of Untaxing Wages and Interest
When the Federal Tax Reform Panel of 2005 talked about "tax
reform," they seldom moved beyond talking about income tax brackets tax and
deductions. We need to get outside the income tax box, because it is the wrong
box. A lot of problems will start to clear up when we (a) stop taxing the wrong
things and (b) shift taxes onto things that should be taxed (see also:
It is an axiom of statesmanship, which the successful founders of tyranny
have understood and acted upon that great changes can best be brought about
under old forms. We, who would free men, should heed the same truth. It
is the natural method. When nature would make a higher type, she takes
a lower one and develops it. This, also, is the law of social growth. Let
us work by it. With the current we may glide fast and far. Against it,
it is hard pulling and slow progress.
By making use of this existing machinery, we may, without jar or shock, assert
the common right to land by appropriating rent by taxation. We already take some
rent in taxation. We have only to make some changes in our modes of taxation
to take it all.*
*Rent in the economic sense is not, as those unfamiliar
with economic terminology may assume, the whole amount paid for the
use of real estate. It is only that part of such amount which is paid
for the use of the bare land or site employed, exclusive of the payment
for the use of any buildings or other improvements on it. H. G. B.
In form, the ownership of land would remain just as now. No owner of land
need be dispossessed, and no restriction need be placed upon the amount
of land any one could hold. For, rent being taken by the State in taxes,
land, no matter in whose name it stood, or in what parcels it was held,
would be really common property, and every member of the community would
participate in the advantages of its ownership.
Now, insomuch as the taxation of rent, or land values, must necessarily
be increased just as we abolish other taxes, we may put the proposition
into practical form by proposing --
to abolish all taxation save that upon land
As we have seen, the value of land is at the beginning of society nothing,
but as society develops by the increase of population and the advance of
the arts, it becomes greater and greater. In every civilized country, even
the newest, the value of the land taken as a whole is sufficient to bear
the entire expenses of government. In the better developed countries it
is much more than sufficient. Hence it will not be enough merely to place
all taxes upon the value of land. It will be necessary, where rent exceeds
the present governmental revenues, commensurately to increase the amount
demanded in taxation, and to continue this increase as society progresses
and rent advances. But this is so natural and easy a matter, that it may
be considered as involved, or at least understood, in the proposition to
put all taxes on the value of land. That is the first step upon which the
practical struggle must be made. When the hare is once caught and killed,
cooking him will follow as a matter of course. When the common right to
land is so far appreciated that all taxes are abolished save those which
fall upon rent, there is no danger of much more than is necessary to induce
them to collect the public revenues being left to individual landholders.
Wherever the idea of concentrating all taxation upon land values finds
lodgment sufficient to induce consideration, it invariably makes way, but
there are few of the classes most to be benefited by it, who at first,
or even for a long time afterward, see its full significance and power.
- It is difficult for workingmen to get over the idea that there is a
real antagonism between capital and labor.
- It is difficult for small farmers and homestead owners to get over
the idea that to put all taxes on the value of land would be unduly to
- It is difficult for both classes to get over the idea that to exempt
capital from taxation would be to make the rich richer, and the poor
These ideas spring from confused thought. But behind ignorance and prejudice
there is a powerful interest, which has hitherto dominated literature,
education, and opinion. A great wrong always dies hard, and the great wrong
which in every civilized country condemns the masses of men to poverty
and want, will not die without a bitter struggle. ... read the whole chapter
H.G. Brown: Significant
Paragraphs from Henry George's Progress & Poverty:
10. Effect of Remedy Upon Wealth Production (in the unabridged P&P: Part
IX — Effects of the Remedy: Chapter 1 — Of the effect upon the
production of wealth)
The elder Mirabeau, we are told, ranked the proposition of Quesnay, to substitute
one single tax on rent (the impôt unique) for all other taxes,
as a discovery equal in utility to the invention of writing or the substitution
of the use of money for barter.
To whosoever will think over the matter, this saying will appear an evidence
of penetration rather than of extravagance. The advantages which would be gained
by substituting for the numerous taxes by which the public revenues are now
raised, a single tax levied upon the value of land, will appear more and more
important the more they are considered.
- This is the secret which would transform the little village into the
- With all the burdens removed which now oppress industry and hamper exchange,
the production of wealth would go on with a rapidity now undreamed
- This, in its turn, would lead to an increase in the value of land — a
new surplus which society might take for general purposes.
- And released from the difficulties which attend the collection of revenue
in a way that begets corruption and renders legislation the tool of
special interests, society could assume functions which the increasing
of life makes it desirable to assume, but which the prospect of political
demoralization under the present system now leads thoughtful men to
*At the beginning of Book
IX of the complete Progress & Poverty, Henry George quotes from
Themistocles: "I cannot play upon any stringed instrument, but I
can tell you how of a little village to make a great and glorious city."
Consider the effect upon the production of wealth.
To abolish the taxation which, acting and reacting, now hampers every wheel
of exchange and presses upon every form of industry, would be like removing
an immense weight from a powerful spring. Imbued with fresh energy, production
would start into new life, and trade would receive a stimulus which would be
felt to the remotest arteries. The present method of taxation operates upon
exchange like artificial deserts and mountains;
- it costs more to get goods through a custom house than it does to carry
them around the world.
- It operates upon energy, and industry, and skill, and thrift, like a
fine upon those qualities.
- If I have worked harder and built myself a good house while you have
been contented to live in a hovel, the taxgatherer now comes annually to
me pay a penalty for my energy and industry, by taxing me more than
- If I have saved while you wasted, I am mulct, while you are exempt.
- If a man build a ship we make him pay for his temerity, as though he
had done an injury to the state;
- if a railroad be opened, down comes the tax collector upon it, as though
it were a public nuisance;
- if a manufactory be erected we levy upon it an annual sum which would
go far toward making a handsome profit.
- We say we want capital, but if any one accumulate it, or bring it among
us, we charge him for it as though we were giving him a privilege.
- We punish with a tax the man who covers barren fields with ripening
- we fine him who puts up machinery, and him who drains a swamp.
How heavily these taxes burden production only those realize who have attempted
to follow our system of taxation through its ramifications, for, as I have
before said, the heaviest part of taxation is that which falls in increased
To abolish these taxes would be to lift the whole enormous weight of taxation
from productive industry. The needle of the seamstress and the great manufactory;
the cart horse and the locomotive; the fishing boat and the steamship;
the farmer's plow and the merchant's stock, would be alike untaxed. All would
free to make or to save, to buy or to sell, unfined by taxes, unannoyed
by the taxgatherer. Instead of saying to the producer, as it does now, "The
more you add to the general wealth the more shall you be taxed!" the state
would say to the producer, "Be as industrious, as thrifty, as enterprising
as you choose, you shall have your full reward! You shall not be fined
for making two blades of grass grow where one grew before; you shall not
for adding to the aggregate wealth."
And will not the community gain by thus refusing to kill the goose that lays
the golden eggs; by thus refraining from muzzling the ox that treadeth out
the corn; by thus leaving to industry, and thrift, and skill, their natural
reward, full and unimpaired? For there is to the community also a natural reward.
The law of society is, each for all, as well as all for each. No one can keep
to himself the good he may do, any more than he can keep the bad. Every productive
enterprise, besides its return to those who undertake it, yields collateral
advantages to others. If a man plant a fruit tree, his gain is that he gathers
the fruit in its time and season. But in addition to his gain, there is a gain
to the whole community. Others than the owner are benefited by the increased
supply of fruit; the birds which it shelters fly far and wide; the rain which
it helps to attract falls not alone on his field; and, even to the eye which
rests upon it from a distance, it brings a sense of beauty. And so with everything
else. The building of a house, a factory, a ship, or a railroad, benefits others
besides those who get the direct profits.
... Well may the community leave to the individual producer all that prompts
him to exertion; well may it let the laborer have the full reward of his labor,
and the capitalist the full return of his capital. For the more that labor
and capital produce, the greater grows the common wealth in which all may share.
And in the value or rent of land is this general gain expressed in a definite
and concrete form. Here is a fund which the state may take while leaving to
labor and capital their full reward. With increased activity of production
this would commensurately increase.
And to shift the burden of taxation from production and exchange to the value
or rent of land would not merely be to give new stimulus to the production
of wealth; it would be to open new opportunities. For under this system no
one would care to hold land unless to use it, and land now withheld from use
would everywhere be thrown open to improvement.
The selling price of land would fall; land speculation would receive its death
blow; land monopolization would no longer pay.* Millions and millions of acres
from which settlers are now shut out by high prices would be abandoned by their
present owners or sold to settlers upon nominal terms. And this not merely
on the frontiers, but within what are now considered well settled districts.
* The fact that a tax on the rental value of land cannot
be shifted by landowners to tenants, though recognized by all competent
economists, is sometimes a stumbling block to persons untrained in economics.
The reason such a tax cannot be shifted is that it cannot limit the supply
of land. Landowners are presumably, before the tax is laid, charging all
the rent they can get. There is nothing in a tax on the rental value of
land to make tenants willing to pay more or to make land more difficult
to hire. On the contrary, more land will be on the market, because of such
a tax, rather than less, since the tax puts a heavy penalty on holding
land out of use and unimproved for mere speculation. The competition of
former vacant land speculators to get their land used will make land cheaper
to rent rather than more expensive. And since only the net rent remaining
after the tax is subtracted is capitalized into salable value, land will
be very much cheaper to buy. H.G.B.
And it must be remembered that this would apply, not merely to agricultural
land, but to all land. Mineral land would be thrown open to use, just as agricultural
land; and in the heart of a city no one could afford to keep land from its
most profitable use, or on the outskirts to demand more for it than the use
to which it could at the time be put would warrant. Everywhere that land had
attained a value, taxation, instead of operating, as now, as a fine upon improvement,
would operate to force improvement. Whoever planted an orchard, or sowed a
field, or built a house, or erected a manufactory, no matter how costly, would
have no more to pay in taxes than if he kept so much land idle.
- The monopolist of agricultural land would be taxed as much as though
his land were covered with houses and barns, with crops and with stock.
- The owner of a vacant city lot would have to pay as much for the privilege
of keeping other people off of it until he wanted to use it, as his
neighbor who has a fine house upon his lot.
- It would cost as much to keep a row of tumble-down shanties upon valuable
land as though it were covered with a grand hotel or a pile of great
warehouses filled with costly goods.
Thus, the bonus that wherever labor is most productive must now be paid before
labor can be exerted would disappear.
- The farmer would not have to pay out half his means, or mortgage his
labor for years, in order to obtain land to cultivate;
- the builder of a city homestead would not have to lay out as much for
a small lot as for the house he puts upon it*;
- the company that proposed to erect a manufactory would not have to expend
a great part of its capital for a site.
- And what would be paid from year to year to the state would be in lieu
of all the taxes now levied upon improvements, machinery, and stock.
*Many persons, and among them some professional economists,
have never succeeded in getting a thorough comprehension of this point.
Thus, the editor has heard the objection advanced that the greater
cheapness of land is no advantage to the poor man who is trying to
save enough from his earnings to buy a piece of land; for, it is said,
the higher taxes on the land after it is acquired, offset the lower
purchase price. What such objectors do not see is that even if the
lower price of land does no more than balance the higher tax on it,
(and this overlooks, for one thing, the discouragement to speculation
in land), the reduction or removal of other taxes is all clear gain.
It is easier to save in proportion as earnings and commodities are
relieved of taxation. It is easier to buy land, because its selling
price is lower, if the land is taxed. And although the land, after
its purchase, continues to be taxed, not only can this tax be fully
paid out of the annual interest on the saving in the purchase price,
but also there is to be reckoned the saving in taxes on buildings and
other improvements and in whatever other taxes are thus rendered unnecessary.
Consider the effect of such a change upon the labor market. Competition
would no longer be one-sided, as now. Instead of laborers competing with
for employment, and in their competition cutting down wages to the point
of bare subsistence, employers would everywhere be competing for laborers,
wages would rise to the fair earnings of labor. For into the labor market
would have entered the greatest of all competitors for the employment of
competitor whose demand cannot be satisfied until want is satisfied — the
demand of labor itself. The employers of labor would not have merely to
bid against other employers, all feeling the stimulus of greater trade
profits, but against the ability of laborers to become their own employers
upon the natural opportunities freely opened to them by the tax which prevented
With natural opportunities thus free to labor;
- with capital and improvements exempt from tax, and exchange released
from restrictions, the spectacle of willing men unable to turn their labor
the things they are suffering for would become impossible;
- the recurring paroxysms which paralyze industry would cease;
- every wheel of production would be set in motion;
- demand would keep pace with supply, and supply with demand;
- trade would increase in every direction, and wealth augment on every
hand. ... read the whole chapter
Henry George: The Land Question (1881)
There are other most important
respects in which this measure will
commend itself to the English mind. The tax upon land values or rent
is in all economic respects the most perfect of taxes. No political
economist will deny that it combines the maximum of certainty with
the minimum of loss and cost; that, unlike taxes upon capital or
exchange or improvement, it does not check production or enhance
prices or fall ultimately upon the consumer. And, in proposing to
abolish all other taxes in favor of this theoretically perfect tax,
the Land Reformers will have on their side the advantage of ideas
already current, while they can bring the argumentum ad hominem to bear on those who might never comprehend an abstract principle.
Englishmen of all classes have happily been educated up to a belief
in free trade, though a very large amount of revenue is still
collected from customs.
- Let the Land Reformers take advantage of
by proposing to carry out the doctrine of free trade to its fullest
extent. If a revenue tariff is better than a protective tariff, then
no tariff at all is better than a revenue tariff.
- Let them propose to
abolish the customs duties entirely, and to abolish as well harbor
dues and lighthouse dues and dock charges, and in their place to add
to the tax on rent, or the value of land exclusive of improvements
- Let them in the same way propose to get
rid of the excise, the
various license taxes, the tax upon buildings, the onerous and
unpopular income tax, etc., and to saddle all public expenses on the
This would bring home the land
question to thousands and thousands
who have never thought of it before; to thousands and thousands who
have heretofore looked upon the land question as something peculiarly
Irish, or something that related exclusively to agriculture and to
farmers, and have never seen how, in various direct and indirect
ways, they have to contribute to the immense sums received by the
landlords as rent. It would be putting the argument in a shape in
which even the most stupid could understand it. It would be directing
the appeal to a spot where even the unimaginative are
sensitive – the pocket. How long would a merchant or banker or
manufacturer or annuitant regard as dangerous and wicked an agitation
which proposed to take taxation off of him? Even the most prejudiced
can be relied on to listen with patience to an argument in favor of
making some one else pay what they now are paying. ... read the whole article
Henry George: Justice
the Object -- Taxation the Means (1890)
What would be the direct result?
Take this city, this State or
the whole country; abolish all taxes on the production of wealth; let
every man be free to plough, to sow, to build, in any way add to the
common stock without being fined one penny. Say to every man who
would improve, who would in any way add to the production of wealth:
Go ahead, go ahead; produce, accumulate all you please; add to the
common stock in any way you choose; you shall have it all; we shall
not fine or tax you one penny. What would be the result of abolishing
all these taxes that now depress industry; that now fall on labour;
that now lessen the profits of those who are adding to the general
wealth? Evidently to stimulate production; to increase wealth; to
bring new life into every vocation of industry.
On the other side what would be
the effect when abolishing all
these taxes that now fall on labour or the products of labour, if we
were to resort for public revenue to a tax upon land values; a tax
that would fall on the owner of a vacant lot just as heavily as upon
the man who has improved a lot by putting up a house; that would fall
on the speculator who is holding 160 acres of agricultural land idle,
waiting for a tenant or a purchaser, as heavily as it would fall upon
the farmer who had made the 160 acres bloom? Why, the result would be
everywhere that the dog in the manger would he checked; for the
result everywhere would he that the men who are holding natural
opportunities, not for use but simply for profit, by demanding a
price of those who must use them, would have either to use their land
or give way to somebody who would. Read the entire article
Henry George: The
Great Debate: Single Tax vs Social Democracy (1889)
Now if that were done, if the
land were let out, those using it
paying its premium value to the community, it would amount to
precisely the same thing if, instead of calling the payment rent, we
called it taxes. “A rose by any other name would smell as
sweet.” In an old country, however, there is a very great
advantage in calling the rent a tax. In an old country there is a
very great advantage in moving on that line. People are used to the
payment of taxes. They are not used to the formal ownership of land
by the community; and to the letting of it out in that way.
Therefore, as society is now constituted, and in our communities as
they now exist, we propose to move towards our ideal along the line
of taxation. (Hear, hear.)
If we were to take the rent of
land for the community, one of the
first and best uses which would be commended to us would be that of
abolishing of taxes that bear in any way upon production, or in any
way hamper industry, or in any way increase the price of those things
that people wish to use and can use without injury to others.
Therefore, as bringing in the idea of abolishing these taxes we call
our measure the Single Tax. (Hear, hear.)
We would abolish all taxation that
falls on industry, and raise
public revenue by this means, and move to our end, the taking of the
full rental value of land for the use of the community, in this way.
This name, Single Tax, expresses our method; not our ideal. What we
are really is liberty men; what we believe in is perfect freedom:
What we wish to do is to give each individual in the community the
liberty to exert his powers in any way he pleases, bounded only by
the equal liberty of others. (Applause.)
We would abolish all taxes, and
begin with the most important of
all monopolies, the fruitful parent of lesser monopolies, that
monopoly which disinherits men of their birthright; that monopoly
which puts m the hands of some that, element absolutely indispensable
to the use of all; and we believe not that labour is a poor weak
thing that must be coddled or protected by Government. We believe
that labour is the producer of all wealth – (applause) –
that all labour wants is a fair field and no favour, and, therefore,
as against the doctrines of restriction we raise the banner of
liberty and equal right in the gospel of free, fair play. (Loud
cheers.) ... Read the entire article
Henry George: The Crime of Poverty (1885 speech)
... Nature gives to labour, and to
labour alone; there must be human work before any article of wealth can
be produced; and in the natural state of things the man who toiled honestly
and well would be the rich man, and he who did not work would be poor.
We have so reversed the order of nature that we are accustomed to think
of the workingman as a poor man.
And if you trace it out I believe you will
see that the primary cause of this is that we compel those who work to pay
others for permission to do so. You may buy a coat, a horse, a house; there
you are paying the seller for labour exerted, for something that he has produced,
or that he has got from the man who did produce it; but when you pay a man
for land, what are you paying him for? You are paying for something that
no man has produced; you pay him for something that was here before man was,
or for a value that was created, not by him individually, but by the community
of which you are a part. What is the reason
that the land here, where we stand tonight, is worth more than it was twenty-five
years ago? What is the reason that land in the centre of New York, that once
could be bought by the mile for a jug of whiskey, is now worth so much that,
though you were to cover it with gold, you would not have its value? Is it
not because of the increase of population? Take away that population,
and where would the value of the land be? Look at it in any way you please. ...
Now, supposing we should abolish all other
taxes direct and indirect, substituting for them a tax upon land values,
what would be the effect?
- In the first place it would be to kill speculative values. It would
be to remove from the newer parts of the country the bulk of the taxation
and put it on the richer parts. It would be to exempt the pioneer from
taxation and make the larger cities pay more of it. It would be to relieve
energy and enterprise, capital and labour, from all those burdens that
now bear upon them. What a start that would give to production!
- In the second place we could, from the value of the land, not merely
pay all the present expenses of the government, but we could do infinitely
more. In the city of San Francisco James Lick left a few
blocks of ground to be used for public purposes there, and
the rent amounts to so much, that out of it will be built the largest telescope
in the world, large public baths and other public buildings, and various
costly works. If, instead of these few blocks, the whole value of
the land upon which the city is built had accrued to San Francisco what
could she not do? ... read the whole speech
Rev. A. C. Auchmuty: Gems from George, a
themed collection of
excerpts from the writings of Henry George (with links to sources)
THAT the masses now festering in the tenement houses of our cities, under
conditions which breed disease and death, and vice and crime, should each
family have its healthful home, set in its garden; that the working farmer
should be able to make a living with a daily average of two or three hours'
work, which more resembled healthy recreation than toil; that his home should
be replete with all the conveniences yet esteemed luxuries; that it should
be supplied with light and heat, and power if needed, and connected with
those of his neighbors by the telephone; that his family should be free to
libraries, and lectures, and scientific apparatus and instruction; that they
should be able to visit the theater, or concert, or opera, as often as they
cared to do so, and occasionally to make trips to other parts of the country
or to Europe; that, in short, not merely the successful man, the one in a
thousand, but the man of ordinary parts and ordinary foresight and prudence,
should enjoy all that advancing civilization can bring to elevate and expand
human life, seems, in the light of existing facts, as wild a dream as ever
entered the brain of hasheesh eater. Yet the powers already within the grasp
of man make it easily possible. — Social
Problems — Chapter 21: City and Country.
GIVE labor a free field and its full earnings; take for the benefit of the whole
community that fund which the growth of the community creates, and want and the
fear of want would be gone. The springs of production would be set free, and
the enormous increase of wealth would give the poorest ample comfort. Men would
no more worry about finding employment than they worry about finding air to breathe;
they need have no more care about physical necessities than do the lilies of
the field. The progress of science, the march of invention, the diffusion of
knowledge, would bring their benefits to all.
With this abolition of want and the fear of want, the admiration of riches would
decay, and men would seek the respect and approbation of their fellows in other
modes than by the acquisition and display of wealth. In this way there would
be brought to the management of public affairs and the administration of common
funds the skill, the attention, the fidelity and integrity, that can now only
be secured for private interests, and a railroad or gas works might be operated
on public account, not only more economically and efficiently than, as at present,
under joint stock management, but as economically and efficiently as would be
possible under a single ownership. The prize of the Olympian games, that called
forth the most strenuous exertions of all Greece, was but a wreath of wild olive;
for a bit of ribbon men have over and over again performed services no money
could have bought. — Progress & Poverty — Book
IX, Chapter 4— Effects of the Remedy: Of the Changes that Would be Wrought
in Social Organization and Social Life
... go to "Gems from George"
Louis Post: Outlines of Louis F. Post's
Lectures, with Illustrative Notes and Charts (1894) — Appendix:
Q48. Would you let money escape taxation, and so favor money lenders?
A. It is a curious fact that this question is most popular among people who clamor
for cheap money. How they expect to cheapen money by taxing its lenders on
their loans is past finding out. To tax money lenders is to discourage money
lending, and thereby to increase interest on loans. Yes, we should let money
escape taxation. It escapes taxation now, which in itself is a politic reason
for exempting it; but we should exempt it (by taxing nothing but land values)
for the additional and better reason that a man's money is his own and the
community has no right to it, while a man's land value is the community's and
the man has no right to it. This would not favor money lenders in any invidious
sense. It would favor both lenders and borrowers; borrowers by enabling them
to borrow on easier terms, and lenders by making their loans more secure. ... read
Charles B. Fillebrown: A Catechism
of Natural Taxation, from Principles of
Natural Taxation (1917)
Q19. Why should buildings and all other improvements and personal property
and capital be exempt from taxes?
A. Because a tax on them falls upon industry, and so increases the cost of
living, while continuing the invidious exemption of the present net land
Q20. Why should stocks and bonds be exempt?
A. Stocks, because they are only paper certificates of property which itself
has been taxed once already. Bonds, if legitimate, because a tax on borrowed
money is paid after all by the borrower and so becomes an added factor in cost
of production, and consequently in the cost of living.
Q41. Why would the single tax be an improvement upon present systems
A. Because: (1) The taking for public uses of that value which justly belongs
to the public is not a tax; (2) it would relieve all workers and capitalists
of those taxes by which they are now unjustly burdened, and (3) it would make
unprofitable the holding of land idle.
Q62. Would it be wise to take gradually in taxation, say, 1/4,
one half, or 3/4 of the future increase in economic
A. One hundred and one professors of political
economy have answered "Yes." Twenty-nine have answered "No."
Q63. How could the single tax be put into
A. By gradually transferring to land all taxes not
already on it.
Q64. How might such a plan be worked out?
A. If fifty cents per thousand should be deducted yearly for 30 years from the
rate on all property other than land, the reduction would finally amount to $15
per thousand, and it would then
be practically exempt from all taxation.
Q65. But how could it be worked out in case of
A. Recognizing that a right thing may be done in a wrong way, it is insisted
that a right way ought to be found to do a thing that ought to be done. The following
is presented as a natural
and convenient unit of calculation:
To be exact, an average of about 20 percent
of the gross ground rent of land is now taken in taxation, for instance, in Boston,
as well as for the whole state of Massachusetts. If an additional one percent
should be taken each year for 30 years, it would amount at the end of that period
to 30 percent, which, added to 20 percent, would make 50 percent, or one half,
which is about the average proportion that present taxes levied on all property
bear to gross ground rent. Meantime few landowners would feel the change, much
less be prejudiced by it.
The following variable illustrations, A, B, and C, make clear.
A "Modus Operandi"
A Increase of Present Tax
For instance, applied to the assessment of a specific lot of land for which
the user pays a gross ground rent of say ...... $68.00
Of which amount there is taken in taxation, 1915 ..... $18.00
Leaving a net income to the owner of .... $50.00
The selling value (presumably also the assessed valuation) would be at 5 per
cent ... $1,000.00
Proceeding to take yearly from now on 1 per cent additional of the gross ground
rent of $68 for a period of thirty years would amount in all to 30 per cent
of $68, equal to .... $20.40
Which, added to the tax already taken .... $18.00
Would give at the end of thirty years, from the $1,000 worth of land alone,
everything else being exempted, a total tax of .... $38.40.
Which is not much more than one half of the gross ground rent of ... $68.00
The opening exhibit in detail would stand as follows:
In 1915 the tax on this $1,000 worth of land was $18.00
In 1916 the tax would be $18 plus 68 cents (1 per cent of the gross ground
rent, $68); equal to .... $18.68
Reducing the owner's net rent from $50 to $49.32
In 1917 the tax would be $18 plus $1.36 (2 per cent of the $68), totaling ....
Reducing the owner's net rent from $50 to $48.64,
In 1918 the tax would be $18 plus $2.04 (3 per cent of the $68) or $20.45
Reducing the owner's net rent from $50 to $47.96
In 1945 the tax on the land would be $18 plus $20.40 (30 per cent of the $68)
or ... $38.40
With all improvements exempted.
Reducing the owner's net rent from $50 to $29.60.
The taking in taxation of any desired
proportion of the future increment could be accomplished simply by continuing
the present valuation and present rate as constant factors, and making a separate
individual assessment of the increment tax after the following or similar formula,
according to the proportion to be taken. For instance, to take in taxation
50 per cent of the future increase:
For a Future Increment Tax
||Tax for year 1916,
||Tax for year 1917,
||Tax for year 1918,
||Tax for year 1919,
||Tax for year 1920,
In applying this formula it would be necessary after the first few years at least
to increase the rate to correspond to the decrease in assessed valuation due
to this new tax. For computations upon
this and related points, see the Report of
the New York City Commission on New Sources of City Revenue (1913), p.
7 and Appendices X to XV.
It should be reiterated that inasmuchas gross ground rent, actual or potential,
is the initial factor in getting at the value of land, it cannot be unprofitable
to become familiar with a more correct formula
as expressed in terms of rent.
The Assessment of Rent
Starting with the present unit of annual value for use to take in taxation in
25 years 50 per cent of the future increase in ground rent:
||Tax for year 1916,
||Tax for year 1917,
||Tax for year 1918,
||Tax for year 1919,
|Tax for year 1920,
||Tax for year 1940,
... read the whole article
Charles T. Root — Not a Single Tax! (1925)
Now what is this net $20,000 a year, which will be regularly remitted to
Mr. Rhinelastor, in Europe or wherever he may be, given in payment for? Not
the old building — the first thing the lessee does is to pull it down.
Not for the land itself — it is all rock, which has got to be blasted
out as part of its improvement.
Clearly it is paid for a location or site value, which the community, and
the community only, has built up and paid for. In other words, the present
$20,000 rental, and the larger one which that location will command in later
years, is strictly a community product, and as such belongs to the community
and not to Mr. Rhinelastor.
That the latter has no good right to it is at once evident when we remember
that "When one man gets something for nothing somebody else has got to
give something for nothing." Here are $20,000 that some men and women
have got to work to earn every year to hand over to a man who does not
render, and does not feel any obligation to render, one dollar's worth
of public or
private service in return. Such is the wild travesty of justice which we
call law. It is not comical only because it is frankly tragic in its social
Now suppose this $20,000 and all the rest of this same community product — i.e.,
the site or location rent of its ground — were paid every year to
its rightful owner, the treasurer of New York City, what would become of
with its inseparable retinue, Fraud, Evasion, Perjury, Inequality, and
an all-pervading public sense of injustice?
An authority on municipal taxation estimates the present economic rent of
the land embraced in the City of New York at from $350,000,000 to $400,000,000.
Assuming the lesser of these figures and adding the receipts from licenses,
fees and fines, New York City should receive, of her own income, enough to
pay all her own legitimate bills, to make her proper contributions to county
and state and build a new subway or its equivalent every year. ... read the whole article
Mason Gaffney: George's Economics
of Abundance: Replacing dismal choices with practical resolutions and synergies
... Equity and efficiency
George refutes the commonplace idea that we must choose between equity
and efficiency. This idea is premised on identifying "equity" with
price and rent controls designed to help the poor against the rich;
counter-incentive progressive income taxation, with its warping,
suppressive effects. George
rejects both price controls and progressive income taxation, and identifies
a different tax policy that brings us both equity and efficiency together.
He would untax productive activity, and instead base taxes on land, in
proportion to its value. This combines the magic of justice with the magic of incentive.
George's land tax promotes equity toward the landless in at least four ways.
- One, it relieves them of taxes, to the extent that landowners pay more;
- Two, it makes jobs by removing all tax penalties from hiring workers,
and also because the land tax, a fixed charge, spurs landowners to use
earn cash to pay the taxes;
- Three, while jobs are generating new money incomes, new production supplies
more goods and services. Those give substance to the money incomes, precluding
inflation such as poisoned the springs of Keynesian "fiscal stimulus";
- Four, it offers the landless new chances to acquire land themselves,
as old owners release surplus lands to the market. ... read the whole article
Nic Tideman: Applications of Land
Value Taxation to Problems of
Environmental Protection, Congestion, Efficient Resource Use,
Population, and Economic Growth
Recognition of the equal rights of
all to natural opportunities,
through land value taxation and its extension to charges for the use
of other resources, is not only just and efficient, but has the
capacity to make a major contribution to economic growth. This occurs
through a variety of paths.
The most important path is that
public collection of the value of
exclusive use of natural opportunities provides revenue that makes it
possible to remove taxes from the earnings of labor and capital. When
people are taxed less, they earn more. Using data that emerged from
changes in U.S. tax rates, Feldstein has estimated that the
elasticity of earnings with respect to the fraction of income not
taken at the margin by federal taxes is at least 1.0 (and more for
workers in higher tax
the entity that
removes a tax on labor is less than global, this action also attract
labor to the region.
When taxes are removed from
capital, the effect is even more
powerful, as long as the entity removing the tax is less than global.
Capital is extremely mobile in response to regional changes in net
returns. It is highly counterproductive for any locality or nation to
tax capital, because there will be virtually no effect on the return
to capital after taxes. Capital will merely be driven from the taxed
region until the return after taxes matches what can be obtained
elsewhere. If the whole world removes taxes from capital, the
resulting increase in the rate of return to capital will increase the
rate of saving, but the adjustment will occur over some years.
Taxing land has an additional
effect that increases the stock of
capital. A tax on land represents a redistribution from living adults
to the young and unborn, who will now be born with rights to land.
Unless there is a perfectly offsetting reduction in the desire to
accumulate assets to transfer to the next generation, this
redistribution will induce the living, who now have fewer assets, to
accumulate at a more rapid rate than they would otherwise do. That
is, saving and capital accumulation will increase.
Taxing land also increases the
efficiency with which land is used.
This occurs through three paths.
- First, a tax on land reduces the return to land
speculation, and therefore reduces the quantity of land speculation.
- Second, as taxes on land are capitalized into the selling
price of land, the result is the substitution of a recurring cost (the
annual tax) for a one-time cost (the purchase price). This makes land
relatively more attractive to bidders with high discount rates and
relatively less attractive to bidders with low discount rates. To the
extent that the former are more entrepreneurial and the latter more
passive investors, land will tend to flow into the hands of persons who
will choose to use it more intensively.
- The third path by which a tax on land increases the
efficiency with which land is used is that, for those who are using
land inefficiently, it substitutes an explicit cost (the tax) for an
implicit one (the income foregone by inefficient use).
Psychologically, explicit costs
tend to be more effective in
motivating efficient behavior than implicit ones.
VIII. An Estimate
of the Magnitudes of the Consequences of Taxing Land
For all of the above reasons, the
substitution of tax on land for
taxes on labor and capital will increase the efficiency of an
economy. To estimate the magnitudes of these consequences, one needs
a model of the economy. Consider the following model. There is a
three-factor CES (constant elasticity of substitution) production
Q = (aTà + bLà +
where Q is output, T is the
quantity of land, L is the quantity of
labor, K is the quantity of capital, a, b and c are coefficients, and
à is related to the elasticity of substitution, å, by
à = 1 - 1/å. Land has a completely fixed supply. Labor
is assumed to have an elasticity of supply of 0.8 (adjusting
Feldstein's number for the fact that he was considering only federal
income taxes. Capital is assumed to be supplied perfectly
elastically. Taking the ratio of compensation of employees to Net
Domestic Product in National Income and Product Accounts, I assume
that labor receives two thirds of output. Somewhat arbitrarily, I
assume that the remaining third is divided equally between land and
capital. I estimate that the marginal tax rate on labor is 43% (28%
for the federal income tax, 12% for the combination of state income
taxes indirect taxes, and 3% for the Medicare tax--I treat social
security as having benefits equal to its costs, and therefore not a
tax.) I estimate the marginal tax rate on land and capital at 50%
(28% for the federal income tax, 12% for the combination of state
income taxes and indirect taxes, plus 10% for profits taxes). The
elasticity of substitution is a parameter that I am very unsure of.
But Feldstein has estimated that the marginal welfare cost of
taxation is 1.65, and I get that result with a å of 0.68, so I
assume that å = 0.68.
I have a spreadsheet that takes
parameters such as the ones
named and determines what would happen (in a comparative static
framework) if all taxes were removed from labor and capital, and 100%
of the rent of land were taxed. Here are the results:
- The quantity of
labor would increase by 55%.
- The quantity of capital would increase
- Output would increase by 53%.
- The wage before taxes would
fall by 1.7%, but the wage after taxes would increase by 72%.
rent of land would increase by 87%, and would provide more than
enough revenue for all existing expenditures of all levels of
government in the U.S., other than social security.
- The aggregate
improvement in well-being of citizens would be about 12.6% of output,
or about $1 trillion per year.
... Read the entire article
Mason Gaffney: Land Rent in a
Tax-free Society (Outline of remarks by Mason Gaffney, for
use at Moscow Congress,
Rent will become huger yet when you abate taxes
presently levied on production and exchange, because these now
depress the rent of land. That is, in a tax-free market
benefit of abating present taxes will lodge mainly in land rents. The
taxable surplus simply shifts from one form to another.
This is more than a simple shift
of a fixed amount. When you
substitute land revenues for existing taxes, the surplus actually
grows, as if by synergy. You gain more revenue base than you lose,
because existing taxes now suppress much latent production. Payroll
taxes directly drive workers from taxable jobs to untaxed gains from
crime. Abating those taxes will unleash suppressed economic giants,
along with all the new surplus values their latent production will
generate. "Monetarists" warn you that "there are no free lunches." In
fact, however, good policy creates lots of "free lunches." It makes
the whole greater than the sum of its parts. Imagine the benefits,
alone, of turning people from destructive careers in crime to useful
jobs producing goods.
At the same time, the effect of
socializing land revenues is
to stimulate better land use - the opposite of the effect of existing
taxes. Every landowner, to pay the required land charge, is pushed to
steer his land to the best use (just as paying interest steers
capital to its best use). Thus, the shift to rent-based revenues
doubly induces new production: it releases the brake of present
taxes, and replaces it with an added push to produce. This is
"supply-side economic policy" in the best and truest sense. It
generates yet more surplus. You may take all of rent to support
government functions, without damaging private market incentives, but
only sharpening them.
This policy lets us achieve and reconcile two policies that many now
believe are incompatible, viz.: free markets, and common rights in
land. It is a kind of miracle, yet simple to understand and implement.
Monetarist advisers would bind you in a dilemma: they claim you must
choose between private markets and common rights. In fact, you may have
both at once. Public revenue is simply the kind of socialization that
occurs in a market economy. Socialize the rent of land, and you
socialize the net benefits of owning land, even while privatizing the
management of land, and gaining the benefits of using free markets.
The combined effect of all this
stimulus would be a burst of
growth such as few economies have ever shown, except in wartime. We
learned in the U.S.A. in World War II the astounding effects of
simply taking the brakes off production. U.S. GNP doubled, 1941-43;
all willing workers were fully employed. This same miracle can occur
in Russia, 1996-98. The natural resources and human talent are here:
you only need the right incentive structure to turn labor from
idleness and crime to producing goods and services.
4. Some of the benefit of abating existing taxes will
lodge in higher after-tax wage rates, rather than higher rents. For
the present and near future, however, the supply of labor in Russia
is highly elastic because so many potential workers are now
unemployed, or underemployed, or occupied in crime. In this
condition, raising demand for labor will raise payrolls by raising
the number of good jobs, more than by raising wage rates. On balance,
therefore, this effect on jobs will create new rents, more than it
cuts into old ones. After Russia shall have achieved full employment,
wage rates may rise and cut into the surplus of land rents, but if
this should then create a new kind of problem (which I doubt), it is
more pleasant, and easier to solve, than those that afflict you
now. Read the whole article
Jeff Smith Share
Rent, Transform Society
If society decided to share
among its members all the
annual value of society's sites and resources and air space, what
If you were to choose the
Libertarian version, and rely
on fees and dividends, you get a geobonus, an added benefit. You
would quit distorting prices, you could pull government back in a
sense. Now taxes and subsidies at the margin can make
housing unaffordable to maintain, so the apartment owner lets his
apartment building become dilapidated and causes nearby owners to do
the same. He can breed a slum.
We subsidize water and make water cheap for farmers in
Arizona to irrigate their land, and we then have taxes to pay for
environmental absurdities. Shift to fees and dividends and have prices
precise and use the weight of the market to guide
our choices toward sustainability. If we had this price leveling, we
could get the market to work right. ...
It is not just collecting
ground rent but also untaxing
other systems. Untax labor and make it more affordable.
such as recycling and reforestation, weatherization, reconstruction,
and health enterprises are labor
intensive and made more expensive artificially by taxing labor. We
subsidize business: free roads for the timber industry, cheap water
for agribusiness. Stop those subsidies and recycling could
On a level field, recycling would roll over extraction
of virgin material. We could spare forests and salmon and have a
healthier eco system. Look at restoration. Money has to come from the
public treasury but we could look at it as public
investment. Pay for restoration and land values increase, so land
dividends would increase. Direct investment benefits the entire
Now the public is paying for
private parties. That is
not fair. Look at the economy. Take taxes off homes, and they
more affordable. Have some kind of land charge, and housing stock
increases as sites get developed. Affordable
housing helps stabilize neighborhoods. In places that do have the
land tax, i.e., Australia and New Zealand, they have fewer
disputes with assessment. Assessors say their job is so much
easier now. If land is less profitable and less of a political
football, it is less tense in local politics.
- If you take taxes off
labor and capital, more investment
flows into jobs, and we would have close to full employment, so labor
could demand full market value for services. We could double the income of the
average worker with no loss in
standard of living.
- If fewer demands are placed on government by
citizens, it doesn't have to borrow so much.
- If you reduce the amount of tax on the economy, and reduce
the amount of
redeemable notes, then we should be able to eliminate inflation. It
is unmasked. You can see lower prices; the cost of living goes down. It
will change social relationships.
- Labor and
capital make up, with higher wages for labor, lower taxes for
capital, and more investment funds.
- Labor can negotiate from a
position of strength.
- Capital might want to share management
decisions and spread that risk of liability to workers. It tends to
reduce hierarchy and increase equality in society.
What other social relations
might change? Increase land
ownership participation in community and it benefits community, with
town hall meetings and block parties. ... Read the whole article
Jeff Smith: How Sharing Earth Brought Peace
New Yorkers benefited before
from geonomics. After World War I,
the city lacked housing. Borrowing a page from former mayoral
candidate Henry George, the council exempted new buildings but not
underlying sites from taxation for the next ten years. During the
first half of the Roaring 20s, new construction more than tripled
while in other big cities it barely doubled. Economic good times came
to an end when owners in 1928 began to anticipate the expiration of
the exemption. Stalled housing starts helped trigger the Great
More recently, Mayor Rudy
Giuliani used to welcome the school year
by suspending for a week the tax on
shoes and clothes. Shoppers
saved, stores profited, and the city took in more revenue. If the
city zeroed out taxes on all sales and wages, customers and workers
would flock to the Big Apple, pumping up site values even higher,
providing a fat fund for fixing up infrastructure. That'd help
redevelop both lower Manhattan and the blocks of vacant lots and
abandoned buildings in the Bronx and Bedford-Stuyvesant. Read the whole article
see also Michael Hudson and Kris Feder: Real
Estate and the Capital
which explores the extent to which land gains are transformed for tax
purposes into "capital" gains, and are largely untaxed.
Dan Sullivan: Are you a Real
Libertarian, or a ROYAL Libertarian?
Much of the government spending
to which libertarians strenuously
object is made necessary by its taxing productivity instead of land
The property tax falls mostly on
improvements, so less housing is
built, giving the government an excuse to build public housing.
Profits are taxed, leading to less employment and giving government
an excuse to spend money on economic stimulus projects. Family income
is taxed to the point that they have difficulty buying a house or
sending their children to college, so government institutes
subsidized mortgages and student loans.
Even the indirect effects are
substantial. Land speculations gone
sour chew up inner cities, so poor people turn to crime (if drug
selling and prostitution be crimes) and the government gets an excuse
to beef up the police state.
Politically connected real estate
interests see that they can buy
up land in the boondocks for a pittance and then get other taxpayers
to build them a superhighway, increasing the value of their holdings
by orders of magnitude. With land value tax they would have
ultimately paid for their own highway or more likely would not have
had it built in the first place.
Even welfare increases do not stay
in the hands of welfare
recipients, but are quickly greeted by higher rent demands from
ghetto landlords. (The War on Poverty did little to end poverty, but
it did a lot to enrich absentee owners of poor communities.)
All goes back to the
land, and the land owner is enabled
to absorb to himself a share of almost every public and every private
benefit, however important or however pitiful those benefits may be.
the whole piece
Ted Gwartney: A Free
Market Strategy to Reduce Sprawl
- Unused land is far more abundant than we realize.
- End the Public Subsidy of Land Speculation and Sprawl
- Counterproductive growth limitations and regulations
should be abolished.
- A Strategy for Urban Renewal
- A Strategy for Economic Development
- Public Finance by Self-Financing
A Strategy for
Economic theory recognizes that
when government places taxes on
production and on commerce the net result is a reduction in those
activities. The reason this occurs is that these taxes add to the
cost of production and to the cost of doing business. The ideal
public policy would be to reduce taxes on production and commerce and
raise public revenue from non-distorting revenue sources.
That non-distorting revenue source
is land and natural resources.
The central problem which limits the operational success of the
economy is the failure to procure the public value which is created
by the community.
This value ought to be reserved
for the community to pay for
public improvements. However, this value is to a large extent
diverted into private pockets by speculation in land and natural
resource values. The correct approach is to create a system in which
no-one, except the citizenry as a whole, is rewarded by the
collection of publicly created values.
Economists can agree that the
economically efficient public
finance system is one in which revenue is drawn from the rent that
people pay for the use of land and natural resources. These payments
do not distort economic activity. Land rent, because it is pure
surplus, could be taken and used for any purpose and there would be
no negative consequences for the allocation of labor and capital, or
in the use of land and natural resources. If this surplus is invested
in needed infrastructure and other public services, it will in turn
increase land values for future public investment.... Read the
Frank Stilwell and Kirrily Jordan: The
Political Economy of Land: Putting Henry George in His Place
One might expect such arguments to have led to the advocacy of land nationalisation.
But George thought this unnecessary because a tax on land could be effective
in capturing the economic surplus arising from land ownership. This tax would
generate all the revenue necessary to fund public expenditures. George thought
that such a land tax would permit the removal of other taxes on labour and
capital, which he regarded as inherently inefficient. He argued that taxes
on incomes, sales, and payrolls, for example, acted as disincentives to production
and active endeavour, thereby stifling economic growth and creating a barrier
to full employment. A land tax, by contrast, would be both economically efficient
and more equitable in its distributional effects.
George’s advocacy of replacing all existing taxes with a single tax
on land values was powerful. He argued that this tax would redistribute the
wealth that would otherwise accrue to private landowners, forcing them to
repay the community for their exclusive use of a public resource. Moreover,
such redistribution would reduce wealth inequalities and allow massive improvements
in welfare provisions and public services. In addition, removing taxes on
labour and capital would boost economic growth and provide a stimulus to
employment. Conversely, taxing land values would reduce speculation in land
and depress land prices, allowing greater access to landownership while reducing
economic instability. ... read the whole article
Nic Tideman: Land Taxation and Efficient
Effects of Taxing Land
One consequence of levying additional taxes on land is that it becomes possible
to lower taxes on other things. One of the things most likely to be taxed less
when land is taxed more is improvements. Lowering taxes on improvements makes
the present value of land development very much less costly, and hence is likely
to accelerate development although it would be possible to construct cases
in which the effect of lowering taxes on improvements would be to postpone
development. Whether it retards or accelerates development, the lowering of
taxes on improvements results in more intensive development when development
occurs. The possibility of promoting more intensive development by reducing
or eliminating taxes on improvements is an important beneficial effect of an
increase in taxes on land.
A second consequence of levying additional taxes on land is that it becomes
possible to price public services more efficiently. Services to land such
as sewers, water and electricity are used most effectively when they are
at marginal cost. The costs of these services, however, are generally such
that the sum of marginal costs will not cover total costs. Land taxes have
the potential to provide a fund to cover the difference between total costs
and the sum of marginal costs. If land taxes are so used, the reductions
in the costs of using services that complement development will promote more
development. ... read the whole article
Judge Samuel Seabury: An Address delivered
upon the 100th anniversary of the birth of Henry George
WE are met to celebrate the 100th anniversary of the birth of Henry George.
We meet, therefore, in a spirit of joy and thanksgiving for the great life
which he devoted to the service of humanity. To very few of the children of
men is it given to act the part of a great teacher who makes an outstanding
contribution toward revealing the basic principles to which human society must
adhere if it is to walk in the way which leads to freedom. This Henry George
did, and in so doing he expressed himself with a clarity of thought and diction
which has rarely been surpassed. ... read the whole speech
Fred E. Foldvary — The
Ultimate Tax Reform:
Public Revenue from Land Rent
Reformers who want to impose a national retail sales tax are well aware of
the substantial impact taxes have on human behavior. That, indeed, is often
why such reforms are proposed: The reformer wishes to discourage borrowing,
reduce consumption, or encourage savings, for example. But moving to a national
retail sales tax results in little improvement.
Most people use their wage income to pay for goods and services and sales
taxes. Switching from an income to a sales tax is like taxing you when you
leave a room instead of when you enter the room.
Income taxes punish savings, but sales taxes punish borrowing. If you borrow
$10,000 to buy a car and there is a 20 percent sales tax, you need to borrow
an extra $2,000 to pay the tax. Some folks might decide to not buy the car,
spending the $10,000 on something else, without borrowing $2,000.
There is no good economic reason to tax-punish consumption or borrowing. The
purpose of production is consumption! If we punish consumption, we punish production.
Consumption is not an evil to be thwarted, but the very benefit we get from
the economy. We may as well also tax fun and joy! Those seeking to tax consumption
act as though they have a Puritan streak that considers enjoying goods to be
evil and working and saving to be good for their own sake. ...
Those suggesting positive consequences of shifting taxation to rent have
been accused of exaggerating its beneficial effects.33 Freedom from punitive
is not a panacea, but the infliction of arbitrary costs on enterprise and
the skewing of market signals such as prices and profits is indeed a universal
and major cause of economic woes. It is not an exaggeration to propose
removing these would have many beneficial results, just as one’s
health improves considerably if one stops taking poison. ...
An ideal public revenue policy respects a person’s right to privacy,
does not discourage work or savings, and does not induce dishonesty. While
income, sales, and value-added taxes fall woefully short of this ideal, land
value taxation meets each requirement.
Imagine the increased prosperity and opportunities for advancement that
would exist if people could keep all of the money they earn; if billions
wasted on efforts to avoid high income taxes were suddenly turned to productive
endeavors; and if the growth of government were constrained by a tax system
that would raise only enough to pay for services actually provided. ...
The shift from taxing productive human action to collecting the economic
rent generated by nature and communities is more than a fiscal reform. There
is a philosophical and even spiritual side to this reform.
One of the ongoing problems of social philosophy is the relationship of
the individual to society. In conventional tax policy, there is an inherent
conflict between the individual and government as the agent of society. Individuals
want to benefit from the collective services provided by government, but
the mechanisms for financing those services typically have used force against
individuals and invaded their private lives. ... read
the whole document