One person's unearned increment is
another's — and likely many others' — lost birthright.
it? All of us! How do we implement this? Land value taxation.
Mason Gaffney, correspondence (used with permission)
We, like you no doubt, are
basking in the unearned increment of the land under our house,
turbo-charged by tax-exemption. Two of our older children in
Marin County are basking, too, and we take comfort in their
well-being. We deserve this, right? Are we not of The
Greatest Generation (how we love that toadying title)? But how will your grandchildren afford a
home at today's prices? We get the increment, but they get the
excrement. Oh, well, the plunging dollar, crumbling
infrastructure, far-called navies and troops melting away, soaring
interest rates, higher taxes, incredible public debts coming due ...
it'll all be different soon. We may all grow poor together.
Henry George: The Wages of Labor
The worst evil of poverty is not
in the want of material
things, but in the stunting and distortion of the higher qualities. So,
in another way, the possession of unearned wealth stunts and distorts
what is noblest in man.
The evil is not in wealth itself –
in its command over
material things: it is in the possession of wealth while others are
steeped in poverty; in being raised above touch with the life of
humanity; from its work and its struggles, its hopes and its fears, and
the kind sympathies and generous acts that strengthen faith in man and
trust in God!
God’s commands cannot be evaded
with impunity. If it be His
command that men shall earn their bread by labor, the idle rich must
suffer. And they do!
See the utter vacancy of the lives
of those who live for
pleasure; see the vices bred in a class who, surrounded by poverty, are
sated with wealth; see the pessimism that grows among them; see that
terrible punishment of ennui, of which the poor know so little that
they cannot understand it!... read
the whole article
Henry George: The Single
Tax: What It Is and Why We Urge It
Our plan involves the imposition
of no new tax, since we already
tax land values in taxing real estate. To carry it out we have only
to abolish all taxes save the tax on real estate, and abolish all of
that which now falls on buildings or improvements, leaving only that
part of it which now falls on the value of the bare land, increasing
that so as to take as nearly as may be the whole of
or what is sometimes
styled the "unearned increment of land values." ... read
the whole article
Henry George: The Condition of
Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)
The sympathy of your Holiness seems exclusively directed to the poor, the
workers. Ought this to be so? Are not the rich, the idlers, to be pitied
also? By the word of the gospel it is the rich rather than the poor who call
for pity, for the presumption is that they will share the fate of Dives.
And to any one who believes in a future life the condition of him who wakes
to find his cherished millions left behind must seem pitiful. But even in
this life, how really pitiable are the rich. The evil is not in wealth in
itself — in its command over material things; it is in the possession
of wealth while others are steeped in poverty; in being raised above touch
with the life of humanity, from its work and its struggles, its hopes and
its fears, and above all, from the love that sweetens life, and the kindly
sympathies and generous acts that strengthen faith in man and trust in God.
Consider how the rich see the meaner side of human nature; how they are
surrounded by flatterers and sycophants; how they find ready instruments
not only to gratify vicious impulses, but to prompt and stimulate them; how
they must constantly be on guard lest they be swindled; how often they must
suspect an ulterior motive behind kindly deed or friendly word; how if they
try to be generous they are beset by shameless beggars and scheming impostors;
how often the family affections are chilled for them, and their deaths anticipated
with the ill-concealed joy of expectant possession. The worst evil of poverty
is not in the want of material things, but in the stunting and distortion
of the higher qualities. So, though in another way, the possession of unearned
wealth likewise stunts and distorts what is noblest in man.
God’s commands cannot be evaded with impunity. If it be God’s
command that men shall earn their bread by labor, the idle rich must suffer.
And they do. See the utter vacancy of the lives of those who live for pleasure;
see the loathsome vices bred in a class who surrounded by poverty are sated
with wealth. See that terrible punishment of ennui, of which the poor know
so little that they cannot understand it; see the pessimism that grows among
the wealthy classes — that shuts out God, that despises men, that deems
existence in itself an evil, and fearing death yet longs for annihilation.
When Christ told the rich young man who sought him to sell all he had and
to give it to the poor, he was not thinking of the poor, but of the young
man. And I doubt not that among the rich, and especially among the self-made
rich, there are many who at times at least feel keenly the folly of their
riches and fear for the dangers and temptations to which these expose their
children. But the strength of long habit, the prompting of pride, the excitement
of making and holding what have become for them the counters in a game of
cards, the family expectations that have assumed the character of rights,
and the real difficulty they find in making any good use of their wealth,
bind them to their burden, like a weary donkey to his pack, till they stumble
on the precipice that bounds this life. ... read the whole letter
Charles B. Fillebrown: A Catechism
of Natural Taxation, from Principles of
Natural Taxation (1917)
Q46. Would it not be confiscation so to increase the tax on land?
A. What would be confiscated? No land would be taken, no right of occupancy,
or use, or improvement, or sale, or devise; nothing would be taken that is
conveyed or guaranteed by the title deed.
Q47. What is the distinction between taxation and confiscation?
A. The sovereign state may appropriate private property of its citizens in
two ways: (1) by confiscation; (2) by taxation. When one particular man by
treason or otherwise has forfeited his rights as a citizen, the land and
houses and personalty of this one man may all be "forfeit to the crown," while
the validity and sanctity of 9,999 other men's rights are in no way infringed.
This is confiscation. On the other hand, when the state, in order to obtain
the revenue to meet the expenses of government, levies tribute upon its 10,000
citizens impartially, this is taxation.
Q48. But would it not be an injustice to the landowner?
A. If it be an injustice to tax hard-earned incomes (wages) to maintain an
unearned income (net economic rent) that bears no tax burden, how can it
be an injustice to stop doing so? There can be no injustice in taking for
the benefit of the community the value that is created by the community.
Q61. Do you think there would be any injustice in taking by taxation
the future increment in the value of land?
A. Fifteen professors of political economy have answered "Yes." Ninety-four
have answered "No." ... read the whole article
Winston Churchill: Land Price as
a Cause of Poverty (1909 speech in Parliament)
When the Leader of the
Opposition seeks by comparisons to show
that the same reasoning which has been applied to land ought also in
logic and by every argument of symmetry to be applied to the unearned
increment derived from other processes which are at work in our
modern civilisation, he only shows by each example he takes how
different are the conditions which attach to the possession of land
and speculation in the value of land from those which attach to other
forms of business speculation.
"If," he inquires, "you tax the
unearned increment on land, why
don't you tax the unearned increment from a large block of stock? I
buy a piece of land; the value rises. I buy stocks; their value
rises." But the operations are entirely dissimilar. In the first
speculation the unearned increment derived from land arises from a
wholly sterile process, from the mere withholding of a commodity
which is needed by the community. In the second case, the investor in
a block of shares does not withhold from the community what the
community needs. The one operation is in restraint of trade and in
conflict with the general interest, and the other is part of a
natural and healthy process, by which the economic plant of the world
is nourished and from year to year successfully and notably
Then the right hon. gentleman
instanced the case of a new railway
and a country district enriched by that railway. The railway, he
explained, is built to open up a new district; and the farmers and
landowners in that district are endowed with unearned increment in
consequence of the building of the railway. But if after a while
their business aptitude and industry create a large carrying trade,
then the railway, he contends, gets its unearned increment in its
But the right
hon. gentleman cannot call the increment unearned
which the railway acquires through the regular service of carrying
goods, rendering a service on each occasion in proportion to the
tonnage of goods it carries, making a profit by an active extension
of the scale of its useful business - he cannot surely compare that
process with the process of getting rich merely by sitting still? It
is clear that the analogy is not true. ... Read
the whole piece
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
compels them to put the land to some use, and that employs labor. ... read the whole speech
Arthur J. Ogilvy: A Colonist's Plea for Land Nationalization (about 1890)
The Unearned Increment: Its Nature.
LET us begin by taking the unearned increment in its simplest and clearest form.
Suppose I buy Government land at £1 per acre, and quietly holding on while roads are being pushed forward, settlement extending and land values rising, refuse offer after offer till the price reaches £2, when I sell out. Of these £2, one I have acquired by direct purchase; £1 worth of money for £1 worth of land; but the other I have done nothing to acquire.
It is not interest on the purchase-money, for interest is payment for the use of capital, and comes out of the use. Who would expect interest on money tied up in an old rag? There has been no use here.
It is not compensation for risk, for the land could not disappear or deteriorate, and was sure to be wanted.
It may be quite right for all that, that I should have it. That is not the point at present. The point at present is simply to explain the term, and to show not only what it directly means, but what it indirectly implies, for it implies a great deal much more than most people have any idea of.
I have neither done anything to create this increase of value nor rendered any service in return for it. If a sovereign were suddenly to drop into my pocket from the sky, it would not be more completely unearned.
But it has not only been unearned. If that were all, it would be no great matter. If, like the sovereign, it had dropped from the sky, then, though I might be undeservedly the richer nobody else would be the poorer. My gain would be a clear addition to the sum total of human wealth, out of which others besides myself would in one way or another derive benefit; and, whether or no whatever benefits one without injuring another is fair subject for congratulation.
But it has not only been unearned; it has been drawn from the earnings of others. My gain is others' loss.
If I sell goods or perform work for another, then no matter how high I may charge for the goods or the work, I am rendering goods for goods, service for service, earnings for earnings. What I offer is my labour, or the fruits of it, and as the public are free to get the same goods or services elsewhere if my terms don't suit, or to go without them, the fact of their accepting my terms shows that the thing I offer is, under the circumstances, worth the money.
But in the case of this unearned increment on land there is no pretence of any exchange. I offer for it neither labour nor the produce of labour. All I do is to place my hand on a certain portion of the earth's surface, and say, "No one shall use this without paying me for the mere permission to use it." I am rendering no more service in return for this extra pound, either to the purchaser or to society, than if I had acquired exclusive title to the air, and charged people for permission to breathe. And if, instead of selling my land for an additional pound, I let it at a proportionately additional rent the principle would be the same.
The increase of value in my land has arisen from the execution of public works and increase of population, causing an increased demand for the land; in other words, it has arisen from the national progress; and I, so far from aiding in this progress have actually hindered it, by keeping my property locked up and so forcing on intending producers to inferior or less accessible lands; and by holding so much land back have helped to make land so much scarcer, and, therefore, so much dearer, and so have helped to increase the tribute which industry has to pay to monopoly for the mere privilege of exerting itself.
I have employed my land not as an instrument of production, but as a means of extortion. I have bought it, not to use but to prevent other people from using it without my purchased leave; not to earn anything by it but to obtain the power of demanding the earnings of others.
Suppose certain parties, knowing that a road would shortly be made into a particular region, bought from Government the privilege of placing bars across the road (when made) and forbidding anybody to pass until he had paid toll; toll not (as under the old State tolls) to pay for the maintenance of the road, but toll for the mere permission to pass along the road. Every one would recognise that this toll was pure blackmail and not earnings, and the obstructors mere parasites licensed to prey upon the public. But where is the difference between blocking the road and blocking the land that the roads lead to? Where is the difference between levying blackmail on the transport of goods and levying it on their production?
But it will be said, "It was with real earnings that I bought the right to demand this payment."
True. But the point is that whether I bought it or stole it, the thing I have bought or stolen is the privilege of levying blackmail upon industry; of demanding something and giving nothing in return; of laying my hand on the earth's surface and saying to all and sundry, "Give me of the produce of your labour, or be off with you; so much a year if I choose to let it; so much in a lump sum if I prefer to sell it." Whichever of the two forms the demand assumes it is called by political economists "rent," and by that name I shall henceforth call it, because that is the accepted name, and because there is no other compact and handy term by which to express it; but it is not to be confounded with rent in the legal and commercial sense, which includes interest on the cost of improvements. The rent I shall mean is economic rent only; the price charged for the mere use of the land as such, either without any improvements or apart from them: I shall mean "ground rent" in short.
The fact that it was with real earnings that I bought the land for which I charge rent does not make rent earnings. I may invest earnings in buying a share in a pirate vessel (as a great writer puts it), but the proceeds of piracy are not therefore earnings.
It is the nature of the business whereby I make money, and not the manner in which I got into it that makes the difference between earnings and appropriation.
Earnings mean taking payment for goods or service rendered; appropriation means taking something and giving nothing in return; no matter whether the taking be legal or illegal, or how I acquired the privilege of taking. Anyone can recognise that it is one thing to charge for the fish I caught in the sea, and quite another thing to charge for permission to fish in the sea; one thing to charge for produce I have raised from the land, and quite another thing to charge for permission to raise produce from land.
"Still I have the right to make this charge?"
I am not disputing that.
If Government, with the full consent of the governed, issued licenses authorising to rob on the highway, the robbers, I suppose, would be justified in acting on their privilege; but their gains, all the same, would be appropriation and not earnings, no matter how high they paid for their license or how honestly they came by the money to pay for it. And if the public, disgusted with the system, demanded its immediate abolition, the robbers would have a claim to compensation but their compensation would have to be assessed, not by the amount of plunder they had expected to make, but by the fee they had paid for their license and the actual loss to which, in one way or another, they had been put by the sudden abolition of a privilege they had honestly paid for.
But it will be said, "Rent is the result of a free contract."
Is it? The Italian peasant who agrees to pay to the brigand on the mountain so much a year in consideration of not being robbed makes a contract, but is it a free contract? If he refuses to pay it the brigand will take his earnings; if the applicant for land refuses to pay rent the landlord will refuse to let him make any earnings. Where is the great difference between the two cases? There is a contract in each case, and the one is about as free as the other.
In neither case is anything given in return for the payment received, except permission to work unmolested in a particular place.
"But," it will be said "in practice the rent of an estate represents real earnings in the shape of improvements made, as well as mere permission to use the land, and how can you separate the two values."
Not only is it quite possible to separate them, but the thing is often done. In London, for instance, the ground rent and the rent for the house often belong to quite different persons. In Ulster, again, the retiring tenant receives the value of his improvements while the landlord keeps the value of the land. And in America, I am told, the land and the improvements are assessed separately and taxed separately.
But all this has really nothing to do with the subject in hand. My concern at present is simply to explain the nature of the unearned increment.
Whether the value of land and the value of the improvements can be separated or not, they are quite distinct elements, just as in a glass of grog, the brandy is brandy and the water water, each with its own distinctive properties and effects, notwithstanding their indistinguishable com-mixture; and he therefore who lets land levies blackmail upon industry by charging for something which represents no service at all, none the less that at the same time he charges for something else that does represent service.
No doubt there are many other things besides land in which a monopoly of the article will enable the possessor to levy something resembling blackmail; but there are points of difference that distinguish them all from the pure and simple appropriation of land monopoly.
The first is that none of them excludes other people from making a living or from making earnings to any extent by other means than the article monopolised.
If by a day's labour or by pure accident I find a diamond, I may ask a price entirely disproportionate to the value of my labour; but then the public need not buy my diamond unless they like. My finding a diamond does not prevent other people from looking for diamonds with as much chance of finding them as I had, and, if they don't think they are likely to find any by looking for them they can go without, and be none the worse.
But every piece of land appropriated shuts out so many other people from that land, and as all the land (practically speaking) is appropriated, or in one way or another out of reach of the masses, they are at the mercy of the landholders, and have no choice but either to rent it from them as tenants or work for them as labourers on the hardest terms to which competition can drive them; which means that the landowner has the power of appropriating the greater part of their earnings in return for the mere permission to them to earn anything.
Or suppose that, instead of finding a diamond, I buy tin, and that next week the price goes up to double here there is an additional distinction between my gains and the land speculator's; for not only are the public under no compulsion to buy tin (while they are to rent land), and not only does tin represent the results of labour, and so represent earnings (which land does not), but the magnitude of my gain in most cases represents compensation for great risk.
The earnings of farmers and of miners may average the same, but the farmers' average is made up of pretty equal profits all round, while the miners' average is made up of a few big prizes and many blanks. And what applies to the miner applies also to the speculator in mining products. His occasional large profits represent compensation for great risks, and is thus as much of the nature of insurance as of profit.
No one would think of either mining or speculating in mining products, unless the many blanks were compensated by occasional large prizes. They are the necessary inducements to engage in those callings, and therefore fair earnings when they come. Land, however, is not a speculation in this sense (though even if it were, its profits would still be appropriation and not earnings for reasons already given); it is a sure investment in the sense that it is subject to no extraordinary risks: to no more risks, that is, than such as are inseparable from all human enterprise, even the safest.
The value of land, as of everything else, will oscillate within certain limits, and even in some exceptional cases, as in the sudden diversion of traffic, fall for an indefinitely prolonged period; but these occasional or exceptional perturbations are but as the advance and recession of the waves in a flowing tide. The tide still comes in.
In every country which has any enterprise and progress, land values must rise. The movement may be fast or slow, continuous or interrupted, but it is up not down.
There is not a single factor in a nation's progress that does not add to the value of land. Every road improved and railway laid down; every machine invented and process perfected; every opening of new markets; every improvement in fiscal policy, in order and good Government, in the knowledge and skill, in the morals, manners, and even numbers of the people, every conceivable element, in short that adds to the productiveness of industry, adds to the value of land, and increases the tribute which monopoly can wring from industry; which the man who merely owns the land can exact from him who uses it for the mere permission to use it.
This is why the gradual rise of land value or rent (ground rent only, remember), is called the unearned increment.
So far for its nature. Our next consideration will be its magnitude.
The Unearned Increment: Its Magnitude.
Under the system prevailing all over the civilised world every country is appropriated by a (comparatively) few owners.
What these owners do with the land is a matter the State concerns itself very little about. Whether they occupy and use it themselves, or let it to a tenant and live in idleness on the fruits of his labour; whether they cultivate it like a garden, making it yield abundant wealth and maintain hundreds of families, or leave it in a state of nature to carry sheep, excluding the whole rising tide of population from the opportunity of developing its boundless resources because the sheep pay them rather better; whether they open out the mineral treasures hidden in its depths or lock them up by demanding such exorbitant royalties that enterprise either will not attempt the work, or attempts and fails; whether they construct factories and build cities upon it, or turn out the whole population and burn down their dwellings (as in the Scottish Highlands) because a foreign millionaire offers them a higher price for the privilege of turning it into a wilderness to shoot deer in than the children of the soil can give for the mere privilege of earning a living; all these things the State regards as matters of quite secondary consideration with which it is not called upon to interpose, because that would be interfering with the "sacred rights" of property.
The one thing it does concern itself energetically about is to establish "the sacred rights" as fast as possible and in all directions, and ensure that every acre shall have its blackmailer privileged to exclude everybody else from the land he has acquired possession of, and to forbid access to all industry except on payment of the heaviest toll which the keenest competition can compel.
The whole country (that is the whole country worth occupying at any given moment) being thus apportioned amongst these privileged few, they are masters of the situation. The first thing a man requires is room to stand in; and there is no unappropriated room available for the purpose. If he stands on private land he is liable to an action for trespass. If he goes out into the street, the policeman may order him to move on. When night comes on, matters are worse. If he sleeps on somebody's premises he can be apprehended for being on the premises for an unlawful purpose. If he sleeps in the bush he may be locked up as a vagrant without any visible means of support. The State insists that he shall pay blackmail to somebody; not payment for service of any sort rendered, but payment for the mere permission to be somewhere.
Land is the basis of all industry.
All industry consists either 1. In extracting the raw materials of wealth from the land; or 2. In working up, shifting about, or distributing these materials, or in aiding in one way or another some of these processes.
We shall call the one class primary and the other secondary industries.
Farming and mining are the chief examples of the primaries. As to the secondaries, they are legion; and not only are all the materials these last have to operate upon drawn from the land, but so are the tools they work with as well as the food the workmen consume.
It is clear that the extent of the secondary industries will be strictly limited by the primaries; that is, there can be no more persons engaged in working up, shifting about and distributing materials than there are materials (extracted from the land) for them to work up, shift about and distribute and not only is the extent of the secondaries determined by the extent of the primaries, but so also are the profits in the secondaries determined by the profits in the primaries.
Materials must be extracted (or produced) from the land before they can be put to any further use, and men will not leave this necessary preliminary work to take to the secondary work unless they can make as much by the new industry as they could by the old; and they cannot hope to make more, because if they did, the opening in the secondary industries being strictly limited, competitors would at once flock in and bring their profits down.
If profits in the primary industries are high, that is, if the land yields abundantly, and no one steps in to appropriate the fruits, profits in the secondaries will be high too, for otherwise people would leave the secondaries and betake themselves to the land.
If, on the other hand, profits in the primaries are low that is, if either nature is niggardly or someone (the landlord for instance) appropriates the fruits, profits in the secondaries will be low too; for otherwise people would leave the land and crowd into the secondaries till they brought profits down. Now, if all the land is held by a comparatively few people (as is the case), then since the land is the basis of all industry, there will be keen competition for it a competition becoming keener year by year as the competitors multiply and wealth increases, the result of which competition will be that the man of average means and capacity will have to give the very highest price for the land that he will consent to give, rather than go without it, and this highest price will be determined, not by the amount that it takes out of his pocket, but by the amount it leaves behind.
Here, for instance, are three farms of differing fertility estimated to yield to the customary system of farming, £200, £300, and £400 net profit respectively. Then, if the first of these fetches, after a pretty close competition, £100 a year, this shows that no bidder will give more than will leave him £100 to himself, but that the competition of the others will not allow him to retain more; in other words, that £100 is the lowest he will consent to keep, and the highest he will be allowed to keep, so that £100 a year is the average profit of farming amongst farmers of that class and means. But since he cannot hope to keep more than £100, it does not matter to him what the surplus may be which he is compelled to give up to his landlord; consequently the other two farms will fetch respectively £200 and £300. Of course it is the rate of profit, and not the actual profit of which we are speaking of. The £100 is only quoted as an example. Amongst one class of farmers the reserve will be higher, among another lower, according to their means and the magnitude of their operations.
This is the theory, and it corresponds exactly with the facts; for whether a farmer settles here or there, near a market or far-off, whether he pays £100 a year for an indifferent farm, £150 for a better, or £200 for a better still, he finds that except by some lucky accident his profits as a farmer remain much the same; which shows that his rent is determined, not by what be has to pay away, but by what he is determined to keep; and this amount, this rate of profit, will, for reasons already given, determine the rate of profit in all the secondary industries, though they have no visible connection with the land at all.
To put it compactly, the profits of industry all around are determined by the rent of land. That amount of profit which the worker on the land can save from his landlord will be all that the worker at any industry can hope to get, and it will represent that minimum margin to which he will consent to be beaten down rather than go without the land.
What is the minimum margin?
The applicant for the land has a certain amount of capital (otherwise he could not be an applicant), and for this he knows he could get interest, and he also has the capacity to work. Consequently, the least he will determine to keep will be what he could earn as a labourer, plus the interest he could get on his capital. Actually (except in the case of the poorest competitors for the smallest and worst farms) it will be something rather more than this, for his capital, such as it is, gives him a certain advantage in the position. He and his competitors being none of them in danger of immediate want, and therefore not pressed by necessity, will have a tendency to hold back in the bidding when it begins to run high, and to cling to something more than the closeness of the competition might seem to demand; and the larger his capital the greater will be his advantage, not only because of his greater power and stronger inclination to hold out for better terms, but also because the men of sufficient means to require a large farm, such as he wants, are fewer in number, and the competition in every way less keen and forced. Hence the smallest and worst farms are always the highest rented, which is only another way of saying that the profits on them are smallest.
Still, be the farms large or small, competition will always force rents up, and therefore profits down to the smallest return the average applicant of his class will consent to accept rather than go without the land.
Land, as we have said, is the basis of all industry, and agriculture is the fundamental industry.
Everyone recognises this; and in view of the hard struggle and hand-to-mouth existence of the farmer, all sorts of projects are proposed to ameliorate his lot.
One party advocates protection, another the lightening and equalising of taxation, another cheapness of labour by assisted immigration (making the labourer the scapegoat), another pins its faith on railways, and so on.
Of these proposals some are good, some bad; but their effects, whichever way they tend, will not, except for the moment, affect the farmers' profit one way or the other.
Let us suppose protection to be the true policy, and raising the price of some particular article by a duty, say meat, see what the result would be.
The rise of price in meat will produce two opposite effects. It will immediately injure one class of farmers and benefit another. Those who by reason of distance from market, unsuitability of their land for grazing, or its still greater suitability for something else, do not fatten stock, notwithstanding the rise in price (and these will be a very large number), will suffer a distinct appreciable loss in increased household expenses and increased cost of feeding their men, without any advantage to set off; while those on the other hand, with land specially adapted for grazing, who already made a profit by it will make a larger profit still; and those on land passably suited for it, who formerly made their profit by something else, may, perhaps, change their system, and make their profit by grazing instead of by those other things.
But the point is, that after the first start neither those who gain nor those who lose will be any the better or the worse off, for their gain or loss, because at the first renewal of their lease they will transfer the gain or loss to their landlords.
For so long as all the land of the country is in the hands of a comparatively few, so that there are more farmers wanting farms than there are farms for them to have, so long will competition force land values up to their maximum, and rent will mean to the farmer the utmost that he can see his way to giving for the land rather than go without it and let another take his place.
But for the very reason that competition is thus already at its full stretch, it cannot be stretched any farther, and those farmers whose narrow margin of profit is trenched on by their increased expenses consequent on the rise in meat will insist on having that margin restored, and they will be able to carry their point; for they were already giving full value for their farms, and their farms (since they produce no more and yet cost more to work) are now worth less, less not only to the present occupants, but to any one else who might want to take their place; therefore, the landlords cannot play off one against another, and so must accept reduction.
Conversely, where the profits on land, already profitable for grazing, have been increased by the duty, those lands will have become just so much more valuable and will fetch so much more rent.
So, if you made a railway to every farmer's door you would simply make the land more valuable. Compare those districts that have railways with those that have none. In the former you will see a greater population: probably, more cultivation, certainly higher rents, but no higher farm profits; for where the carcase is there will the eagles be gathered together; where returns are high, thither will competitors flock. There may be no actual bidding against each other among the applicants, but this is only because the landlord will kindly take that trouble off their hands. He will put up the rent as high as he thinks he can too high at first perhaps if so his vacant farm will soon cause him to correct his error; but whatever the process, the result will be the same.
So, if by assisted immigration, you reduce the cost of labour by half, or if by mechanical inventions you enable the farmer to do with half the number of men (which would come to much the same thing to him) you would be simply reducing the cost of working the land, and so increasing the return to be got out of the land, and so increasing the value of land, and so raising rents.
One after another labour-saving appliances have been introduced within the last 20 years; double-furrow ploughs, reapers and binders, horse rakes, steam threshers, without improving the condition of the farmer in the least. Never have there been so many aids and appliances to industry as there are now, and never has the struggle of the farmer been more severe.
So if you lightened taxation, or even abolished it altogether, it would make no difference to the farmer, beyond the moment. At present some leases stipulate that the landlord shall pay all rates; others that the tenant shall pay them; others again that each shall pay half, but it is all a mere adjustment of rent. The more taxes the less rent, and vice versa.
If the farmer pays more rent it is because he has to pay less taxes, and whether this is owing to the landlord paying them, or to there being none to pay, makes not the least difference to the farmer.
So if nature herself instead of the mere instruments of production were improved; if the soil were suddenly doubled in fertility; if the sun could be got to shine and the rain to fall exactly when and where it was wanted; if all weeds and plagues were abolished, it would come to the same thing, and for the same reasons.
The Press is continually preaching that the fault of things all lies with the farmer. He should be more industrious or more provident, he should know something about chemistry, he should buy the best appliances, and use the most advanced methods. It is very good advice in its way perhaps, but it does not touch the question in the least.
If you passed every farmer through a technical college, if by a network of meteorological stations and commercial agencies you supplied him every day with a forecast of the weather, and the state of the markets, if you supplied him gratis with all the best machinery, if you trained him in habits of industry and economy, foresight and skill, till you made him as much superior to what he now is as a steam thresher is superior to a flail, you would enormously increase his efficiency no doubt, but you would not add one farthing to his profits. The whole benefit would go as before to the landlord, and for the same reasons. You would not have eased the pressure of competition, but only have put it into the power of every competitor to offer more. Still, as before, rent would mean the utmost the farmer could be forced to bid for the land rather than go without it.
Granting that there are many things that swallow up much of the surplus that would otherwise come to the farmer; heavy taxes, injudicious laws, bad roads, scarce labour; all these matter nothing (as a great writer says) so long as behind them stands something which swallows all that is left. So long as that something stands waiting with open mouth, abolishing any of these only leaves so much more for it to swallow.
Some people shrink from these conclusions saying, "it is a hard doctrine" (as if truths could be dodged by shrinking from them.)
Others say that the remedy is the fixing of a fair rent.
But what is meant by a fair rent?
If Brown objects to his present rent of £100, saying it is too high, and should be reduced to £80, and yet Jones is standing by prepared to give £100, why should the rent be reduced? Why should Jones be forbidden to have what he is ready to give £100 for, in order that Brown should have it for £80? It is fair neither to Jones nor to the landlord whatever it may be to Brown.
What would Brown think if Jones objected to pay the 5s. for his wheat that he had agreed to pay, saying it ought to be reduced to 4s., when Smith is standing by ready to give 5s.?
In the open market a "fair price" has no meaning. Hudibras' saying still holds good that "The value of a thing is just as much as it will bring."
There is a remedy for this evil, and a very simple one, but it is not the fixing of a fair rent.
"But," it will be said, "all farmers are not tenants. Many own the land they occupy." True; but all that this proves is, not that the preceding remarks are incorrect, but that there is a certain class to whom they do not apply. For the present we will let the exception go for what it is worth. What I shall undertake to show by-and-bye is that it is worth nothing.
But we shall have to present one or two other considerations at some length before we are prepared to deal fully with this. For the present we will let it stand over, only remarking that in farming, tenants are the rule, occupying owners the exception, and that the exceptions grow steadily fewer year by year. Not only in Tasmania, but in all the other colonies, in the United States, and wherever, in short, land is recognised as absolute private property, the divorce between occupation and ownership is proceeding apace, and the very institution which was designed to secure to the producer the full fruits of his labour is becoming the means by which he is compelled to surrender them to another. ... read the whole paper.
Louis Post: Outlines of Louis F. Post's
Lectures, with Illustrative Notes and Charts (1894)
c. Significance of the Upward Tendency of Rent
Now, what is the meaning of this tendency of Rent to rise with social progress,
while Wages tend to fall? Is it not a plain promise that if Rent be treated
as common property, advances in productive power shall be steps in the direction
of realizing through orderly and natural growth those grand conceptions of
both the socialist and the individualist, which in the present condition
of society are justly ranked as Utopian? Is it not likewise a plain warning
that if Rent be treated as private property, advances in productive power
will be steps in the direction of making slaves of the many laborers, and
masters of a few land-owners? Does it not mean that common ownership of Rent
is in harmony with natural law, and that its private appropriation is disorderly
and degrading? When the cause of Rent and the tendency illustrated in the
preceding chart are considered in connection with the self-evident truth
that God made the earth for common use and not for private monopoly, how
can a contrary inference hold? Caused and increased by social growth, 97
the benefits of which should be common, and attaching to land, the just right
to which is equal, Rent must be the natural fund for public expenses. 98
97. Here, far away from civilization, is a solitary settler.
Getting no benefits from government, he needs no public revenues, and
none of the land about him has any value. Another settler comes, and
another, until a village appears. Some public revenue is then required.
Not much, but some. And the land has a little value, only a little; perhaps
just enough to equal the need for public revenue. The village becomes
a town. More revenues are needed, and land values are higher. It becomes
a city. The public revenues required are enormous, and so are the land
98. Society, and society alone, causes Rent. Rising with
the rise, advancing with the growth, and receding with the decline of
society, it measures the earning power of society as a whole as distinguished
from that of the individuals. Wages, on the other hand, measure the earning
power of the individuals as distinguished from that of society as a whole.
We have distinguished the parts into which Wealth is distributed as Wages
and Rent; but it would be correct, indeed it is the same thing, to regard
all wealth as earnings, and to distinguish the two kinds as Communal
Earnings and Individual Earnings. How, then, can there be any question
as to the fund from which society should be supported? How can it be
justly supported in any other way than out of its own earnings?
If there be at all such a thing as design in the universe — and who
can doubt it? — then has it been designed that Rent, the earnings of
the community, shall be retained for the support of the community, and that
Wages, the earnings of the individual, shall be left to the individual in
proportion to the value of his service. This is the divine law, whether we
trace it through complex moral and economic relations, or find it in the
eighth commandment. ...
Q18. How would you reach the bondholder, or the man with money alone?
A. Why should we wish to reach him if his bonds or his money represent labor
products to which he has honestly acquired a just title? This question
is a legitimate offspring of the plundering theory that men should be taxed
according to their ability to pay, the merits of which are considered on
pages 7-9. It is a question which may also have been suggested by the fact
that "bondholders" and "men of money" are so often
men who have special privileges which coin money for them. There is a feeling
that it would be unfair to allow such special privileges to escape taxation.
It would be. But inquiry will show that the most important of these privileges
rest in the ownership of land, and that the "bondholders" and "men
of money" whom the questioner probably has in mind, are in fact great
landlords; that is to say, that their fortunes are really based upon land.
When land values were taxed, the great source of unearned incomes — land
monopoly — would be practically abolished, and bondholders
and men of money would be only those who earn what they have. Such property
man of honest instincts should wish to expropriate. ...
Q21. Do not the benefits of good government increase the value of houses
as well as of land?
A. No. Houses are never worth any more than it costs to reproduce them.
Good government tends to diminish the cost of house building; how, then, can
government increase the value of houses? You are confused by the fact
that houses, being attached to land, seem to increase in value, when it is the
land and not the house that really increases. It is the same mistake that a somewhat
noted economic teacher, who advocates protection as his specialty, made when
to show that there is an "unearned increment" to houses as well as
to lands. He did so by instancing a lot of vacant land which had risen in value
from $5000 to $10,000, and comparing it with a house on a neighboring lot which,
as he said, had also increased in value from $5000 to $10,000. At the moment
when he wrote, the house to which he referred could have been reproduced for
$5000; and had he been capable of thinking out a proposition he must have discovered
that it was the lot on which the house stood, and not the house itself, which
had increased in value.
... read the book
Upton Sinclair: The Consequences of Land
Speculation are Tenantry and Debt on the Farms, and Slums and Luxury in the
I know of a woman — I have never had the pleasure of making her acquaintance,
because she lives in a lunatic asylum, which does not happen to be on my
visiting list. This woman has been mentally incompetent from birth. She is
care of, because her father left her when he died the income of a large
farm on the outskirts of a city. The city has since grown and the land is
at conservative estimate, about twenty million dollars. It is covered with
office buildings, and the greater part of the income, which cannot be spent
by the woman, is piling up at compound interest. The woman enjoys good
health, so she may be worth a hundred million dollars before she dies.
I choose this case because it is one about which there can be no disputing;
this woman has never been able to do anything to earn that twenty million dollars.
And if a visitor from Mars should come down to study the situation, which would
he think was most insane, the unfortunate woman, or the society which compels
thousands of people to wear themselves to death in order to pay her the income
of twenty million dollars?
The fact that this woman is insane makes it easy to see that she is not
entitled to the "unearned increment" of the land she owns. But how about all
the other people who have bought up and are holding for speculation the most
desirable land? The value of this land increases, not because of anything these
owners do — not because of any useful service they render to the community — but
purely because the community as a whole is crowding into that neighborhood
and must have use of the land.
The speculator who bought this land thinks that he deserves the increase,
because he guessed the fact that the city was going to grow that way. But it
seems clear enough that his skill in guessing which way the community was going
to grow, however useful that skill may be to himself, is not in any way useful
to the community. The man may have planted trees, or built roads, and put in
sidewalks and sewers; all that is useful work, and for that he should be paid.
But should he be paid for guessing what the rest of us were going to need?
Before you answer, consider the consequences of this guessing game. The
consequences of land speculation are tenantry and debt on the farms, and
slums and luxury
in the cities. A great part of the necessary land is held out of use, and
so the value of all land continually increases, until the poor man can no
own a home. The value of farm land also increases; so year by year more
independent farmers are dispossessed, because they cannot pay interest on
So the land becomes a place of serfdom, that land described by the poet, "where
wealth accumulates and men decay." The great cities fill up with festering
slums, and a small class of idle parasites are provided with enormous fortunes,
which they do not have to earn, and which they cannot intelligently spend. ...
In Philadelphia, as in all our great cities, are enormously wealthy families,
living on hereditary incomes derived from crowded slums. Here and there among
these rich men is one who realizes that he has not earned what he is consuming,
and that it has not brought him happiness, and is bringing still less to his
children. Such men are casting about for ways to invest their money without
breeding idleness and parasitism. Some of them might be grateful to learn about
this enclave plan, and to visit the lovely village of Arden, and see what its
people are doing to make possible a peaceful and joyous life, even in this
land of bootleggers and jazz orchestras. ... read
the whole article
Mason Gaffney: Nonpoint
Pollution: Tractable Solutions to Intractable Problems
The Special Challenge to
The Search for Surrogates
Sources of Nonpoint Pollution
What Problems are Created?
What Problems are Unsolved by Excise Taxes on Surrogates?
The Case of Forestry
The Case of Urban Settlement
The Case of Agriculture
The Common Theme from Forest, City and Farm
THE SEARCH FOR SURROGATES
The frustrated economist, unable to tax runoff, still has a bag
of tricks. He looks for surrogates to tax, something in a sack or
bottle that moves through a market: Aha! pesticides, fertilizers, salt,
they'll do nicely to tax. Thus we will "internalize the
externalities" and have "proper pricing of inputs" to create incentives
for correct "trade‑offs" in the "production functions," and we're
nearly home. Well, halfway home.
Well, we've made a start. A few problems remain. One
is that a plurality of economists don't like the effluent charge
approach anyway, even for point sources. They follow Coase and
prefer to grant pollution entitlements to be traded in a free
market. Incredibly (to me) this view has prevailed.
In principle they profess not to care what worthy few get the
original entitlements, but in practise a select company of ancient and
honorable polluters get them. We now call these "offset rights,"
a new form of property. In the L.A. Basin (South Coast Air
Quality Management District), a few have grown rich by establishing
their respective histories of pollution which they can now sell to
others who wish to continue this wholesome tradition. The
demonstration effect on those contemplating new and as yet unregulated
forms of pollution may be imagined.
Those needing air to breathe? Well, according to the
modern philosophers they can enter the market, buy up offset rights and
retire them. Thus is fulfilled Robert Ingersoll's forecast a
century ago that if some corporation could bottle the air they would
charge us to breathe. It seems to confirm this dour warning from
a former Secretary of Labor:
"We soon discovered ... the danger of allowing
economic policy to be dominated by business or financial interests or,
which usually comes to the same thing, orthodox economic
analysis." (Marshall, p.ix) (emphasis added)
The public has learned what is being done to it, finally, and is
rebelling at the Coase logic, which only a Chicago economist could
love. Offset rights are on the ropes. To simplify,
therefore, I am not going to speculate how Coase might be applied to
nonpoint, but just ignore it. I will treat effluent charges, and
taxes on surrogates, as the conventional economic solution to
But before leaving this there
is a lesson in it. The holders of offset rights, whether
"ancient and honorable" or "innocent purchasers," are demanding
compensation. Never mind about asking them to pay the victims;
they demand payment to stop! (Polakovic, 1987)
They will probably get it, for
if the system be changed, there will be a taking of something, which
they claim is property. Such is the force of the Great Secular
Superstition, that unearned gains are sacred, even those originating
with something as unworthy as dumping crud on other human beings.
This superstition is why effective control seems so expensive.
My remarks will not be instructed by it. ...
This perversion does not occur
Spread and sprawl in forestry, cities and agriculture are common
results of the dominant force driving American politics, the quest for
unearned increments to land value. ... Read
the entire article
Walter Rybeck: The
Uncertain Future of the Metropolis
The single element that makes me
apprehensive about the future of our cities is our land system.
of our misguided land policies are choking almost every vital aspect of
metropolitan life. This is doubly worrisome, because the full
dimensions of the land problem have barely surfaced in the public
consciousness. To put it in the
vernacular, most of us don't know what's eating us.
We have scarcely begun to identify the causes of today's city
problems. This is not to denigrate the legions of good folk --
officials and citizens alike -- who are trying desperately to cope with
the daily disasters. But without a better notion of what is producing
these disasters, we are unlikely to stem the flood.
A major problem, certainly, is
distorted land system that operates around the clock and around the
calendar, and under the full sanction of the law. It rips off the poor,
saps small business, and deprives municipalities of their rightful
The people as a whole create
values, not only by their presence, but also through participation in
government, as taxpayers. Schools, firehouses, streets, police,
water lines -- the whole gamut of public works and services that
enhance a neighborhood are converted into higher land values. The
taxpayers of the entire country, through federal aid for our
multi-billion-dollar Metrorail project, have been boosting Washington,
D.C. land values mightily.
Not all land values are
manmade. Inherent qualities also give land special advantages:
fertile soils in farming districts, scenic views in residential areas,
subsurface riches of coal, oil, and minerals. None of us, as landlords,
tenants, or governments, can lay claim to having created these values.
The people who have been drawing up an international law of the Seas
have characterized these natural
endowments as "the common heritage of mankind", where no people,
individually or collectively, produce these land values, it is difficult to argue with the
conclusion that they belong to all people equally.
If the institution of private property
has a sound foundation, and I believe it does, then it rests on the
principle that people have a right to reap what they sow, to retain for
themselves what they themselves produce or earn. Land values, produced
by all of society, and by nature, do not conform to this prescription.
Decade after decade, billions of
dollars in urban land values are being siphoned off by a narrowing
class that has no ethical or economic claim to them. To be outraged
when a few ghetto dwellers, in an occasional frenzy of despair, engage
in looting on a relatively miniscule scale, but to remain indifferent
to this massive, wholesale looting, is worse than hypocritical. It is
to ignore a catastrophic social maladjustment, more severe, I believe,
than anything the U.S. has experienced since slavery. ...
But I sense that we are drifting rapidly towards a
landlord-dominated society. ...
Before that happens, the opportunity
awaits to see whether a reasonably free economy can still be made to
work. Unless we tackle the land question, and the looting of America,
that game may be forfeited.
The future of the
metropolis is uncertain. The choice is ours. We can
intervene in the way society is now headed, to preserve the American
dream. Or, we can continue along the present path and await the
Read the whole article
Mason Gaffney: Sounding
the Revenue Potential of Land: Fifteen Lost Elements
increments as current income. There is a swelling of land
gains as a
component of income. Gains on land value are a form of land rent,
eminently taxable. Great is the need for objective economists to
establish the taxability of capital gains, to show how to tax
unrealized gains as they accrue. It’s surprisingly easy: levy a
property tax based on the market value of appreciating land. That is
just what the property tax was, before the current movement to limit
assessed valuations to capitalized income from current use only. Read the whole article
Mason Gaffney: The Taxable
Capacity of Land
Those getting the cold shower,
meantime, may resist it. In
California, the land of extremes, we got Howard Jarvis and Prop.
13. This Constitutional Amendment capped the property tax rate at 1%,
and virtually froze assessed values until land sold. Then the
boom really went wild. I myself, after campaigning hard against
Jarvis, unexpectedly made $200,000 in a few months after it passed.
Buyers were chasing me around the block, just to buy a scrap of land
I happened to have in the right place at the right time. It was blind
luck, but the money was as good as though I had earned it honestly:
better, in fact, because 60% of the gain was not even reportable as
taxable income. It was a once-in-a-lifetime experience, but buyers
and sellers came to regard it as normal, and only fair. They saw
regular annual increments as a divine right of property. For a few
mad years, they were. ... Read
the whole article
California homeowners are
wallowing in unearned increments beyond
the dreams of avarice, while its governments are courting bankruptcy. Warren Buffett dared point
this out, and overnight changed from
the Oracle of Omaha into the Numbskull of Nebraska because he does
not understand the "reality of California politics," the oxymoron du
Most candidates for Governor fled
like startled deer. Buffett's
sponsor, well-tailored Mr. Muscles, recalled meeting a tearful widow
who said she would have been taxed out of her home were it not for
Prop 13. Poor thing, her home had risen in value. No one asked her
name, or whether she knew what she was talking about, or had her
claims audited - being a tearful widow "on a fixed income" insulates
one from reality checks. The press chimed in with pix of poster
oldsters, gazing from their multi-million dollar perches over the
blue Pacific, fretting about Buffett's solecism and its possible
effect on them, never mind anyone else.
is, unearned increments ARE income, at the time they accrue. Illiquid?
They are better than cash income because you can turn them
into cash by borrowing on them, and pay no income tax on the cash.
If you have trouble with that, the tax man himself will arrange it
for you by placing a tax lien on your appreciated home, rather than
foreclose and evict you. This helps explain why we never actually
see one of these evicted widows suffering from unearned increments --
they are maudlin figments for mythmakers. The evictees we do see
are renters who couldn't pay, and had no equity to mortgage. Who
cries for them? ...
Governor Gray Davis, supposedly
fighting to close a deficit,
chimed in endorsing Prop 13, citing the mythical widow again to
explain why non-residential property, about 2/3 of the tax base,
should enjoy low rates. Faced with a negative poll, he backed right
down from his "land tax on wheels," the higher vehicle registration
- No one has said a word about a severance tax on oil and
although California is the only major producing state without one.
- No one has crusaded for a severance tax on water
although it would solve both our revenue and water crises in one
- No one has said word one about taxing the taboo lands used
for golfing, timber, or farming. ... Read the whole article
Michael Hudson: The Lies of the
Land: How and why land gets undervalued
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
THE FREE LUNCH Its cost to citizens
Its cost to the economy
Hiding the free
BAUDELAIRE OBSERVED that the devil
wins at the point where he
convinces humanity that he does not exist. The Financial,
Insurance and Real Estate (FIRE) sectors seem to have adopted a
kindred philosophy that what is not quantified and reported will be
invisible to the tax collector, leaving more to be pledged for
mortgage credit and paid out as interest. It appears to have worked.
To academic theorists as well.,
breathlessly focused on their own
particular hypothetical world, the magnitude of land rent and
land-price gains has become invisible. But not to investors. They
out to pick a property whose location value increases faster rate
than the interest charges, and they want to stay away from earnings
on man-made capital -- like improvements. That's earned income, not
the "free lunch" they get from land value increases.
that no free lunch exists. But
when one begins to look beneath the surface of national income
statistics and the national balance sheet of assets and liabilities,
one can see that modern economies are all about obtaining a free
lunch. However, to make this free ride go all the faster, it helps if
the rest of the world does not see that anyone is getting the
proverbial something for nothing - what classical economists
unearned income, most
characteristically in the form of land rent.
You start by using a method of
appraising that undervalues the real
income producer, land. Here's how it's done.
the whole article
Herbert J. G. Bab: Property
Tax -- Cause of Unemployment (circa 1964)
Ricardo believed that ground rents and the value of land have a
tendency to rise continuously and that this benefits solely the
landowners. The progress of
industrialization and urbanization in the
second half of the 19th century resulted in a rapid increase in the
value of urban land and the owners of such land reaped tremendous
profits. This led John Stuart Mill to observe, that "Only the
landowners grow richer, as it were in their sleep without working,
risking and economizing". He called for the taxation of land in order
to recapture the unearned increment accruing to the land owners.
The apostle of land taxation is Henry George. In his famous book
and Poverty he develops
his single tax theory. He tries to show that poverty and unemployment
and other evils are caused by the land monopolists. Henry George's
theory is similar to that developed by John Stuart Mill. Land values
are based on ground rents which are created by the community and not by
the land owners. Therefore the community is justified in recapturing
these rents by a single tax on land.
Henry George: Justice
the Object -- Taxation the Means (1890)
For these reasons increases in land values can be prevented by taxing
land at an appropriate rate. Yet urban land values have increased
tremendously during recent years. For instance in Los Angeles county the assessed value of
land increased from $1,972 millions in 1952 to $4,002 millions in 1962,
an increase of a little over 100%. The assessed values, are
supposed to represent 25% of the market value. Thus the unearned increment in
land values during this period amounted to not less than $8 billions. Even
this figure is an understatement because it is based on assessed values
and land is greatly underassessed. While land values have risen by
about 10% yearly, property taxes assessed on land averaged about 1.5%.
Thus a person owning vacant or underimproved land would have earned
about 8 1/2% per year just by withholding land from its proper use. Read
the whole article
We used to be confronted
constantly by the question: "Well,
after you have divided the land up, how do you propose to keep it
divided?" We don't meet that question now. The Single Tax has,
at least, this great merit: it suggests our method; it shows the way
we would travel — the simple way of abolishing all taxes, save one
tax upon land values. Now, mark: One tax upon land values.
We do not propose a tax upon land,
as people who misapprehend us
constantly say. We do not propose a tax upon land; we propose a tax
upon land values, or what in the terminology of political economy is
termed rent; that is to say, the value which attaches to land
irrespective of any improvements — in or on it; that value which
attaches to land, not by reason of anything that the user or improver
of land does — not by reason of any individual exertion of labour,
but by reason of the growth and improvement of the community. A tax
that will take up what John Stuart Mill called the unearned
increment; that is to say, that increment of wealth which comes to
the owner of land, not as a user; that comes whether he be a resident
or an absentee; whether he be engaged in the active business of life;
whether he be an idiot and whether he be a child; that growth of
value that we have seen in our own times so astonishingly great in
this city; that has made sand lots, lying in the same condition that
they were thousands of years ago, worth enormous sums, without anyone
putting any exertion of labour or any expenditure of capital upon
Now, the distinction between a
tax on land and a tax on land
values may at first seem an idle one, but it is a most important one.
A tax on land that is to say, a tax upon all land — would
ultimately become a condition to the use of land; would therefore
fall upon labour, would increase prices, and be borne by the general
community. But a tax on land values cannot fall on all land, because
all land is not of value; it can only fall on valuable land, and on
valuable land in proportion to its value; therefore, it can no more
become a tax on labour than can a tax upon the value of special
privileges of any kind. It can merely take from the individual, not
the earnings of the individual, but that premium which, as society
grows and improves, attaches to the use of land of superior
quality. Read the entire article
Winston Churchill: The
...If the railway makes greater
profits, it is usually because it carries more goods and more
passengers. If a doctor or a lawyer enjoys a better practice, it is
because the doctor attends more patients and more exacting patients,
and because the lawyer pleads more suits in the courts and more
important suits. At every stage the doctor or the lawyer is giving
service in return for his fees, and if the service is too poor or the
fees are too high, other doctors and other lawyers can come freely into
competition. There is constant service, there is constant competition;
there is no monopoly, there is no injury to the public interest, there
is no impediment to the general progress.
comparing these healthy processes with the enrichment which comes to
the landlord who happens to own a plot of land on the outskirts or at
the centre of one of our great cities, who watches the busy population
around him making the city larger, richer, more convenient, more famous
every day, and all the while sits still and does nothing. Roads are
made, streets are made, railway services are improved, electric light
turns night into day, electric trams glide swiftly to and fro, water is
brought from reservoirs a hundred miles off in the mountains -- and all
the while the landlord sits still.To not one of those improvements does the
land monopolist as a land monopolist contribute, and yet by every one
of them the value of his land is sensibly enhanced. He renders
no service to the community, he contributes nothing to the general
welfare; he contributes nothing even to the process from which his own
enrichment is derived. If the land were occupied by shops or by
dwellings, the municipality at least would secure the rates upon them
in aid of the general fund, but the land may be unoccupied,
undeveloped, it may be what is called 'ripening' -- ripening at the
expense of the whole city, of the whole country, for the unearned
increment of its owner. Roads perhaps may have to be diverted to avoid
this forbidden area. The merchant going to his office, the artisan
going to his work, have to make a detour or pay a tram fare to avoid
it. The citizens are losing their chance of developing the land, the
city is losing its rates, the State is losing its taxes which would
have accrued if the natural development had taken place; and that share
has to be replaced at the expense of the other ratepayers and
taxpayers, and the nation as a whole is losing in the competition of
the world -- the hard and growing competition of the world -- both in
time and money. And all the while the land monopolist has only to sit
still and watch complacently his property multiplying in value,
sometimes manifold, without either effort or contribution on his part;
and that is justice!
Every one of those improvements
is effected by the labour and at the cost of other people. Many of the
most important are effected at the cost of the municipality and of the
reaped in exact proportion to the disservice done. But let us
follow the process a little further. The population of the
city grows and grows still larger year by year, the congestion in the
poorer quarters becomes acute, rents and rates rise hand in hand, and
thousands of families are crowded into one-roomed tenements. There are
120,000 persons living in one-roomed tenements in Glasgow alone at the
present time. At last the land becomes ripe for sale -- that means that
the price is too tempting to be resisted any longer -- and then, and
not till then, it is sold by the yard or by the inch at ten times, or
twenty times, or even fifty times, its agricultural value, on which
alone hitherto it has been rated for the public service. The greater
the population around the land, the greater the injury which they have
sustained by its protracted denial, the more inconvenience which has
been caused to everybody, the more serious the loss in economic
strength and activity, the larger will be the profit of the landlord
when the sale is finally accomplished. In fact, you may say that the
unearned increment on the land is on all fours with the profit gathered
by one of those American speculators who engineer a corner in corn, or
meat, or cotton, or some other vital commodity, and that the unearned
increment in land is reaped by the land monopolist in exact proportion,
not to the service but to the disservice done. ...
Now let the Manchester Ship
Canal tell its tale about the land. It has
a story to tell which is just as simple and just as pregnant as its
story about Free Trade. When it was resolved to build the Canal, the
first thing that had to be done was to buy the land. Before the
resolution to build the Canal was taken, the land on which the Canal
flows -- or perhaps I should say 'stands' -- was, in the main,
agricultural land, paying rates on an assessment from 30s. to L2 an
acre. I am told that 4,495 acres of land purchased fell within that
description out of something under 5,000 purchased altogether.
Immediately after the decision, the 4,495 acres were sold for L777,000
sterling -- or an average of L172 an acre -- that is to say, five or
six times the agricultural value of the land and the value on which it
had been rated for public purposes.
Now what had the landowner done for
the community; what enterprise had he shown; what service had he
rendered; what capital had he risked in order that he should gain this
enormous multiplication of the value of his property! I will tell you
in one word what he had done. Can you guess it! Nothing.
But it was not only the owners of the land that was needed for
the Canal, who were automatically enriched. All the surrounding land
either having a frontage on the Canal or access to it rose and rose
rapidly, and splendidly, in value. By the stroke of a fairy wand,
without toil, without risk, without even a half-hour's thought many
landowners in Salford, Eccles, Stretford, Irlam, Warrington Runcorn,
etc., found themselves in possession of property which had trebled,
quadrupled, quintupled in value.
Apart from the high prices which were paid, there was a heavy
compensation, severance, disturbance, and injurious affection where no
land was taken -- injurious affection, namely, raising the land not
taken many times in value -- all this was added to the dead-weight cost
of construction. All this was a burden on those whose labour skill, and
capital created this great public work. Much of this land today is
still rated at ordinary agricultural value, and in order to make sure
that no injustice is done, in order to make quite certain that these
landowners are not injured by our system of government, half their
rates are, under the Agricultural Rates Act, paid back to them. The
balance is made up by you. The land is still rising in value, and with
every day's work that every man in this neighbourhood does and with
every addition to the prosperity of Manchester and improvement of this
great city, the land is further enhanced in value.
The shareholders and the
ratepayers I have told you what happened to the
landowners. Let us see what
happened to the shareholders and
the ratepayers who found the money. The ordinary shareholders, who
subscribed eight millions, have had no dividend yet. The Corporation
loan of five millions interest on which is borne on the rates each
year, had, until 1907, no return upon its capital. A return has come at
last, and no doubt the future prospects are good; but there was a long
interval -- even for the corporation. These are the men who did the
work. These are the men who put up the money. I want to ask you a
question. Do you think it would be very unfair if the owners of all
this automatically created land value due to the growth of the city, to
the enterprise of the community, and to the sacrifices made by the
shareholders -- do you think it would have been very unfair, if they
had been made to pay a proportion, at any rate, of the unearned
increment which they secured, back to the city and the community? ... Read the whole piece
Bill Batt: Painless Taxation
Bill Batt: The Nexus
of Transportation, Economic Rent, and Land Use
Real tax reform could do away with those taxes that are resented
by the large proportion of our population. We could replace all taxes on
wages and on interest by instead taxing economic rent. Rent is windfall income;
it is income that arises not from the efforts of any person or corporation;
it comes about as a surplus gain from common social enterprise. There is
ample moral warrant for society to lay claim to that which it has created,
as well as to that which no individual or party has earned. Analysis increasingly
makes clear that economic rent in all its forms is far larger than official
government figures indicate; in fact it is likely sufficient to supplant
all current taxes on labor and capital (wages and interest) which are acknowledged
to have so many negative effects. Recovering economic rent in all its manifestations
by taxing its various bases actually can foster economic performance and
yield other benefits that make it the natural source of revenue for governments.
Such a tax is essentially painless. ...
The Tax Base
The next concern should be upon what base to impose a tax — not about
taxing whom but taxing what. There are only three possibilities, as all revenue
streams necessarily come from one of three factors of economic production —
1) upon resources found raw in nature (what was classically called land),
2) upon our labor, or
3) upon things created by human hands or minds (capital).
No other source exists; every possible tax must be on one or some combination
of these parts. Each of these factors has its price: the price of land is
counted in economic rent; the price of labor is in wages, and the price of
capital (its liquid form) is in interest.
Any tax on capital has its downside effects, so that taxing savings causes
people to save less, taxing consumption causes people to buy less, and taxing
buildings causes people to build less. The result is that economists as well
as businessmen usually frown upon taxing capital. Another alternative is
to tax labor, but it is even more widely understood that taxing labor normally
discourages people from working as much as they would in the absence of a
tax. From this comes sentiment against taxing labor, even though for want
of any alternative, people have today commonly come to accept it as a necessity.
But electing to tax labor, just as for taxing capital, forecloses a discussion
of the virtues of taxing land — not necessarily land as earth, but
rather land as location. Yet land rent is the most attractive tax base of
all, as rent is not earned; it is windfall income, entirely the result of
being well situated in any market of scarce natural resources and where community
demand (rather than one's own efforts) leads to an appreciation of that land's
price. To be sure many people have learned to position themselves in situations
where a land's market value is likely to rise — indeed these people
come to think of themselves as astute investors. But the fact is that that
market gain is not of their own doing at all; it is the result of common
enterprise creating a surplus that comes to settle on land sites. An investment
in land, in any form it might take, is speculation in greater or lesser degree.
Land in all its forms is a tax base that also conforms well to all the classic
principles of sound tax theory as enumerated above. Land is classically taken
to mean not just surfaces of the earth but places in time, in space, in any
medium whether it be solid, liquid or gas, and even as a form of light, in
the electromagnetic spectrum, and in life forms. One needs to return to 19th
century classical economic definitions of the factors of production to appreciate
the separate significance of land as it was understood in its manifold forms.
One should ask how it is that land, so important to 19th century classical
economic theory, has been given so little attention today in neoclassical
economics. This is a story only now recovered from the dusty archives of
academic economic history. Once understood and appreciated, it may be one
of the greatest, if very silent, political revolutions of world history. ... read the whole article
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
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
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
Today, on the other hand, the
unearned surplus which classical
economists called rent attaches to monopoly titles -- largely
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
Where does economic rent most tend to lodge? In the center of
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
Bill Batt: The
Compatibility of Georgist Economics and Ecological Economics
As with all nineteenth century
moral philosophers, Henry George
subscribed to a belief in natural law. The natural order of things as
he saw it required that land be held in usufruct and that rent from
such should be returned to society. The theory was inspired by his
deeply religious roots and grounded in his reading of the prominent
thinkers that predated him. The natural order was also a moral order,
and the failure to comply with the order of nature and society as he
saw it was a perversion of justice. The fruits of the land belonged to
everyone, just as the fruits of one’s own labor were uniquely one’s
own. Since one owned one’s body, one was entitled to keep the product
of one’s physical efforts. Society had no more right to confiscate the
earnings of one’s sweat and brow than it ought to leave in the hands of
rich landowners the rent that was everyone’s inherent birthright to be
shared. There were just and unjust
taxes, and the only just tax was that which grew out of rent, of the
unearned increment that visited certain land sites as windfall gains
because of the efforts and investments by the community. Income
excise taxes were unjust and confiscatory — even theft, as especially
were tariffs. Taxing or collecting land rent alone was the means of
ending poverty and restoring progress. Indeed many Georgists reject use
of the word tax entirely, preferring instead to talk instead about rent
collection. There is even a lapel button Georgists use that says
“Abolish all taxes; collect ground rent instead.”... read the whole article
Bill Batt: How the Railroads
Got Us On the Wrong Economic Track
In classical economics, the
definition of capital grew out of
labor mixed with earlier capital. Land, by conventional definition,
was not capital, nor was it a component of wealth. Rather land was
its own category. Conflating land into capital allowed land rent to
be hidden and diluted in ways so that the unearned increment arising
from social improvements fell to speculators rather than being returned
to society in rent.... read the whole article
Mason Gaffney: Nonpoint
Pollution: Tractable Solutions to Intractable Problems
The public has learned what is
being done to it,
finally, and is rebelling at the Coase logic, which only a Chicago
economist could love. Offset rights are on the ropes. To
simplify, therefore, I am not going to speculate how Coase might be
applied to nonpoint, but just ignore it. I will treat effluent
charges, and taxes on surrogates, as the conventional economic solution
But before leaving this there is a lesson in
it. The holders of offset
rights, whether "ancient and
honorable" or "innocent purchasers," are demanding compensation.
Never mind about asking them to pay the victims; they demand payment to
stop! (Polakovic, 1987)
They will probably get it, for
changed, there will be a taking of something, which they claim is
is the force of the Great Secular Superstition,
that unearned gains are sacred, even those originating with something
as unworthy as dumping crud on other human beings. This
superstition is why effective control seems so expensive. My
remarks will not be instructed by it. ...
THE COMMON THEME FROM
FOREST, CITY AND FARM
Market failure, public programs and perverse
incentives in the land market create a gross bias towards spreading out
too much. This aggravates otherwise fairly tractable runoff
problems. The more Tierra Desnuda, the more runoff.
This perversion does not occur by accident.
Spread and sprawl in forestry, cities and agriculture are common
results of the dominant force driving American politics, the quest for
unearned increments to land value.
Thorstein Veblen in his final testament, Absentee
Ownership, noted that American farmers
always, ... wanted something more than their ... share of
the soil; not because they were driven by a felt need of doing more
than their fair share of work ..., but with a view to ... getting
a little something for nothing in allowing their holdings to be turned
to account (Veblen, pp. 138-40).
To enhance those values they will now invoke
any complaisant higher power, and since God already did His bit by
donating the Earth, they turn to Government.
But the profile of land values
island. To raise the top and the slopes and the shores we must
also raise the shallows above sea level, where they shed the waters and
come into use.
Rising population is one factor pushing up the
profile of values, but not the strongest one. Increased demand
per capita is the main factor. These demands include all the
spurious demands described above, like the demand of government for
land to "bank" and hold idle, and the demand of speculators "with a
view to getting a little something for nothing." ...
Read the whole article
Frank Stilwell and Kirrily Jordan: The
Political Economy of Land: Putting Henry George in His Place
George saw land as a community resource provided by nature, to which
every human being had an equal right. He argued that, since land was fixed
supply, the system of private land ownership allowed the wealthy few to
enjoy exclusive rights to land and its benefits, while alienating the poorer
majority from land ownership and forcing them to pay rent to landowners
in order to access this necessary resource. Moreover, the collection of
rents by landowners allowed them to increase their wealth without contributing
to the productive efforts of society. As the population grew, so too did
the demand for land, forcing rents and land values ever higher. In addition,
increases in land value resulting from publicly-funded developments, such
as roads and public transport systems, unduly benefited landowners at the
expense of the community. Such unearned gains from landownership encouraged
speculation in land, pushing prices even higher, while exposing the economy
to the risks of speculative ‘booms’ and ‘busts’.
... read the whole article
Peter Barnes: Capitalism
3.0 — Chapter 6: Trusteeship of Creation (pages 79-100)
It shouldn’t be thought that the commons is, or ought to be, a money-free
zone. In fact, an important subject for economists (and the rest of us) to
understand is commons rent.
By this I don’t mean the monthly check you send to a landlord. In
economics, rent has a more precise meaning: it’s money paid because
of scarcity. If you’re not an economist, that may sound puzzling, but
consider this. A city has available a million apartments. In absolute terms,
that means apartments aren’t scarce. But the city is confined geographically
and demand for apartments is intense. In this economic sense, apartments
are scarce. Now think back to that check you pay your landlord, or the mortgage
you pay the bank. Part of it represents the landlord’s operating costs
or the bank’s cost of money, but part of it is pure rent — that
is, money paid for scarcity. That’s why New Yorkers and San Franciscans
write such large checks to landlords and banks, while people in Nebraska
Rent rises when an increase in demand bumps into a limit in supply. Rent
due to such bumping isn’t good or bad; it just is.We can (and should)
debate the distribution of that rent, but the rent itself arises automatically.
And it’s important that it does so, because this helps the larger economy
allocate scarce resources efficiently. Other methods of allocation are possible.
We can distribute scarce things on a first come, first served basis, or by
lottery, political power, seniority, or race. Experience has shown, though,
that selling scarce resources in open markets is usually the best approach,
and such selling inevitably creates rent.
Rent was of great interest to the early economists — Adam Smith, David
Ricardo, and John Stuart Mill, among others — because it constituted
most of the money earned by landowners, and land was then a major cost of
production. The supply of land, these economists noted, is limited, but demand
for it steadily increases. So, therefore, does its rent. Thus, landowners
benefit from what Mill called the unearned increment — the rise in
land value attributable not to any effort of the owner, but purely to a socially
created increase in demand bumping into a limited supply of good land.
The underappreciated American economist Henry George went further. Seeing
both the riches and the miseries of the Gilded Age, he asked a logical question:
Why does poverty persist despite economic growth? The answer, he believed,
was the appropriation of rent by landowners. Even as the economy grew, the
property rights system and the scarcity of land diverted almost all the gains
to a landowning minority. Whereas competition limited the gains of working
people, nothing kept down the landowners’ gains. As Mill had noted,
the value of their land just kept rising. To fix the problem, George advocated
a steep tax on land and the abolition of other taxes. His bestselling book
Progress and Poverty catapulted him to fame in the 1880s, but mainstream
economists never took him seriously.
By the twentieth century, economists had largely lost interest in rent;
it seemed a trivial factor in wealth production compared to capital and labor.
But the twenty-first century ecological crisis brings rent back to center-stage.
Now it’s not just land that’s scarce, but clean water, undisturbed
habitat, biological diversity, waste absorption capacity, and entire ecosystems.
This brings us back to common property rights. The definition and allocation
of property rights are the primary factors in determining who pays whom for
what. If, in the case of pollution rights, pollution rights are given free
to past polluters, the rent from the polluted ecosystem will also go to them.
That’s because prices for pollution-laden products will rise as pollution
is limited (remember, if demand is constant, a reduction in supply causes
prices to go up), and those higher prices will flow to producers (which is
to say, polluters).
By contrast, if pollution rights are assigned to trusts representing pollutees
and future generations, and if these trusts then sell these rights to polluters,
the trusts rather than the polluters will capture the commons rent. If the
trusts split this money between per capita dividends and expenditures on
public goods, everyone benefits.
At this moment, based on pollution rights allocated so far, polluting corporations
are getting most of the commons rent. But the case for trusts getting the
rent in the future is compelling. If this is done, consumers will pay commons
rent not to corporations or government, but to themselves as beneficiaries
of commons trusts. Each citizen’s dividend will be the same, but his
payments will depend on his purchases of pollution-laden products. The more
he pollutes, the more rent he’ll pay. High polluters will get back
less than they put in, while low polluters will get back more. The microeconomic
incentives, in other words, will be perfect. (See figure 6.1.)
What’s equally significant, though less obvious, is that the macroeconomic
incentives will be perfect too. That is, it will be in everyone’s interest
to reduce the total level of pollution. Remember how rent for scarce things
works: the lower the supply, the higher the rent. Now, imagine you’re
a trustee of an ecosystem, and leaving aside (for the sake of argument) your
responsibility to preserve the asset for future generations, you want to
increase dividends. Do you raise the number of pollution permits you sell,
or lower it? The correct, if counterintuitive answer is: you lower the number
of permits. ... read
the whole chapter
History of Pennsylvania, by Phillip S. Klein and Ari Hoogenboom, p. 441
More than any other person, Gifford Pinchot dominated Pennsylvania in the
1920s and early 1930s. Serving as governor from 1923 to 1927 and from 1932
to 1935, Pinchot gave Pennsylvania a progressive administration during the
reactionary 1920s. Pinchot was born in Connecticut, but his family came from
Milford, where his grandfather had settled and prospered. His father made
a fortune as a New York merchant, married the daughter of millionaire New
Yorker Amos R. Eno, and built the family mansion Grey Towers just outside
Milford. Pinchot was committed to public service. "My own money," he
remarked in 1914, "came from the unearned increment on land in New York
held by my grandfather, who willed the money, not the land, to me. Having
got my wages in advance that way, I am now trying to work them out." ...