To abolish these taxes would be to lift the
whole enormous weight of taxation from productive industry. The needle
of the seamstress and the great manufactory;
the cart horse and the locomotive; the fishing boat and the steamship;
the farmer's plow and the merchant's stock, would be alike untaxed. All
would be free to make or to save, to buy or to sell, unfined by taxes,
unannoyed
by the taxgatherer. Instead of saying to the producer, as it does now, "The
more you add to the general wealth the more shall you be taxed!" the
state would say to the producer, "Be as industrious, as thrifty,
as enterprising as you choose, you shall have your full reward! You
shall not
be fined for making two blades of grass grow where one grew before;
you shall not be taxed for adding to the aggregate wealth."
And will not the community gain by thus refusing to kill the goose that
lays the golden eggs; by thus refraining from muzzling the ox that treadeth
out the corn; by thus leaving to industry, and thrift, and skill, their natural
reward, full and unimpaired? For there is to the community also a natural
reward. The law of society is, each for all, as well as all for each. No
one can keep to himself the good he may do, any more than he can keep the
bad. Every productive enterprise, besides its return to those who undertake
it, yields collateral advantages to others. If a man plant a fruit tree,
his gain is that he gathers the fruit in its time and season. But in addition
to his gain, there is a gain to the whole community. Others than the owner
are benefited by the increased supply of fruit; the birds which it shelters
fly far and wide; the rain which it helps to attract falls not alone on his
field; and, even to the eye which rests upon it from a distance, it brings
a sense of beauty. And so with everything else. The building of a house,
a factory, a ship, or a railroad, benefits others besides those who get the
direct profits.
Well may the community leave to the individual producer all that prompts
him to exertion; well may it let the laborer have the full reward of his
labor, and the capitalist the full return of his capital. For the more that
labor and capital produce, the greater grows the common wealth in which all
may share. And in the value or rent of land is this general gain expressed
in a definite and concrete form. Here is a fund which the state may take
while leaving to labor and capital their full reward. With increased activity
of production this would commensurately increase.
And to shift the burden of taxation from production and exchange to the
value or rent of land would not merely be to give new stimulus to the production
of wealth; it would be to open new opportunities. For under this system no
one would care to hold land unless to use it, and land now withheld from
use would everywhere be thrown open to improvement. ... read the whole chapter
Louis Post: Outlines of Louis F.
Post's Lectures, with Illustrative Notes and Charts (1894) — Appendix:
FAQ
Q6. If a land-owner builds, does not that increase the value
of his land and consequently the amount of the tax he would have
to pay? If so, would not he be taxed for his improvement?
A. No. Upon the value of the building he would never pay any tax. It is true
that his improvement might attract others to the locality in such numbers
as to make land there scarcer and consequently dearer. His own lot would
in that case rise in value with the other land and be taxed more, just as
the rest would be. But that would not take any of his labor in taxes; he
would still have his building free of taxation. Thus: If on a lot worth $1000
a building worth $1000 were erected, making the whole worth $2000, the tax
would fall only upon the $1000 which represents the value of the lot. If
land then became so scarce that the lot rose in value to $1500 the tax would
be raised. But the owner's improvement would be still exempt. When his property
was worth $2000 he was taxed on $1000, the value of the lot, leaving $1000,
the value of the building, free; and now, though he is taxed on $1500, the
value of the lot, $1000, the value of the building, is still free. ... read the book
Mason Gaffney: The Taxable
Capacity of Land
To stimulate building is
also to uphold and fortify the tax
base, even though you do not tax the new buildings directly. Some
people fault the "depressing" canyons of Manhattan, between the
skyscrapers. In my observation, it is not the canyons that depress
Manhattan. When the GM building went up, Fortune Magazine reported
it doubled the rents of stores across the deep canyon so formed.
Its spillover effects were highly
positive. What really depresses
Manhattan are rather the centenarian firetraps and the activities
they attract. They tend to downvalue other lands nearby, eroding the
tax base.
Consider the effect of
floorspace rentals on ground rents
and land values. Doubling floorspace rentals will more than double
land values, through a kind of leverage effect. That is because all
cash flows above a constant amount required for the building will
inure as ground rents. The higgling and arbitrage of the market
will
see to that. Once that constant is met, everything above it goes to
landownership as such, raising land prices which are the land tax
base.
When you observe cities
much, the positive neighborhood
effects of replacing old buildings with new are irresistible and
contagious, raising land prices all around. The converse is also
true: the negative neighborhood effects of letting old junkers stand
without replacement are depressive. Thus, when you take the tax off
new buildings, and put it on the land under old tumbledowns, you kick
off a general process of revitalization that turns gloom into hope
into optimism: optimism that boosts land prices and the land tax
base. ... Read
the whole article
Fred Foldvary: Geo-Rent:
A Plea to Public Economists
A site’s geo-rent is not based on the particular activity at that
site. The geo-rent of a site containing lavish buildings and gardens
equals what the geo-rent would be if, for some strange reason, those improvements
suddenly disintegrated. A fully developed site has about the same geo-rent
(per
acre)
as an adjacent vacant lot.
Suppose I own a 50-acre site that is pristine, unimproved. That site would rent
for $100,000. Hence, the geo-rent is $100,000. The next year I build a large
beautiful and successful shopping center on the site. My geo-rent is still only
$100,000 (assuming the amount for which my site unimproved would rent has not
changed). However, if my shopping center makes neighboring land more valuable,
it does increase my neighbor’s
geo-rent.
The interrelation between one landowner’s improvements and his
neighbor’s geo-rent is an interesting matter. Another interesting matter
is a landowner’s contribution to improvements on neighboring lands,
such as sponsoring a new road. If the new road would increase his geo-rent
tax bill,
geo-rent taxation, it would seem, would reduce his incentive to sponsor
such an improvement.1 But here I leave
these tangents aside, with the summary judgment that I do not think that such
issues do much, if anything, to weaken the case for
tapping geo-rent.
1 The effect on geo-rent
would be smaller if the road is a toll-road, because then more of the value
added is internalized, i.e., captured by the road owners. ...
read the whole article
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