I have friends who make every effort to conserve water and energy, not to save money but because they believe they are making an important contribution toward environmental sustainability. But until we fix the perverse incentives which encourage overuse by the largest users, conservation efforts by a few or even by millions of individuals are useless, merely subsidizing the large users.

Our elected representatives at all levels of government need to examine the perverse incentives and replace them with incentives that reward the kinds of behavior that promote sustainability and equality. A logical starting point, of course, is the property tax. When the property tax rate and/or the assessments on some people's property are artificially capped, as in California's Proposition 13 or Florida's Save Our Homes, the landholders still receive most of the services that support their property values, but others get to pay for them. Worse, older people have an incentive to stay in houses that are too large for their needs and close to jobs they no longer have, while younger people who need larger homes for their families end up commuting many hours each day, at a high cost to them and to society. Housing prices rise out of sight, driven by the finiteness of land and the scarcity of properties for sale.

Correcting the perverse incentives would cure many of these problems.

Similarly, the property tax as we commonly know it is the marriage of two taxes that have very different effects. The tax on land values has desirable effects, while the tax on buildings, usually at the same millage rate, has only undesirable effects. To increase the tax on land values, most towns have to increase the tax on buildings as well, and they suffer from the perverse incentives that building taxes bring. The solution? Divorce the tax rate on buildings and the tax rate on building values, and start lowering the taxes on your buildings, and increasing the taxes on local land values.

Land value taxation is as good an example of thinking globally and acting locally as I can think of!

The elder Mirabeau, we are told, ranked the proposition of Quesnay, to substitute one single tax on rent (the impôt unique) for all other taxes, as a discovery equal in utility to the invention of writing or the substitution of the use of money for barter.

To whosoever will think over the matter, this saying will appear an evidence of penetration rather than of extravagance. The advantages which would be gained by substituting for the numerous taxes by which the public revenues are now raised, a single tax levied upon the value of land, will appear more and more important the more they are considered.

• This is the secret which would transform the little village into the great city.*
• With all the burdens removed which now oppress industry and hamper exchange, the production of wealth would go on with a rapidity now undreamed of.
• This, in its turn, would lead to an increase in the value of land — a new surplus which society might take for general purposes.
• And released from the difficulties which attend the collection of revenue in a way that begets corruption and renders legislation the tool of special interests, society could assume functions which the increasing complexity of life makes it desirable to assume, but which the prospect of political demoralization under the present system now leads thoughtful men to shrink from.
  *At the beginning of Book IX of the complete Progress & Poverty, Henry George quotes from Themistocles: "I cannot play upon any stringed instrument, but I can tell you how of a little village to make a great and glorious city."

Consider the effect upon the production of wealth.

To abolish the taxation which, acting and reacting, now hampers every wheel of exchange and presses upon every form of industry, would be like removing an immense weight from a powerful spring. Imbued with fresh energy, production would start into new life, and trade would receive a stimulus which would be felt to the remotest arteries. The present method of taxation operates upon exchange like artificial deserts and mountains;

• it costs more to get goods through a custom house than it does to carry them around the world.
• It operates upon energy, and industry, and skill, and thrift, like a fine upon those qualities.
• If I have worked harder and built myself a good house while you have been contented to live in a hovel, the taxgatherer now comes annually to make me pay a penalty for my energy and industry, by taxing me more than you.
• If I have saved while you wasted, I am mulct, while you are exempt.
• If a man build a ship we make him pay for his temerity, as though he had done an injury to the state;
• if a railroad be opened, down comes the tax collector upon it, as though it were a public nuisance;
• if a manufactory be erected we levy upon it an annual sum which would go far toward making a handsome profit.
• We say we want capital, but if any one accumulate it, or bring it among us, we charge him for it as though we were giving him a privilege.
• We punish with a tax the man who covers barren fields with ripening grain,
• we fine him who puts up machinery, and him who drains a swamp.

How heavily these taxes burden production only those realize who have attempted to follow our system of taxation through its ramifications, for, as I have before said, the heaviest part of taxation is that which falls in increased prices.

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.

The selling price of land would fall; land speculation would receive its death blow; land monopolization would no longer pay.* Millions and millions of acres from which settlers are now shut out by high prices would be abandoned by their present owners or sold to settlers upon nominal terms. And this not merely on the frontiers, but within what are now considered well settled districts.

* The fact that a tax on the rental value of land cannot be shifted by landowners to tenants, though recognized by all competent economists, is sometimes a stumbling block to persons untrained in economics. The reason such a tax cannot be shifted is that it cannot limit the supply of land. Landowners are presumably, before the tax is laid, charging all the rent they can get. There is nothing in a tax on the rental value of land to make tenants willing to pay more or to make land more difficult to hire. On the contrary, more land will be on the market, because of such a tax, rather than less, since the tax puts a heavy penalty on holding land out of use and unimproved for mere speculation. The competition of former vacant land speculators to get their land used will make land cheaper to rent rather than more expensive. And since only the net rent remaining after the tax is subtracted is capitalized into salable value, land will be very much cheaper to buy. H.G.B.

And it must be remembered that this would apply, not merely to agricultural land, but to all land. Mineral land would be thrown open to use, just as agricultural land; and in the heart of a city no one could afford to keep land from its most profitable use, or on the outskirts to demand more for it than the use to which it could at the time be put would warrant. Everywhere that land had attained a value, taxation, instead of operating, as now, as a fine upon improvement, would operate to force improvement. Whoever planted an orchard, or sowed a field, or built a house, or erected a manufactory, no matter how costly, would have no more to pay in taxes than if he kept so much land idle.

• The monopolist of agricultural land would be taxed as much as though his land were covered with houses and barns, with crops and with stock.
• The owner of a vacant city lot would have to pay as much for the privilege of keeping other people off of it until he wanted to use it, as his neighbor who has a fine house upon his lot.
• It would cost as much to keep a row of tumble-down shanties upon valuable land as though it were covered with a grand hotel or a pile of great warehouses filled with costly goods.

Thus, the bonus that wherever labor is most productive must now be paid before labor can be exerted would disappear.

• The farmer would not have to pay out half his means, or mortgage his labor for years, in order to obtain land to cultivate;
• the builder of a city homestead would not have to lay out as much for a small lot as for the house he puts upon it*;
• the company that proposed to erect a manufactory would not have to expend a great part of its capital for a site.
• And what would be paid from year to year to the state would be in lieu of all the taxes now levied upon improvements, machinery, and stock.

  *Many persons, and among them some professional economists, have never succeeded in getting a thorough comprehension of this point. Thus, the editor has heard the objection advanced that the greater cheapness of land is no advantage to the poor man who is trying to save enough from his earnings to buy a piece of land; for, it is said, the higher taxes on the land after it is acquired, offset the lower purchase price. What such objectors do not see is that even if the lower price of land does no more than balance the higher tax on it, (and this overlooks, for one thing, the discouragement to speculation in land), the reduction or removal of other taxes is all clear gain. It is easier to save in proportion as earnings and commodities are relieved of taxation. It is easier to buy land, because its selling price is lower, if the land is taxed. And although the land, after its purchase, continues to be taxed, not only can this tax be fully paid out of the annual interest on the saving in the purchase price, but also there is to be reckoned the saving in taxes on buildings and other improvements and in whatever other taxes are thus rendered unnecessary. H.G.B.

Consider the effect of such a change upon the labor market. Competition would no longer be one-sided, as now. Instead of laborers competing with each other for employment, and in their competition cutting down wages to the point of bare subsistence, employers would everywhere be competing for laborers, and wages would rise to the fair earnings of labor. For into the labor market would have entered the greatest of all competitors for the employment of labor, a competitor whose demand cannot be satisfied until want is satisfied — the demand of labor itself. The employers of labor would not have merely to bid against other employers, all feeling the stimulus of greater trade and increased profits, but against the ability of laborers to become their own employers upon the natural opportunities freely opened to them by the tax which prevented monopolization.

With natural opportunities thus free to labor;

• with capital and improvements exempt from tax, and exchange released from restrictions, the spectacle of willing men unable to turn their labor into the things they are suffering for would become impossible;
• the recurring paroxysms which paralyze industry would cease;
• every wheel of production would be set in motion;
• demand would keep pace with supply, and supply with demand;
• trade would increase in every direction, and wealth augment on every hand. ... read the whole chapter

We cannot cure this evil of poverty by dividing up wealth, monstrous as are some of the fortunes that have arisen — and fortunes are concentrating in this country faster than ever before in the history of the world. But divide them and still there would not be enough.

But if men want more wealth, why don't they get more wealth? If we, as a people, want more wealth (and certainly ninety-nine out of every hundred Americans do want more wealth), why are some suffering from the want of employment? Others are at work without making a living. But ninety-nine out of a hundred have some legitimate desire that they would like to gratify. Well, in the first place, if we want more wealth — if we call that country prosperous which is increasing in wealth — is it not a piece of stupidity that we should tax men for producing wealth? Yet that is what we are doing today.

Bring almost any article of wealth to this country from a foreign country, and you are confronted at once with a tax. Is it not from a common sense standpoint a stupid thing, if we want more wealth — if the prosperous country is the country that increases in wealth, why in Heaven's name should we put up a barrier against the men who want to bring wealth into this country? We want more dry-goods (if you don't know, your wives surely will tell you). We want more clothing; more sugar; more of all sorts of the good things that are called "goods;" and yet by this system of taxation we virtually put up a high fence around the country to keep out these very things. We tax that convenient man who brings goods into the country.

If wealth be a good thing; if the country be a prosperous country — that is, increasing in wealth — well, surely, if we propose to restrict trade at all, the wise thing would he to put the taxes on the men who are taking goods out of the country, not upon those who are bringing goods into the country.

We Single Tax men would sweep away all these barriers. We would try to keep out small-pox and cholera and vermin and plagues. But we would welcome all the goods that anybody wanted to send us, that anybody wanted to bring home. We say it is stupid, if we want more wealth, to prevent people from bringing wealth to the country. We say, also, that it is just as stupid to tax the men who produce wealth within the country.

Here we say we want more manufacturers. The American people submit to enormous taxes for the purpose of building up factories; yet when a man builds a factory, what do we do? Why, we come down and tax him for it.

We certainly want more houses. There are a few people who have bigger houses than any one reasonable family can occupy; but the great mass of the American people are underhoused. There, in the city of New York, the plight to which all American cities are tending, you will find that 65 % of the population are living two families or more to the single floor. Yet let a man put a house in any part of the United States, and down comes the tax-gatherer to demand a fine for having put up a house.

We say that industry is a good thing, and that thrift is a good thing; and there are some people who say that if a man be industrious, and if a man he thrifty, he can easily accumulate wealth. Whether that be true or not, industry is certainly a good thing, and thrift is certainly a good thing. But what do we do if a man be industrious? If he produces wealth enough, and by thrift accumulates wealth at all, down comes the tax-gatherer to demand a part of it.

We say that that is stupid; that we ought not by our taxes to repress the production of wealth; that when a farmer reclaims a strip of the desert and turns it into an orchard and a vineyard, or on the prairie produces crops and feeds fine cattle, that, so far from being taxed and fined for having done these things, we ought to be glad that he has done it; that we ought to welcome all energy; that no man can produce wealth for himself without augmenting the general stock, without making the whole country richer. We impose some taxes for the purpose of getting rid of things, for the purpose of having fewer of the things that we tax. In most of our counties and States when dogs become too numerous, there is imposed a dog tax to get rid of dogs. Well, we impose a dog tax to get rid of dogs, and why should we impose a house tax unless we want to get rid of houses? Why should we impose a farm tax unless we want fewer farms? Why should we tax any man for having exerted industry or energy in the production of wealth?

Tax houses and there will certainly be fewer houses. If you go east to the city of Brooklyn, you may see that demonstrated to the eye. What first surprised me in the city of churches was to see long rows of buildings, of brown-stone houses, two stories in front and three stories behind; or three stories in front and four stories behind; and I thought for a moment what foolish idea ever entered the brains of those men, to have left out half an upper story in that way? I found out by inquiring that it was all on account of tax. In the city of Brooklyn, the assessor is only supposed to look in front, and so by making the house in that way, you can get a three-story building behind with only a two-story front and a two-story tax.

So in England, in the old houses, there you may see the result of the window tax. The window tax is in force in France today, and in France there are two hundred thousand houses, according to the census, that have no window at all — in order to escape the tax.

So if you tax ships there will be fewer ships. What old San Franciscan cannot remember the day when in this harbour might be seen the graceful forms and lofty spars of so many American ships, the fleetest and best in the world? I well remember the day that no American who crossed to Europe thought of crossing on any other than an American ship. Today, if you wish to cross the Atlantic, you must cross on a British steamer, unless you choose to cross on a German or French steamer. On the high seas of the world the American ship is becoming almost as rare as a Chinese junk. Why? Simply because we have taxed our ships out of existence. There is the proof.

Tax buildings, and you will have fewer or poorer buildings; tax farms, and you will have fewer farms and more wilderness; tax ships, there will be fewer and poorer ships; and tax capital, and there will be less capital; but you may tax land values all you please and there will not he a square inch the less land. Tax land values all you please up to the point of taking the full annual value — up to the point of making mere ownership in land utterly unprofitable, so that no one will want merely to own land — what will be the result? Simply that land will be the easier had by the user. Simply that the land will become valueless to the mere speculator — to the dog in the manger, who wants merely to hold and not to use; to the forestaller, who wants merely to reap where others have sown, to gather to himself the products of labour, without doing labour. Tax land values, and you leave to production its full rewards, and you open to producers natural opportunities.

Take it from any aspect you please, take it on its political side (and surely that is a side that we ought to consider clearly and plainly), while we boast of our democratic republicanism, democratic republicanism is passing away. I need not say that to you men of San Francisco — San Francisco ruled by a boss; to you men of California, where you send to the Senate the citizen who dominates the State as no duke could rule. Look at the corruption that is tearing the heart out of our institutions; where does it come from? Whence this demoralisation? Largely from our system of taxation. What does our present system of taxation do? Why, it is a tax upon conscience; a tax upon truth; a tax upon respect for law. It offers a premium for lying and perjury and evasion. It fosters and stimulates bribery and corruption. ... read the whole speech

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 and legislation.

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.

Hence:

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 do.

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 others.

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 innocent.

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? ... read the whole letter

Henry George: The Wages of Labor

It is to have some to take what justly belongs to all; it is to forego the only means by which it is possible in an advanced civilisation to combine the security of possession that is necessary to improvement with equality of natural opportunity – the most important of all natural rights.

It is thus at the basis of all social life to set up an unjust inequality between man and man, compelling some to pay others for the privilege of living, for the chance of working, for the advantages of civilisation, for the gifts of God....  read the whole article

Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)

THE mere abolition of protection — the mere substitution of a revenue tariff for a protective tariff — is such a lame and timorous application of the free-trade principle that it is a misnomer to speak of it as free trade. A revenue tariff is only a somewhat milder restriction on trade than a protective tariff.
 
Free trade, in its true meaning, requires not merely the abolition of protection but the sweeping away of all tariffs — the abolition of all restrictions (save those imposed in the interests of public health or morals) on the bringing of things into a country or the carrying of things out of a country.

But free trade cannot logically stop with the abolition of custom-houses. It applies as well to domestic as to foreign trade, and in its true sense requires the abolition of all internal taxes that fall on buying, selling, transporting or exchanging, on the making of any transaction or the carrying on of any business, save of course where the motive of the tax is public safety, health or morals. Thus the adoption of true free trade involves the abolition of all indirect taxation of whatever kind, and the resort to direct taxation for all public revenues.

But this is not all. Trade, as we have seen, is a mode of production, and the freeing of trade is beneficial because it is a freeing of production. For the same reason, therefore, that we ought not to tax anyone for adding to the wealth of a country by bringing valuable things into it, we ought not to tax anyone for adding to the wealth of a country by producing within that country valuable things. Thus the principle of free trade requires that we should not merely abolish all indirect taxes, but that we should abolish as well all direct taxes on things that are the produce of labor; that we should, in short, give full play to the natural stimulus to production — the possession and enjoyment of the things produced — by imposing no tax whatever upon the production, accumulation or possession of wealth (the things produced by labor), leaving everyone free to make exchange, give, spend or bequeath. — Protection or Free Trade — Chapter 26: True Free Trade - econlib -|- abridged 

TO abolish the taxation which, acting and reacting, now hampers every wheel of exchange and presses upon every form of industry, would be like removing an immense weight from a powerful spring. Imbued with fresh energy, production would start into new life, and trade would receive a stimulus which would be felt to the remotest arteries. The present method of taxation operates upon exchange like artificial deserts and mountains; it costs more to get goods through a custom house than it does to carry them around the world. It operates upon energy, and industry, and skill, and thrift, like a fine upon those qualities. If I have worked harder and built myself a good house while you have been contented to live in a hovel, the tax-gatherer now comes annually to make me pay a penalty for my energy and industry, by taxing me more than you. If I have saved while you wasted, I am mulct, while you are exempt. If a man build a ship we make him pay for his temerity, as though he had done an injury to the state; if a railroad be opened, down comes the tax collector upon it, as though it were a public nuisance; if a manufactory be erected, we levy upon it an annual sum which would go far towards making a handsome profit. We say we want capital, but if anyone accumulate it, or bring it among us, we charge him for it as though we were giving him a privilege. We punish with a tax the man who covers barren fields with ripening grain; we fine him who puts up machinery, and him who drains a swamp. — Progress & Poverty — Book IX, Chapter 1, Effects of the Remedy: Of the Effect upon the Production of 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. Nature laughs at a miser. He is like the squirrel who buries his nuts and refrains from digging them up again. Lo! they sprout and grow into trees. In fine linen, steeped in costly spices, the mummy is laid away. Thousands and thousands of years thereafter, the Bedouin cooks his food by a fire of its encasings, it generates the steam by which the traveler is whirled on his way, or it passes into far-off lands to gratify the curiosity of another race. The bee fills the hollow tree with honey, and along comes the bear or the man. — Progress & Poverty — Book IX, Chapter 1, Effects of the Remedy: Of the Effect upon the Production of Wealth

CONSIDER the effect of such a change upon the labor market. Competition would no longer be one-sided, as now. Instead of laborers competing with each other for employment, and in their competition cutting down wages to the point of bare subsistence, employers would everywhere be competing for laborers, and wages would rise to the fair earnings of labor. For into the labor market would have entered the greatest of all competitors for the employment of labor, a competitor whose demand cannot be satisfied until want is satisfied — the demand of labor itself. The employers of labor would not have merely to bid against other employers, all feeling the stimulus of greater trade and increased profits, but against the ability of laborers to become their own employers upon the natural opportunities freely opened to them by the tax which prevented monopolization. — Progress & Poverty — Book IX, Chapter 1, Effects of the Remedy: Of the Effect upon the Production of Wealth

... go to "Gems from George"

Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)

Q19. Why should buildings and all other improvements and personal property and capital be exempt from taxes?
A. Because a tax on them falls upon industry, and so increases the cost of living, while continuing the invidious exemption of the present net land value.

... read the whole article

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

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?

An authority on municipal taxation estimates the present economic rent of the land embraced in the City of New York at from $350,000,000 to $400,000,000. Assuming the lesser of these figures and adding the receipts from licenses, fees and fines, New York City should receive, of her own income, enough to pay all her own legitimate bills, to make her proper contributions to county and state and build a new subway or its equivalent every year.

And this with nobody paying a dollar of taxes, or, if we except the fines, a dollar that he was not ready and glad to pay for his own advantage.

We repeat, this is not taxation; but for the sake of those who cannot grasp the idea of public revenue without taxation, let us state the matter in their own language.

Think of a tax which both assesses itself and collects itself, which burdens no one, which is paid voluntarily, and only by those who do so for their own profit or other advantage. Compare this with our present system of taxes, which everyone despises, which can be collected in full only from the very scrupulous and from the helpless, from trust funds of widows and orphans, or from estates which lie naked before the tax gatherer on the records of court; a system which drives men of property from state to state and town to town in flight from the assessor, and well-nigh forces many worthy citizens to practices of evasion which must make it hard for them to look into their own mirrors during the season for "Correction of Assessments;" there can be but one verdict upon such comparison.

But again the voice of the objector is heard, possibly to this effect: "This plan may be all right for the community, but how about poor Mr. Rhinelastor?"

In reality the landowner would not suffer so much from the restoration of the public revenue as might at first appear. For one thing, whereas he is now taxed, at least in theory, not only on land, but on buildings, cash, bonds, and all other personal property, and perhaps on his income as well, he would then have no taxes at all to pay. Furthermore the economic rent is not the full measure of the possible earning capacity of the land, but will always be less than the offerer expects to make out of its use.

Again, while it must be firmly insisted that the economic rent is the rightful property of the community and not of the landowner, the community would probably never take it all. Communal ownership of land is not desirable, even if it were practicable. Individual ownership and management are best, and it is not at all improper for the community to allow the owner something for caring for the land to which he holds title, and for collecting and transmitting to the treasury the economic rent.

But — and right here is one of the prime advantages of the abolition of taxation — Mr. Rhinelastor, in order to get satisfactory return from his land, must improve it. Unless he is satisfied with a small income from it, to wit, the proportion of the economic rent which the community chooses to leave in his hands, he must put upon his land the best building the location will warrant. The rents of this building will be his in their entirety, not one dollar of them being taken from him by taxation. If he is not prepared or not willing to do this he would probably find it more profitable, before he leaves the country, to sell the land to some one of the many persons who are eager to build upon it. It will always be salable, although not by any means at present figures.

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? ... read the whole article

Ted Gwartney:  A Free Market Strategy to Reduce Sprawl

... If land holders can produce a higher return on investment by not using land for productive purposes but rather hold it for a higher price from those willing and able to pay the higher price in the future, there is a flaw in public policy. Public policy thereby gives speculative, nonproductive investment a higher return than productive investment. Sprawl is subsidized by taxes on production and distribution and the failure to recapture the benefits resulting from public improvements. If we choose to end this subsidy, we would reduce sprawl.

One example that I know is that of a friend who bought land within the city but did nothing with it. I asked him why he put good money into an investment that had no visible return? He replied that, by holding the land for future sale or development, his long term return, in capital gains would exceed 18% annually. If he built a building on the site now, his long term return would only be 12% annually, including both net income plus capital gains. Why should he use his land now when it would be more profitable for him to not use it, but to hold it for a larger future gain?

What is needed is a continuously self-renewing city and a public policy that can work effectively. Buildings have a limited useful life. Continuous maintenance and frequent retrofitting sometimes extends this life span. Other buildings reach a point where they should be replaced. Some buildings sit vacant for decades even in the city's central business district. Valuable parcels of land are left undeveloped or paved over and used as surface parking lots. The result is a lower tax base and an eyesore.

As urban buildings deteriorate, owners often don't renovate, remodel or make repairs because their property tax may rise. Thus the typical property tax creates suburban sprawl and urban decay. Shifting the property tax off buildings and onto land reverses these processes. Taxing land more than buildings usually reduces taxes for homeowners.  ... Read the whole article

However, what is the effect on production of taxes levied on products and of taxes levied on the value of land?

Of taxes levied on products, George said: "The present method of taxation operates upon exchange like artificial deserts and mountains; it costs more to get goods through a custom house than it does to carry them around the world. It operates upon energy, and industry, and skill, and thrift, like a fine upon those qualities. If I have worked harder and built myself a good house while you have been contented to live in a hovel, the taxgatherer now comes annually to make me pay a penalty for my energy and industry, by taxing me more than you. If I have saved while you wasted, I am mulct, while you are exempt. If a man build a ship we make him pay for his temerity, as though he had done an injury to the state; if a railroad be opened, down comes the taxcollector upon it, as though it were a public nuisance; if a manufactory be erected we levy upon it an annual sum which would go far toward making a handsome profit. We say we want capital, but if anyone accumulate it, or bring it among us, we charge him for it as though we were giving him a privilege. We punish with a tax the man who covers barren fields with ripening grain, we fine him who puts up machinery, and him who drains a swamp. How heavily these taxes burden production only those realize who have attempted to follow our system of taxation through its ramifications, for, as I have before said, the heaviest part of taxation is that which falls in increased prices." 

Turning to taxation levied on the value of land, George went on to say:

For this simple device of placing all taxes on the value of land would be in effect putting up the land at auction to whosoever would pay the highest rent to the state. The demand for land fixes its value, and hence, if taxes were placed so as very nearly to consume that value, the man who wished to hold land without using it would have to pay very nearly what it would be worth to anyone who wanted to use it.

And it must be remembered that this would apply, not merely to agricultural land, but to all land. Mineral land would be thrown open to use, just as agricultural land; and in the heart of a city no one could afford to keep land from its most profitable use, or on the outskirts to demand more for it than the use to which it could at the time be put would warrant. Everywhere that land had attained a value, taxation, instead of operating, as now, as a fine upon improvement, would operate to force improvement.

A few pages before this he had told us that, "It is sufficiently evident that with regard to production, the tax upon the value of land is the best tax that can be imposed. Tax manufactures, and the effect is to check manufacturing; tax improvements, and the effect is to lessen improvement; tax commerce, and the effect is to prevent exchange; tax capital, and the effect is to drive it away. But the whole value of land may be taken in taxation, and the only effect will be to stimulate industry, to open new opportunities to capital, and to increase the production of wealth." 

In other words, according to George, taxation of products checks production, whereas taxation of land values stimulates production.... read the whole article

Economists agree that the imposition of taxes generally retards an economy. The reason for this is that with almost all taxes, it is possible for a tax payer to reduce total tax collections by doing less of whatever is taxed--work less, spend less, save less, etc. This means that taxes generate an incentive to be less productive.

With fees for the use of government-assigned opportunities, on the other hand, the only thing that a person can do to reduce the amount of money that he or she pays is to use fewer of these opportunities. But then the opportunities can be used by someone else, who will pay the fees, and total public revenue will be unchanged. There is no possibility reducing total government revenue by being less productive. Thus these fees can be collected without dragging down the economy in the way that existing taxes do.

Our ideas provide for the natural financing of any worthwhile public expenditure that makes a particular area more attractive or productive--parks, freeways, subways, sewer systems, etc. These public expenditures raise the rental value of land in their vicinity, and thereby raise the fees that can be collected for using the land. If the activity is worthwhile, the increase in rental values will be sufficient to pay for the activity.

Another way in which our ideas promote a more efficient economy is by eliminating the opportunity grow rich by having government promote one's own interest at the expense of others. Such distortions of the political process can occur either by persuading a government agency to spend money in a way that raises the value of land that one owns while others foot the bill, or by persuading a government agency to prohibit others from doing what one is permitted to do. In both kinds of cases, the person who promotes his or her own interest has no reason to take account of the costs that are thereby imposed on others, and typically these costs to others are greater than the self-seeking benefits. This makes the economy less productive.

Furthermore, the very possibility of growing rich by manipulating government action draws talented people into the effort to manipulate government decisions, when they could be employed doing something useful.  ... 

But the very great increases of recent years, which have made it nearly impossible for young families to afford houses of their own, have additional causes. The implementation of our ideas would bring down the price of access to land in three ways.

It should give one pause. It is the expectable consequence of what the voters did. They rejected the concept of taxing inert wealth in favor of the alternative: taxing liquidity, cash flow, work, production and commerce. The predictable result has been to inhibit economic activity, and encourage holding wealth inert and stagnant. They turned property from a functional concept into a sacred one; from a commission to be enterprising, hire people, produce goods, and pay taxes into a welfare entitlement.

The invisible, pervasive change is due to Proposition 13, which makes it possible to hold land at negligible tax cost. In 1945 land was taxed at 3 percent every year, building a fire under holdouts to turn their land to use. Today that same tax cost is well below 1 percent. Using Gwartney's Rule of Thumb (see below under #2, A, "Reassessing Land Frequently") it is about 1/8 of 1 percent: a rate of 1 percent applied to 1/8 of the true value.

Does this help you understand why California landowners are now so slow to adapt to new demands? In 1945 the assessors were building fires under landowners, so they sought new strategies to meet new circumstances. Today there remains a weak incentive to improve to improve property: tax collectors generally cost them money when they make improvements. Sit still, lie low, hire no one, hang on, produce nothing, and your holding costs are negligible. ...

In spite of extreme underassessment, the assessed value of taxable land in California is 40 percent of the total real estate value. Imagine what it would be if assessed values were real values, "marked-to-market,'' as the law used to stipulate. It would be over 70 percent, as in 1917. "Staying power" would go down; land use, jobs and production would rise. ... Read the whole article

Mason Gaffney: Economics in Support of Environmentalism

Walt Rybeck: Have We Forgotten The Foundation?

• Owner No. 1 adds a rec room, new roof, great landscaping. The assessor comes by and says, in effect: "As punishment for making a showplace, and for generating jobs and profits for local businesses, we're raising your assessment by the amount of your investments. Your tax bill will go up, not just for a year, but for as long as you keep the house in good condition."
• Owner No. 2 lets his house of the same size run down -- loose banisters, torn screens, broken gutters, junk-filled yard. The assessor tells him, in effect: "Because you created an eyesore for your neighbors and an unsafe dwelling for your tenants, we're reducing your assessment and your taxes. If your place is more dilapidated next year, we'll reduce them even more."
• Owner No. 3 tears his building down; the idle lot neither houses nor employs anybody. The friendly assessor tells him, in effect: "For completely wasting your property, and for making no use of the infrastructure provided for this area, we'll give you the lowest assessment and tax bill of the three."

The immorality of landlordism. An increasingly small elite is taking possession of the nation’s land, enabling them to squeeze more and more from the landless. This is runaway landlordism, and current public policy fuels its progress.

On the federal level, while the wages of ordinary workers find no shelter from the Internal Revenue Service, exemptions and special preferences for landowners whittle down their taxes or turn real estate losses into profits. The 1986 Tax Reform Act aims to reduce these privileges, but landowners’ past ingenuity in avoiding taxation warrants continued vigilance over tax structures. At the local level, the property tax rises for owners who build or improve their homes, rental apartments or commercial buildings, while it is reduced for those who let their land go fallow. Compare the following situation of the Joneses, the Smiths and the Greens.

• The Joneses have a well-maintained home. The local tax office, seeing that they have has added air conditioning, a recreation room and a new roof, raises their assessment. Never mind that the Joneses improved their neighborhood and generated jobs and business. The result will be higher taxes not only this year, but as long as they keep the house in good condition.
• The Smiths’ home of the same size and age is an eyesore. The yard is full of junk, gutters are rusted, screens are torn, paint is peeling. The tax office says it is worth less than last year. The Smiths’ taxes are reduced, a "reward" for blighting the community.
• The Greens do not use their lot at all. They offer no production or housing on it. For wasting the site’s potential, they enjoy the lowest tax bill of the three.

Overtaxing good land use while under-taxing blight and empty lots invites slumlords and encourages land speculators. This type of landlordism -- or modern feudalism -- is an injustice. It allows individual landowners to siphon off the lion’s share of land values.  ...   Read the whole article

 The universal state and local revenue problem today is whether we must cap tax rates to avoid driving business away. It is exemplified by Governor Pete Wilson of the suffering State of California. He keeps repeating we must make a hard choice: cut taxes and public services, or drive out business and jobs. (When a public figure gives you two choices you know they're both bad, and he wants one of them.)

 The unique, remarkable quality of a property tax based on land ex buildings is that you may raise the rate with no fear of driving away business, construction, people, jobs, or capital! You certainly will not drive away the land. However high the tax rate, not one square foot of it will put on a track shoe and hop out of town. The only bad thing to say about this tax's incentive effects is that it stimulates revitalization, and makes jobs. If some people think that is bad, maybe this attitude is the problem. ...

Non-property taxes, you know, mostly have the character that they "shoot anything that moves," penalizing and discouraging economic activity. ...

Most California land, on the other hand, is now taxed at well below the allowable max of 1%. Speculators may sit on it at little tax cost, however many highways and water and sewer lines run to and past it, however many policemen are guarding it from trespass. Little wonder that California enterprise, once so dynamic, flexible, and vital, is giving way to stasis and decay. We used to lead the nation in making jobs; now in losing them. We used to lead in school quality; now in jail population.

• When you tax land, the market moves each owner to join it with labor and capital as a vehicle for enterprise or shelter.
• When you untax it, the market moves each owner to hold it more passively and obstructively as a "store of value," like a dog burying a bone. The market not only moves the sitting owners, it moves ownership itself to new owners whose needs are compatible with the tax system you impose. ...

 "What, then, will have changed?", you might be asking. It's a fair question. What's changed is that your property tax is no longer biased against renewal, against replacement of old by new. Neither is it biased against full development of the economic capacity of each site. All the ground rents that are now aborted by deferral of renewal, and by underdevelopment, will be generated by new, full development. Land prices, your new tax base, will be pushed up just by the expectation of new buildings' being tax free. The mere expectation will immediately boost the value of land, your new city tax base, even before the new buildings go up.  ...

 "How about corporate stock?", I hear. "Should we exempt corporate wealth from the property tax?" Actually, almost all jurisdictions already exempt stock and all other "intangible" property. Not to worry, however, you tax corporate assets. When you rank property owners by value of holdings, the top ten on most tax rolls are all corporations. None of their multi-national profit-shifting through layered ownership of foreign subs, and creative transfer pricing, can hide their taxable property on your assessor's maps. This makes sense anyway. Why should you think you can tax a corporation for its business in Malaysia? What concerns you is its property in your town. ...

 For example, in West Allis, Wisconsin, the southwest corner of the Allis-Chalmers plant occupies the northeast corner of the 100% location, the most valuable commercial site in town. That land, with the same retail potential as the other three corners, is assessed as raw industrial acreage, as though it were in the boonies, with no recognition of its high location value for retail/office use. To make a land tax work, the assessor must be reinstructed to value that land at its highest and best use rather than as ordinary raw acreage. Exempting buildings would create the necessary pressure, thus solving the very problem that otherwise might be taken as a point against it. As noted earlier, the U.S. Census of Governments gives us no data on this point. You, however, can find it easily enough: tax assessments are public records, and you know your own town. ...

Not only can you have both common land and free markets, you can't have one without the other. They go together, like love and marriage. You need market prices to help identify land's taxable surplus, which is the net product of land after deducting the human costs of using it. At the same time, you must support government from land revenues to have a truly free market, because otherwise you will raise taxes from production, trade, and capital formation, interfering with free markets. If you learn this second point, and act on it, you will have a much freer market than any of the OECD nations that now presume to instruct you, and that are campaigning vigorously to make all nations in the world "harmonize" their taxes to conform with their own abysmal systems.

• polluting air and water,
• wasting water,
• cutting timber whose value is less than the cost of logging, or
• populating remote regions whose costs exceed the benefits derived.

Many Georgists fail to see that a major part of the problem is underassessment of the land. Land is underassessed when tax-valuers lapse into using the “building-first, land-residual” method of separating land from building values. This results in land valuations so absurdly low that one observes, in many cities and neighborhoods, most of the joint value of land/building being allocated to the building in the very year that the owner chooses to demolish the building, i.e. when the building really no longer has any value at all. Then the assessor raises the land valuation under the new, or replacement building – making the land tax in effect an additional tax on the new building. The correct method is the “land-first, building-residual” method: value the land as though vacant, and give the old building the excess, if any, of the joint value over the land value. Then the land value remains fixed when a new building arises, and the land tax serves, as it should, as a stimulus to rebuilding (Gaffney, 2001).

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

• If taxes on improvements are low or non-existing and taxes on land are high, the cities are bound to grow vertically and at a fast rate.
• If taxes on improvements are high and taxes on land are low, our cities will spread over larger and larger areas. TGEorge's Progress & Povertyhey will become metropolitan areas and they will grow at a much slower rate.

The tax on land values is the most just and equal of all taxes. It falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses (George, P&P, 421).

And yet, my friends, in the topsy-turvy world in which we live, this provided fund goes mainly into the pockets of speculators and monopolists, while the body politic meets its needs by extorting from individual producers the fruits of honest toil. If ever there were any doubt about the perversity of human nature, our present system of taxation is the proof! Everywhere about us, we see the ironic spectacle of the community penalizing the individual for his industry and initiative, and taking away from him a share of that which he produces, yet at the same time lavishing upon the non-producer undeserved windfalls which it — the community — produces. And, as Winston Churchill put it, the unearned increment, the socially-produced value of the land, is reaped by the speculator in exact proportion, not to the service, but to the disservice, done. "The greater the injury to society, the greater the reward."

• Is it the sluggard who refuses to seek work when there is work available?
• Is it the slattern who generates offspring solely for the sake of the allotment they command?
• Or is it the man — perhaps a civic leader and a pillar of his church — who sits back, and, with perfect propriety and respectability, collects thousands and maybe even millions of dollars in unearned increments created by the public, as his reward for withholding land from those who wish to put it to productive use.

We say that industry is a good thing, and that thrift is a good thing; and there are some people who say that if a man be industrious, and if a man he thrifty, he can easily accumulate wealth. Whether that be true or not, industry is certainly a good thing, and thrift is certainly a good thing. But what do we do if a man be industrious? If he produces wealth enough, and by thrift accumulates wealth at all, down comes the tax-gatherer to demand a part of it.

We say that that is stupid; that we ought not by our taxes to repress the production of wealth; that when a farmer reclaims a strip of the desert and turns it into an orchard and a vineyard, or on the prairie produces crops and feeds fine cattle, that, so far from being taxed and fined for having done these things, we ought to be glad that he has done it; that we ought to welcome all energy; that no man can Produce wealth for himself without augmenting the general stock, without making the whole country richer. We impose some taxes for the purpose of getting rid of things, for the purpose of having fewer of the things that we tax. In most of our counties and States when dogs become too numerous, there is imposed a dog tax to get rid of dogs. Well, we impose a dog tax to get rid of dogs, and why should we impose a house tax unless we want to get rid of houses? Why should we impose a farm tax unless we want fewer farms? Why should we tax any man for having exerted industry or energy in the production of wealth?

Tax houses and there will certainly be fewer houses. If you go east to the city of Brooklyn, you may see that demonstrated to the eye. What first surprised me in the city of churches was to see long rows of buildings, of brown-stone houses, two stories in front and three stories behind; or three stories in front and four stories behind; and I thought for a moment what foolish idea ever entered the brains of those men, to have left out half an upper story in that way? I found out by inquiring that it was all on account of tax. In the city of Brooklyn, the assessor is only supposed to look in front, and so by making the house in that way, you can get a three-story building behind with only a two-story front and a two-story tax.

So in England, in the old houses, there you may see the result of the window tax. The window tax is in force in France today, and in France there are two hundred thousand houses, according to the census, that have no window at all — in order to escape the tax.

So if you tax ships there will be fewer ships. What old San Franciscan cannot remember the day when in this harbour might be seen the graceful forms and lofty spars of so many American ships, the fleetest and best in the world? I well remember the day that no American who crossed to Europe thought of crossing on any other than an American ship. Today, if you wish to cross the Atlantic, you must cross on a British steamer, unless you choose to cross on a German or French steamer. On the high seas of the world the American ship is becoming almost as rare as a Chinese junk. Why? Simply because we have taxed our ships out of existence. There is the proof.

The property tax falls mostly on improvements, so less housing is built, giving the government an excuse to build public housing. Profits are taxed, leading to less employment and giving government an excuse to spend money on economic stimulus projects. Family income is taxed to the point that they have difficulty buying a house or sending their children to college, so government institutes subsidized mortgages and student loans.

Even the indirect effects are substantial. Land speculations gone sour chew up inner cities, so poor people turn to crime (if drug selling and prostitution be crimes) and the government gets an excuse to beef up the police state.

Politically connected real estate interests see that they can buy up land in the boondocks for a pittance and then get other taxpayers to build them a superhighway, increasing the value of their holdings by orders of magnitude. With land value tax they would have ultimately paid for their own highway or more likely would not have had it built in the first place.

Even welfare increases do not stay in the hands of welfare recipients, but are quickly greeted by higher rent demands from ghetto landlords. (The War on Poverty did little to end poverty, but it did a lot to enrich absentee owners of poor communities.)

All goes back to the land, and the land owner is enabled to absorb to himself a share of almost every public and every private benefit, however important or however pitiful those benefits may be. --Winston Churchill   ... Read the whole piece

The case for site value rating in terms of economic efficiency is founded on the fact that a tax on resources that are not produced by human effort is one of the few sources of government revenue that does not reduce incentives for people to be productive. Two other revenue sources that have this virtue are taxes on other government-granted privileges such as exclusive use of radio frequencies and taxes on activities with harmful consequences, such as polluting the air. An economy will be more efficient if revenue sources that do not diminish productivity are employed to the greatest possible extent before any use is made of taxes that impede productivity.

What makes a tax efficient is that the amount of tax that is due cannot be reduced by reducing productive activities. When incomes are taxed, people can reduce the amount of taxes owed by working less. They do so, and the productivity of the economy falls. When houses are taxed, people can reduce the amount of taxes owed by building fewer house and smaller houses. They do so, and the housing shortage worsens. But when the unimproved value of land is taxed, there is no resulting diminution in the quantity of land. Thus taxes can be levied on land without diminishing the productivity of an economy. And shifting taxes from other, destructive bases to land will improve the productivity of an economy. ... read the whole article

Bill Batt: Who Says Cities are Poor? They Just Don't Know How to Tax Their Wealth!

The problem

It's been an axiom of urban policy for the past half century to lament the plight of American cities — that they have lost their most productive populations, that their infrastructure is deteriorated and obsolete, that they contain people most in need, and that their tax base is limited. This essay argues that none of this needs to be so, and that municipal leaders need only to think "outside the box" as the hackneyed phrase goes, to find undreamed of revenue that will not only provide all the support cities need but enhance the economic vitality of their being by its collection.

As conventionally viewed, cities not only have need for more services but lack the tax base on which to draw from. The services are greater in cities than in suburban and rural communities because that's where streets and other general services are the heaviest, where the schools are the greatest challenge, where the police and fire departments are most relied upon, where the social programs face the greatest pathologies, and where general administration is the most complex and requires the greatest control and coordination. It seems so obvious that it hardly needs mentioning, and no further discussion is required.

At the same time, so the argument goes, the revenue bases upon which to levy taxes are most lacking: the middle class and the wealthier populations have largely moved out, and stores have relocated to malls and highway junctions taking the sales tax base with them. What's left are deteriorating buildings and a complaining citizenry: the footloose commercial and industrial sector also threatens to relocate along with a residential population feeling strangled by growing municipal and school taxes on real property. A few cities have reached beyond taxation of property and sales to impose one more — an income tax — on top of the others. And greater reliance upon user fees and on privatized services shifts the burden increasingly to the poor.

It is difficult to argue with the truth of this picture. The most recent National League of Cities Annual Report[1] indicated that most urban officials are very pessimistic about the general directions the country is heading, and most expect continued decreases in the levels services in years to come. Using almost any indicator — traffic, unemployment, infrastructure, housing, drug and alcohol abuse, or economic conditions, the problems have gotten worse. As federal and state taxes are cut back in the face of growing resentment, local leaders are faced with a Hobson's choice — raise more taxes or further cut services. In recent years, the changes in revenue streams between federal, state, and local governments show a continued decrease of support in all areas.

1. National League of Cities, The State of America's Cities 2004: The Annual Opinion Survey of Muncipal Elected Officials. www.nlc.org/resources_for_cities/publications/1637.cfm.

The revenue choices, political leaders assume, are between taxes on real property, retail sales, and personal income. All three are recognized to have strong negative impacts. Property taxes, well documented as being the most resented of all,[2] are viewed as unevenly and even arbitrarily applied, regressive, and destructive of economic vitality. Sales taxes are acknowledged also as regressive and easily evaded. And income taxes, intended as a means of taxing the "rich," also have downside consequences in their invitation to both tax avoidance and enactment of loopholes by compliant legislatures. What then to do? The more each tax rate is increased, the greater the tendency to institute beggar-thy-neighbor policies that raise the cost of their administration and foster more resentment and evasion. Not without reason do tax experts regard politics today as essentially a contest over taxes.[3] ... read the whole article

Frank Stilwell and Kirrily Jordan: The Political Economy of Land: Putting Henry George in His Place

One might expect such arguments to have led to the advocacy of land nationalisation. But George thought this unnecessary because a tax on land could be effective in capturing the economic surplus arising from land ownership. This tax would generate all the revenue necessary to fund public expenditures. George thought that such a land tax would permit the removal of other taxes on labour and capital, which he regarded as inherently inefficient. He argued that taxes on incomes, sales, and payrolls, for example, acted as disincentives to production and active endeavour, thereby stifling economic growth and creating a barrier to full employment. A land tax, by contrast, would be both economically efficient and more equitable in its distributional effects. ...

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

Bill Batt: Comment on Parts of the NYS Legislative Tax Study Commission's 1985 study “Who Pays New York Taxes?”

Henry George’s Solution: Taxing the Flow of Land Rent

If land values are really the present values of anticipated future ground rents, one can certainly treat them as flows rather than stocks, just as community services are continuous flows. The amount of rent flowing through a site and through the economy is not negligible; what estimates have been made, where indeed the economic data allow it to be made, suggest that it is roughly a third of a nation’s GDP.29 The question is whether it makes more sense to. Should we elect to continue property tax regimes as we do, it would make better sense to tax buildings as stocks and lands as rent flows. But this raises the question whether real property should be exempt from all taxes, as some have argued.30 What rationale exists for taxing lands, whether as stocks or flows; and why do we tax buildings? I will argue below that taxing buildings and the failure to adequately tax land both have deleterious consequences for the whole economy.

Little justification exists for taxing buildings, or improvements of any sort, so this question is easily disposed of. The practice is explained largely as a matter of historical inertia. Only in the recent century or two have buildings represented any significant capital value; prior to the rise of major cities, the value of real property lay essentially in land. American cities today typically record aggregate assessed land values – at least when the valuations are well-done – at about 40% to 60% of total taxable value, that is, of land and buildings taken together.31 Skyscrapers reflect enormous capital investment, and this expenditure is warranted because of the enormous value of locational sites. Each site gets its market price from the fact that the total neighborhood context creates an attractive market presence and ambience. By taxing buildings, however, we impose a penalty on their optimum development as well as on the incentives for their maintenance. Moreover, taxes on buildings take away from whatever burden would otherwise be imposed on sites, with the result that incentives for their highest and best use is weakened. Lastly, the technical and administrative challenges of properly assessing the value of improvements is daunting, particularly since they must be depreciated for tax and accounting purposes, evaluated for potential replacement, and so on. In fact most costs associated with administration of property taxation and appeal litigation involve disputes over the valuation of structures, not land values. ... read the whole commentary

• First, it robs the community of its land values;
• second, it robs labor of its wages in the name of taxation;
• third, it sustains and fosters landlordism, a most conspicuously damnable difference;
• fourth, it exhibits willing workers in enforced idleness; beholding their families in want on the one hand, and unused land that would yield them abundance on the other.