Wealth and Want
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Communities Leaking Resources

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. Just 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, on schools, streets, emergency services. Why tax the tenants, whether they are the folks who rent their homes from someone else or those who own retail, professional, 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 very services that 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 cause their 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 of 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.


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

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 Rent."

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 stated above, 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 wild travesty 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, Perjury, 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 possibilities.

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 Governor-Elect

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 fact it 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.

  • Net 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 will stay 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 on.
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 for 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? What 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 the 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 than necessary.

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.

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 norm.

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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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper