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Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)
Thomas Flavin, writing in The Iconoclast, 1897
The statement above expresses "The Physiocratic Doctrine" of tax incidence, harking back to Francois Quesnay, and even earlier writers like John Locke and Jacob Vanderlint. The Doctrine has staying power: it is used, for example, by Bogart, Bradford, and Williams writing in the National Tax Journal, December, 1992, on tax incidence in New Jersey.... Read the whole article
Mason Gaffney: Rent, Taxation, Dissipation and Federalism
Fred Foldvary: See the Cat
Picture an unpopulated island where we're going to produce one good, corn, and there are eleven grades of land. On the best land, we can grow ten bushels of corn per week; the second land grows nine bushels, and so on to the worst land that grows zero bushels. We'll ignore capital goods at first. The first settlers go the best land. While there is free ten-bushel land, rent is zero, so wages are 10. When the 10-bushel land is all settled, immigrants go to the 9-bushel land.
Wages in the 9-bushel land equal 9 while free land is available. What then are wages in the 10-bushel land? They must also be 9, since labor is mobile. If you offer less, nobody will come, and if you offer a bit more than 9, everybody in the 9-bushel land will want to work for you. Competition among workers makes wages the same all over (we assume all workers are alike). So that extra bushel in the 10-bushel land, after paying 9 for labor, is rent.
That border line where the best free land is being settled is called the "margin of production." When the margin moves to the 8-bushel land, wages drop to 8. Rent is now 1 on the 9-bushel land and 2 on the 10-bushel land. Do you see what the trend is? As the margin moves to less productive lands, wages are going down and rent is going up. We can also now see that wages are determined at the margin of production. That is the "law of wages." The wage at the margin sets the wage for all lands. The production in the better lands left after paying wages goes to rent. That is the "law of rent." If you understand the law of wages and the law of rent, you see the cat! To complete our cat story, suppose folks can get land to rent and sell for higher prices later rather than using it now. This land speculation will hog up lands and make the margin move further out than without speculation, lowering wages and raising rent even more.
Now we have good news and bad news. The good news is that when we put in the capital goods... we first left out from the example above, the tools and technology increase the productivity of all the lands. If production doubles, rent doubles, and wages go up. Wages won't double, because workers have to pay for the tools, but even if wages go up 50 percent, that's good news, and why industrialized economies have a high standard of living. Also, high skills enable educated workers to have a wage premium above the basic wage level. The bad news is that the technology enables us to extend the margin to less productive land, which lowers wages again. So there is this constant race between technology raising wages and lower margins reducing wages. Read the whole articleAlanna Hartzok: Ethical Land Tenure
I want to tell you the story of Charles Avilla. A while back I came across a book called Ownership, Early Christian Teachings. Avilla was a divinity student in the Phillipines. One of his professors had a great concern about poverty conditions in the Phillipines, and was taking students out to prisons where the cooks were the land rights revolutionaries in the Phillipines. Because they kept pushing for land reform for the people, they had ended up in jail. So they were political prisoners who were reading the Bible and were asking the question, who did God give this earth to? Who does it belong to? It isn't in the Bible that so few should have so much and so many have so little. In the theological world in this upscale seminary he was trying to put this together about poverty and what the biblical teachings were. He had a thesis to write and he was thinking he would do something about economic justice. One of his professors thought there would be a wealth of information from the church's early history, the first 300 years after Jesus. So he actually went back to read the Latin and Greek about land ownership and found a wealth of information about the prophetic railings of the people in that early time on the rights of the land. ...
In the Judaic tradition, and the Talmudic tradition, how much of the Jubilee justice was actually implemented is a subject of discussion. Some say it was a good idea but not put in place. Others say it was substantially put into place.
The Talmudic rabinical discussion is of interest to Georgists because they tried to allocate the land according to the richness of the soil for agriculture. For better soil, richer for agriculture, maybe an acre of that would be allocated. On the poorer soil, these tribes could get five acres.
The other thing was some lands were closer to the market. Some land was closer to Jerusalem. That is an advantage over those who would have to travel a longer distance to get to the market. How do you have an equal rights distribution of land allocation with reference to the market problem? For those more advantageously situated, the adjustment was to be made by money. Those holding land nearer the city should pay in to the common treasury the estimated excess of value attaining to it by reason of superior situation. While those holding land of less value by reason of distance from the city would receive from the treasury a money compensation. On the more valuable holdings would be imposed a tax or a lease fee, the measure of which was the excess of their respective values over a given standard, and the fund thus created was to be paid out in due proportion to those whose holdings were in less favorable locations.
In this, then, we see affirmed the doctrine that natural advantages are common property and may not be diverted to private gain. Throughout the ages when wisdom is applied to land problems, we see this emerge.... Read the whole article
Karl Williams: Land Value Taxation: The Overlooked But Vital Eco-Tax
I. Historical overviewa synopsis of Robert V. Andelson and James M. Dawsey: From Wasteland to Promised land: Liberation Theology for a Post-Marxist World
II. The problem of sprawl
III. Affordable and efficient public transport
IV. Agricultural benefits
V. Financial concerns
VI. Conclusion: A greater perspective
Appendix: "Natural Capitalism" -- A Case Study in Blindness to Land Value Taxation
The major dynamic behind such over-exploitation of parts of the environment is the process by which hundreds of millions of people are displaced onto marginal land by current tax-and-tenure systems. In desperation they overwork resources that ought to be carefully nurtured. Yet the practices of such desperate peasants can be largely halted when the principles of LVT are implemented and made clear. Daly makes the case that taking away by taxation the value added by individuals from applying their own labor and capital creates resentment but "taxing away value that no one added, scarcity rents on nature's contribution, does not create resentment. In fact, failing to tax away the scarcity rents to nature and letting them accrue as unearned income to favored individuals has long been a primary source of resentment and social conflict." read the entire article
Land's value goes up when population increases and technological and economic development make labor more productive. Those who "own" land often withhold it from use, expecting to capture its increased value in the future -- thus, the possession of land enables people to take an income that they did nothing to produce.
Speculative withholding of land has disastrous consequences. Peasants who seek land on which to survive are pushed out to poorer and poorer lands. These "sub-marginal" lands become their alternative place for self-employment. With such a poor alternative, they have no choice but to accept very low wages. Rent -- the payment to landowners -- absorbs more of the wealth produced on all sites.
Land speculation also prevents development near the center of cities, pushing it to the outskirts while the center decays from neglect and slums increase. The "sprawl" engulfs farms and forests, even as it raises the price of land, making use and development more costly.
Rapid destruction of the Amazon rain forest in Brazil dramatizes how the unnatural phenomenon of sprawl has an ominous worldwide impact on the environment. In Brazil, ten per cent of the landowners own 80 percent of the land, while one million peasants are forced off the land each year. And a mere one per cent controls 48 percent of the cultivable land. The only place in Brazil where there is land for the taking is in the Amazon rain forest. The destruction of the rain forest is caused by a system that perpetuates artificial land shortages. Nearly four-fifths of Brazil's arable land is covered by sprawling latifundios, most of which are held by speculators who produce nothing.
Here is the root cause of poverty. When laborers are faced with the choice of either bare subsistence wages or land that can barely maintain life, labor itself is marginalized and cannot effectively bargain on its own behalf. Wages, generally, on all land, are driven down toward the point of bare subsistence. Returns to capital are also depressed for the same reason, deterring investment. When this is carried to an extreme -- when people can no longer afford the goods being produced and when there is little profit in applying capital -- the economy collapses. The inflated land market, on which the speculative frenzy has fed, collapses too. Read the whole synopsis
Mason Gaffney: Economics in Support of Environmentalism
Both Soilsmen and habitatspersons have a point, we will see, but they have a fatal weakness. Neither has a system that composes conflict with other worthy goals, including each others'. As to cities, both soilsmen and habitat-savers would direct cities away from low-cost, high-productivity land to the high-cost leftover lands. They would not make this an end in itself, of course, but it is the necessary by-product of downgrading urban usage in the competition for land.
Thus, to restore citriculture and habitat in what is now L.A. we would move the city folks to hazard-prone floodplains, steep slopes subject to fire and erosion, quake-prone fault lines and liquefiable soils, etc. We would also move them away from the center, imposing longer commutes, greater auto-dependency, longer utility lines, longer hauls to dispose of solid wastes, more air to protect, more aquifer surface to protect, more land to protect from flooding, etc. ... read the whole articleMason Gaffney: Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth
Weight of excess burden of most taxes. Many modern Georgists tend, oddly, to trivialize the power of tax bias to keep land from its best use. They have seized upon a conventional micro-economic device, now generally called the “Harberger Triangle,” in recognition of one Chicago-School expositor. It is based on supply and demand curves, with no reference to land markets at all. Perhaps these Georgists are hoping this will help them get through to ordinary economists; but this device has the effect, by accident or design, of minimizing estimates of the economic losses, or “excess burdens,” that bad taxes cause.
The power of tax bias to keep land from its best use is starkly obvious by analyzing the economics of using marginal land. Any tax at all will sterilize such land completely, unless the taxes are so universal that the mobile factors, labor and capital, cannot escape them by moving.
“Who cares about marginal land?”, some may say. The distorting power of taxes has been demonstrated inadvertently by Chicago-School economists Gale Johnson and Stephen Cheung. They have shown that sharecropping, as a private arrangement, creates a bias on the part of tenants to substitute land for labor and equipment, almost without limit. This is because extra land costs the cropper nothing, unless it adds to output, so the cropper’s interest is to substitute land, which is free to him, for his labor and capital, which he pays for.
Taxes based on gross output affect all landowners the same way the cropshare lease affects croppers. They make every landowner a cropper of the state, giving every landowner a motive to substitute land for labor and capital indefinitely. Private landlords overcome this by limiting how much land to allow each cropper; but the state has no such offsetting control. Thus, each landowner’s motive to acquire excess land runs wild.
In conjunction, consider that taxes (other than property taxes) are based solely on cash flows, thus entirely exempting all the imputed income from and imputed consumption of the service flows of land – the “amenities.” Government tells the landed gentry, “Hold land as a totem, an heirloom, a private hunting and riding park, a dream of future retirement, a speculation, a hedge against inflation, an entry into high society, a beach access, a protection against future neighbors, a shooting range, a golf course, a ski hideaway, a drinking club, a private landing strip … anything private and narcissistic or exclusionary or snobbish … and your pleasures are tax exempt. Produce goods and services for others, though, and we will treat you like a sharecropper – and tax your employees, too.”
Now hark back to George’s second force holding labor off the better lands (Item A,3,b): holding land as a totem. He noted that tendency in an age before we even had an income tax, or state sales taxes. Our present tax system magnifies the tendency beyond all reason, resulting in the relegation of much of our best land to the indulgences of the landed gentry, old and new.... read the whole article
Mason Gaffney: Nonpoint Pollution: Tractable Solutions to Intractable Problems
The solution is land stewardship, a new-old ethic to supplant the cowboy ethic in which western man has wallowed over several centuries of territorial expansion.
To reprise from the section on forestry, we must synthesize two concepts of land stewardship. Concept A says "save for the future"; Concept B says put land to full use right now, to serve and employ people. Concept AB says do both, but each in the right place. Use the good land, use it well and fully, employ the workers, serve everyone's needs. Congregate and cooperate on central, low, flat, fertile ground, as efficient markets and efficient public policies would dictate anyway. Leave the marginal land in peace. ... 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