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Henry George: The Common Sense of Taxation (1881 article)
Henry George: Thou Shalt Not Steal (1887 speech)
There is no need for poverty in this world, and in our civilization. There is a provision made by the laws of the Creator which would secure to the helpless all that they require, which would give enough and more than enough for all social purposes. These little children that are dying in our crowded districts for want of room and fresh air, they are the disinherited heirs of a great estate.
Did you ever consider the full meaning of the significant fact that as progress goes on, as population increases and civilization develops, the one thing that ever increases in value is land? Speculators all over the country appreciate that fact. Wherever there is a chance for population coming; wherever railroads meet or a great city seems destined to grow; wherever some new evidence of the bounty of the Creator is discovered, in a rich coal or iron mine, or an oil well, or a gas deposit, there the speculator jumps in, land rises in value, and a great boom takes place, and people find themselves enormously rich without ever having done a single thing to produce wealth.
Now, it is by virtue of a natural law that land steadily increases in value; that population adds to it; that invention adds to it; that the discovery of every fresh evidence of the Creator’s goodness in the stores that He has implanted in the earth for our use adds to the value of land, not to the value of anything else. This natural fact is by virtue of a natural law, a law that is as much a law of the Creator as is the law of gravitation.
What is the intent of this natural law of increasing land values? Is there not in it a provision for social needs? That land values grow greater and greater as the community grows and common needs increase: is there not built into this law a manifest provision for social needs — a fund belonging to society as a whole, with which we may take care of those who fall by the wayside — with which we may meet public expenses, and do all the things that an advancing civilization makes more and more necessary for society to do on behalf of its members?
Today the value of land in New York city is over a hundred million annually. Who has created that value? Is it because a few landowners are here that that land is worth a hundred million a year? Is it not because the whole population of New York is here? Is it not because this great city is the center of exchanges for a large portion of the continent? Does not every child that is born, every one that comes to settle in New York, does it not add to the value of this land? Ought it not, therefore, get some portion of the benefit? And is it not wronged when, instead of being used for that purpose, certain favored individuals are allowed to appropriate the fund of land values?
We might take this vast fund for common needs; we might with it make a city here such as the world has never seen before — a city spacious, clean, wholesome, beautiful — a city that should be full of parks; a city without tenement houses; and we could do this, not merely without imposing any tax upon production, without interfering with the just rights of property, but while at the same time securing far better than they are now the rights of property, and abolishing the taxes that now weigh on production. ... read the whole article
Everett Gross: Explaining Rent
Nic Tideman: The Case for Site Value Rating
The Social Justice of Site Value Rating
The Efficiency of Site Value Rating
How Valuations would be Made
Both for reasons of social justice and for reasons of economic efficiency, site value rating deserves a continued place in the programme of the Liberal Party.
The case for site value rating in terms of social justice is founded on two understandings: first, that the value of land in the absence of economic development is the common heritage of humanity, and second, that increases in the rental value of land arising from economic development and government expenditures should be collected by governments to finance those activities. What is meant by "land" is the unimproved value of sites and the value of extractable natural resources such as North Sea oil.
While there may someday be institutions capable of implementing a recognition of land as the heritage of all humanity on a worldwide basis, in the absence of such institutions each nation should implement a recognition that land within its boundaries is the common heritage of its citizens. This is accomplished not by making the nation a gigantic Common or by instituting government management of all land, but rather by requiring all persons and corporations that are granted the use of land to pay a fee or tax equal to what the rental value of the land they control would be if it were in an unimproved condition.
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.
Subsequent sections explain in
more detail these social justice
and efficiency arguments for site value rating, describe procedures
for implementing such a tax system, and explain why a variety of
potential objections are without merit. ...
The general principle that is applied in site value rating is that everyone pays for the naturally created and publicly created resources they use. There are a number of ways in which this principle can be extended. Where driving in crowded cities adds noticeably to the travel costs of others, there should be charges corresponding to those costs, provided that the administrative costs of implementing such a system are not so great as to outweigh the benefits of resulting improvements in traffic flows. Activities such as the consumption of alcohol that have socially adverse consequences should be taxed according to the costs of those consequences. Public services -- gas, electricity, telephone, water, sewerage, transportation, etc. -- whether publicly or privately owned, are best financed by a combination of charges on users and charges on land. Each user should be required to pay the addition to costs that results from serving him or her. The component of costs that is not covered by such charges on users can be recovered by collecting the increase in land values that comes from provision of public services.... Read the whole articleNic Tideman: The Morality of Taxation: The Local Case
From a moral perspective, taxation is dubious or worse. We tell our fellow citizens that if they do not pay taxes that we say they owe, their property will be seized or they will be sent to prison. Why do we treat people this way? Is there a justification?
The dubiousness of taxation increases when we consider its origins. Government seems to have originated as roving bandits who learned that total destruction was less profitable than protecting their victims from other bandits and allowing them to keep a fraction of what they produced (Olson, 1993). In time, scheduled partial plunder evolved into taxation. Over the centuries, regimes that started as tyrannies evolved into democracies. The public sector evolved from an apparatus for implementing the will of despots into a mechanism for carrying out democratic decisions. But public finance continues to rely on the power of tax collectors, developed under early tyrants, to coerce citizen to pay taxes. The wrath that citizens feel toward tax collectors is probably the strongest antagonistic feeling that citizens have toward a governmental institution. Why do we allow ourselves to do this to one another?
There is a gentler side of taxation that provides some explanation of our tolerance of this coercion. Taxation can be the way that people achieve their common purposes. People may agree to be taxed so that there will be money to pay for public services that they want. From this perspective, taxation may be considered no more than the dues for belonging to a club that provides people with things that they would rather pay their share of than do without. However, to make this "voluntary exchange" theory of taxation relevant, people must be able to choose freely whether or not to "join the club," to be a citizen of the taxing jurisdiction. With all land claimed by some taxing jurisdiction, the choice isn't exactly free.
The problem of morality in taxation is the following:
we would probably have a much more efficient public sector if every public expenditure required two-thirds approval in legislative bodies.
But to make taxation truly voluntary, the option to leave must be viable. If people could move costlessly from one jurisdiction to another, taking all of their belongings with them, then competition among jurisdictions would tend to eliminate oppressive taxation. This would leave only the fees that people were prepared to pay to have public services (Tiebout, 1956).
Of course, moving will always have some costs, so the ideal will not be attainable. But what can be imagined is a system in which all taxes were local taxes. Then people would not have to move nearly as far to escape from taxes that they regarded as oppressive. Higher levels of government would not need to disappear; if the services that they provide are desired, they could be financed by levies on lower levels of government. ...
...Thus communities would not be able to raise much revenue from income tax or taxes on capital before they would drive residents and investment away. It might seem that there would be no way that localities could finance themselves.
Such a conclusion would be unwarranted, because there is a very significant source of public revenue that can survive when localities compete for mobile residents. This source is land. When people are taxed in proportion to the land they possess, no land moves to another locality where taxes are lower. Thus two questions arise:
Nic Tideman: Using Tax Policy to Promote Urban Growth
The efficiency that is entailed in using the rent of land to finance public activities applies to certain other sources of public revenue as well:
1. Charges on any publicly granted privileges, such as the exclusive right to use a portion of the frequency spectrum for radio and TV broadcasts.
All of the above taxes are positively beneficial and should be collected even if the revenue is not needed for public purposes. Any excess can be returned to the population on an equal per capita basis. If these attractive sources of revenue do not suffice to finance necessary public expenditures, then the least damaging additional tax would probably be a "poll tax," a uniform charge on all residents. If some residents are regarded to be incapable of paying such a tax, then the next most efficient tax is a proportional tax on income up to some specified amount. Then there is no disincentive effect for all persons who reach the tax limit. The next most efficient tax is a proportional tax on all income.
It is important not to tax the profits of corporations. Capital moves from where it is taxed to where it is not, until the same rate of return is earned everywhere. If the city refrains from taxing corporations they will invest more in St. Petersburg. Wages will be higher, and the rent of land, collected by the government, will be higher. The least damaging tax on corporations is one that provides a complete write-off of investments, with a carry-over of tax credits to future years. Such a tax has the effect of making the government a partner in all new investments. With such a tax the government provides, through tax credits, the same share of costs that it later receives in revenues. However, the tax does diminish the incentive for entrepreneurial activity, and it raises no revenue when investment is expanding rapidly. Furthermore, the efficiency of such a tax requires that everyone believe that the tax rate will never change. Thus it is best not to tax the profits of corporations at all. If the people of St. Petersburg want to share in the profits of corporations, then they should invest directly in the corporations, either privately or publicly. The residents of St. Petersburg would be best served by refraining from taxing the profits of corporations. Creating a place where profits are not taxed can be expected to attract so much capital that the resulting rises in wages and in government-collected rents will more than offset what might have been collected by taxing profits.
The taxes that promote urban growth have at least one of two features.
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper