Wealth and Want
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The big question, of course, is "who is entitled to the surplus?"  Much rides on how we answer this question.  America's traditional answer is that the landlord gets it, supplemented by some other goodies. 

Do you remember the story, perhaps apocrypal, from the early days of computerization that computer programmers in a few banks initially arranged things so that the fractional cents of interest which would have been applied to individual customers' accounts would be "harvested" into their own accounts? Well, the social surplus is a lot more than rounding error. It is more like the difference between the cost of living in rural Alabama and the cost of living in Manhattan. Who is it that is entitled to that? The landlords, or all of us? Our society's current answer seems to be that the landlord is entitled, just as the slaveholder of the 19th century was entitled to what his slaves produced. Georgists see that the privatization of the common treasure is a source of many of our most troubling — and supposedly intractible — social and economic problems.

Henry George had a better answer — one that acknowledges that the landlord is not "God's Eldest Son" and that we are all created equal, and are thus equally entitled to what the earth and the community provide.  This sounds as if it would be good in theory but difficult to implement, but it turns out that it is very simple to implement

Virtually every municipality in America already assesses property values.  Some do it more accurately than others, but with the advent of CAMA (Computer-Aided Mass Assessment), it is possible to do more accurate assessments, particularly of land values, which tend to vary with some fairly predictable patterns.  (See Assessment, Land Value Mapping)

To understand ground rents and land prices is to understand cities; not to understand is to remain mired forever in confusion and fallacy. Ground rent continues forever, generally tending to rise; therefore, to buy title to land, people pay prices that look high relative to current cash flows. -- Mason Gaffney: How to Revive a Dying City

Fred Foldvary: Geo-Rent: A Plea to Public Economists
Every microeconomics textbook shows the “producer surplus” as the area between the supply curve and the price. But no textbook that I have seen, with the exception of David Friedman (1996), has thought to ask who receives the surplus. If the industry is perfectly competitive, firms being price takers, there is no economic profit, yet the surplus is a return beyond costs. The surplus does not go to the owners of the firms, but, as Friedman states, flows through to the input factor owners. Going beyond Friedman, it should be clear that if markets for labor and capital goods, too, are perfectly competitive, they too have no super-normal returns, so the only other place the surplus can go to is to geo-rent. In a fully perfectly competitive model, “producer surplus” does not go to producers at all; it is a payment to landowners who have never produced a thing. It is really the non-producer surplus. Read the entire article

Fred E. Foldvary — The Ultimate Tax Reform: Public Revenue from Land Rent

Tapping rent or land value, by contrast, avoids the manipulation of an individual’s choice to save or borrow, consume or invest. A well-constructed land value levy has no distortive effect at all on human action or decisions, since it taps a pure surplus, what is left over after paying for the economic costs of production. The effect of shifting public revenue from labor and capital to land would be to liberate human action from the disincentives currently imposed by other taxes. ... read the whole document

The Most Rev. Dr Thomas Nulty, Roman Catholic Bishop of Meath (Ireland): Back to the Land (1881) 

... 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. ...Read the whole letter

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

f. The Single Tax Retains Rent for Common Use.

To retain Rent for common use it is not necessary to abolish land-titles, nor to let land out to the highest bidder, nor to invent some new mechanism of taxation, nor in any other way to directly change existing modes of holding land for use, or existing machinery for collecting public revenues. "Great changes can be best brought about under old forms."109 Let land be held nominally as it is now. Let taxes be collected by the same kind of machinery as now. But abolish all taxes except those that fall upon actual and potential Rent, that is to say, upon land values.

If that were done it is doubtful if land-owners could any longer confiscate enough Rent to be worth the trouble. Even though some surplus were still kept by them, it would be so much more easy to secure Wealth by working for it than by confiscating Rent to private use, to say nothing of its being so much more respectable, that speculation in land values would practically be abandoned. At any rate, the question of a surplus — Rent in excess of the requirements of the community — may be readily determined when the principle that Rent justly belongs to the community and Wages to the individual shall have been recognized by society in the adoption of the Single Tax. 110

110. Thomas G. Shearman, Esq., of New York, author of the famous magazine article on "Who Owns the United States," estimates that sixty-five per cent of the present annual value of the land in the United States would pay all the present expenses of American government — federal, state, county, and municipal. ... read the book

Michael Hudson: The Lies of the Land: How and why land gets undervalued

Turning land-value gains into capital gains
Hiding the free lunch
Two appraisal methods
How land gets a negative value!
Where did all the land value go?
A curious asymmetry
Site values as the economy's "credit sink"
Immortally aging buildings
Real estate industry's priorities
    * Its cost to citizens
    * Its cost to the economy
... Of course, investing most surplus income and wealth in land has been going on ever since antiquity, and also pledging one's land for debt ("mortgaging the homestead") that often led to its forfeiture to creditors or to forced sale under distress conditions. Today borrowing against land is a path to getting rich -- before the land bubble bursts. As economies have grown richer, most of their surplus is still being spent acquiring real property, both for prestige and because its flow of rental income grows as society's prosperity grows. That's why lenders find real estate to be the collateral of choice.  ... read the entire article

Mason Gaffney: The Taxable Capacity of Land

 Another attractive feature of land taxation is its interesting positive effect on the economic base of a city. It strengthens it by its tendency to hit absentee owners harder than resident owners. The land fraction in real estate is generally highest in the CBD of any city, so that is a favorite place for absentees to buy and hold. They like the steady income, and the "trophy" quality. The surplus in real estate is what attracts outside buyers, and land is what yields the surplus. About 2/3 of downtown Los Angeles is owned by non-resident aliens, for example. In a more workaday city, Milwaukee, the absentee owners consist of former residents, or their heirs, who grew too rich to abide the harsh winters.

 Consider the effect on your balance of payments. When you get more tax money from absentees, money that used to flow to Tehran, Zurich, or Palm Beach now flows into your local treasury to pay your local teachers and city workers, and relieve your builders and building managers. In this way taxing land actually acts to undergird the value of its own base.  ...   Read the whole article

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

We have largely lost sight of these basic premises of economic thought, and it has led to our general inability to address the urban challenge of taxation with a perspective that offers an easy solution. Returning to these fundamental building blocks makes things much simpler and more comprehensible. Labor continues to be easily understood; its meaning has not changed in the course of a shift from classical to neoclassical economic thought. But capital, which had earlier encompassed only those creations that were the result of human enterprise— the product of labor and land, has now been redefined to include land. Land by itself in contemporary neoclassical economics has dropped out of the equation altogether, and so for the most part has the concept of economic rent.[4] Mathematical formulas in neoclassical economics are entirely changed.

There is good reason, however, to recover the use of the terms land and rent as they were employed in 19th century classical economics: rent is the surplus produced by the collective enterprise that can provide the necessary revenue to easily support public services, if it were only collected in the form of taxes.[5] In fact, by shifting taxes off labor and capital and onto land rent, the performance of markets would be made fully efficient and would be essentially painless to taxpayers. This is the thesis I am arguing here, and which is now possible to demonstrate with the advent of computer power and available data. It amplifies and validates what has been for a century only a plausible theoretical claim. We can now show that collecting economic rent can provide for all the services demanded of cities and avail themselves of the proper tax base that exceeds all others.[6] And unlike other taxes there is no downside impact; in fact it's positive. Economic rent is the surplus created by the community, and it circulates through the markets until it ultimately comes to settle on land sites.[7] The result of its accretion to land sites is to raise their market price. Economic rent is sometimes called land rent or ground rent for this reason, and comes about not through any titleholder's individual enterprise but by the consequence rather of society's collective effort. British political economist David Ricardo first conceived of land rent in terms of its relationship to agricultural production in the early 1800s, but its applicability today is understood far more easily with regard to the site values in cities. Whereas ground rent to Ricardo reflected the differential gifts of nature inherent in various land sites, it is today better understood as reflective of locational differentials in the capacities of communities.

This is relatively easy to understand by considering a vacant expanse of land that has imposed upon it a grid of roads like a tic-tac-toe board. Suppose each of the squares were privately owned, and development of those sites were to ensue, the economic surplus generated by that market activity would raise the value of each of those locations. Let's further suppose that every site were developed except the center square, that titleholder choosing instead to just hold his title vacant. Which land site, discounting the building values, would command the greatest market price after a short time? The center square, of course — even though that owner made no effort to earn that increase in price. The center square would see the greatest accretion of economic rent because of its strategic access. It would be the passive beneficiary of the surplus generated by the common enterprise of all the market exchanges resulting from the other locations. In just this way rent becomes the social creation of the community and not the result of any private individual's enterprise. The more the economic activity, the more the surplus generated comes to settle on land in the form of rent. Rent accretes to land sites and raises their market value, directly reflecting the varying levels of productive economic surplus generated over time throughout a community. High economic productivity yields high surplus rent. ...

The Rent in Cities

The land values are highest in urban cores, one is reminded, because the economic rent passes as a surplus through all market transactions and comes to settle on land sites. Rent happens, so to speak, and it raises the market price of sites accordingly. Were cities to recover the socially produced ground rent in the form of tax revenue, it would not be left to collect on sites but could be used to provide the financial wherewithal for the services that cities are bound to perform. As will be evident below, the amount of economic rent available for recovery is thought sufficient to pay for all services and then some. Today it simply collects on sites of greatest activity with typical and visible negative consequences.

One might suppose that collecting the economic rent would leave locational sites with less market price appreciation, stabilizing land prices at levels that are more within reach for various developments. To be sure collecting economic rent exerts a downward pressure on market prices. But there is a countervailing pressure that works to neutralize whatever tendencies are otherwise at work: the collection of rent, especially from high-value sites, increases the carrying costs in ways that provides a greater inducement for their titleholders to improve them. That incentive fosters development in areas that, together in combination with other activity generated in neighborhoods, tends to maintain the stability of land markets in a roughly constant pattern.[11]... read the whole article

Clarence Darrow: How to Abolish Unfair Taxation (1913)

... Beyond a living all surplus goes to the monopolist, and it does go to him. You talk about a city of a million in 1915 — who would be benefited? Not the workingman; he would be far worse off than at present, for the greater the city the greater the poverty.

Taxes on goods are added to the price of goods and passed on to the consumer. There is only one kind of tax that is not a curse, and that is the land tax. If you tax a pair of shoes a dollar, the manufacturer will add that to the price of the shoes, and thus diminish the number of shoes the people can buy. The higher you tax the land the more land is thrown on the market and the easier it is to secure, and it is the only thing that increases by taxation.

The higher the tax on land the more it comes into use, and so "single tax" is a positive blessing. It is the only tax that does not come out of labor, it comes out of the monopolist; it stays right there, and that fact compels them to put the land to some use, and that employs labor. ... read the whole speech

Bill Batt: The Nexus of Transportation, Economic Rent, and Land Use

What is Land Rent?
John Houseman, an actor perhaps most widely known as Professor Kingsfield in the long-running TV series, The Paper Chase, later became the pitchman for Smith Barney. In that advertisement, his tag line was "We make money the old-fashioned way -- we earn it."

That we should earn our money rather than live off the efforts of others seems a simple enough moral tenet. But it seems to have lost its cogency in contemporary economic thought. More than a century ago John Stuart Mill noted that
Landlords grow richer in their sleep without working, risking or economizing. The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold title.(1)

Today, on the other hand, the unearned surplus which classical economists called rent attaches to monopoly titles -- largely the scarce goods and services of nature like locational sites, and has totally disappeared from economic calculus. Yet this is the primary vehicle by which wealth is captured by economic elites. If government recaptured the socially-created economic rent from land sites that comes from the investment of the collective community, we could eliminate other taxes that are both more onerous and create a drag on the economy that makes us all poorer. There are many websites that explain how this can be done, ways that not only beget greater economic efficiency but also bring about economic justice.(2) The surplus economic rent that derives from community effort is its rightful entitlement.

Where does economic rent most tend to lodge? In the center of cities where people are. And also proximate to heavy social investments -- such as railroad and metro stations, public and office buildings, hotels and conference centers, and anywhere there is high traffic in personal or market exchanges. The land value in New York City is higher than all the rest of the New York state combined, even though it is only a minute fraction of the area. One 9-acre site south of the United Nations Building was recently sold to a developer intent on building luxury condominiums facing the East River. That site sold for $680 million, and would have been higher had the existing structure, an obsolete power plant, not have to be razed.(3) Land values in any given area tend to rise and fall together, and tend also to form a contour somewhat comparable to a topographical survey map. In a city's center are the highest value locations, analogous to a mountain peak. Once one departs from that center, land values fall in direct proportion to the value of their use, made more or less attractive by whatever social attributes are provided in the proximate areas. Two illustrations from small and medium sized cities in the United States illustrate the point. ... read the whole article

Mason Gaffney: How to Revive a Dying City
One reason we remember Henry George is his pioneering study of how cities work and the good they do. Previous economists showed limited understanding of location value and its causes. Even von Thunen, father of location theory, approached cities in an antiseptic way that left out what today we call urban linkages and synergy. George was a mensch, seeing cities in human, interactive terms.

George saw cities as foci of civilization's basic mechanisms. People with mutual access, associating on equal terms, expedite cooperation and specialization through the market. Multivariate interactions are synergistic. Indeed, while each parcel is developed in the stage of decreasing returns, the composite city is generally in a stage of increasing returns, thanks to synergy: the whole exceeds the sum of its parts, and increases to the whole yield more than the sum of increases to the parts. Synergistic surplus, said George, lodges in urban land rents. Thus he explained a phenomenon which other economists overlooked: the unparalleled rise in urban rents and land prices, and in owners' wealth and power.

Sharing the Surplus

Because urban rents are a social surplus, not a payment for anyone's making or supplying land, parties other than the landowner have a claim. A good deal of American politics deals with how to assert that claim and share in the surplus.

Dividing a big pie seems a pleasant enough task, but Confucius knew better: "It is easier to face a common enemy than to share a surplus." The common ways of sharing surplus are clumsy, divisive, and destructive; they bear some responsibility for dead cities. With too much quarreling over spoils, there are no spoils to dispute. Consider how spoils are shared, and how we might do better.  ... read the whole article

Mason Gaffney: Land as a Distinctive Factor of Production
Land rent is a taxable surplus
a. Relative elasticities.
Land rent is nearly identical with taxable surplus.  This follows from simply observing that the supplies of labor and capital are highly elastic, while the supply of land (within any given taxing jurisdiction ) is totally inelastic, because  a "jurisdiction" is defined as a specific area of land.

François Quesnay and the “Physiocrats,” and their fellow-traveler A.R. Jacques Turgot, deduced from the above that almost all taxes, whatever the nominal base, are shifted to land rents, and lodge there.  Market forces tend to equalize all AFTER-tax returns to labor and capital, because of their mobility or, in the case of some labor, the inability of humans to survive on less than subsistence wages.

As a corollary, if there is no rent there is nothing to tax.  E. R. A. Seligman in one of his exhortations against the single tax, warned that a marginal community --one on land of no value -- can have no tax base if it taxes only land. However, this hypothetical community can have no tax base anyway.  Whatever labor or capital it tries to tax will leave, or never arrive, because their supplies are elastic.

Capital will only appear to bear a tax if it can shift it to land in the form of lower rent, or a lower purchase price.  If rent and land values are already zero, there is nowhere to shift a tax.  Mobile factors will not bear it, but turn away.  Customers will not bear it, but buy elsewhere.
Seligman does not consider the interesting possibility that public services paid by taxation might create the very rents that are taxed to support the public services.  That complex question would make an interesting book, but one too long to insert here.

b.  The surplus is much more than usually stated.
    The writer has dealt with this elsewhere (Gaffney, 1970, 1993), and is currently writing a book on the subject.  Cf. also B-12.  The failure of modern economists, whether neo-classical or heterodox, to acknowledge the Himalayan Range of land values in their faces, and to reckon its role in theory and policy, is denial and delusion on a scale at which one can only marvel. ... read the whole article

Mason Gaffney: Introduction: The Power of Neo-classical Economics  (Introduction to The Corruption of Economics, London: Shepheard-Walwyn, 1994)
7. George's land tax lets a polity attract people and capital en masse, without diluting its resource base. This is by virtue of synergy, the ultimate rationale for Chamber-of-Commerce boosterism. Urban economists like William Alonso have illustrated the power of such synergy by showing that bigger cities have more land value per head than smaller ones. (Land value is the resource base of a city.) Urbanists like Jane Jacobs and Holly Whyte have written on the intimate details of how this works on the streets. Julian Simon (The Ultimate Resource) philosophizes on the power of creative thought generated when people associate freely and closely in large numbers. Henry George made the same points in 1879.  ...   Read the whole article

Mason Gaffney: Land Rent in a Tax-free Society  (Outline of remarks by Mason Gaffney, 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. ...
 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.

This is more than a simple shift of a fixed amount. When you substitute land revenues for existing taxes, the surplus actually grows, as if by synergy. You gain more revenue base than you lose, because existing taxes now suppress much latent production. Payroll taxes directly drive workers from taxable jobs to untaxed gains from crime. Abating those taxes will unleash suppressed economic giants, along with all the new surplus values their latent production will generate. "Monetarists" warn you that "there are no free lunches." In fact, however, good policy creates lots of "free lunches." It makes the whole greater than the sum of its parts. Imagine the benefits, alone, of turning people from destructive careers in crime to useful jobs producing goods.
4. Some of the benefit of abating existing taxes will lodge in higher after-tax wage rates, rather than higher rents. ...
 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. ... read the whole article

Mason Gaffney: Oil and Gas Leasing: a Study in Pseudo-Socialism
Distributive Socialism, in contrast to Managerial, means tapping surpluses in the private sector and using them for the public good. The revenues may
  • provide public services that are available to all, like schooling and social security; or
  • be used to abate regressive taxes; or
  • be used to finance social dividends paid in cash, as in Alaska.
  • Revenues may also be used to finance public works, even though these benefit only a few specific landowners.
This becomes Distributive Socialism when the enhanced land rents are tapped to recoup more than the allocated expenditure. (If only expenditures are recouped, it is more like a contract between the state and the landowners.)  ...

Thus, to define Distributive Socialism we need to define "surpluses." These are primarily rents from lands and resources given by nature. In an open tax jurisdiction, labor and capital are mobile and their supply is elastic; only land is fixed. Land rent is the basic taxable surplus. Where there is no land rent, an attempt to levy any tax can only abort production and land use, rather than collect the tax. Where is there no land rent?

  • First, there is no rent generated on "marginal" land that is just barely worth using at all.
  • Second, and more generally, there is no rent generated by marginal increments of labor and capital applied on any land, from the best to the worst.
  • Otherwise, all production on land generates some rent, which is a taxable surplus.

The statement above expresses "The Physiocratic Doctrine" of tax incidence, harking back to Francois Quesnay, and even earlier writers like John Locke and Jacob Vanderlint. The Doctrine has staying power: it is used, for example, by Bogart, Bradford, and Williams writing in the National Tax Journal, December, 1992, on tax incidence in New Jersey.... Read the whole article

Mason Gaffney:  The Taxable Surplus of Land: Measuring, Guarding and Gathering It  (for the Duma Hearings in Moscow, 1999)

The Net Product of Land is the Taxable Surplus
A. To socialize the taxable surplus, land rent, effectively, you must define and identify it carefully, and structure your taxes to home in on it. Taxable surplus means a value you can collect in taxes without destroying, or even diminishing it, or driving it away. In practice this means mostly land rent, because the supply of land is fixed -- what economists call "inelastic" -- however much or little you tax it.
Land rent is the same as the Net Revenue of land, that is the Gross Revenue less the cost of mobile human inputs (including capital) needed to make land yield the revenue. Accountants generally divide these mobile human inputs into two parts: current expenses and durable capital. The durable capital has to be converted to an annual equivalent, to make capital costs commensurable with annual expenses. This is done by multiplying the value of capital on the land times the sum of an interest rate plus a depreciation rate. ...[Formulas follow]  ...

B. Taxable surplus is also what you can tax without driving land into the wrong use. It is not enough that the land supply is fixed: a tax must not force underuse or other misuse of the fixed supply.
A great advantage of taxing rent is that it does not change the ranking of land uses in the eyes of the landowner. Let me explain.
In a free market, the function of rent is to sort and arrange land uses: landowners allocate land to those uses yielding the most net product, or rent. Economists have shown (and you can easily see) that this is socially advantageous: the net product is the excess of revenue over all costs, so land yielding the highest rent is adding its utmost to the national product.  ...

When you base a tax on taxable surplus, and keep the tax proportional to taxable surplus, you levy taxes without twisting and inverting the landowner's or land manager's ranking of land uses. As noted before, the owner's preferred use after tax remains the same as it would be without any tax. On the other hand, if you tax on some other basis (Gross Revenue, for example), you bias the owner against uses more heavily taxed. To keep the example simple, and generally realistic, we assume here that the seller is a "price-taker," meaning he sells on a world market and cannot raise the price, and so has no choice but to bear the tax.
Bear in mind that Net Revenue is the Taxable Surplus: you cannot tax more than that without aborting the land use. The ratio of Costs (C) to Gross Revenue (G) varies over a wide range, from zero up nearly to one (and even above one for subeconomic uses which, however, you do not want). Let's compare two rival uses, A and B, for the same piece of land. Use "A" yields more Net Revenue (N), but has a higher ratio of C/G. We levy a tax of 10% on Gross Revenue (G). To simplify, Expenses and Capital Costs are consolidated as "C", so N = G-C. Table 1 shows the effects of the tax on Net Revenue after Tax (NAT).

Table 1: Effect on Net Revenues of a 10% Tax on Gross Revenues

Revenues/ %



Net Product

Gross/ Net


Net After Tax $

Tax/ Net

Land Use












10 x








4 x




The higher use, A, produces more goods, makes more jobs, and yields more Net Product: it is clearly the higher use. The tax on G [Gross Revenue], however, turns A into a lower use than B, in the eyes of the landowner or manager. A 10% tax on G is a 100% tax on the N from use A, wiping out the entire incentive to put land to use A. It is a 40% tax on the N from use B, leaving 60% of the Net Product for the landowner. The landowner would choose use A in the absence of taxes, or with a tax on N; but the tax on G forces him to choose use B, which is socially inferior. This, in a nutshell, expresses the damage done by imposing taxes on bases other than N, the Net Revenue of land.

  • The tax lowers output, employment, and investment opportunities for capital, all three.
  • Fourth, it lowers tax revenues well below their maximum possible level of $10k, the Net Revenue from use A. ...

... The taxable surplus available from taxing the Net Product of land goes on forever, and grows as land rents grow. It is not like the false "revenue" that comes from privatizing land, which the IMF et al. would have you do. Selling the title to land gives money to the government currently in power, which this government is prone to treat as current income and spend right away: but it is not permanent income, any more than you would call it income when you sell your farm or home. To have income, permanent income, you must reserve the right to tax land forever, and use that income for public purposes or social dividends.

If you think you need cash immediately, in excess of current taxable surplus, you can always borrow on the security of the tax revenue you have reserved for your government. There are certain dangers in mortgaging your public revenues like that, and I would counsel prudence and caution; but these dangers are small and uncertain compared with the certain disaster that will follow if you sell land forever, without reserving any power to tax it in the future.
The U.S.A. fell into this trap in the 19th Century. Our Federal Government supported itself for years by selling off its vast public domain, a domain so vast that generations of politicians came and went who thought of these sales revenues as a kind of income. After a while, though, the land was all gone. Then we had to turn to excise taxes, and income taxes, which have now grown so high they will slowly strangle us. Those of us who foresee this danger now look to you, Russia, with your vast undeveloped resources in public ownership, to avoid our errors and become, as we once fancied ourselves, the "last best hope of earth." We look to you to convert your nation from its status as a wretched colony from which people would escape, to a refuge of new opportunity for your own people, and for the "huddled masses, yearning to breathe free" of the whole world.

...    Read the whole article

Ted Gwartney:  Estimating Land Values
When considering world-wide economics, most people think that land rent contributes only a small insignificant portion of value. But as societies progress, land has become the predominant force in determining the progress or poverty of all people within a community. Land in major or cities is so costly that people are forced to move further away and travel great distances in order to get to work and social attractions. In the more developed countries of the world, land rent represents more than 40% of gross annual production.

Since land is fixed in supply, as more land is demanded by people the rent will increase proportionally. Demand is the sole determinant of land rent. Changes in land rent and land taxes have no impact on the supply of land, because the land supply is fixed and cannot be significantly expanded. Labor and capital are variable in supply. A higher price for commodities causes more labor and capital to make itself available. Labor and capital are rewarded for their work. A high price is an incentive to work harder and longer, while a low price is not an incentive to work harder and longer.

The rent of land, however, serves no such incentive function, because the supply of land is fixed. The same amount is available no matter how high or low the price. Buildings are not a part of land rent. Land rent results from the desire made by everyone who lives within a community to use land. Economic rent is the only source of revenue that could be taken for community purposes without having any negative effect on the productive potential of the economy. Economists consider rent to be a surplus payment which is unnecessary to ensure that land is available. When a community captures land rent for public purposes, both efficiency and equity are realized. ... 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
A Strategy for Economic Development
Economic theory recognizes that when government places taxes on production and on commerce the net result is a reduction in those activities. The reason this occurs is that these taxes add to the cost of production and to the cost of doing business. 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

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

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

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

Land value taxation, on the other hand, overcomes all these obstacles. Locations are the beneficiaries of community services whether they are improved or not. As has been forcefully argued by this writer and others elsewhere,32 a tax on land value conforms to all the textbook principles of sound tax theory. Some further considerations are worth reviewing, however, when looking at ground rent as a flow rather than as a “present value” stock. The technical ability to trace changes in the market prices of sites – or as can also be understood, the variable flow of ground rent to those sites – by the application of GIS (geographic information systems) real-time recording of sales transactions invites wholesale changes in the maintenance of cadastral data. The transmittal of sales records as typically received in the offices of local governments for purposes of title registration over to Assessors’ offices allows for the possibility of a running real-time mapping of market values. Given also that GIS algorithms can now calculate the land value proportions reasonably accurately, this means that “landvaluescapes” are easily created in ways analogous to maps that portray other common geographic features. These landvaluescapes reflect the flow of ground rent through local or regional economies, and can also be used to identify the areas of greatest market vitality and enterprise. The flow of economic rent can easily be taxed in ways that overcomes the mistaken notion that it is a stock. Just as income is recognized as a flow of money, rent too can (and should) be understood as such.

The question still begs to be answered, “why tax land?” And what happens when we don’t tax land? Henry George answered this more than a century ago more forcefully and clearly, perhaps, than anyone has since. He recognized full well that the economic surplus not expended by human hands or minds in the production of capital wealth gravitates to land. Particular land sites come to reflect the value of their strategic location for market exchanges by assuming a price for their monopoly use. Regardless whether those who acquire title to such sites use them to the full extent of their potential, the flow of rent to such locations is commensurate with their full capacity. This is why John Stuart Mill more than a century ago observed that, “Landlords grow richer in their sleep without working, risking or economizing. The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold title.”33 Absent its recovery by taxation this rent becomes a “free lunch” to opportunistically situated titleholders. When offered for sale, the projected rental value is capitalized in the present value for purposes of attaching a market price and sold as a commodity. Yet simple justice calls for the recovery in taxes what is the community’s creation. Moreover, the failure to recover the land rent connected to sites makes it necessary to tax productive activities in our economy, and this leads to economic and technical inefficiency known as “deadweight loss.”34 It means that the economy performs suboptimally.

Land, and by this Henry George meant any natural factor of production not created by human hands or minds, is ours only to use, not to buy or sell as a commodity. In the equally immortal words of Jefferson a century earlier, “The earth belongs in usufruct to the living; . . . [It is] given as a common stock for men to labor and live on.”35 This passage likely needs a bit of parsing for the modern reader. The word usufruct, understood since Roman times, has almost passed from use today. It means “the right to use the property of another so long as its value is not diminished.”36 Note also that Jefferson regarded the earth as a “common stock;” not allotted to individuals with possessory titles. Only the phrase “to the living” might be subject to challenge by forward-looking environmentalists who, taking an idea from Native American cultures, argue that “we do not inherit the earth from our ancestors; we borrow it from our children.” The presumption that real property titles are acquired legitimately is a claim that does not withstand scrutiny; rather all such titles owe their origin ultimately to force or fraud.37

If we own the land sites that we occupy only in usufruct, and the rent that derives from those sites is due to community enterprise, it is not a large logical leap to argue that the community’s recovery of that rent should be the proper source of taxation. This is the Georgist argument: that the recapture of land rent is the proper – indeed the natural – source of taxation.38 ... read the whole commentary

Bill Batt: The Compatibility of Georgist Economics and Ecological Economics

The concept of rent needs further explication precisely because it is so foreign to 20th century students, even those who have been schooled in economics at it is currently taught. Land rent has no relationship to the word rent as it is used in contemporary vernacular, that is, when one rents a car or an apartment. Rather, rent is a surplus, defined as the return on investment above and beyond what is minimally required to bring a service into production. To take just an elementary example, consider that there are three parcels of land available for farming and three farmers of equal ability and enterprise. But suppose the parcels differ in their productive capacity, due perhaps to their fertility, access to water, and so on. If planted with similar quality seed, the three parcels will yield different quantities of harvest, the one with the highest quality land having the best return. The one with the lowest quality land would in like fashion have the lowest return. Economic rent is defined as the amount of surplus harvest qualitatively measured by the difference between the parcel with the highest return and that with the lowest return. ... 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