Much of the land rent in the typical municipality's central
business district leaves town. The landholders are not local residents who
might spend their "take" in local stores. Rather, they are family trusts,
corporations, real estate investment trusts and other corporate entities.
What are we to do about that? Think outside the income
tax box! Stop taxing wages. Stop taxing profits. Stop taxing buildings.
tax the land values on the sites in the central business district.
Keep that money in town, recirculating to fund next year's common spending,
streets, emergency services. Why tax the tenants, whether they are
the folks who rent their homes from someone else or those who own retail,
manufacturing or other businesses? It seems very odd that first we
ask tenants to pay their landlords, and then we ask them, as wage-earners,
to pay a
portion of their wages, and/or a tax on their purchases, to fund the
make the site they work on valuable. Even more perverse is to tax the
commuters who live elsewhere to pay for a portion of the services that
employers to pay higher rents.
Our landlords make out very well, while the rent-payers end up paying
twice. No wonder they're poor.
And we haven't yet talked about people who buy their own homes.
They pay the previous owner -- who didn't do anything particular to create
the land value -- for the right to occupy the house and land.
The previous owner leaves town with tens or hundreds of thousands of
dollars' worth of appreciation -- land appreciation, since houses, bring
manmade, are depreciating, just like cars and TVs -- and our young people
must stretch to afford a home within a reasonable distance
their work. They pay large percentages of their salaries -- and both
husbands and wives work in most couples -- to the mortgage lender, and
then they pay again in the form of income and sales taxes. The lucky
town-departer, though, leaves having been paid for occupying his house,
or more precisely, his land, for all those years. He leaves with land
rent too, just as the individual and corporate landlords do.
Is this any way to run a society??? Georgists don't think so. We
think we have a much better idea. Tax the land value. Bring
the price of land down to affordability. Don't
reward people for holding land; ask them to pay the community, in the
form of taxes
pegged to the land's value, for the use of that site. Simple? Yes. Easy
to implement? Yup! Just? Yep! Different from
what we do now? Yes, just as the end of slavery was different from the
period in which some Americans
enslaved other Americans. Will it lead to a freer society, a more equal
distribution of wealth, income, leisure and opportunity? We are persuaded
that it will.
Every community, whatever its
political name and extent — village,
city, state or province or nation — has its own normal, unfailing
income, growing with the growth of the community and always adequate
to meet necessary governmental expenditure.
To explain: Every community has an indefeasible original right to the
land on which it exists, and to all the natural, unmodified properties
and advantages of that particular area of the earth's surface. To this
land in its natural state, undrained, unfenced, unfertilized, unplanted
and unoccupied, including its waters, its contents and its location,
every individual in the community (which may consist of any political
unit selected) has an equal right, while all the individuals together
have a joint right to the value for use which society has conferred
upon these natural advantages.
This value for use is known as "Land Value," or by the not
particularly descriptive but generally adopted name of "Economic
Briefly defined the land value or economic rent of any
piece of ground is the largest annual amount voluntarily offered for
the exclusive use
of that ground, or of an equivalent parcel, independent of improvements
thereon. Every holder or user of land pays economic rent, but
he now pays most of it to the wrong party. The aggregate economic
rent of the territory occupied by any political unit is, as has been
always sufficient, usually more than sufficient, for the legitimate expenses
of the government of that unit. As also stated above, the economic
rent belongs to the community, and not to individual landowners. ...
An illustration has already been given of the case of a
piece of farm land. Let us take an example in a large city. Let us take
a corner lot centrally located in New York City, the title to which lot
is held by, say, Mr. John William Rhinelastor. This lot was a part of
an old Dutch farm, and is an heirloom. It did not cost the present owner
anything, nor his father nor his grandfather. There is a little old building
on it, which has always been rented at a figure ten times as large as
the taxes imposed, so that the owner has been handsomely subsidized each
year for storing his title-deeds during a period of the city's growth
in which the increase in population and the expenditure of public money
in that neighborhood have raised the value of this corner location to,
say, two hundred times its early value.
About now, Mr. Rhinelastor decides that he will go abroad to live, and
can't be bothered with this piece of property. But knowing that the pressure
of population is sure to increase and that the expenditure of public
money to the benefit of this land must continue, he will not sell it.
So he gives a twenty-one year lease to the corner for, say, $20,000 a
year net, with a privilege to the lessee of renewals at advancing figures.
The lessee agrees to pay all taxes.
Now what is this net $20,000
a year, which will be regularly remitted to Mr. Rhinelastor, in Europe
or wherever he may be, given in payment
for? Not for the old building — the first thing the lessee does
is to pull it down. Not for the land itself — it is all rock,
which has got to be blasted out as part of its improvement.
Clearly it is paid for a location or site value, which the community,
and the community only, has built up and paid for. In other words, the
present $20,000 rental, and the larger one which that location will command
in later years, is strictly a community product, and as such belongs
to the community and not to Mr. Rhinelastor.
That the latter has no good right
to it is at once evident when we remember that "When one man gets something for nothing somebody else has
got to give something for nothing." Here are $20,000 that some
men and women have got to work to earn every year to hand over to
a man who
does not render, and does not feel any obligation to render, one
dollar's worth of public or private service in return. Such is the
of justice which we call law. It is not comical only because it is
frankly tragic in its social results.
Now suppose this $20,000 and
all the rest of this same community product — i.e.,
the site or location rent of its ground — were paid every year
to its rightful owner, the treasurer of New York City, what would
become of taxation, with its inseparable retinue, Fraud, Evasion,
Inequality, and an all-pervading public sense of injustice? ...
Now imagine for a moment the effect upon the appearance
of a city and upon the comfort of its population which would result from
the change of fiscal policy which this article proposes. At present,
a tempting premium is placed upon keeping land unimproved or inadequately
improved, while a heavy penalty is imposed upon improvement. Most land
appreciates constantly. All buildings depreciate from the moment of completion.
Yet the building is taxed equally with the land.
What incentive does such a system offer the speculative landowner to
put up a commodious, well-lighted modern structure in place of the old
ruin which now pays him so well? The old one cannot depreciate much more,
and while paying a trifling tax because of its physical worthlessness,
he is thereby enabled to collect and pocket the economic rent of the
ground, which the community is continually rendering more valuable. The
new building would absorb a large amount of capital, would begin to run
down even before it could be occupied, and would be taxed to the limit.
Why then is not the landlord justified in letting well enough alone,
enjoying the growing economic rent, and waiting till he can get a fancy
price for the right to collect it?
But reverse the conditions. Reclaim for the community its natural income,
making it expensive either to keep needed land vacant or to withhold
it from the ready and willing to improve it to the full extent of its
Does it require severe intellectual effort to foresee the results? Better
and better houses, apartments, tenements, offices and stores, more employment
for labor in all enterprises now held back by the shadow of the tax-gatherer,
an end of all tax-lying, tax-evasion and tax-injustice, and withal, a
public revenue adequate to all real public needs.
What a contrast to the existing plan of pouring public
money into the laps of individual landowners ... read the whole article
Mason Gaffney: The Taxable Capacity of Land
Another attractive feature
of land taxation is its interesting positive effect on the economic
base of a city. It strengthens it by its tendency to hit absentee
owners harder than resident owners. The
land fraction in real estate is generally highest in the CBD of
any city, so that is a favorite place for absentees to buy and
hold. They like the steady income, and the "trophy" quality. The
surplus in real estate is what attracts outside buyers, and land
is what yields the surplus. About 2/3 of downtown Los Angeles is owned
by non-resident aliens, for example. In a more workaday city, Milwaukee,
the absentee owners consist of former residents, or their heirs,
who grew too rich to abide the harsh winters.
Consider the effect on your
balance of payments. When you get more tax money from absentees,
money that used to flow to Tehran, Zurich, or Palm Beach now flows
into your local treasury to pay your local teachers and city workers,
and relieve your builders and building managers. In this way taxing
land actually acts to undergird the value of its own base. ... Read the whole article
Mason Gaffney: California's
A high fraction of California
real estate is absentee owned.
The Sultan of Brunei, for example, owns several houses and sites
in Beverly Hills and Bel Air. California's official Legislative
Analyst, the highly respected William Hamm, estimated in 1978 that
over fifty per cent of the value of taxable property in California
was absentee-owned. This is such a bold, bare, and enormous
is hard to understand how Californians have been misled into
resisting the urge to levy land taxes on all this foreign wealth. They
may be put off by the argument that they need to attract outside
capital, but that carries no weight when considering the large
percentage of this property which is land value, and which may be
taxed separately from buildings.
Some half of any reduction in
California property taxes leaks
to out-of-state owners. Nor is this the only leakage.
federal income tax payments have risen because sales and nuisance
taxes raised to replace lost property taxes are not deductible.
- Sales of local general obligation bonds have stopped and
stopped. Revenue bonds are sold instead, with higher interest rates.
- Fire insurance rates must rise.
- Private spending, even by local
landowners, has a higher propensity to import than public spending
that goes for policemen, firemen, teachers, local contractors, and so
This substantial leakage of
economic base results in multiple
declines in state income. Cities love to commission "economic
base" studies, and a small industry of moonlighting economists love
to perform them, usually to rationalize subsidizing some
transnational conglomerate to put in a branch plant. They use canned
"input-output" models to show how every dollar invested generates
$2-3 of induced investment locally. Yet no one has seized on this
obvious case to show that local property taxes, substituted
absentee rent payments, creates multiple increases in local income.
The whole intellectual apparatus is dominated by absentee investors
and used for their benefit. ... read
the whole essay
Jeff Smith: What the Left Must
Do: Share the Surplus
What would you do if you could
work two days and take five off? Write?
Play soccer? Tend to the community garden? Time off is an option made
increasingly viable by our relentlessly rising rate of productivity.
French Marxist and media critic Jean Baudrillard, while still advancing
the interests of labor, implores the Left to move on from seeing humans
as workers to seeing workers as human beings, with more needs than
merely the material. Enabling people
to live their lives more fully is an issue made to order for
rescuing the Left from the doldrums that descended when “history ended”.
What would single mothers do with enough income to stay home?
would minorities do with the wherewithal to begin their own businesses?
What would communities do if they did
not leak resources up to an upper
class and out to a distant lender or tax collector? What would
elite do without our commonwealth? 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
While mortgages and interest
elevate an elite elsewhere, they keep
debtors on a treadmill at home. To those anxious over every next
payment, how appealing is an economy no longer expanding its girth?
In addition, what’s their debt for? Credit? The total savings of
all members of a community should suffice. Local bank "used to" be
The other major drain, taxes, at
about 40% of the average
worker’s income, usually total more than the value of government
services received. And who receives them? Corporate loggers, miners,
factory farms, and tractor trailers. Lose such subsidies, leveling
the playing field, and local recyclers, family farmers, and freight
haulers could compete. Their success would plug the visible leaks -
imported food, energy, and materials.... Read the whole article
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