
and the police department? To whom do I pay the $50,000?" And the real
estate agent says, "Oh no. You don't pay it to them. You pay it to the
person who owned the land before."
The man says, "But who supports the schools, and the roads, and the police,
and the other good things?" And the real estate agent says, "If you
build, then you'll pay for them again."
The buyer then asks, "And what will the previous owner do for me
for my $50,000?" The real estate man answers, "Nothing! Nothing
Now I don't need to use the word "rent" in that explanation.
Everett Gross and Dave Wetzel: Explaining
... A gentleman came to the town to build a factory and he chose a woman
realtor. He described to the realtor the exact size of the piece of land
he needs to build his factory.
She said, "Come with me; I have got exactly that size piece of land." They
get into the automobile and drive down the freeway, and drive off the freeway
onto a local road, drive off the local road onto a country road, drive off
the country road onto a dirt track, and in the middle of nowhere they get
out of the automobile, and walk for 10 minutes through marsh, bog, bushes,
and eventually they get to this site. She said "here you are, this site
is for sale, it is $10,000."
The factory builder looks around and asks, "Is that the only access,
or is there a nice highway on the other side of the field?"
She said, "No, that's the only access."
He said "Have you got any energy coming to the site? Gas? Water? Sewage" Cable?"
She said, "No, there is none of that out here." ... Read
the whole story
William F. Buckley, Jr.: Home
The real estate boom is a familiar phenomenon. Most people are predicting
that it will, if not burst, at least wilt. But the basic components aren't
going to change, not unless we have a catastrophe of sorts, something economists
don't feel obliged to integrate into their speculations.
The components are:
- a relatively wealthy community;
- the hard desire to own one's own house, along with the ambition to make
it more and more comfortable and pleasing;
- the dependence of building sites on immediate amenities (sewage, power);
- strategic sources of nourishment (jobs).
The convenience of infinitely available land faded as urbanization brought
on heavy dependence on elements that weren't always available to homes on the
range. Schools and hospitals are not only useful for educating children and
curing the infirm. They are necessary to attract affluent home buyers. ... read the whole
Nic Tideman: Land Taxation
and Efficient Land Speculation
One consequence of levying
additional taxes on land is that it
becomes possible to lower taxes on other things. One of the things
most likely to be taxed less when land is taxed more is improvements.
Lowering taxes on improvements makes the present value of land
development very much less costly, and hence is likely to accelerate
development although it would be possible to construct cases in which
the effect of lowering taxes on improvements would be to postpone
development. Whether it retards or accelerates development, the
lowering of taxes on improvements results in more intensive
development when development occurs. The possibility of promoting
more intensive development by reducing or eliminating taxes on
improvements is an important beneficial effect of an increase in
taxes on land.
A second consequence of levying
additional taxes on land is that
it becomes possible to price public services more efficiently.
Services to land such as sewers, water and electricity are used most
effectively when they are priced at marginal cost. The costs of these
services, however, are generally such that the sum of marginal costs
will not cover total costs. Land taxes have the potential to provide
a fund to cover the difference between total costs and the sum of
marginal costs. If land taxes are so used, the reductions in the
costs of using services that complement development will promote more
efficient development.... Read the whole article
Karl Williams: Land
Value Taxation: The Overlooked But Vital Eco-Tax
I. Historical overview
II. The problem of sprawl
III. Affordable and efficient
IV. Agricultural benefits
V. Financial concerns
VI. Conclusion: A greater perspective
Appendix: "Natural Capitalism" -- A Case Study in Blindness to
Land Value Taxation
While, at first sight, the prospect of
sprawling cities with lots of open space and possible greenery might be
appealing from an environmental perspective, a closer examination
should lead to a different conclusion. The inducement to collect
windfall profits (resulting from the failure of society to apply LVT)
encourages some landholders to withhold vacant land from the market and
forces new development to "leapfrog"
this land and move further out.
Hence there is an unnecessary outlay
in roads, pipelines, power
supplies and other infrastructure which must service a greater area.
Commuting journeys, similarly, must now consume greater
Financially inducing land to be put to its optimal use is not
"flogging" the land, but is rather ensuring land is carefully used and
that we only exploit as much as we properly need. ...
But LVT has much more to contribute to the question of
function, in the form of affordable and efficient public transport and
other desirable infrastructure. The principle reason why public
transport options are presently so limited is because the
taxpayer-funded investment in this and other forms of infrastructure
effectively disappears, in an almost unseen manner, into the "Black
Hole" of landowners' pockets.
That is, not only is the
compact cityscape more amenable to the provision of public transport
(not to mention walking and riding), but LVT makes the investment in
such infrastructure affordable because the resulting enhanced land
values are "recycled" back into public coffers. The extension of
London's Jubilee line
underground network, which opened in 1999, provides a good case in
point of how desirable infrastructure can be self-funding if land
values are recaptured. An independent study was performed which
assessed the increase in land values extending to 800 yards from each
of the 10 stations. The accumulated gain (to private landowners) was
estimated to be around £13 billion, courtesy of the £3.5
taxpayers funds it took to build the line! read the entire article
Mason Gaffney: Nonpoint
Pollution: Tractable Solutions to Intractable Problems The
Special Challenge to Economic Thinking
The Search for Surrogates
Sources of Nonpoint Pollution
What Problems are Created?
What Problems are Unsolved by Excise Taxes on Surrogates?
The Case of Forestry
The Case of Urban Settlement
The Case of Agriculture
The Common Theme from Forest, City and Farm
Jeff Smith and Kris Nelson: Giving
Life to the Property Tax Shift (PTS)
Major sources of nonpoint pollution are:
* paving and rooftops,
* lawns and gardens,
* onsite industrial waste dumps, and
* military, for a start.
To these I would add
* the class of moving point sources, like
autos and vessels and aircraft, which have part of the elusive
character of nonpoint sources. I would add
* septic tanks; and
* moonlight dumpers; and
served by a storm sewer, or no sewer at all.
"Construction" is usually added, but construction per se is
innocent and should not bear the onus. It is rather grading, the
destruction that precedes construction on new lands, that denudes land
and allows runoff and blowing. Filling can be noxious, too, when
it takes wetlands that otherwise help filter runoff before it hits
shellfish beds and beaches.
So nice a distinction may seem picky, but it is heavy with
policy meaning. The Sears Tower and the Empire State Building
probably caused less runoff than any modern cookie‑cutter
subdivision. We can have needed construction without grading and
filling by renewing and infilling our cities instead of promoting more
urban sprawl. Milwaukee in the last 20 years has lost 20% of its
population. Buildings are boarded up and land lies vacant while
dozers and scrapers tear up new land upstream of it. At least
one‑third of Milwaukee, perhaps more, could and should be renewed
forthwith, obviating much of the random lateral expansion onto new land
whose runoff now causes so much grief down here.
Within agriculture it is common to hear that tillage is the
problem; the solution, evidently, is grazing. On some lands that
is true, but the generalization is not. On other more fragile
lands, grazing causes runoff. Not for nothing are sheep called
"woolly maggots," and the Arab called the father, rather than the son
of the desert. Exploitive high-grading grazing, leaving weeds to
take over the range, is another form of pollution — biological
pollution, depleting the gene pool. As with all land problems,
"where" and "when" are as important as "what." "A place for
everything, and everything in its place," the slogan of land economics,
is the proper watchword.
We sometimes hear that good organic manure is the answer.
But on feedlots, too much of a good thing becomes a nonpoint
pollutant. Cities in the upper Santa Ana River basin must provide
tertiary sewage treatment, but the largest concentration of dairy
cattle in the world, in the Chino basin, drains into the same
waters. Next time you visit Disneyland if the water reminds you
of Wisconsin, there may be a reason. (Chino, ironically, is in an
agricultural preserve, to enhance the environment.) These
feedlots also overlie what might be one of our most usable aquifers, in
a region in sorest need of water storage.
Cities like Milwaukee are painted as victims of nonpoint
pollution, but within cities the great anomaly is that the output of
sanitary sewers is monitored and treated while that of storm sewers is
not. A few blocks from this meeting in downtown Milwaukee you can
see coal and salt stored in the open, draining directly into the Harbor
with each rain.
In Riverside, the local scatological whimsy is "Flush your
toilets, Orange County needs the water." It relieves the local
inferiority complex, but actually that water gets tertiary
treatment. It is our storm runoff that's dirty. Some cities
of course have only one set of sewers, but that creates problems of its
own which Milwaukee knows well.
In Riverside we have also poisoned many of our own water wells
with toxic percolation from farm and industry wastes which, since they
are inside our expansive city limits, we cannot blame on others; but
which our prudent city fathers prefer not to identify too
closely. Read the entire article
John Muir is right. "Tug on any
thing and find it connected to everything else in the universe." Tug on
the property tax and find it connected to urban slums, farmland loss,
political favoritism, and unearned equity with disrupted neighborhood
tenure. Echoing Thoreau, the more familiar reforms have failed to
address this many-headed hydra at its root. To think that the root
could be chopped by a mere shift in the property tax base -- from
buildings to land -- must seem like the epitome of unfounded faith. Yet
the evidence shows that state and local tax activists do have a
powerful, if subtle, tool at their disposal. The "stick" spurring
efficient use of land is a higher tax rate upon land, up to even the
site's full annual value. The "carrot" rewarding efficient use of land
is a lower or zero tax rate upon improvements. ...
What's won or lost is a value generated by
society. That is, land rises in value
- where a new resource is
discovered (during a gold rush, more money is made by land developers
than by prospectors),
- where population grows (see the Sun
- where technology advances (witness
the land values
in the various Silicon Valleys, Forests, etc),
expands (e.g., near a new road or sewer), and
- where society cooperates
(e.g., in communities that organize street fairs, neighborhood watches,
factors driving land value are not improvements made by
lone owners but by the entire community. The closest correlation to
land value is density and no one person creates that. Hence the site
value levy merely puts public values in the public treasury for public
benefit, as untaxing homes, sales, and income leaves
privately-generated values in private pockets. ...
The failed policy that the PTS would
is the present property tax. This is actually two taxes in one, one on
land and another on improvements. The tax on improvements penalizes
owners for improving. This negative incentive does its greatest damage
at the margin, where profit is slim. There, rather than pay a higher
tax, owners let buildings dilapidate into slums. The lack of much tax
on land keeps overhead on speculators affordable. This negative
incentive lets owners under-utilize prime sites, even withhold them
from use entirely. Kept from prime sites, development sprawls outward.
Sprawl inflates the values of suburban and
rural land. Leap-frog
development raises a few spikes in a land value map that soon pull up
values everywhere, increasing the property tax burden of owners of
previously developed sites, unless the tax is capped. The resultant
sprawl also raises enormously the cost of extending infrastructure and
makes auto-dependency a given.
The PTS reverses all these negative
- Rather than burden
construction, taxing only land spares it.
- Rather than spread
development (hooking us on cars), taxing land concentrates it
(providing a market for mass transit).
- Rather than inflate land price,
a land tax squashes it.
- Rather than enrich the owners of
prime sites or
itself, a land-taxing government could rebate some collected site rent
as a dividend, perhaps in the form of a Housing Voucher, making home
problem needs a big solution which in turn needs a
matching shift of our prevailing paradigm. Geonomics -- advocating that
we share the social value of sites and natural resources and untax
earnings -- does just that. Read the whole article
Jeff Smith: Leaking Economic
Value of Communities
Wearing pajamas outdoors in the
winter, one wouldn’t expect
to retain body heat. Yet, people do try to sustain community while
hemorrhaging its commonwealth. Losing it, residents must work more
When residents import food and
energy, they deprive others in the
community of income. Yet, the loss pales when compared to paying
mortgages and [income] taxes. A recent
study of Oakland, CA found torrents of dollars pumped out of town
headed for the treasuries of distant capitols and the bank vaults of
distant lenders. ...
Cutting out outsiders’ taxes
means the locality would have to
take over providing the outsiders’ services: nuclear power
plants, toxic dumps, scarifying freeways, submarines, whatever. To
pay for whatever desired services, from where will the city or county
get the money? From themselves, their commonwealth. It’s the
money they spend on the nature they use, the prices and rents paid
for sites and resources.
How can communities capture that
flow of natural values and keep
it circulating locally? Get local government to charge some kind of
land use fee. Depending on state law, the locality could replace the
property tax with a site value tax, raise the fee for defending
deeds, levy a fee for resource use, and/or resurrect ancient land
No matter what the mechanism, as
the community collects more of
its value, that leaves less for owners to capitalize into price; as
land dues rise, land prices must fall. Cheap land means buyers need
borrow less, shrinking mortgages. Less demand for credit also drops
the lending rate. Deflated profits makes real estate less attractive
to mega-banks, more suitable to local lenders.... Read the whole article
Jeff Smith: Share Rent, Transform Society
In the past, land owners owed services to
king, but in this age of equality then we owe our neighbors. We have an equal
right to the earth.
The community creates rent. Land
value rises when infrastructure goes on land. Technology progresses when
the community becomes more tranquil and density goes up. Density is a really
good measure of land value. No one owner by himself is responsible for density.
Rent from land value is justified because all should share in the rent.
If the community collected the rent, it would
motivate owners not to speculate in anticipation of a higher future return.
There would be a tendency to infill in the city and make cities more efficient. It
would make mass transit more efficient. We could collect some rent in a greater
amount as ecological security deposits for gas stations with gas pump brownfields.
We could actually put a surcharge on gasoline and put the playing field back
to level between cars and other transportation. If we collected ground rent
around transit stops and dedicated that income stream to the transit system,
we could run a free system. When built, BART (Bay Area CA Rapid Transit) did
a study and found it could run BART free. If we had free mass transit,
people would choose to ride instead of drive. It becomes more efficient
and more people use, increasing the mobility of citizens in the region. If
we get people out of cars, that reduces air pollution, noises, run off, and
use of resources. ... read the whole article
The Most Rev. Dr Thomas Nulty, Roman Catholic Bishop of Meath
(Ireland): Back to the Land (1881)
Land Values intended by
Providence for Public Purposes.
I have already observed that the chief peculiarity of the land
a country was that its value was never stationary, that it was always
progressive and rising, that in fact it increased in a direct ratio
with the growth of the population and the advancing progress of the
industry of the nation.
It would seem as if Providence had
destined the land to serve as a
large economical reservoir, to catch, to collect and preserve the
overflowing streams of wealth that are constantly escaping from the
great public industrial works that are always going on in communities
that are progressive and prosperous.
Besides the permanent improvements
that are made in the land
itself, and which increase its productiveness and value, there are
other industrial works not carried out on the land itself, but on its
surroundings and in its vicinity, and which enhance its value very
considerably. A new road is made for the accommodation of a district;
a new bridge is thrown across a river or a stream to make two
important localities accessible to each other; a new railway passes
close by and connects it with certain large and important centres of
industry; a new factory or a new mill is erected, or a new town is
built in the neighbourhood.
Industrial works like these add
very materially to the value of
all the land in their vicinity. It is a well-known fact that a new
railway has in several instances doubled the value of the land
through which it passed, in consequence of the increased facilities
it had afforded for the sale of its agricultural products.
In every state of society, which
is progressive and improving,
such industrial works are continually going on, and hence the value
of the land is rising also everywhere. But its value rises enormously
with the enlarged growth of the population of a nation, and with the
increased productiveness of its industry. ...
The Great National Property
Which Landlords Are Permitted to
But now the great national property which Providence has
for the support of the public burdens of society has been diverted
from its original purpose to minister to the wants, the necessities,
and perhaps the extravagance of a class. The explanation of this
extraordinary act of national spoliation will be found in the fact
that hitherto this class could just do as it pleased; the government
of the country lay for centuries exclusively in its hands, and
despite the combined influence of "English radicalism" and "Irish
obstructionism" it is practically in its hands still. The enormous
value, then, thus superadded to the land from the two sources just
indicated passes directly with the land itself into the hands of
those who own it.
Those who hold the ownership of
the land hold also the ownership
of all the accessions of value it receives from all quarters. This
increase in the value of their property cost no sacrifice, demanded
no painful effort of labour. Even while they slept their rent rolls
went on increasing and multiplying.
The value continually imparted to
the land by the industrial
exertions of the community, in the construction of harbours and
bridges, in the making of new roads and railways, in the erection of
new factories, mills and houses, etc., has all gone with the land,
has all been confiscated and appropriated by the owners of the
Professor Cairnes feels sorely
perplexed to account for some of
the anomalous results of this appropriation. He says: "A bale of
cloth, a machine, a house, owes its value to the labour expended upon
it, and belongs to the person who expends or employs the labour; a
piece of land owes its value, so far as its value is affected by the
causes I am now considering, not to the labour expended on the land,
but that expended on something else -- the labour expended in making
a railroad or in building houses in an adjoining town; and the value
thus added to the land belongs not to the persons who have made the
railroads or built the houses, but to someone who may not have been
aware that these operations were being carried on -- nay, who perhaps
has exerted all his efforts to prevent their being carried on. How
many landlords have their rent rolls doubled by railways made in
It never occurred to Mr. Cairnes that he had here given, quite
unconsciously to himself, an unanswerable argument, ex absurdo, to
prove the injustice of the appropriation of the land. If the land had
not been confiscated no such absurd or unjust result could have
followed. The value imparted by labour to the land, exactly like "the
bale of cloth, the house or the machine," would belong to the persons
who expended or employed that labour, that is to say, to the public,
by whose industrial exertions it had been created.
Lastly, the vast accessions of
value which the land is constantly
receiving from the proceeds of that "self-imposed tax" which the
nation levies on itself in the high prices it pays for the "raw
products of the soil," together with the increased productiveness of
the soil itself, go all, as Mr. Cairnes is forced to confess,
"neither to profits nor to wages nor to the public at large, but to
swell a fund ever growing, even while its proprietors sleep -- to the
rent roll of the owner of the soil."
Read the whole letter
Bill Batt: The Nexus of
Transportation, Economic Rent, and Land Use
is Land Rent?
John Houseman, an actor perhaps most widely known as Professor
Kingsfield in the long-running TV series, The Paper Chase, later became
the pitchman for Smith Barney. In that advertisement, his tag line was
"We make money the old-fashioned way -- we earn it."
That we should earn our money rather than live off the efforts
others seems a simple enough moral tenet. But it seems to have lost its
cogency in contemporary economic thought. More than a century ago John
Stuart Mill noted that
grow richer in their sleep
without working, risking or economizing. The increase in the value of
land, arising as it does from the efforts of an entire community,
should belong to the community and not to the individual who might hold
Today, on the other hand, the
unearned surplus which classical
economists called rent attaches to monopoly titles -- largely
scarce goods and services of nature like locational sites, and has
totally disappeared from economic calculus. Yet this is the primary
vehicle by which wealth is captured by economic elites. If government
recaptured the socially-created economic rent from land sites that
comes from the investment of the collective community, we could
eliminate other taxes that are both more onerous and create a drag on
the economy that makes us all poorer. There are many websites that
explain how this can be done, ways that not only beget greater economic
efficiency but also bring about economic justice.(2) The
surplus economic rent that derives from community effort is its
Where does economic rent most
tend to lodge? In the center of cities
where people are. And also proximate to heavy social investments --
such as railroad and metro stations, public and office buildings,
hotels and conference centers, and anywhere there is high traffic in
personal or market exchanges. The land value in New York City
than all the rest of the New York state combined, even though it is
only a minute fraction of the area. One 9-acre site south of the United
Nations Building was recently sold to a developer intent on building
luxury condominiums facing the East River. That site sold for $680
million, and would have been higher had the existing structure, an
obsolete power plant, not have to be razed.(3) Land
values in any given area tend to rise and fall together, and tend also
to form a contour somewhat comparable to a topographical survey map. In
a city's center are the highest value locations, analogous to a
mountain peak. Once one departs from that center, land values fall in
direct proportion to the value of their use, made more or less
attractive by whatever social attributes are provided in the proximate
areas. Two illustrations from small and medium sized cities in the
United States illustrate the point. ...
... capital investments affect the
market value of
locational sites by conveying rent to those in any way benefitting from
the service. That rent accruing to proximate sites and can easily
recaptured to pay off the debt service of project construction.
Typically rent collection is ignored, however, left instead in the
hands of titleholders whose sites are serviced by the infrastructure
investment. This drives speculation in land, with all the negative
effects it brings both economically and politically. In fact the rent
created by capital investment in transportation can be enormous.
- One nine-mile
of interstate highway in Albany, New York, costing $125 million to
construct has yielded $3.8 billion in increased land values within just
two miles of its corridor in the 40 years of its existence.(27)
This is a thirty-fold return in a timespan typically used for bond
- The Washington Metro created increments in land value
of the 101-mile system under of construction in 1980 that easily
exceeded $3.5 billion, compared with the $2.7 billion of federal funds
invested in Metro up until that time.(28) No
doubt the return is far greater today.
The component of transportation
costs constituting capital expenditure
can and should be recaptured through the collection of land rent since
it accounts for the creation of that value particular to proximate
locational sites.... read the whole article
Bill Batt: The
Compatibility of Georgist Economics and Ecological Economics
Any failure to pay back that
increment to society, or of government to
recapture it in the form of taxes, constituted not only an injustice to
the poor but a distortion of economic equilibrium. He witnessed first
hand the perverted configurations of land use that today we know as sprawl development— even in his
time it was apparent that urban, high value land parcels were being
held off the market for speculative gain by meretricious interests. He
witnessed also the boom and bust cycles of the land markets on account
of such speculation, effects which spread far wider than just land
prices. These inevitable cycles would dislocate labor and capital
supply, giving impetus to the impoverishment and suffering which he
himself had experienced. He understood that holding the most
strategically valuable landsites out of circulation constituted a
burden on the economy. He understood that financial resources spent to
pay exorbitant land prices had a depressing effect on capital and
labor. And because government was taxing labor and capital instead of
recovering land rent, it was further restricting the job market and the
growth of capital. He realized that
people who captured monopoly
control of strategically valuable landsites could do so because they
were privy to information prior to its public release. It was not by
any means his insight alone; it was captured also by George
Plunkett writing at the same time:
an honest graft, and I’m an example of how it works. I might sum up the
whole thing by sayin’: “I seen my opportunities and I took ‘em.”
Just let me explain by
examples. My party’s in power in the city, and it’s goin’ to undertake
a lot of public improvements. Well, I’m tipped off, say, that they’re
going to lay out a new park in a certain place.
I see my opportunity and I take it. I go to that place and I buy up all
the land I can in the neighborhood. Then the board of this or that
makes its plan public, and there is a rush to get my land, which nobody
cared particularly for before.
Ain’t it perfectly honest to charge a good price and make a profit on
my investment and foresight? Of course, it is. Well, that’s honest
32William L. Riordan,
of Tammany Hall. New York: Dutton, 1963, p. 3.
All society needed to do was to collect the
economic rent from
landholders as its rightful due, a solution that became part of the
subtitle of his book, “the remedy.” Taxing the land (or, alternatively,
collecting the economic rent) was something common citizens could
understand. ... read the whole article
Bill Batt: Stemming Sprawl: The Fiscal Approach
From the standpoint of an economic geographer and for some land economists,
land rent is simply capitalized transportation cost. Land rent is the surplus
generated by social activity on or in the vicinity of locational sites that
accrues to titleholders of those parcels. Whether or not it is recaptured by
public policy, rent is a natural factor deriving from the intensive use of
natural capital. One must return to nineteenth-century classical economics
to appreciate the importance of economic rent or land rent; neoclassical economic
frameworks have largely discarded it. More
intensive use of high-value land sites leads to site configurations that
are less dependent on transportation services. Land rent is highest where
traffic and market exchanges occur, that being at the center of large conurbations.
Comparing land values of urban property parcels, the highest land rent
in the urban cores and traffic junctures are analogous to the contours
of land elevations.
Mountain peaks gradually slope down to valleys and flatland regions and
continue outward until at distant points — perhaps at the poles of the earth — land
sites have no market value at all.
The differentials in land values are profound, even more than most people
realize. In 1995, in the small city of Ithaca, New York, the highest quintile
of land had a value of over $56,000 per acre in the downtown center, whereas
the lowest quintile only a mile away falls to less than $3,000. Large
city centers have far higher site prices. Even in Polk County, Iowa (which
includes Des Moines), in the middle of cornfields where I did a study two years
ago, the highest urban value land site was $31.3 million per acre, which quickly
declined to about $20,000 per acre only about a mile away. In the spring of
1998, one land parcel (the building was to be razed) of less than an acre in
New York City's Times Square and split in two pieces by Broadway was sold by
Prudential Life to Disney for roughly $240 million. To
take another instance, a nine-acre tract on the East River in New York City
occupied by an obsolete power plant was purchased by Mort Zuckerman to build
high-rise condominiums two years ago. The sale price was in the neighborhood
of $680 million and would have been higher were it not for some enormous costs
associated with the demolition of the old structures. It
should be noted that the overwhelming proportion of land value is in cities;
relatively speaking, the site values of peripheral lands, typically used for
agriculture and timber growth, are negligible. Land values are high in urban
areas because, over time, rent accrues to a site. Each improvement in proximity
to a property parcel enhances the value of all other parcels. This makes even
unimproved sites attractive objects for speculation, particularly when land
sites surrounding it are to be improved by adding either transportation service
or new structures. One nine-mile stretch of interstate highway in Albany, New
York, costing $125 million to construct, has yielded $3.8 billion in increased
land values (constant dollars) within just two miles of its corridor in the
forty years of its existence. This
is a thirty-fold return in a time span typically used for bond repayment! The
Washington Metro created increments in land value along much of the 101-mile
system completed by 1980 that easily exceeded $3.5 billion, compared with the
$2.7 billion of federal funds invested in Metro up until that time. Any
major building construction project, private or public, will have a similar
effect on adjacent land sites. Differentials in land value can have a profound
effect on decisions made by titleholders, either positively by inducing appropriate
development in urban cores or negatively by giving monopoly titleholders power
to hold sites out of use for long-term speculative gain. Such decisions of
course determine the character of urban configurations and society as well.... read
the whole article
Nic Tideman: Using
Tax 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
4. Taxes on any other activities that reduce the rental
value of surrounding land.
5. Taxes on activities such as driving or parking
in crowded streets, where one person's activities reduce opportunities
for others. The administration of such charges may be so expensive that
it is not worth implementing them, but if the administration can be handled
sufficiently cheaply, these charges are efficient to the extent that
they only charge people for costs imposed on others.
6. Taxes on activities, such as the consumption of
alcohol, which impose costs on others (e.g., higher traffic fatalities).
7. Charges for local public services, such as water,
electricity, sewer connections, etc. It is not generally desirable to
make every service completely self-financing. Rather, what is desirable
is that each user be required to pay the marginal cost of the service
he receives. Extensions of service networks are efficient when they increase
publicly collected land rents by enough to cover the costs not covered
by user charges.
8. A self-assessed tax on permanent improvements
to land, at a very low rate (perhaps 1/10 of 1% per year). With a self-assessed
tax, each possessor of land names a price at which he would be willing
to part with the land he possesses (and any immovable improvements).
He pays a tax proportional to the value he names, and anyone who wishes
to may take over possession at that price. The value of such a tax
is that it makes it much easier to assemble land for redevelopment,
and to identify appropriate compensation when land is taken for public
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.
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.
- The first feature that a growth-promoting tax can have is that
it can serve to allocate a naturally occurring resource among competing
potential users. Charges for the use of land, for the use of the frequency
spectrum and for depleting natural resources share this feature.
- The second feature that a growth-promoting tax can have is that
of being a charge for the costs imposed on the city by the person who
pays the tax. This feature is shared by taxes on pollution, taxes on
other activities that reduce the value of surrounding land, taxes on
imposing congestion and other costs on other residents of the city,
charges for the marginal cost of publicly provided services, and a
self-assessed tax on property, reflecting the hindrance to future growth
represented by existing development.
...Read the whole article
Nic Tideman: Applications of
Land Value Taxation to Problems of Environmental Protection, Congestion,
Efficient Resource Use, Population, and Economic Growth
Land value taxation is usually thought of as a possible source of revenue
for local governments. But the ethical principle
that supports it is most coherent when the principal is applied on a global
basis: All persons in the world have equal rights to natural opportunities.
This does not mean that all persons in the world have equal rights to all
land rent. To the extent that the rent of land arises as a result of the
of infrastructure, that rent is the natural income of the polity that provided
the infrastructure, and the logical source for financing it. What all persons
world have equal rights to is the "pre-development" rental value of land, the
rental value that land would have to the potential developer of a new community
if there were no community and no
infrastructure. To motivate the application of land value taxation to
other areas of economic life, I will assume that there is a global agreement
that, because all persons have equal rights to natural opportunities, there
will be transfers among nations to equalize per capita pre-development rent.
behind this agreement is
then extended to other issues. ... read
the whole article
Nic Tideman: Revenue Sharing under
Land Value Taxation
Consider a system of states and localities in which both state and local governments
finance their activities by taxing every parcel of land in their jurisdictions,
according to the rental value that the parcel would have if it were unimproved.
Suppose that a state government placed a tax of 10% on the value that land
would have if it were unimproved, and suppose that there was a local project
that would cost $95,000 per year and raise the rental value of local land by
$100,000 per year. The project would be socially beneficial, and if there were
no national tax on the rental value of land, the local government would find
that undertaking the project would improve the welfare of its citizens. However,
one effect of the project would be to increase by $10,000 (10% of $100,000)
the amount of money that the citizens of the locality were required to pay
to the state government. Therefore it would not be in their interest to undertake
the project. Thus taxation of the rental value of land by both states and localities
does not promote efficiency in a federal system. ... read the whole article
Frank Stilwell and Kirrily Jordan: The
Political Economy of Land: Putting Henry George in His Place
George saw land as a community resource provided by nature, to which every
human being had an equal right. He argued that, since land was fixed in supply,
the system of private land ownership allowed the wealthy few to enjoy exclusive
rights to land and its benefits, while alienating the poorer majority from
land ownership and forcing them to pay rent to landowners in order to access
this necessary resource. Moreover, the collection of rents by landowners
allowed them to increase their wealth without contributing to the productive
efforts of society. As the population grew, so too did the demand for land,
forcing rents and land values ever higher. In addition, increases
in land value resulting from publicly-funded developments, such as roads
and public transport systems, unduly benefited landowners at the expense
of the community. Such unearned gains from landownership encouraged
speculation in land, pushing prices even higher, while exposing the economy
to the risks of speculative ‘booms’ and ‘busts’. ...
Indeed, one could say that the term ‘tax’ is a misnomer because
what is really involved is value created by the community being retained
by the community rather than being appropriated by private landholders. For
example, under current arrangements landowners receive ‘windfall’ gains
when the market value of their land rises as a result of publicly provided
infrastructure being built nearby, or when local government zoning decisions
reclassify their land as appropriate for further development. In this way,
individual landowners stand to reap huge benefits at the expense of community-generated
processes. Such arrangements create an odd incentive: allowing landholders
to appropriate the unearned wealth generated by rising land values, thereby
rewarding this unproductive activity, while taxing productive endeavour.
The Georgist land tax ‘remedy’, by contrast, would eliminate
such perverse incentives and thereby more effectively align private and public
interests in the use of society’s resources. ... read
the whole article
Rick Rybeck: Using Value Capture to Finance Infrastructure and
Encourage Compact Development, at http://www.edrgroup.com/ted2006/T3_Rybeck_Rick.pdf.
Fred Harrison: Wheels of Fortune: Self-funding Infrastructure
and the Free Market Case for a Land Tax at http://www.iea.org.uk/files/upld-publication307pdf?.pdf.