|Wealth and Want|
|... because democracy alone is not enough to produce widely shared prosperity.|
|Home||Essential Documents||Themes||All Documents||Authors||Glossary||Links||Contact Us|
Henry George: The Crime of Poverty (1885 speech)
... Nature gives to labour, and to labour alone; there must be human work before any article of wealth can be produced; and in the natural state of things the man who toiled honestly and well would be the rich man, and he who did not work would be poor. We have so reversed the order of nature that we are accustomed to think of the workingman as a poor man.
And if you trace it out I believe you will see that the primary cause of this is that we compel those who work to pay others for permission to do so. You may buy a coat, a horse, a house; there you are paying the seller for labour exerted, for something that he has produced, or that he has got from the man who did produce it; but when you pay a man for land, what are you paying him for? You are paying for something that no man has produced; you pay him for something that was here before man was, or for a value that was created, not by him individually, but by the community of which you are a part. What is the reason that the land here, where we stand tonight, is worth more than it was twenty-five years ago? What is the reason that land in the centre of New York, that once could be bought by the mile for a jug of whiskey, is now worth so much that, though you were to cover it with gold, you would not have its value? Is it not because of the increase of population? Take away that population, and where would the value of the land be? Look at it in any way you please. ...
Now, supposing we should abolish all other taxes direct and indirect, substituting for them a tax upon land values, what would be the effect?
Louis Post: Outlines of Louis F. Post's Lectures, with Illustrative Notes and Charts (1894) — Appendix: FAQ
Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)
Charles T. Root — Not a Single Tax! (1925)
Mason Gaffney: Adequacy of Land as a Tax Base (1969)
Nic Tideman: Basic Tenets of the Incentive Taxation Philosophy
Replacing Existing Taxes
When we say that the appropriate recipient of rent is the public treasury, it should be understood that this is not in addition to existing sources of public revenue, but rather instead of existing sources of public revenue.
While one might call such fees "taxes," we consider that designation inappropriate, because the word "tax" connotes an exaction from someone of something to which he or she has a just claim, and we deny that there are such just claims with respect to land. We expect that the collection of fees for the full value of opportunities assigned by governments would provide adequate revenue for all necessary government expenditures. ...
Creating a More Productive Economy
The ideas we espouse are attractive not only for their embodiment of principles of justice, but also because they can be expected to lead to a more productive economy.
Economists agree that the imposition of taxes generally retards an economy. The reason for this is that with almost all taxes, it is possible for a tax payer to reduce total tax collections by doing less of whatever is taxed--work less, spend less, save less, etc. This means that taxes generate an incentive to be less productive.
With fees for the use of government-assigned opportunities, on the other hand, the only thing that a person can do to reduce the amount of money that he or she pays is to use fewer of these opportunities. But then the opportunities can be used by someone else, who will pay the fees, and total public revenue will be unchanged. There is no possibility reducing total government revenue by being less productive. Thus these fees can be collected without dragging down the economy in the way that existing taxes do.
Our ideas provide for the natural financing of any worthwhile public expenditure that makes a particular area more attractive or productive--parks, freeways, subways, sewer systems, etc. These public expenditures raise the rental value of land in their vicinity, and thereby raise the fees that can be collected for using the land. If the activity is worthwhile, the increase in rental values will be sufficient to pay for the activity.
Another way in which our ideas promote a more efficient economy is by eliminating the opportunity grow rich by having government promote one's own interest at the expense of others. Such distortions of the political process can occur either by persuading a government agency to spend money in a way that raises the value of land that one owns while others foot the bill, or by persuading a government agency to prohibit others from doing what one is permitted to do. In both kinds of cases, the person who promotes his or her own interest has no reason to take account of the costs that are thereby imposed on others, and typically these costs to others are greater than the self-seeking benefits. This makes the economy less productive.
Furthermore, the very possibility of growing rich by manipulating government action draws talented people into the effort to manipulate government decisions, when they could be employed doing something useful. ... Read the whole articleRobert V. Andelson Henry George and the Reconstruction of Capitalism
Nobody, to my knowledge, advocates that it be instituted whole-hog overnight. But it could be phased in in easy stages so as to obviate the risk of shock and dislocation. And it is my considered opinion that, by the time the system were in full effect, the revenues produced by collecting land values alone would suffice to meet all legitimate public needs. This may not have been true during the Cold War, with its staggering burden of nuclear defense. But with that burden lifted, and with the need for welfare of all kinds evaporated because of the full employment and other social benefits that the system would naturally engender, and for other reasons, which time precludes my specifying here, I really think that we could dispense with taxes on incomes, improvements, sales, imports, and all the rest. If I am unduly optimistic in this belief, and the public appropriation of land-values were insufficient, this would be no argument against using it as far as it could go.Read the whole article
Nic Tideman: Global Economic Justice, followed by Creating Global Economic Justice
WOULD THERE be enough revenue for the public sector? To address this question, one should consider different types of public activities separately. The type of public activity that can most readily be financed by charges for exclusive access to natural opportunities is local public services. When these are desired by voters and provided efficiently, they tend to raise the rental value of land by enough to pay for themselves, since a local public service provides a benefit in a limited region, and people will bid up the rental value of that land by the value of access to the service.2 Thus local services can be financed without even beginning to draw on the value of opportunities provided by nature.
Another broad area of public spending is national defense. While defense increases the value of land in a dangerous world, one might reasonably hope that the need for defense spending would be greatly reduced in a world that had adopted a general norm of acknowledging the equal rights of all persons to natural opportunities.
To the extent that defense costs are raised when a nation becomes a more attractive target-- because of increases in its stock of capital or in the productivity of its citizens--it would be efficient and not unreasonable to have an annual charge on capital and on talent (an asset protection fee) to defray these costs. Such a fee could be collected by a self-assessed tax. For capital, the tax could be enforced by an obligation to sell the capital at the self-assessed price. For talent, the tax could be enforced by a rule that if a person was injured in an accident and wished to sue for loss of earning power, the self-assessed value of the person's talent would be the upper limit on the damages that could be claimed. It is likely that a tax rate of two or three tenths of one percent per year would suffice to fund the current level of U.S. defense spending. But I would hope and expect that defense spending would fall substantially. Between the reduced need for defense spending and an efficient asset protection fee for the extra defense costs generated by increases in capital and talent, it should be possible to finance defense without exhausting the rental value of exclusive access to natural opportunities.
The next major area of government spending to consider is social welfare programs-welfare, social security, unemployment compensation, health insurance, etc. These would tend to raise the rental value of land to some extent, but they would generally not raise land rents by enough to pay for themselves, because their perceived value to individuals tends to be highly disparate, so that those who value access to such programs generally do not need to offer the full value of such programs in rent premiums in order to get access to them. Thus one cannot count on financing such programs by increases in rent. The disparate value of public education to families makes this public service subject to the same analysis.
Social welfare programs often have an insurance component, requiring payments by potential beneficiaries. If a program is so close to a true insurance program that virtually everyone receives an expected benefit that is as great as his or her assigned contribution, then it can be financed by the assigned contributions, and few will find the program objectionable. But social welfare programs rarely approximate true insurance programs.
The difficulty with financing social welfare programs with rent arises because those who design such programs usually seek to require some people to pay more than the expected value of their benefits. In a world that recognizes the equal rights of all persons to natural opportunities and the right of any person to emigrate, social welfare programs of this sort will be possible only to the extent that they reflect shared community values. If such a program draws on shared feelings of community responsibility, then people will be happy to contribute part of their shares of the value of natural opportunities, or even part of their earnings to such programs. If an attempt is made to implement social insurance that exceeds what people are prepared to pay for out of a sense of community, people will tend to emigrate or secede. Thus in a world that operates on principles of global economic justice, people will not be required to pay for social insurance that they object to. If people have potential needs that exceed what their fellow citizens are willing to provide, they will have to buy their own insurance before the need arises or rely on friends and family. If those who are never able to provide for themselves are to be provided for in a just world of limited generosity, parents will need to buy insurance against having children with special needs before they conceive those children. But I believe that feelings of community are sufficiently extensive that those who need help would receive it. Unlike the present situation, in a just world every person would have a share of the value of exclusive access to natural opportunities, which would provide a guaranteed income that would provide for many contingencies. ... Read the whole articleNic Tideman: The Shape of a World Inspired by Henry George
How would the world look if its political institutions were shaped by the conception of social justice advanced by Henry George?
Nic 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:
Stability refers to the ability of a tax to produce revenue in the face of changing economic circumstances. Income and sales taxes, for example, vary according to phases in the economic cycle; the property tax, in contrast, is highly stable regardless of the state of the economy.Ted Gwartney: Estimating Land Values
In assessing the value of a tax it is also important, of course, to understand its potential to bring in revenue for the purposes of government, usually deemed revenue sufficiency. Income, sales and property taxes, along with corporation taxes to a lesser extent, have come to be regarded as the workhorses of the American revenue structure. But, as anti-tax politicians are quick to note, the higher these taxes are, the more they impose a drag on the economy. One recent study calculates that the deadweight loss due to taxes in the American economy is equal to $1 trillion every year, about a sixth of the total GDP.17 This is why one should ponder whether to consider raising taxes which have demonstrable distorting effects. ... Read the whole piece
The economic market rental value of land should be sufficient to finance public services and to obviate the need for raising revenue from taxes, such as income or wage taxes; sales, commodity or value-added taxes; and taxes on buildings, machinery and industry. Public revenue should not be supplied by taxes on people and enterprise until after all of the available revenue has been first collected from the natural and community created value of land. Only if land rent were insufficient would it be necessary to collect any taxes.
The collection of land rent, by the public for supplying public needs, returns the advantage an individual receives from the exclusive use of a land site to the balance of the community, who along with nature, contributed to its value and allow its exclusive use. ...
While the major argument for raising public revenue from land rent and natural resources is because it is equitable and fair, it is also the most efficient method of raising the revenue which is needed for public facilities and services. Land is visible, can't be hidden and its valuation is less intrusive than valuations of income and sales. Taxes on labor and capital cause people to consider alternative options, including working with less effort, which produces less real goods. For example, a tax on wages will reduce after-tax net wages and weaken the incentive to work. A person might be willing to work hard for a wage of $20 per hour, but decide to drop out if the taxes take $8 and the net wage is only $12 per hour. Economists claim that present taxes account for a 25% loss in production in the United States. Production and consumption would be greatly improved if public revenue came primarily from land rather than a wage tax. The same would occur when buildings and machinery are taxed. The tax on building reduces the quantity and quality of buildings produced. A tax on sales, commerce or value added reduces consumption, production and net wealth. Sales tax evasion in the United States has exceeded 30% in recent years.
As new inventions and more efficient ways of producing goods are discovered, people's economic well-being is not improved, because they have lost access to land and must pay both rent and taxes. (5) Instead of rent being used to provide community services, capital and wages must be depleted, which obstructs private enterprise.
When the rent of land is taken for public purposes production and distribution are not held back. This is because the same amount of rent would otherwise have been taken by some private individual. The rent would be the same, the difference is how it is utilized. There is evidence that communities who raise their revenue from land, rather than from labor and capital, are more prosperous, many increasing productivity by more than 25%. (6)
HOW MUCH LAND RENT SHOULD THE COMMUNITY COLLECT?
In order to preserve the environment, it is necessary and possible to better utilize our communities. If the producers of the land market value (nature, government and people) don't utilize land rent, someone else will. This is why efficient land use fails under contemporary land systems in most countries. All countries collect some of the land rent, perhaps 10%, 20% or 30%, but none yet, collect all of the market rent of land.
Studies have been produced that demonstrate that communities prosper and succeed in proportion to the percentage of the land rent that they collect. The first communities that decide to collect all of the ground rent will have an enormous competitive advantage over all other communities. They will be able to reduce or eliminate regressive taxes on labor and capital. They will attract new business and industry and become prosperous.
To determine how much land rent the community should collect let's consider the alternatives. Whatever is not collected will be capitalized into market value by land owners. Buying land at inflated market prices is a block to new industry. Land owners sell the capitalized land rent (known as land value) which is uncollected by the community even though it is unearned income. This causes a disparity between landowners and non-landowners. In the United States 5% of the population, which does not include many homeowners or farmers, own 70% of the total national land and natural resource values.
People will come to a well run community because they will be better off than living by themselves or in an impoverished locale. A city must secure revenue in order to provide good quality services.
This revenue can best be procured when the community recaptures the value of the benefits and services that it provides. This is done by collecting the rental revenue from land that reflects the value of the services and facilities provided in that community. The land rent belongs equally to all people that live in the locale who helped to produce that value. In a well run community. there is sufficient land rent to provide adequate funding for the social purposes requested of, and provided by, the local city government
Cities which choose to collect land rent as their primary source of revenue have the advantage of not requiring burdensome taxes to be paid by workers, businesspeople, entrepreneurs or citizens. Individuals who work to create wealth should be allowed to keep what they produce. When labor is not taxed, greater production and consumption occurs. Investment capital is formed which is used to produce more wealth. New jobs are created and economic diversity results.
Each person has a right to keep what he or she produces, but no one has the right to waste what belongs to all people, the land which includes the natural environment. Each person should have an opportunity to use the best land for his business or personal needs, as long as they are willing to pay the land rent that other land users are willing to pay.
If the value of land rent exceeds the community's needs for public services a method of dispensing of the revenue can easily be found. To maintain an equitable society, where nobody has special benefits that they do not pay for, it is important to collect all of the land rent. The community should use what is needed for public services and improvements such as schools, hospitals, parks, police, roadways, utilities and defense -- and reserve a fund for emergencies.
An ethical proposal might be to then divide the excess revenue that is not needed for public facilities and services at the end of each year and send each citizen in that community an equal portion of the remaining revenue. This is similar to the method used in Alaska and Alberta. Equality of opportunity to be productive can only be accomplished by recapturing all of the market rent of land and ensuring that all people benefit from its value.
Not only is land rent potentially an important source of public revenue, collecting all of it would ensure that the equal opportunity to be productive would be available to all citizens. People could fund useful buildings, equipment and wages, rather than having to buy land at inflated prices. Many countries, including the United States, were started on the premise of using land rent to fund public services. Many countries suffer economic loss because they no longer collect the market rent of land.
The value of land can be estimated with an acceptable accuracy, at a cost which is very small compared to the revenue to be obtained. A proper system of assessment and taxation of land can provide for the proper economic use of the land. A land site should be available to the user who can make the highest and best use of the site and maximize the site benefits for all people. A land tax can provide a major source of public revenue which the local governing body could use for the benefit of all people. A land tax can prevent the dispossession of our children, the future producers in the society. Justice requires that land values, which are created by society and nature, be made available for public improvements. This is the responsibility of good government.Read the whole article
Joseph Stiglitz: October, 2002, interview
Fred E. Foldvary — The Ultimate Tax Reform: Public Revenue from Land Rent
Karl Williams: Land Value Taxation: The Overlooked But Vital Eco-Tax
I. Historical overviewFred Foldvary: Geo-Rent: A Plea to Public Economists
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
That public finance can be raised is a way that doesn't undervalue natural resources is, of course, a principle of all eco-taxes. But the amount of revenue that can be raised, while still sending these strong price signals, is also important to build infrastructure, social welfare, education, environmental rehabilitation etc. The funds that can be raised (or have been forgone thus far) from LVT are colossal by any estimate. ...
The whole field of eco-taxes cannot be viewed in isolation of the fiscal imperatives to raise sufficient public finance, and here we see another of the virtues of LVT. If people were required to pay the rental value of most natural resources they used (as many, in fact, already do - to private owners) an adjustment in patterns of consumption would follow. The environmental goals would be achieved - at the cost of fiscal goals.
However, under our present fiscal regime, governments are locked into a dependency on revenue from socially-harmful sources such as tobacco and gambling, and cannot raise the taxes on them to levels that would "kill the golden goose". Would such political realities change with eco-taxes? Because of the inherent problem with most eco-taxes that they reduce consumption of natural resources and therefore the tax base, they give rise to a financial inducement to hold the tax rate at a low enough rate so that a degree of pollution and wasteful consumption can continue.
The effects of conventional eco-taxes sharply contrast with LVT which instead is a renewable and naturally-escalating source of revenue which arises when people are willing to pay for the use of land the value of which is enhanced by natural resources which sustain healthy lives. In other words, the success of a cleaner and more secure environment would feed through to the land market, which measures the attraction of the natural environment for living and working. Because people are willing to pay higher rents for such benefits LVT, instead of eroding revenue, expands the public's revenue base so that everybody enjoys the benefits of cleaning up and conserving the natural environment. Under the current system of land tenure, the financial benefits of a cleaner environment accrue to landowners. read the entire article
HOW LARGE IS THE GEO-RENT TAX-BASE? One of the pitfalls surrounding the idea of tapping geo-rent is that it is closely associated with Henry George’s single-tax ideal society. Authors such as Mankiw (2004, 168) and McConnell and Brue (2005, 300) point out that geo-rent taxation alone could not cover the current levels of government spending. But that point works only as a criticism of eliminating all taxes aside from geo-rent taxation, not as a criticism of the principle of the idea of tapping geo-rent.
I have the further impression that many economists think that geo-rent is a tiny portion of GDP. That notion seems to lead some economists to figure that even if geo-rent taxation is efficient, it is empirically of small import. Dick Netzer (1998, 116) notes that the proposition that “the potential revenue from land value taxation” is insufficient “is widely held today.”
In a chapter entitled “rent, interest, and profits,” Salvatore and Diulio (1996) have an exercise, “What are the criticisms of the single-tax movement?” One criticism offered is that “rents in the United States today amount to just about 1% of GNP, while taxes are 25% of GNP” (355).
In the official GDP accounts by the Bureau of Economic Analysis in the Department of Commerce, the only category termed “rent” is "rental income of persons," which in 2004 was put at an annualized estimate of $150 billion, or less than 1.5% of GDP. This "rental income" is net of expenses such as property taxes and mortgage interest, but the bulk of such expenses are also returns on real estate which are being paid to lenders and the government!
The BEA’s “rental income of persons” includes rental payments for both the sites and the buildings, adjusted down for the deprecation or “capital consumption” of the improvements. Without capital consumption, the rental income is $166 billion, and that includes the imputed rentals of owner-occupied houses and the mortgage interest paid. This “rental income of persons” is personal income, excluding the rental income from land owned by corporations as well as the implicit opportunity-cost rental value of land held by governments and nonprofit agencies. Furthermore, corporate-owned land is severely understated in corporate reports, because land is valued at the historical purchase price, not current value.
That economists would believe that the GDP rental income figures comes anywhere close to being the total land rent is quite remarkable. Other official data come closer to the actual geo-rent. The Bureau of Labor Statistics of the Department of Labor reported that consumer units spent an average of $13,283 on housing in 2002, one third of total spending (BLS, 2004), including the imputed rental of owner-occupied dwellings. The BLS reports 112,108,000 "consumer units" (households), so the total spent for housing was $1.5 trillion, ten times the "rental income" figure of the BEA. That the $150 in BEA rental-income accounts have little connection with actual geo-rent becomes even clearer when compared to the 2003 home mortgage debt of $7.2 trillion (Financial Services Fact Book, 2005), total mortgages of $9.3 trillion in 2003 (Financial Services Fact Book, 2005), and a housing stock of $15 trillion (National Association of Realtors, 2005).
Property taxes in the U.S. are about $300 billion per year (Youngman and Malme, 1993), with $228 billion going to local governments (Fisher, 1999). If a landlord collects $20,000 in annual rent and pays a property tax of $9,000, the “rental income of persons” here (not subtracting depreciation) is only $11,000, because the reported amount deducts the landlord’s property-tax expense. Similarly, homeowner and condominium association dues are deducted out in arriving at “rental income of persons.” This category “rental income of persons,” then, both includes elements other than geo-rent (notably, rental payments for improvements such as buildings), and excludes much of the geo-rent of the land.
Moreover, as Gaffney (1970, 194) concludes, the untaxing of buildings, which is part of the geo-rent taxation proposal, will raise ground rent by an amount about equal to the loss of building taxes. Narrowing the property tax to geo-rent only, therefore, would increase the geo-rent tax-base by about the same amount as the building tax-based removed.
Studies of geo-rent have been conducted by Steven Cord, Mason Gaffney, Mike Miles, and others. Mason Gaffney (1970, 181) finds that site value is generally at least half of real estate value, which would imply that for the housing stock alone the site value would be about $7.5 trillion.
For private lands, much of the revenue from geo-rent is hidden in interest payments, corporate profits, and capital gains, implying that it isn’t showing up in “rental income of persons.” For example, the way that building-owners may treat “depreciation” is unrealistic and even nonsensical. Suppose Bob buys a building for $275,000 (excluding the land value) and rents it out for $40,000 per year. On the premise that a building is used up in 27.5 years, the tax code allows him to deduct $10,000 each year. And then he deducts his real expense (maintenance, etc.) of, say, $5,000, so the column shows only $25,000 in rental income. Suppose that after 27.5 years, Bob sells the building to Sam. Now Sam starts deducting depreciation all over again. Capital consumption is to a large degree a legal fiction.
One bids less for land that has tax liabilities and on which profits are lower. Untax the economy, and the economy would produce greater output, which would be capitalized into higher geo-rent. Even if the geo-rent today were accurately calculated, it would be far less than the potential public revenue, because of capitalization effects of the untaxing side of the scheme. As noted, the scheme would involve geo-rent payments from government agencies. That, of course, will brings a corresponding increase in government spending, so the matter of geo-rent of government lands is not pertinent to the present issue. However, it is worth noting that for government lands, the geo-rent is utterly opaque (Foldvary, 1989), and that would have to change.
Using a variety of data, Steven Cord (1985, 1991) puts geo-rent at around 20 percent of GDP. Mike Miles (1990) comes up with a similar figure using data from the Bureau of Economic Analysis. The totals include government lands, but these estimates do not include the increase in geo-rent that would occur with the elimination of market-hampering taxes.
The amount of actual and potential site revenues warrants much more research, but these findings indicate that the tax base is substantial, most likely in the range of 50 percent of all-level government tax revenues. Interestingly, if both punitive taxes and transfer payments were eliminated, the geo-rent would about equal government spending for goods and services, in accord with the Henry George Theorem! At any rate, any allegation that land rent is too small to be of policy significance would have to be well argued. Read the entire article
Mason Gaffney: Land Rent in a Tax-free Society - Outline of remarks for use at Moscow Congress, 5/21/96
1. Rents are a taxable surplus. I estimate that this taxable surplus constitutes 35% or more of the national income in most nations with market economies, and more in resource-rich nations. ...
2. The value of rent is huge. Every economy produces a large excess over wages. To be sure, not all of it is surplus. Some of it goes to replace capital that wears out each year. This is not part of the net surplus, nor income to the capitalist; it is a return of capital. ...
The rest of the excess over wages is captured in the rent of land. It is a true taxable surplus. The amount is already huge, and will become huger yet when existing taxes are abated.
3. Rent will become huger yet when you abate taxes presently levied on production and exchange, because these now depress the rent of land. That is, in a tax-free market economy, the benefit of abating present taxes will lodge mainly in land rents. The taxable surplus simply shifts from one form to another. ...
5. Many varieties of natural resources generate rents. City land is the greatest single source. For example, one city, Vancouver, contains half the value of taxable property in B.C. - a province of 934,000 sq. kilometers, or 70% larger than France.
However, many other resources yield rents. Some of them are also huge in value, even though some are inconspicuous. Here are a few varieties of them:
Some of those varied resources are highly valued. For example,
Mason Gaffney: The Taxable Capacity of Land
The question I am assigned is whether the taxable capacity of land without buildings is up to the job of financing cities, counties, and schools. Will the revenue be enough? The answer is "yes."... Read the whole article
Mason Gaffney: California's Governor-Elect
For better or worse, California has recalled its governor and elected Arnold Schwarzenegger (A.S.) to replace him. A.S. has revealed no specifics of how he will stanch our deficit. He campaigned on generalities: he is against taxes, against waste in government, against measures to rein in vehicle use, and nostalgic about the good old days when Governor Pat Brown was spending heavily on roads and water projects. No one seems sure how he will connect the dots. After his first visit to Sacto last week, he seemed not sure, either.
His choice of advisors, however, tells us A.S. will repeat Pete Wilson's performance from the early 1990s. Chief of Staff Patricia Clarey is a good soldier from Wilson's old staff; Auditor Donna Arduin is from Jeb Bush's Florida. The gurus who set the doctrinal tone give the clearest hints: they are neo-classical economists of deepest dye. These are advisors George Shultz and Michael Boskin from the Hoover Institution. Economics, to them, is a set of dismal choices. California's choice is to cut public services, or lose business and jobs. That is what they told Wilson in 1994. All taxes are the same, always "burdens," always driving away "business." ...
Boskin and Shultz, posing their dismal choice for California, dismissed by silence that we can raise needed revenues while also spurring job creation and stimulating the economy. It is simple: restore that part of the property tax that falls on land, while continuing to cap the rate on buildings. ...
It is also alleged that land values are too small to support government. Let us test that idea. In 2003, at the current rate, there will be about 15,000 "confirmed" sales of owner-occupied urban California residences at prices over $1 million. That is from DataQuick, a standard source of current real estate data. 15,000 is about 2.7% of all confirmed sales. Some of those go much higher. The mean is probably over $2 million.
Turnover of costlier homes is lower than that of ordinary homes. (For example, turnover of existing homes is 30% greater in Riverside County, with lower values, than in Orange County, with higher values.) 2% a year is a fair guess at the turnover of homes valued at $1 million or more. If so, there are 50 x 15,000, or 750,000 homes in Calif valued at a mean $2 millions. Their aggregate value is 750,000 x $2million = $1.5 trillions.
These are not large buildings: they average 2864 s.f., with 4 bdrms, 3 baths. In the north end of Sta. Monica, a vacant lot alone is over $1m. They are not new buildings: only 9% are new. It's the land that makes them worth so much.
A tax of 1% on that value would yield $15 billions a year. That's from only 2.7% of the urban homes in Calif. The data exclude many sales, country manors, for example. Some well-known lands thus excluded are
There is also the other 97.3% of urban owner-occupied residential real estate. A lot of it is just under $1 million a pop. In Marin County, the median sales price of owner-occupied single-family homes was $700,000 when last seen, and rising. The mean is always higher than the median. Some L.A. County cities with median values just under $1 million include San Marino, Bel Air, Westwood, Brentwood, La Canada, Calabasas, and others. There is also all the other land: commercial, industrial, farm, forest, etc., which is 60% of the assessed property value in California, and a much higher fraction of the real value because it is so egregiously underassessed. ...
A high fraction of California real estate is absentee owned. The Sultan of Brunei, for example, owns several houses and sites in Beverly Hills and Bel Air. California's official Legislative Analyst, the highly respected William Hamm, estimated in 1978 that over fifty per cent of the value of taxable property in California was absentee-owned. ...
Some half of any reduction in California property taxes leaks to out-of-state owners. Nor is this the only leakage. ...
Yet no one has seized on this obvious case to show that local property taxes, substituted for absentee rent payments, creates multiple increases in local income. The whole intellectual apparatus is dominated by absentee investors and used for their benefit.
Many valuable land resources are held by license, rather than title, and escape the property tax almost entirely. ... Read the whole article
Mason Gaffney: Sounding the Revenue Potential of Land: Fifteen Lost Elements
The revenue potential of land is greater than anyone thinks. This is a progress report on a study that finds, bares, and to some extent measures elements of enhanced revenue potential by using truer and more comprehensive measures of rent and land values. It should go without saying, but often does not, that the purpose of raising more land revenues is not to fatten vexatious bureaucrats. It is
There are at least fifteen elements of land’s taxable capacity that previous researchers have either slighted, or overlooked entirely. Read the whole article
Nic Tideman: The Structure of an Inquiry into the Attractiveness of A Social Order Inspired by the Ideas of Henry George
I. Ethical Principles
A. People own themselves and therfefore own what they produce.II. Ethical Questions
B. People have obligations to share equally the opportunities that are provided by nature.
C. People are free to interact with other competent adults on whatever terms are mutually agreed.
D. People have obligations to pay the costs that their intrusive behaviors impose on others.
A. What is the relationship between justice (as embodied in the ethical principles) and community (or peace or harmony)?III. Efficiency Questions
B. How are the weak to be provided for?
C. How should natural opportunities be shared?
D. Who should be included in the group among whom rent should be shared equally?
E. Is there an obligation to compensate those whose presently recognized titles to land and other exclusive natural opportunities will lose value when rent is shared equally?
F. Can a person who is occupying a per capita share of land reasonably ask to be left undisturbed indefinitely on that land?
G. What is the moral status of "intellectual property?"
H. What standards of environmental respect can people reasonably require of others?
I. What forms of land use control are consistent with the philosophy of Henry George?
A. Would public collection of the rent of land provide enough revenue for an appropriate public sector?Herbert J. G. Bab: Property Tax -- Cause of Unemployment (circa 1964)
B. How much revenue could public collection of rent raise?
C. Is it possible to assess land with sufficient accuracy?
D. How much growth can a community expect if it shifts taxes from improvements to land?
E. To what extent does the benefit that one community receives from shifting taxes from buildings to land come at the expense of other communities?
F. What is the impact of land taxes on land speculation?
G. How, if at all, does the impact of shifting the source of public revenue to land change if it is a whole nation rather than just a community that makes the shift?
H. Is there a danger that the application of Henry George's ideas would lead to a world of over-development?
I. How would natural resources be managed appropriately if they were regarded as the common heritage of humanity? Read the whole article
... Three criteria are generally used to judge the merits of a tax.
For instance if full employment and economic growth are regarded as desirable, the question to be examined is what effects will this tax have on achieving these objectives?
The shortcomings of property taxes as revenue producers have been obvious for a long time and are widely known. The main difficulty is that revenues from property taxation do not keep pace with the ever-increasing requirements of local governments. Every county, every city official and every school administrator will testify, that there are not enough funds available to meet the requirements of local governments.
The inability of local government to raise enough revenues from property taxation has forced them to borrow at an ever-increasing rate. The debts of local governments have increased from about $16 billions in 1947 to over $61 billions in 1963, an increase of about 382%. During the same period private debt increased by 279% and federal debt by only 26%. ...
Professor Galbraith and others have expressed concern about the poverty of the public sector of our economy as compared to the affluence of the private sector. The appearance of our cities, the inadequate financial support we give our schools and poor public services seem to support this view. Yet, I can not agree with Professor Galbraith's conclusion that we need more public revenues to meet these needs. It seems to me that the spreading out of our cities over wider and wider metropolitan areas has immeasurably increased the financial burden of local governments. In other words, wasteful use of land caused by our property tax system is the real reason of the poverty of the public sector.
It stands to reason that the spreading out of our cities into wider and wider metropolitan areas is a very costly venture. For instance it was found that in the New York region suburbs have to make capital outlays of $68 per capita for new housing, while only $44 was required for new housing in the central cities and only $38 in the non-metropolitan area. Another survey found that it costs $80 per household to provide water in the outlying suburbs against $30 in the city. Read the whole article
The Most Rev. Dr Thomas Nulty, Roman Catholic Bishop of Meath (Ireland): Back to the Land (1881)
Land Rent for the Community a Design of Divine Providence.
I think, therefore, that I may fairly infer, on the strength of authority as well as of reason, that the people are and always must be the real owners of the land of their country.
This great social fact appears to me to be of incalculable importance, and it is fortunate indeed that on the strictest principles of justice it is not clouded even by a shadow of uncertainty or doubt. There is, moreover, a charm and a peculiar beauty in the clearness with which it reveals the wisdom and the benevolence of the designs of Providence in the admirable provision He has made for the wants and the necessities of that state of social existence of which He is the author, and in which the very instincts of nature tell us we are to spend our lives.
A vast public property, a great national fund, has been placed under the dominion and at the disposal of the nation to supply itself abundantly with resources necessary to liquidate the expenses of its government, the administration of its laws and the education of its youth, and to enable it to provide for the suitable sustentation and support of its criminal and pauper population. One of the most interesting peculiarities of this property is that its value is never stationary; It is constantly progressive and increasing in a direct ratio to the growth of the population; and the very causes that increase and multiply the demands made on it increase proportionately its ability to meet them.
Landlordism Takes the Patrimony of the People.
Let the democracy of England as well as of Ireland, learn the melancholy fate that has overtaken this splendid inheritance which God has placed in their hands, and which would have saved them eighty millions sterling which they now annually pay by direct and indirect taxation for the government of the country. That patrimony was once theirs by right, and by right it is theirs still; but, in fact, it is theirs no longer: a class has wrested the land from the people of the country and now hold a strict monopoly in it. They sell it out to the people as if it were an ordinary article of private property and solely the result of their own capital and labour.
The rents which the landlords draw from their lands is an income which they derive from the sale of what are avowedly God's gifts, which "no man made." If they had only claimed the right of selling the use of the permanent improvements they had made in the soil, by the capital and labour they had expended on it, no one could dispute the Justice of their demand; but any element of income that might possibly be derived from this source is called in the language of political economy, not Rent, but Profit.
Political economists who have written with scientific precision on the nature and properties of Rent, confine it exclusively to the moneys which the landlord receives for allowing the tenant the use of the original and natural productiveness of the soil. ...
Land Values intended by Providence for Public Purposes.
I have already observed that the chief peculiarity of the land of a country was that its value was never stationary, that it was always progressive and rising, that in fact it increased in a direct ratio with the growth of the population and the advancing progress of the industry of the nation.
It would seem as if Providence had destined the land to serve as a large economical reservoir, to catch, to collect and preserve the overflowing streams of wealth that are constantly escaping from the great public industrial works that are always going on in communities that are progressive and prosperous.
Besides the permanent improvements that are made in the land itself, and which increase its productiveness and value, there are other industrial works not carried out on the land itself, but on its surroundings and in its vicinity, and which enhance its value very considerably. A new road is made for the accommodation of a district; a new bridge is thrown across a river or a stream to make two important localities accessible to each other; a new railway passes close by and connects it with certain large and important centres of industry; a new factory or a new mill is erected, or a new town is built in the neighbourhood.
Industrial works like these add very materially to the value of all the land in their vicinity. It is a well-known fact that a new railway has in several instances doubled the value of the land through which it passed, in consequence of the increased facilities it had afforded for the sale of its agricultural products.
In every state of society, which is progressive and improving, such industrial works are continually going on, and hence the value of the land is rising also everywhere. But its value rises enormously with the enlarged growth of the population of a nation, and with the increased productiveness of its industry. Read the whole letterBill Batt: How Our Towns Got That Way (1996 speech)
In assessing the value of a tax it is also important, of course, to understand its potential to bring in revenue for the purposes of government. This is usually deemed revenue sufficiency. Income, sales and property taxes, along with corporation taxes to a lesser extent, have come to be regarded as the workhorses of the American revenue structure. But, as anti-tax politicians are quick to note, the higher these taxes are, the more they impose a drag on the economy. This is why one should ponder whether to consider raising taxes which have demonstrable distorting effects. In contrast, if you take the time to look at a tax on land value alone, it measures up so well that it looks like the perfect tax!... read the whole article
Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
In the Georgist view, this economic rent is the public’s birthright,47 and the failure to collect it and to use it to pay for the general costs of government services is a moral as well as a public policy lapse. Georgists regard the private confiscation of public wealth as mistaken policy if not actually an immoral transgression — in a word, theft! He himself was an advocate of the public owning and protecting “the commons” and what is today often called “natural capital.” Studies have shown that if economic rent were collected in full as well as other appropriate revenues such as user fees and green taxes, the total income would likely be enough to pay not only the costs of all government services but provide a citizens’ dividend of significant amounts as well.48 Statistical data is difficult to compile, but what studies have been attempted to date indicate that economic rent in all its forms and from all its sources comprises approximately a third of the economy as it is currently calculated.49 Arrangements such as these are to the followers of Henry George a far more efficient and moral system of public finance. ... read the whole article
to email this page to a friend: right click, choose "send"
Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper