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Henry George: The Common Sense of Taxation (1881 article)

To illustrate: A man builds a fine house or large factory in a poorly improved neighborhood. To tax this building and its adjuncts is to make him pay for his enterprise and expenditure — to take from him part of his natural reward. But the improvement thus made has given new beauty or life to the neighborhood, making it a more desirable place than before for the erection of other houses or factories, and additional value is given to land all about. Now to tax improvements is not only to deprive of his proper reward the man who has made the improvement, but it is to deter others from making similar improvements. But, instead of taxing improvements, to tax these land values is to leave the natural inducement to further improvement in full force, and at the same time to keep down an obstacle to further improvement, which, under the present system, improvement itself tends to raise. For the advance of land values which follows improvement, and even the expectation of improvement, makes further improvement more costly.

See how unjust and short-sighted is this system. Here is a man who, gathering what little capital he can, and taking his family, starts West to find a place where he can make himself a home. He must travel long distances; for, though he will pass plenty of land nobody is using, it is held at prices too high for him. Finally he will go no further, and selects a place where, since the creation of the world, the soil, so far as we know, has never felt a plowshare. But here, too, in nine cases out of ten, he will find the speculator has been ahead of him, for the speculator moves quicker, and has superior means of information to the emigrant. Before he can put this land to the use for which nature intended it, and to which it is for the general good that it should be put, he must make terms with some man who in all probability never saw the land, and never dreamed of using it, and who, it may be, resides in some city, thousands of miles away. In order to get permission to use this land, he must give up a large part of the little capital which is seed-wheat to him, and perhaps in addition mortgage his future labor for years. Still he goes to work: he works himself, and his wife works, and his children work — work like horses, and live in the hardest and dreariest manner. Such a man deserves encouragement, not discouragement; but on him taxation falls with peculiar severity. Almost everything that he has to buy — groceries, clothing, tools — is largely raised in price by a system of tariff taxation which cannot add to the price of the grain or hogs or cattle that he has to sell. And when the assessor comes around he is taxed on the improvements he has made, although these improvements have added not only to the value of surrounding land, but even to the value of land in distant commercial centers. Not merely this, but, as a general rule, his land, irrespective of the improvements, will be assessed at a higher rate than unimproved land around it, on the ground that "productive property" ought to pay more than "unproductive property" — a principle just the reverse of the correct one, for the man who makes land productive adds to the general prosperity, while the man who keeps land unproductive stands in the way of the general prosperity, is but a dog-in-the-manger, who prevents others from using what he will not use himself.

Or, take the case of the railroads. That railroads are a public benefit no one will dispute. We want more railroads, and want them to reduce their fares and freight. Why then should we tax them? for taxes upon railroads deter from railroad building, and compel higher charges. Instead of taxing the railroads, is it not clear that we should rather tax the increased value which they give to land? To tax railroads is to check railroad building, to reduce profits, and compel higher rates; to tax the value they give to land is to increase railroad business and permit lower rates. The elevated railroads, for instance, have opened to the overcrowded population of New York the wide, vacant spaces of the upper part of the island. But this great public benefit is neutralized by the rise in land values. Because these vacant lots can be reached more cheaply and quickly, their owners demand more for them, and so the public gain in one way is offset in another, while the roads lose the business they would get were not building checked by the high prices demanded for lots. The increase of land values, which the elevated roads have caused, is not merely no advantage to them — it is an injury; and it is clearly a public injury. The elevated railroads ought not to be taxed. The more profit they make, with the better conscience can they be asked to still further reduce fares. It is the increased land values which they have created that ought to be taxed, for taxing them will give the public the full benefit of cheap fares.

So with railroads everywhere. And so not alone with railroads, but with all industrial enterprises. So long as we consider that community most prosperous which increases most rapidly in wealth, so long is it the height of absurdity for us to tax wealth in any of its beneficial forms. We should tax what we want to repress, not what we want to encourage. We should tax that which results from the general prosperity, not that which conduces to it. It is the increase of population, the extension of cultivation, the manufacture of goods, the building of houses and ships and railroads, the accumulation of capital, and the growth of commerce that add to the value of land — not the increase in the value of land that induces the increase of population and increase of wealth. It is not that the land of Manhattan Island is now worth hundreds of millions where, in the time of the early Dutch settlers, it was only worth dollars, that there are on it now so many more people, and so much more wealth. It is because of the increase of population and the increase of wealth that the value of the land has so much increased. Increase of land values tends of itself to repel population and prevent improvement. And thus the taxation of land values, unlike taxation of other property, does not tend to prevent the increase of wealth, but rather to stimulate it. It is the taking of the golden egg, not the choking of the goose that lays it.

Every consideration of policy and ethics squares with this conclusion. The tax upon land values is the most economically perfect of all taxes. It does not raise prices; it maybe collected at least cost, and with the utmost ease and certainty; it leaves in full strength all the springs of production; and, above all, it consorts with the truest equality and the highest justice. For, to take for the common purposes of the community that value which results from the growth of the community, and to free industry and enterprise and thrift from burden and restraint, is to leave to each that which he fairly earns, and to assert the first and most comprehensive of equal rights — the equal right of all to the land on which, and from which, all must live.

Thus it is that the scheme of taxation which conduces to the greatest production is also that which conduces to the fairest distribution, and that in the proper adjustment of taxation lies not merely the possibility of enormously increasing the general wealth, but the solution of these pressing social and political problems which spring from unnatural inequality in the distribution of wealth.... read the whole article

Henry George: Why The Landowner Cannot Shift The Tax on Land Values (1887)

Land upon which there is no taxation even a poor man can easily hold for higher prices, for land eats nothing. But put heavy taxation upon it, and even a rich man will be driven to seek purchasers or tenants, and to get them he will have to put down the price he asks, instead of putting it up; for it is by asking less, not by asking more, that those who have anything they are forced to dispose of must seek customers. Rather than continue to pay heavy taxes upon land yielding him nothing, and from the future increase in value of which he could have no expectation of profit, since increase in value would mean increased taxes, he would be glad to give it away or let it revert to the State. Thus the dogs in the manger, who all over the country are withholding land that they cannot use themselves from men who would be glad to use it, would be forced to let go their grasp. To tax Land Values up to anything like their full amount would be to utterly destroy speculative values, and to diminish all rents into which this speculative element enters. ... read the whole 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? 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 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,

H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty, Chapter 5: The Basic Cause of Poverty (in the unabridged: Book V: The Problem Solved)

The truth is self-evident. Put to any one capable of consecutive thought this question:

"Suppose there should arise from the English Channel or the German Ocean a no man's land on which common labor to an unlimited amount should be able to make thirty shillings a day and which should remain unappropriated and of free access, like the commons which once comprised so large a part of English soil. What would be the effect upon wages in England?"

He would at once tell you that common wages throughout England must soon increase to thirty shillings a day.

And in response to another question, "What would be the effect on rents?" he would at a moment's reflection say that rents must necessarily fall; and if he thought out the next step he would tell you that all this would happen without any very large part of English labor being diverted to the new natural opportunities, or the forms and direction of industry being much changed; only that kind of production being abandoned which now yields to labor and to landlord together less than labor could secure on the new opportunities. The great rise in wages would be at the expense of rent.

Take now the same man or another — some hardheaded business man, who has no theories, but knows how to make money. Say to him: "Here is a little village; in ten years it will be a great city — in ten years the railroad will have taken the place of the stage coach, the electric light of the candle; it will abound with all the machinery and improvements that so enormously multiply the effective power of labor. Will, in ten years, interest be any higher?"

He will tell you, "No!"

"Will the wages of common labor be any higher; will it be easier for a man who has nothing but his labor to make an independent living?"

He will tell you, "No; the wages of common labor will not be any higher; on the contrary, all the chances are that they will be lower; it will not be easier for the mere laborer to make an independent living; the chances are that it will be harder."

"What, then, will be higher?"

"Rent; the value of land. Go, get yourself a piece of ground, and hold possession."

And if, under such circumstances, you take his advice, you need do nothing more. You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon, or down a hole in the ground; and without doing one stroke of work, without adding one iota to the wealth of the community, in ten years you will be rich! In the new city you may have a luxurious mansion; but among its public buildings will be an almshouse.

... For land is the habitation of man, the storehouse upon which be must draw for all his needs, the material to which his labor must be applied for the supply of all his desires; for even the products of the sea cannot be taken, the light of the sun enjoyed, or any of the forces of nature utilized, without the use of land or its products. On the land we are born, from it we live, to it we return again — children of the soil as truly as is the blade of grass or the flower of the field. Take away from man all that belongs to land, and he is but a disembodied spirit. Material progress cannot rid us of our dependence upon land; it can but add to the power of producing wealth from land; and hence, when land is monopolized, it might go on to infinity without increasing wages or improving the condition of those who have but their labor. It can but add to the value of land and the power which its possession gives. Everywhere, in all times, among all peoples, the possession of land is the base of aristocracy, the foundation of great fortunes, the source of power. ... read the whole chapter

Henry George: Justice the Object -- Taxation the Means (1890)

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. Read the entire article

Henry George: The Great Debate: Single Tax vs Social Democracy  (1889)
What we want is full competition. (Hear, hear.) What we want to do is to abolish monopolies, and it is to these monopolies, and not to the earnings of capital, that the great fortunes to which my opponent has alluded are due.

What are the causes of these big fortunes? In the United States, go wherever you please, you find that the real element is land ownership. It is a great mistake to think that the only landlords are those which pose as such. today, who are the great owners of the Irish estates? Not so much the Irish landlords as the English banks and insurance societies. (Hear, hear.) Take our, Jay Gould, the most conspicuous example of a great fortune made outside the rise of land values. He made his first stride by getting hold of a piece of land and taking advantage of its rise in value, and he is today the owner of millions of acres. He made his money in what? In a public franchise, that we would abolish.  ...

What has the deterioration in the condition of our farms been caused by? Not, as Mr Hyndman says, by any exploiting power of capital, but by the monopolisation of land, and by the taxes levied on industry (Hear, hear.) What do these great farms come from? They come from the great railroad grants. (Hear, hear.) They come from the system permitted under the land-laws of the United States, under which single individuals have taken hundreds of thousands of acres. And from the same cause comes the mortgage on the farms. Wherever the farmer goes he finds the speculator ahead of him, he finds the land already taken up, and he must either start with capital and pay a large sum for the purpose of getting virgin soil to cultivate, or he must mortgage his labour for years. That is what he does. (Hear; hear.) The real cause is in the high purchase price, of his land, and that is why times have been getting harder in the United States. Then I am asked, how can a man using a spade compete with this great machinery of the 5,000 acre farm? This, at least, he can do; he can make a living and a good living, too; and when men can make a good living themselves they will not work for anything less than that for any capitalist. (Loud cheers.)  ... Read the entire article

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

The Laws of Social Life

TAKE now some hard-headed businessman, who has no theories, but knows how to make money. Say to him: "Here is a little village; in ten years it will be a great city — in ten years the railroad will have taken the place of the stagecoach, the electric light of the candle; it will abound with all the machinery and improvements that so enormously multiply the effective power of labor. Will, in ten years, interest be any higher?"

He will tell you, "No!"

"Will the wages of common labor be any higher; will it be easier for a man who has nothing but his labor to make an independent living?"

He will tell you, "No; the wages of common labor will not be any higher; on the contrary, all the chances are that they will be lower; it will not be easier for the mere laborer to make an independent living; the chances are that it will be harder."

"What, then, will be higher?" " Rent; the value of land. Go; get yourself a piece of ground, and hold possession."

And if, under such circumstances, you take his advice, you need do nothing more. You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico: you may go up in a balloon, or down a hole in the ground; and without doing one stroke of work, without adding one iota to the wealth of the community, in ten years you will be rich! In the new city you may have a luxurious mansion; but among its public buildings will be an almshouse. — Progress & Poverty — Book V, Chapter 2: The Problem Solved: The Persistence of Poverty amid Advancing Wealth

THERE may be disputes as to whether there is yet a science of political economy, that is to say, whether our knowledge of the natural economic laws is as yet so large and well digested as to merit the title of science. But among those who recognize that the world we live in is in all its spheres governed by law, there can be no dispute as to the possibility of such a science. — The Science of Political Economyunabridged: Book I, Chapter 14, The Meaning of Political Economy: Political Economy as Science and as Artabridged: Part 1, Chapter 12: Political Economy as Science and Art

THE domain of law is not confined to physical nature. It just as certainly embraces the mental and moral universe, and social growth and social life have their laws as fixed as those of matter and of motion. Would we make social life healthy and happy, we must discover those laws, and seek our ends in accordance with them. — Social Problems — Chapter 22: Conclusion

... go to "Gems from George"

Louis Post: Outlines of Louis F. Post's Lectures, with Illustrative Notes and Charts (1894) — Appendix: FAQ

Q44. Though some people have made money by owning land, isn't it true that others have lost? And don't the losses more than off-set the gains?
A. Possibly. But that has no bearing upon the question. What men lose through investments in land, the community does not gain; but what they gain the community does lose. Therefore, as between land speculators and the community, the losses cannot be charged against the gains.

... read the book

Nic Tideman: Basic Tenets of the Incentive Taxation Philosophy

Making Housing Affordable
The implementation of our ideas would have a dramatic effect in making housing more affordable. The principal reason why housing costs have risen so much is that the price of land has risen enormously. Some increase in the price of access to land is a natural accompaniment of an increasing population.

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.

  • First, much land is held off the market by speculators who may wait generations do decide to develop it. The introduction of a fee for holding land, whether used or not, equal to the rental value of the land, will induce speculators to either develop this land themselves or turn it over to someone who will.
  • Second, an important cause of higher prices for access to land by those who wish to build low-cost housing is zoning restrictions. These restrictions are introduced by political factions that already have their houses and do not mind if housing becomes scarcer. It just raises the market value of their homes. But if a rise in land values were accompanied by rises in the fees that existing residents had to pay for the use of the land on which their houses sit, they would have an incentive to do what they could to make land plentiful rather than scarce, and zoning restrictions could be expected to diminish.
  • Third, a person who wishes to own a house must borrow money to cover the price of buying the title to the land on which the house sits as well as the cost of the house itself. If the use of land required the payment of a fee equal to the rental value of land, so that the selling price of land titles became virtually zero, then the amount of money that a family would have to borrow to purchase a house would fall. ...  Read the whole article

Henry George: How to Help the Unemployed   (1894)

These recurring spasms of business stagnation; these long-drawn periods of industrial depression, common to the civilized world, do not come from our treatment of money; are not caused and are not to be cured by changes of tariffs. Protection is a robbery of labor, and what is called free trade would give some temporary relief, but speculation in land would only set in the stronger, and at last labor and capital would again resist, by partial cessation, the blackmail demanded for their employment in production, and the same round would be run again. There is but one remedy, and that is what is now known as the single-tax -- the abolition of all taxes upon labor and capital, and of all taxes upon their processes and products, and the taking of economic rent, the unearned increment which now goes to the mere appropriator, for the payment of public expenses. Charity can merely demoralize and pauperize, while that indirect form of charity, the attempt to artificially "make work" by increasing public expenses and by charity woodyards and sewing-rooms, is still more dangerous. If, in this sense, work is to be made, it can be made more quickly by dynamite and kerosene.

But there is no need for charity; no need for "making work." All that is needed is to remove the restrictions that prevent the natural demand for the products of work from availing itself of the natural supply. Remove them today, and every unemployed man in the country could find for himself employment tomorrow, and his "effective demand" for the things he desires would infuse new life into every subdivision of business and industry, even that of the dentist, the preacher, the magazine writer, or the actor.

The country is suffering from "scarcity of employment." But let anyone to-day attempt to employ his own labor or that of others, whether in making two blades of grass grow where one grew before, or in erecting a factory, and he will at once meet the speculator to demand of him an unnatural price for the land he must use, and the tax-gatherer to fine him for his act in employing labor as if he had committed a crime. The common-sense way to cure "scarcity of employment" is to take taxes off the products and processes of employment and to impose in their stead the tax that would end speculation in land.

But, it will be said, this is not quick enough. On the contrary, it is quicker than anything else. Even the public recognition of its need, by but a part of the intelligence and influence that is now devoted to charity appeals and schemes, would have such an effect upon the speculative price of land as to at once set labor and capital to work.Read the entire article


Upton Sinclair: The Consequences of Land Speculation are Tenantry and Debt on the Farms, and Slums and Luxury in the Cities

I know of a woman — I have never had the pleasure of making her acquaintance, because she lives in a lunatic asylum, which does not happen to be on my visiting list. This woman has been mentally incompetent from birth. She is well taken care of, because her father left her when he died the income of a large farm on the outskirts of a city. The city has since grown and the land is now worth, at conservative estimate, about twenty million dollars. It is covered with office buildings, and the greater part of the income, which cannot be spent by the woman, is piling up at compound interest. The woman enjoys good health, so she may be worth a hundred million dollars before she dies.

I choose this case because it is one about which there can be no disputing; this woman has never been able to do anything to earn that twenty million dollars. And if a visitor from Mars should come down to study the situation, which would he think was most insane, the unfortunate woman, or the society which compels thousands of people to wear themselves to death in order to pay her the income of twenty million dollars?

The fact that this woman is insane makes it easy to see that she is not entitled to the "unearned increment" of the land she owns. But how about all the other people who have bought up and are holding for speculation the most desirable land? The value of this land increases, not because of anything these owners do — not because of any useful service they render to the community — but purely because the community as a whole is crowding into that neighborhood and must have use of the land.

The speculator who bought this land thinks that he deserves the increase, because he guessed the fact that the city was going to grow that way. But it seems clear enough that his skill in guessing which way the community was going to grow, however useful that skill may be to himself, is not in any way useful to the community. The man may have planted trees, or built roads, and put in sidewalks and sewers; all that is useful work, and for that he should be paid. But should he be paid for guessing what the rest of us were going to need?

Before you answer, consider the consequences of this guessing game. The consequences of land speculation are tenantry and debt on the farms, and slums and luxury in the cities. A great part of the necessary land is held out of use, and so the value of all land continually increases, until the poor man can no longer own a home. The value of farm land also increases; so year by year more independent farmers are dispossessed, because they cannot pay interest on their mortgages. So the land becomes a place of serfdom, that land described by the poet, "where wealth accumulates and men decay." The great cities fill up with festering slums, and a small class of idle parasites are provided with enormous fortunes, which they do not have to earn, and which they cannot intelligently spend. ... read the whole article

Fred Foldvary:  The Rent, the Whole Rent, and Nothing but the Rent

Real-estate land rent and rentals arise from the differing productivity of various sites: rent is the differential between the productivity of a site relative to the least productive marginal sites. This is the same as the "marginal product" of land as used in economics. Buying land for speculation anticipating higher future rentals not paid for by the landowner can induce higher prices for land that shifts the margin to inferior lands, raising the rents on superior lands and lowering wages set at the margin.

Lindy Davies:   The Top Ten Reasons Why Land is More Important than Ever
The Georgist economic proposal insists on the primary importance of land as a factor in the economy. Many people dismiss that as a quaint, agrarian notion. "Perhaps," they scoff, "land was that significant back when most people had to work the soil for a living, but modern agriculture has moved far past that! Nowadays we deal with modern issues of technology, global markets, information -- land is no longer a big deal."
10. There's no place to dump your trash for free. ...
9. Scratch a financial crisis, find a real estate bubble. ...
8. Information (like railroads) needs routes. ...
7. Cities can no longer afford to be inefficient. ...
6. Global climate change is too likely to ignore. ...
5. The loss of biological diversity cannot be reversed. ...
4. Two out of every five people lack a safe and dependable source of drinking water. ...
3. The myth of overpopulation causes cultural sickness. ...
2. We have forgotten what nations are. ...
1. "The land shall not be sold forever, for ye are strangers and sojourners with Me." ...

Mason Gaffney:  Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth

... George spoke for the landless, the tenants, the young, the upwardly mobile, orphans with nothing to inherit (as opposed to the mythical orphans who own all the property in the country), the students and trainees, the exploited workers, the innovators and entrepreneurs and adventurers who turn their capital and turn the wheels of capitalism – not so much for stolid settled burghers and retirees who own land. Their buildings, yes, he would exempt. But if those buildings rest on land of high social utility, they are playing the role of land speculators. Call them Type #3 speculators: the “passive-aggressive” type. (For Types #1 and #2, see item 9, below.)

It is not that George or his allies are against homeownership. Georgist tax reform makes it easier for first-time buyers to enter the market, and tends to raise the number of owner-occupants. However that sometimes entails inducing Type #3 speculators, melded in among existing homeowners, to let go of excess land they do not need. That basic point gets lost when campaigners pitch their message solely to existing homeowners, lumping them all as a class.

Folklore and commercial drama make sympathetic figures of Type #3 speculators. Environmentalists cozy up to landed gentry as soon as these set aside some land for wildlife, and abate the bloodlust of their foxhunting. The challenge for educators and economists is to explain that their role in the land market can be just as anti-social as those who are more transparently aggressive and greedy. It is a mighty challenge, I allow; but it is what’s out there, and we must face it, or settle for tokenism that absorbs our lives and resources while papering over the major issues. ...

9. Territorial expansion: Regional cross-subsidy, with subeconomic extension of public works and services. George’s critique of land speculation came to be focused on “Speculator Type #1,” who withholds good lands from timely use. Georgists have neglected to condemn the counterpart “Speculator Type #2,” who acquires marginal lands cheaply, and then lobbies public agencies to extend roads, utilities, military and police protection, and other public services to them, below cost.

Some Georgists may even see this as a legitimate way, and an easier way, to combat the artificial scarcity of land that Speculator Type #1 causes – a way of perpetuating the “frontier safety-valve.” However, it unbalances development severely: too much roading, et al., too little use of the land thus “opened up.” Some taxpayer must pay for the roading et al. If the taxes are activity-based or improvement-based (i.e. anything but land taxes) they will sterilize marginal land, and lower the intensity of use of all land.

This is a pervasive, immanent bias in most of our institutions, from city departments of public works up through state and provincial public utilities commissions and highway departments, clear to the Pentagon, World Bank, and CIA. Types #1 and #2, in tandem, create our form of Imperialism, that perpetual quest for Lebensraum that is our curse.

In my political experiences, one collects more cuts and bruises combating Speculators Type #2 than Type #1. I was, for example, able to lead the local countywide campaign against Howard Jarvis’ “Proposition 13” without being seriously punished, but a few years later when I led the campaign against southern California’s favorite public water-works boondoggle, the “Peripheral Canal,” my academic and professional world collapsed about me. Earlier, when I joined the furor against American imperialism (Gaffney, 1971) and the myth of infinite natural resources (Gaffney, 1972), I became persona non grata at Resources for the Future, Inc., where I then worked. In British Columbia, 1975, I learned that the self-styled “socialist” government under Premier David Barrett was unwilling even to consider withdrawing any of its expensive cross-subsidies to speculators Type #2, and resented me for raising the issue. The moose-pastures of northern B.C. “are a mighty empire,” they told me, and the rich retirees on the Gulf Islands are important constituents who should have both their subsidized ferry service and their exclusionary zoning to keep hoi polloi from sharing it. I have war stories, but the objective point is that the socio-political bias for territorial expansion is even stronger than the bias against cultivating, intensifying and renewing our internal frontiers. The Georgist dream of taxing central rents to finance public services becomes a nightmare when the public money is dissipated in enriching Speculators Type #2. This kind of spending not only dissipates rents, and wastes capital, at the same time it despoils the environment. Worst of all, as the subeconomic land development proceeds, each new settlement makes a platform for the next, so there is no end to it short of the limits of capital and of Earth. It is perhaps fortunate for Earth that, historically, the limits of capital have been reached first, at the ends of bursts of territorial overexpansion. Read the whole article

Mason Gaffney: Oil and Gas Leasing: a Study in Pseudo-Socialism
"Socialism," in common usage, is a Protean word, slippery and shifting. Many use it without defining it, whether from innocence, negligence, or cunning. These many include not just the vulgar, but most economists: semantic care is weak in the traditions of the profession. "Rigorous" model-builders today are among the offenders: the premium is on gilding the superstructure, neglecting the foundation. Indeed, foundations are not even needed for models that float in outer space, vouching for and communing mainly with each other.

Those who do define Socialism, explicitly or implicitly, use the word for different things. A major difference, treated here, is between Managerial Socialism (who decides) and Distributive Socialism (who gets). These may overlap, but are independent of each other and often conflict. For example, Riverside, CA, owns its own electric utility (on whose Board I sit, losing battles). This is Managerial Socialism, municipal style. Its traditional rate structure includes large elements of cross-subsidy, mainly taking from the lower middles for the rich, tempered by crumbs thrown to the very poor. The same is true of our water system, and of most municipally owned and managed utilities around the nation. Water and sewer service are common examples of Managerial Socialism (from which the mnemonic "sewer socialism"). They have little in common with Distributive Socialism.

At higher levels of government, also, Managerial Socialism may play reverse Robin Hood. In British Columbia the "Socred" (right-wing) party in the 1960s socialized the ferry service, the provincial railroad, and the electric utility (now B.C. Hydro), using them in schemes to enrich land speculators. To boost along B.C. Hydro they raided the teachers' pension fund, borrowing from it at rates near zero. The New Democratic Party (NDP) (left-wing), taking power in 1972, ended the raid on teachers, but not the cross-subsidy. In California, the State Department of Water Resources (DWR) designed, built, and operates the California Water Plan (CWP) for the primary gain of a handful of giant landowners. They, too, raided education, taking certain State oil revenues (known as the COPHE fund) previously earmarked for The University of California. Such examples could, of course, be extended at length. ... Read the whole article

Mason Gaffney: The Taxable Capacity of Land
 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.

 There is the answer to Governor Wilson' dilemma. I hope here in The Empire State you will supply a practical demonstration of the answer, one we may then use to inspire The Golden State. California now, following Proposition 13, has become a morality play, a gruesome object lesson in what happens when the property tax is pushed down toward zero. It forces higher taxes on production and exchange. Non-property taxes, you know, mostly have the character that they "shoot anything that moves," penalizing and discouraging economic activity. New buildings gain by having a lower property tax burden, it is true; but they bear the brunt of these new taxes and impost fees up front, at the time they are built. These offset the benefits of their lower property tax rate.

 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.  ...   Read the whole article

a synopsis of Robert V. Andelson and James M. Dawsey: From Wasteland to Promised land: Liberation Theology for a Post-Marxist World
All of us, no less than the Hebrews in Egypt, are captives of structures imposed upon us. To enslave people, today as three thousand years ago, is to rob them of the value of their labor. Millions of working people living in severe poverty are robbed of the fruits of their labor. Through various forms of exploitation, especially the monopolization of land rights, large segments of humanity are oppressed, dehumanized, held in bondage. One factor enabling governments to legalize land theft and lend respectability to exploitative landlordism is the general silence of religious and intellectual leaders about humanity's common rights to land.

We begin to penetrate and overcome this silence when we realize that the Wasteland is wasted land, unfulfilled potential, producing no "milk and honey." Speculators in both urban and rural areas hoard land on which the hungry, the homeless, and the jobless could feed, shelter, and employ themselves. Keeping valuable lands idle causes artificial shortages that drive up rents which poor people must pay for poor land. Land hoarding deserves much of the blame for creating the Wasteland: it forces people into the "desert." There, people find the oases controlled by more land monopolists who must be paid a ransom for access to nature's life-sustaining water. And as we will see, the primary focus of Biblical economic laws was the prevention of precisely this sort of usurpation of God's gifts to all creatures. ...

To recognize that "the earth is the Lord's" is to see that the same God who established communities has also in his providence ordained for them, through the land itself, a just source of revenue. Yet, in the Wasteland in which we live, this revenue goes mainly into the pockets of monopolists, while communities meet their needs by extorting individuals the fruits of their honest toil. If ever there were any doubt that structural sin exists, our present system of taxation is the proof. Everywhere we see governments penalizing individuals for their industry and creativity, while the socially produced value of land is reaped by speculators in exact proportion to the land which they withhold. The greater the Wasteland, the greater the reward. Does this comport with any divine plan, or notion of justice and human rights? Or does it not, rather, perpetuate the Wasteland and prevent the realization of the Promised Land?

This not meant to suggest that land monopolists and speculators have a corner on acquisitiveness or the "profit motive," which is a well-nigh universal fact of human nature. As a group, they are no more sinful than are people at large, except to the degree that they knowingly obstruct reforms aimed at removing the basis of exploitation. Many abide by the dictum: "If one has to live under a corrupt system, it is better to be a beneficiary than a victim of it."

But they do not have to live under a corrupt system; no one does. The profit motive can be channeled in ways that are socially desirable as well as in ways that are socially destructive. Let us give testimony to our faith that the earth is the Lord's by building a social order in which there are no victims.  Read the whole synopsis

Walt Rybeck: Have We Forgotten The Foundation?
Urbanologists and the public need to be awakened to the central role played by taxation. They need to see that loss of our historic land tax has made speculation our top national sport -- a treacherous one at that. As Hans Blumenthal wrote in Metropolis...and Beyond (edited by fellow panelist on this program, architect Paul Spreiregen):
There is no doubt that the present real property tax...contributes more to depressing the standard of housing than all government housing policies combined do to raise it. The current property tax may fairly be called the upside-down tax. It taxes land values too lightly, buildings much too heavily. It rewards bad land use, penalizes good land use. Consider three identical homes and lots:
  • 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."
These all-too-familiar examples condemn not the assessor but our present tax system. And the same perverse property tax incentives apply to commercial properties. Is it any wonder cities are torn apart? The wretched tax on buildings is only the half of it. The low land tax is the other half. A speculator sees that the annual increase in his or her land value is greater than the tax bill. This signals the owner to do nothing, to sit back and collect the values generated by productive neighbors and the community.

Speculation feeds on itself. The more land held out of use, the tighter the supply of available sites. This raises land prices further, seducing more speculators into the land game, hastening the flight of residents and businesses from central cities and even small towns. This is far from the only cause of sprawl, but one of the most potent. It cannot be stressed too much because it is one of the least recognized causes. Read the whole article

Mason Gaffney:   Privatizing Land Without Giveaway (1990)
What avails the trade-off, to buy land cheaper, only to pay more over time? Median buyers are much better able to pay over time than up front. The effect is the same as financing all buyers, and so doing without credit discrimination as to rate of interest or other terms of lending. It removes all forms of credit rationing as factors in the land market, at the same time that it automatically meets the new buyer's greatest credit need, financing for the purchase of land. It yields all those benefits not just once, but for every succeeding generation of buyers in perpetuity.

The same force that helps the median buyer, conversely, inhibits the "strong-handed" speculative buyer who esteems land more as a store of value than as a factor of production, who grasps simply to be grasping, or to place surplus funds where they will keep with minimal care. A land tax stings the sleeping owner who clings to lands from inertia and lassitude, and bids him or her release them to youth and enterprise. It legitimizes and supports property only as a means to produce wealth, not property for the sake of property. It penalizes pure possessiveness. It overpowers the ancient vice of self-justifying acquisition, the auri sacra fames of Virgil, the "proputty, proputty, proputty" lampooned so mordantly by Alfred, Lord Tennyson, the Absentee Ownership savaged in Thorstein Veblen's final testament, the landlordism searchingly psychoanalyzed by Leo Tolstoy and Russian populist novelists of the 19th Century.  ... read the whole article

Karl Williams:  Land Value Taxation: The Overlooked But Vital Eco-Tax
I. Historical overview
II. The problem of sprawl
III. Affordable and efficient public transport
IV. Agricultural benefits
V. Financial concerns
VI. Conclusion: A greater perspective
Appendix: "Natural Capitalism" -- A Case Study in Blindness to Land Value Taxation

While all landholders will be encouraged to put their land to its optimal use, land speculators will be particularly affected by LVT. The former head of the Town Planning Department of the University of Queensland, Philip Day, characterises the current lure of windfall increases in land value operating as a standing invitation to "develop" land by seeking approval for a change of use, irrespective of its environmental significance and regardless of how such rezoning repeatedly leads to the environmentally destructive process of urban sprawl.  read the entire article

Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)
John Muir is right. "Tug on any one thing and find it connected to everything else in the universe." Tug on the property tax and find it connected to urban slums, farmland loss, political favoritism, and unearned equity with disrupted neighborhood tenure. Echoing Thoreau, the more familiar reforms have failed to address this many-headed hydra at its root. To think that the root could be chopped by a mere shift in the property tax base -- from buildings to land -- must seem like the epitome of unfounded faith. Yet the evidence shows that state and local tax activists do have a powerful, if subtle, tool at their disposal. The "stick" spurring efficient use of land is a higher tax rate upon land, up to even the site's full annual value. The "carrot" rewarding efficient use of land is a lower or zero tax rate upon improvements. ...

the US, the federal government traditionally relied on tariffs, then selling the west, and now the income tax. States relied on sales and now income taxes. Localities relied on property taxation. This traditional divvying of the tax base pie is not embedded in the constitution. During the Civil War, the federal government enacted both a property tax and an income tax -- and could do so again.

Some state constitutions prevent the PTS. Decades ago, speculator-led initiatives enacted amendments to require the same rate on structures and sites. To repeal this stricture, a future amendment could be either a statewide mandate or local option. (The former orders and the latter allows local jurisdictions to adopt the PTS.) Both Pennsylvania's and a currently proposed amendment in New Jersey permit municipal, county, and local districts to adopt differential rate property taxes, including 100% land taxes. ...

What determines one's new bottom line is how intensely one uses land.
  • The PTS raises the tax burden on low intensity users of land, such as: slum lords, car dealers, speculators sitting on unused land, mall owners and probably their tenants, and farmers on land near a city's limits, assessed according to potential use, and not granted deferments.
  • On the other hand, owners of homes, condos, apartments, neighborhood-based, pedestrian-friendly businesses, and industrial facilities generally use land intensively. The PTS would save them money, although only slightly for home owners, based on studies of King and Clark Counties, WA (Gihring, 1994, 1996).
  • Agricultural parcels far removed from suburban areas, given very low value, may also come out ahead. ...
What's won or lost is a value generated by society. That is, land rises in value
  • where a new resource is discovered (during a gold rush, more money is made by land developers than by prospectors),
  • where population grows (see the Sun Belt and verdant Northwest),
  • where technology advances (witness the land values in the various Silicon Valleys, Forests, etc),
  • where infrastructure expands (e.g., near a new road or sewer), and
  • where society cooperates (e.g., in communities that organize street fairs, neighborhood watches, etc).
These factors driving land value are not improvements made by lone owners but by the entire community. The closest correlation to land value is density and no one person creates that. Hence the site value levy merely puts public values in the public treasury for public benefit, as untaxing homes, sales, and income leaves privately-generated values in private pockets. ...

The failed policy that the PTS would replace is the present property tax. This is actually two taxes in one, one on land and another on improvements. The tax on improvements penalizes owners for improving. This negative incentive does its greatest damage at the margin, where profit is slim. There, rather than pay a higher tax, owners let buildings dilapidate into slums. The lack of much tax on land keeps overhead on speculators affordable. This negative incentive lets owners under-utilize prime sites, even withhold them from use entirely. Kept from prime sites, development sprawls outward.

Sprawl inflates the values of suburban and rural land. Leap-frog development raises a few spikes in a land value map that soon pull up values everywhere, increasing the property tax burden of owners of previously developed sites, unless the tax is capped. The resultant sprawl also raises enormously the cost of extending infrastructure and makes auto-dependency a given.

The PTS reverses all these negative consequences.
  • Rather than burden construction, taxing only land spares it.
  • Rather than spread development (hooking us on cars), taxing land concentrates it (providing a market for mass transit).
  • Rather than inflate land price, a land tax squashes it.
  • Rather than enrich the owners of prime sites or itself, a land-taxing government could rebate some collected site rent as a dividend, perhaps in the form of a Housing Voucher, making home ownership inflation-proof. ...
It may be possible to mollify some potential opponents. Speculators and holders of underused sites, particularly in high value areas, are the most likely "losers". Efforts to educate this sector, prior to politicizing the public, may prevent loud opposition. The lesson from Southfield, Australia, and most two-rate cities in Pennsylvania is that, post PTS, land values in urban areas increase. Although higher values mean higher taxes, they also mean a higher potential profit. The owner could put up an income-earning structure or sell out at a higher price.

Developers might learn to like the PTS, since financial loss does not necessarily follow.
  • First, tho' the land tax would preclude a huge profit from a few sales, it would also, by unplugging effective demand for housing, create many more sales of smaller profit.
  • Second, instead of profiting from locational values, they could make more money -- untaxed -- by adding value, such as total weatherization, heat pumps, light tubes, built-in wiring for the cyber-house, etc.
  • Third, to buy land, developers would not need to go so deeply into debt.
  • Fourth, by building on central sites, they could drastically reduce their systems development charges, which, were they pegged to full costs, would be up to $30,000 in Oregon.
For these four reasons, developers could break even.

Realtors, too, may remain on the sidelines. Tho' housing prices will decline, more owners will afford the cost of entry. The volume of home sales climbs after the PTS. ...
A big problem needs a big solution which in turn needs a matching shift of our prevailing paradigm. Geonomics -- advocating that we share the social value of sites and natural resources and untax earnings -- does just that. Read the whole article

Jeff Smith: What To Do About the Real Estate Bubble
What’s bubbling, and until when?

Sellers are happy. So are developers and speculators. Real estate has gone all bubbly, and that bubble has gone ballistic. What goes up, however, must soon do something else. ...

Actually, it’s not housing whose price has entered the stratosphere. Buildings age – get older, more worn out. What’s getting more valuable is the land, the location – whether it has a building on it or not. Buildings you can make more of, but land you can not, especially locations along the coasts or on the good side of town. None of that would matter if you could ever get buildings to hover around in the air. Meanwhile however, speculators are happy.

... What’s seemingly good for landowners is not necessarily good for the economy. As people spend more on land, something nobody produced, they spend less on output, things people do produce. As producers get less money spent on their products, eventually they take the hint and produce less. "Produce less" is another way of spelling recession.

Plus, more expensive land means heavier borrowing to buy it. More debt means more inflation and less stability. When producers cut back, borrowers have a much harder time paying back their debts. As people go bankrupt, they drag others down with them. A collapsing house of cards is another way of spelling depression.

Preventing bubbles?

If land values didn’t get inflated, of course they would not have to get deflated.Call it mutual compensation for deprivation from part of our common natural heritage. While in rhythmic systems, prices must rise and fall, but they need not boom then bust; they could climb then glide. What would temper economies, preventing bubbles? Rather than let a few lucky owners collect land values, neighbors would have to recover land values for themselves. Nobody made land, and no lone owner made its value; the presence of society in general did that. Plus, for excluding everyone else from their sites, owners owe everyone else, as each one of us owes everyone for excluding them.

To recover land value, government could either transform the property tax into a land tax or replace it and other taxes with land dues or land use fees or an annual deed fee. ...

To pay the land dues, owners use their land efficiently; owners who had been speculating get busy and develop. No longer allowed to tax anything that moves, local governments, too, which presently let acres of abandoned urban land and buildings lie fallow, get busy, too, and make sure to get those acres into the hands of ambitious owners who’ll pay land dues. More locations put to use and more buildings put up increases supply, which dampens price.

Better still, as government recovers land rent, that leaves owners with less land rent to capitalize into land price. Hence buyers need not borrow so much.  ...

Land would still rise in value. With every discovery of a nearby natural resource. With the opening of every new bridge. With every techno-advance, as silicon wafers did for Silicon Valley. With every jump in income and drop in crime, land value rises. But no longer into a bubble. Because every rise would find its way – via land dues and rent dividends – into everyone’s pockets. ...

If the 18-year average holds for this cycle, then real estate still has a few more years of sucking all the investments and purchasing power out of the rest of the economy. Land is still able to soak it all up, and lenders are still willing to pump more in. So despite the premature panic (markets almost never do what everybody says they’re going to do), Mankiw’s 2007 would be the earliest that the current bubble would burst, and 2008 is just as likely.

Then land prices will fall for a few years. Since the run-up was steep, the drop will be, too – after correcting for inflation, maybe as much as 50%. Which will be an enormous relief for the economy – just what the doctor ordered. With land affordable again, a new cycle can get under way. Whether the new one will be boom and bust or climb and glide is up to us, whether we’re willing to practice geonomics, to forego taxes and subsidies in favor of land dues and a Citizens Dividend.

While I don’t mind the current gambling, I do mind the widening of the cavernous gulf between haves and have-nots, and I boil over while workweek grows more onerous, and just seethe watching vacant lots and abandoned buildings push development out from urban cores to sprawl on suburban farmland. To reverse that, let’s let go of the individual owner’s hold on land rent and share Earth’s worth equitably among us all. We’ll all be glad we did. ...  Read the whole article

Dan Sullivan: Are you a Real Libertarian, or a ROYAL Libertarian?
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.... Read the whole piece

Winston Churchill: The People's Land 
... Fancy comparing these healthy processes with the enrichment which comes to the landlord who happens to own a plot of land on the outskirts or at the centre of one of our great cities, who watches the busy population around him making the city larger, richer, more convenient, more famous every day, and all the while sits still and does nothing. Roads are made, streets are made, railway services are improved, electric light turns night into day, electric trams glide swiftly to and fro, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits still. Every one of those improvements is effected by the labour and at the cost of other people. Many of the most important are effected at the cost of the municipality and of the ratepayers. To not one of those improvements does the land monopolist as a land monopolist contribute, and yet by every one of them the value of his land is sensibly enhanced. He renders no service to the community, he contributes nothing to the general welfare; he contributes nothing even to the process from which his own enrichment is derived. If the land were occupied by shops or by dwellings, the municipality at least would secure the rates upon them in aid of the general fund, but the land may be unoccupied, undeveloped, it may be what is called 'ripening' -- ripening at the expense of the whole city, of the whole country, for the unearned increment of its owner. Roads perhaps may have to be diverted to avoid this forbidden area. The merchant going to his office, the artisan going to his work, have to make a detour or pay a tram fare to avoid it. The citizens are losing their chance of developing the land, the city is losing its rates, the State is losing its taxes which would have accrued if the natural development had taken place; and that share has to be replaced at the expense of the other ratepayers and taxpayers, and the nation as a whole is losing in the competition of the world -- the hard and growing competition of the world -- both in time and money. And all the while the land monopolist has only to sit still and watch complacently his property multiplying in value, sometimes manifold, without either effort or contribution on his part; and that is justice!

Unearned increment reaped in exact proportion to the disservice done.
But let us follow the process a little further. The population of the city grows and grows still larger year by year, the congestion in the poorer quarters becomes acute, rents and rates rise hand in hand, and thousands of families are crowded into one-roomed tenements. There are 120,000 persons living in one-roomed tenements in Glasgow alone at the present time. At last the land becomes ripe for sale -- that means that the price is too tempting to be resisted any longer -- and then, and not till then, it is sold by the yard or by the inch at ten times, or twenty times, or even fifty times, its agricultural value, on which alone hitherto it has been rated for the public service. The greater the population around the land, the greater the injury which they have sustained by its protracted denial, the more inconvenience which has been caused to everybody, the more serious the loss in economic strength and activity, the larger will be the profit of the landlord when the sale is finally accomplished. In fact, you may say that the unearned increment on the land is on all fours with the profit gathered by one of those American speculators who engineer a corner in corn, or meat, or cotton, or some other vital commodity, and that the unearned increment in land is reaped by the land monopolist in exact proportion, not to the service but to the disservice done. ... Read the whole piece

Bill Batt: How Our Towns Got That Way   (1996 speech)
Two-factor economics, however, had advantages to influential individuals and special interests. Land speculators who were positioned to profit from knowing where locational values would increase, or were in a position to cause those increases, could quickly and easily reap a private gain. Simply by holding title to parcels of real property, without doing anything at all to increase their value, one could quickly turn a profit. This is because the increment of unearned increases resulting from social investments were left for owners to reap rather than recovered by society. In three-factor economics, land rent reverted to society in an automatic and efficient manner. When a railroad magnate like George Leland Stanford extended the Southern Pacific track to the east of Los Angeles on land that he was granted by the government, all he then needed to do was to sit back and wait for the land sales to give him a return on that which was made more valuable by his investment in the line. All across America, land speculators learned that capturing monopoly titles to tracts of land allowed them to quickly and easily turn a "profit" on their investment yet hardly raising a finger. ...

In classical economics, the definition of capital grew out of labor mixed with earlier capital. Land, by conventional definition, was not capital, nor was it a component of wealth. Rather land was its own category. Conflating land into capital allowed land rent to be hidden and diluted in ways so that the unearned increment arising from social improvements fell to speculators rather than being returned to society in rent. The failure of society to recapture the appropriate level of land rent from titleholders led also to depression of labor wages at the margin, creating poverty and artificial scarcity of labor where otherwise it could be relieved. Hence the title of George's book, Progress and Poverty. George recognized that the value of any land parcel arose out of its social activity, not from anything which a titleholder might have done to it. He recognized that many, perhaps most, titleholders in land were speculators, reaping the benefit of others' investments, and selling out at last when their price was met. Hence it made sense that society had a right to a return on what it had brought about, as well as from the fact that those titles could never be other than leaseholds. That land rent, shortly confused by use of the words "single tax," was, to George, the rightful return to society. ...

Failure to recapture publicly-created land rents through the tax mechanism provided the incentive to speculators to buy land, not to use it in production but to hold it for the rise. In this way, choice parcels remain undeveloped or underdeveloped relative to the full extent that their values warrant and development occurs instead in remote areas where opportunity for profit is more immediate. The result was low density development what we know as sprawl.

To some people this may be counter-intuitive. It may not be obvious that increasing taxes on a parcel of land will foster its improvement. Consider, however, the possibility that there are two parcels of land in roughly the same location and of equal size. You own a vacant parcel and another next to it has a twenty-story building. If only the land-value is taxed you will be paying the same tax revenue as your neighbor. What are you likely to do with your parcel? If you are rational, you will either build a twenty-story building or else sell the land to someone who will. In this way improvements tend to be clustered in high-land-value areas except where it is prohibited, perhaps for a park. ... read the whole article

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

Taxing land value only is an incentive with the virtue of reversing the centrifugal forces of sprawl development and the tendency for builders to choose suboptimal locations.[14] Some titleholders find it advantageous to hold their valuable parcels off the market for speculative gain. But bringing the holding costs forward rather than allowing their exploitation for a capital gain upon sale increases the market efficiency of transactions and more optimal use of sites. The incentive to speculate on others' dime is removed. ...

One could argue that the failure to tax every bit of economic rent that accretes to land sites also has destructive consequences, although this is somewhat open to debate. Classical economists agree that rent collection ought to be at least the sum of inflation plus interest, otherwise the public is facilitating speculation in ways that distorts urban configurations even more than they constitute an inequity. But land sites frequently rise in market price far more than the rate of inflation, especially in times (as is perhaps true today) that a "bubble" in an economic cycle is in full flower. Some municipalities, especially on the east and west coasts of US, are today claiming to have increases in housing prices of as high as 20 percent per annum, a fever that surely will not last and will be especially destructive when it collapses.[19] Land values are what create that bubble; buildings are subject to continuing depreciation just like cars, computers, refrigerators or any other manufactured (capital) item. Recovering the economic rent reduces and perhaps even eliminates the speculative bubbles and swings that (some argue) account for economic cycles, fostering stability and regularity in economic planning and development that make for improved financial health to all. ...

All this makes for a far simpler and more comprehensible system of taxation. Land taxes are totally transparent, impossible to evade, and therefore much more administrable. This further engenders the legitimacy of taxation and of government itself. What it also does is assure stability to the tax system, for the reason that land values are not subject to the variations and vacillations that other tax bases frequently have. Indeed, the removal of economic rent from locational sites discourages speculative bubbles and the related economic cycles that are associated with them. This greater stability and reliability is to the advantage of every sector of the economy — private, public, and non-profit.

A tax that collects economic rent offers a win-win proposition to every sector of the community — except to those who speculate in land. But who wants to favor land speculators? They are not held in high regard anywhere; their destructive behavior is the bane of cities, recognized everywhere for what it is: parasitic and passive. Speculators provide no added value to a community's well-being, and taxing rent is a foolproof means by which to eliminate it. Land speculation is highest where the most rent can be privately captured, but it forces those who choose to develop to look to sub-optimal locations when the primary locations they hoped for are held off the market for opportunistic gain. By collecting rent, primary choice locations become available for use and to facilitate the development of land use configurations ideal for the economic health and efficient allocation. Urban ambience is improved, public sector service costs are reduced, and sprawl development is stemmed.

In the final analysis cities have no reason to complain other than by being hoodwinked by an economics profession that went off track a century ago and has seen its own disciples unable to take off the veil.[23] It was then that economic theory was altered to treat land as simply another form of capital, changed to formulas based on two factors of production rather than three, and disposing of the notion of economic rent altogether. Henry George, the last passionate defender of the classical economic tradition a century ago, lost his fight to preserve three-factor economics. But there are many still who appreciate the value, even the truth, of his insight and analysis. Today we have the computer power to test these ideas and to demonstrate their validity. There is an oft retold story among adherents of the Georgist school referred to as "seeing the cat." ... read the whole article

Ted Gwartney:  A Free Market Strategy to Reduce Sprawl
  • Unused land is far more abundant than we realize.
  • End the Public Subsidy of Land Speculation and Sprawl
  • Counterproductive growth limitations and regulations should be abolished.
  • A Strategy for Urban Renewal
  • A Strategy for Economic Development
  • Public Finance by Self-Financing
The ideal public policy would be to reduce taxes on production and commerce and raise public revenue from non-distorting revenue sources.

That non-distorting revenue source is land and natural resources. The central problem which limits the operational success of the economy is the failure to procure the public value which is created by the community.

This value ought to be reserved for the community to pay for public improvements. However, this value is to a large extent diverted into private pockets by speculation in land and natural resource values. The correct approach is to create a system in which no-one, except the citizenry as a whole, is rewarded by the collection of publicly created values.

Economists can agree that the economically efficient public finance system is one in which revenue is drawn from the rent that people pay for the use of land and natural resources. These payments do not distort economic activity. Land rent, because it is pure surplus, could be taken and used for any purpose and there would be no negative consequences for the allocation of labor and capital, or in the use of land and natural resources. If this surplus is invested in needed infrastructure and other public services, it will in turn increase land values for future public investment.... Read the whole article

Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
The heart of George’s economics was, in a way, Biblical. As the son of a religious book publisher born in Philadelphia, he had adequate opportunity to witness the early growth of the American republic in a unique way. On his own in San Francisco and responsible for a wife and child at a young age, his first effort at resolving the puzzles of injustice were a manuscript printed in 1871. But only after additional exposure to Ricardian rent theory was he able to refine his ideas such that they could form the basis of his Progress and Poverty eight years later. His Christian roots led him to a deep commitment to the basic moral equality of all people; his challenge was to find a way to ensure that this equality was manifest in economic fairness.

As noted earlier, the starting point of Georgist philosophy is that nature belongs to owners only in usufruct and not in freehold. Because any monetary wealth that accrued to that nature stemmed directly from the physical presence of people and was therefore social in character, the resulting added increment of value that constituted rent belonged in turn to the community that created it. Nature would have no economic price without people. Hence rent was the community’s entitlement and not that of individuals, and the land rent that accrued to parcels as a result of social investment should be returned to — recaptured by — the community. It was obvious to George that the wealthiest people in the nation usually owed their fortune not to the sweat of their brow or the inventiveness of their minds. Rather their position was due to their success as land speculators, to an increase in rent on land they had captured title to, land rightfully belonging to all. The earth and all its product, he argued, was the common heritage of humanity, a birthright of all people.

Any failure to pay back that increment to society, or of government to recapture it in the form of taxes, constituted not only an injustice to the poor but a distortion of economic equilibrium. He witnessed first hand the perverted configurations of land use that today we know as sprawl development— even in his time it was apparent that urban, high value land parcels were being held off the market for speculative gain by meretricious interests. He witnessed also the boom and bust cycles of the land markets on account of such speculation, effects which spread far wider than just land prices. These inevitable cycles would dislocate labor and capital supply, giving impetus to the impoverishment and suffering which he himself had experienced. He understood that holding the most strategically valuable landsites out of circulation constituted a burden on the economy. He understood that financial resources spent to pay exorbitant land prices had a depressing effect on capital and labor. And because government was taxing labor and capital instead of recovering land rent, it was further restricting the job market and the growth of capital. He realized that people who captured monopoly control of strategically valuable landsites could do so because they were privy to information prior to its public release. It was not by any means his insight alone; it was captured also by George Washington Plunkett writing at the same time:
There’s an honest graft, and I’m an example of how it works. I might sum up the whole thing by sayin’: “I seen my opportunities and I took ‘em.”

Just let me explain by examples. My party’s in power in the city, and it’s goin’ to undertake a lot of public improvements. Well, I’m tipped off, say, that they’re going to lay out a new park in a certain place.

I see my opportunity and I take it. I go to that place and I buy up all the land I can in the neighborhood. Then the board of this or that makes its plan public, and there is a rush to get my land, which nobody cared particularly for before.

Ain’t it perfectly honest to charge a good price and make a profit on my investment and foresight? Of course, it is. Well, that’s honest graft. 32

32William L. Riordan, Plunkett of Tammany Hall. New York: Dutton, 1963, p. 3.

All society needed to do was to collect the economic rent from landholders as its rightful due, a solution that became part of the subtitle of his book, “the remedy.” Taxing the land (or, alternatively, collecting the economic rent) was something common citizens could understand.... read the whole article

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