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 values.

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 tax them.
• 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 poorer.

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 great city.*
• With all the burdens removed which now oppress industry and hamper exchange, the production of wealth would go on with a rapidity now undreamed of.
• 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 complexity of life makes it desirable to assume, but which the prospect of political demoralization under the present system now leads thoughtful men to shrink from.

  *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 make me pay a penalty for my energy and industry, by taxing me more than you.
• 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 grain,
• 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 prices.

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 be 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 be taxed 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. H.G.B.

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 each other for employment, and in their competition cutting down wages to the point of bare subsistence, employers would everywhere be competing for laborers, and 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 labor, a 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 and increased 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 monopolization.

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 into 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

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

Q6. If a land-owner builds, does not that increase the value of his land and consequently the amount of the tax he would have to pay? If so, would not he be taxed for his improvement?
A. No. Upon the value of the building he would never pay any tax. It is true that his improvement might attract others to the locality in such numbers as to make land there scarcer and consequently dearer. His own lot would in that case rise in value with the other land and be taxed more, just as the rest would be. But that would not take any of his labor in taxes; he would still have his building free of taxation. Thus: If on a lot worth $1000 a building worth $1000 were erected, making the whole worth $2000, the tax would fall only upon the $1000 which represents the value of the lot. If land then became so scarce that the lot rose in value to $1500 the tax would be raised. But the owner's improvement would be still exempt. When his property was worth $2000 he was taxed on $1000, the value of the lot, leaving $1000, the value of the building, free; and now, though he is taxed on $1500, the value of the lot, $1000, the value of the building, is still free.

Q20. Would not the single tax increase the rent of houses?
A. No. It takes taxes off buildings and materials, thus making it cheaper to build houses. How can house rent go up as the cost of building houses goes down? Read pp. 5 to 8 and the related notes. ... read the book

Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)

Q55. How would the single tax effect the tenant?
A. It would neither increase nor decrease his land rent. It would reduce his house rent by the amount of the house tax. ... read the whole article

Ted Gwartney:  Estimating Land Values

The collection of land rent, by the public for supplying public needs, returns the advantage an individual receives from the exclusive use of a land site to the balance of the community, who along with nature, contributed to its value and allow its exclusive use. ...

Adam Smith, in The Wealth of Nations, suggested that any "tax" should be a charge for services which benefit all people and are more efficiently performed by a single cooperative effort. He postulated four principles of taxation which any source of revenue should meet:

1. Light on the production of wealth, and does not impede or reduce production;
2. Cheap to collect, requiring few collectors, and easy to understand;
3. Certain; can't be avoided, little opportunity for corruption, and provides adequate revenue;
4. Equitable and fair, payment for benefits received, impartial, and just.

Collecting public revenue from land rent is the only revenue source, or "tax", that meets these criteria.

While the major argument for raising public revenue from land rent and natural resources is because it is equitable and fair, it is also the most efficient method of raising the revenue which is needed for public facilities and services. Land is visible, can't be hidden and its valuation is less intrusive than valuations of income and sales. Taxes on labor and capital cause people to consider alternative options, including working with less effort, which produces less real goods. For example, a tax on wages will reduce after-tax net wages and weaken the incentive to work. A person might be willing to work hard for a wage of $20 per hour, but decide to drop out if the taxes take $8 and the net wage is only $12 per hour. Economists claim that present taxes account for a 25% loss in production in the United States. Production and consumption would be greatly improved if public revenue came primarily from land rather than a wage tax. The same would occur when buildings and machinery are taxed. The tax on building reduces the quantity and quality of buildings produced. A tax on sales, commerce or value added reduces consumption, production and net wealth. Sales tax evasion in the United States has exceeded 30% in recent years.

As new inventions and more efficient ways of producing goods are discovered, people's economic well-being is not improved, because they have lost access to land and must pay both rent and taxes. (5) Instead of rent being used to provide community services, capital and wages must be depleted, which obstructs private enterprise.

Cities which choose to collect land rent as their primary source of revenue have the advantage of not requiring burdensome taxes to be paid by workers, businesspeople, entrepreneurs or citizens. Individuals who work to create wealth should be allowed to keep what they produce. When labor is not taxed, greater production and consumption occurs. Investment capital is formed which is used to produce more wealth. New jobs are created and economic diversity results.... Read the whole article

Land comprises all natural resources, not just ‘terra firma.’ It is the universe minus man’s products. Even the simplest of human activities, sleep, requires each of us to occupy exclusively a space, a location, preferably a bed in a home of our own. But that word ‘own’ conjures emotions and political postures. ...

The Nobel-winning economist William Vickrey said that the property tax is actually two different taxes (Vickrey 1991). That is because buildings are capital, not land, in the economic sense – even if, in most legal codes, there is no distinction between land and improvements made to it which are all lumped together as ‘landed property’ or real estate. Buildings and other improvements to land all depreciate over time unless further capital is expended. Eventually the market value of such improvements may become negative, owing to the costs that would need to be incurred by someone wishing to redevelop the site for an alternative use. But that does not necessarily take away the rental value of the site.

Much urban blight is caused by these so-called ‘brown field’ vacant and under-used sites. However they are often in valuable locations, with good transport connections. It may be that owners are speculating that land prices will rise and enable them to sell at greater profit in the future than now, or it may be that there is genuinely no market for sites in a particular location unless the cost of remediation is subsidised as a form of public investment. Such investment, according to Vickrey and other followers of Henry George, can be entirely funded from LVT. In a lecture given in 1991, first published last year, Vickrey claimed:

“Cities have the capacity to be fully self-financing without dependence on either federal assistance or on general taxes that are unrelated to benefits received.”

The proviso, according to Vickrey, is to replace the tax on buildings with a tax on land value alone – LVT:-

“The property tax combines one of the best and one of the worst taxes we have. The portion that falls on sites or land values is the only major tax that is reasonably free of distortionary effects and is not intolerably regressive”.

Taxing buildings and work done to improve them discourages such work. Un-taxing them and taxing land more highly, irrespective of its actual state of development but based upon its highest and best immediate potential use, will encourage owners to maintain their sites and buildings in such a way as to maximise their income. A remote site or one with conservation or other restrictions will have a low site value, hence attract low taxes, whereas a high value city centre derelict site will very soon be redeveloped. The extra property tax revenue from extending the tax base to sites that are currently under-taxed (because the tax is based primarily on building/rental value not site/owner value), ensures public infrastructure projects can be funded without resource to general taxes or excessive borrowing on the financial markets. ... Read the whole article

... Untaxing buildings obviously draws in outside capital, which is good locally, but is not capital formation to the whole economy. In Keynesian models, higher income leads to higher saving, and does create new capital. Supply-siders today worry more about raising the rate of saving from any given income. In supply-side models it is more important to increase the rate of saving, without depending entirely on the Keynesian effect, where higher income raises saving. Also, from the nationalist viewpoint, it is better to supply investable funds from domestic savings, to minimize foreign ownership.

Land taxation helps here, too. Land taxation, if heavy enough to count, lowers the investment value of land, through "tax capitalization". There is a diminishing marginal utility of savings to any wealth-holder, meaning the more you have, the less you need more. With land devalued, those needing wealth seek substitute assets to replace land in their portfolios. To acquire those additional assets they must save more, and invest the savings in real new capital, rather than land.

Thus, Georgist taxation meets the proper goals of supply-side economics: raising output, and raising saving. It reconciles supply-side economics with taxation by providing a mode of taxation that stimulates instead of dragging down production and employment. 10... read the whole article

Nor will Georgist taxes leave owners sulking on their land, but the contrary. A 1983 Fortune magazine article calls them "Higher Taxes that Promote Development." The fixed tax is levied on land value, based on opportunity cost. The owner uses land harder and improves it more to meet a fixed tax; or sells, releasing surplus land to those needing more space. Taxes stifle enterprise only if they increase with enterprise. Land tax increases only with opportunity cost, which is independent of the enterprise of the owner. The only activity this tax impairs is withholding land from use.

George's land tax promotes equity toward the landless in at least four ways:

• it relieves them of taxes, to the extent that landowners pay more;
• it supplies them with more goods and services, as land is used better;
• it offers them jobs producing those goods and services; and
• it offers them a better chance to acquire land, as surpluses are released to the market.

It is an achievement on a par with resolving Evolution and Creation, except George's program is something we can do something about. We can implement it as quickly as we unclog the cerebral arteries and follow thought with action.

Many people are comforted to think justice must be sacrificed for efficiency, and schools starved or libraries closed to free up incentives, so nothing, really, can ever be done. We all feel compassion, but, to stay whole in this world of beggars and bandits, learn to harden our hearts. We screen out evidence of injustice and rationalize what we cannot deny. This mindset, while understandable, is unaffordable in a period of dangerous national decline and of growing division between haves and have-nots. Corking in feelings is difficult; there is satisfaction in venting compassion via support of constructive public policies.

Camden has the highest tax rate in New Jersey, causing a vicious circle as high rates drive away capital and further erode the tax base. What if only land value were taxed? The depressant would become a stimulant by the simple magic of converting a variable charge into a fixed, unavoidable one. So it is with most depressed cities, which today look vainly to Washington for salvation. They need enabling legislation from their states, on the Pennsylvania model, but given this power can save themselves.  ... read the whole article

•  The average house (ex land) in the posh UEL jurisdiction is worth 2.8 times the average in the Victoria Rural jurisdiction ($173.1/$61.9).
• The average land parcel (ex building) in the UEL is worth 17.5 times the average in the Victoria Rural jurisdiction ($692.5/$39.6).

An American counterpart of Vancouver's "University Endowment Lands" is Beverly Hills, California, where land value composes some 80% of residential values, and the mean parcel is worth something like a million dollars. Beverly Hills, with its great wealth and mansions, is known as "Tear-down City." Every year many a grand old palace that once sheltered some renowned matinee idol, and rang to scandalous parties, is torn down to salvage its site for the next, grander one. In a land boom, such as crested in 1989, half the city goes to the brink of demolition and replacement.

 What do those data tell us? The rich as a rule do not live next to the poor. Rather, they cluster in neighborhoods with much higher lot values. The poor seek shelter first, and go where it is affordable. The rich put a high premium on location, neighborhood, views, and grounds, resulting in higher land fractions in their real estate. Mansions are visible evidences of wealth, impressing viewers powerfully; land values are invisible. The perceptual bias is to underrate the invisible, if you are not regularly in the real estate market. In the numbers, however, land and buildings are equally visible, and their message is clear. It is land value more than house value that divides the rich from the poor. Ergo, a tax shift from buildings to land is a shift from the poor to the rich, even though the houses of the rich are exempted. It makes the property tax more progressive. ...

 They may be "land-poor:" a few folks always are. They have non-cash assets, but are illiquid. "Illiquid" may be just a euphemism for "holding out for more" -- there is always a market at a price. Even so their plight, genuine or affected, traditionally evokes sympathy and support. We must address it.

 California, although backward in many ways, has addressed it effectively. In our special improvement districts (SIDs), State law allows the SID to contract with the landowner as follows. You don't have to pay your annual charge in cash. If you choose not to, we take an equity in your property, charging a modest rate of interest. Our equity accumulates over time. When you die, we sell the property and take our share; your estate gets the rest. Should our equity reach 100% during your lifetime, you stay there for the duration, tax free.

 Objectively, it looks like a good deal for the taxpayer. They can't come out behind, even if they die soon; if they live long, they come out ahead. The instructive result is that very few people take this apparently advantageous option. UCLA's Donald Shoup has published several works on the program. One way or another, they manage to pay on time. Perhaps it attracts the attention of potential heirs, in a compelling way, but somehow the cash comes forth. While intending only to relieve distress, the program seems to have called a great bluff. The lachrymose plea of the cash-poor widow is unanswerable in debate, without appearing callous, doctrinaire, and jackbooted. Meantime wealthy interests, thoroughly undistressed, hide behind the widow's skirt and get their way. ...

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

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

• 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

It was estimated that the BART transportation system in San Francisco produced two times more land value than it cost to build. The public recaptured only a small part of the cost from benefits provided by land taxes and user fees. Most of the cost came from external sources, unrelated sales and income taxes. Most of the profits went into only a few pockets.

Thus, the claim that a community is short of capital is misleading. In fact, a community could become self-sufficient in the supply of capital from internal sources. But a precondition for this is the reduction of taxes on productive capital and labor. Examine, for example, what would happen as a result of the elimination of taxation of buildings. This decision, not to penalize people who invest their savings in new buildings, leads to the stimulation of a higher level of national income, higher saving, and the creation of new capital. According to the study made by Tideman and Plassmann (1998, The Losses of Nations, Fred Harrison, editor, Orthila Press), shifting taxes off buildings, production and distribution, and onto land and natural resources, could increase the gross national product by 25%, or one trillion 1998 dollars ($1,000,000,000,000). ...  Read the whole article

Mason Gaffney: The Taxable Surplus of Land: Measuring, Guarding and Gathering It

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 brackets).6 When 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. ... read the whole article

Bill Batt: The Fallacy of the "Three-Legged Stool" Metaphor

Tax experts, especially at the state level, ply their trade by invoking one metaphor above all others: the three-legged stool.  It rests on the claim that a sound and successful tax regime for any government needs to rely on a three tax bases: income, property and sales.  This is repeated so often that it passes today without much examination. ...

The power with which the three-legged stool analogy has underpinned tax policy is in fact rather disconcerting, because a close examination of its premises shows that they are very questionable.  These benchmark measures of a tax regime are scrutinized here in order to cast doubt on the claims so often made on their behalf. ...

If one realizes that houses, just like cars, refrigerators, computers and other manufactured items, depreciate in value and that only Land increases in market value due to the factors of inflation and rent accretion, it will become clear that the remedy for onerous real estate taxes is downtaxing buildings and uptaxing Land.  The result of doing so will stabilize tax burdens for those who otherwise resent their payment.  In the unusual cases, especially during transitions, when titleholders of limited income cannot manage such obligations, taxes can easily be deferred until owners "cash out" by selling or dying when such debts can be settled.  Sales of appreciated land typically provide estates with adequate wherewithal to both pay any back taxes and give a capital gain too.  And because business tenants continue to pay the going market rate for office space, they too are in no way burdened by any tax shifts.

The upshot is that a tax on Land value alone -- totally neutral, efficient, certain, progressive, stable, and administrable -- measures up so well that it looks like the perfect tax!  It is even argued that a land tax is "better than neutral," in that it actually fosters the kind of economic activity that fosters vibrant communities. ...

In the final analysis, studies show that very few states measure up to the one-third -- one third -- one-third standard in any case.  Political and other factors aside, there are good reasons for a state's not abiding by such rules.  It is only due to misunderstandings that faith in the big three taxes constituting the three-legged stool have come to prevail.   When these taxes are measured by their conformity with the conventionally accepted principles of sound tax theory, they appear wanting.  By shifting to the collection of economic rent, manifest mainly in the form of land value taxation, governments will better succeed not only in overcoming the prevailing resentment against current taxation policies but provide better financial support for those services which are the rightful province of public obligation. ... read the whole article

Charles T. Root — Not a Single Tax! (1925)

Briefly defined the land value or economic rent of any piece of ground is the largest annual amount voluntarily offered for the exclusive use of that ground, or of an equivalent parcel, independent of improvements thereon. Every holder or user of land pays economic rent, but he now pays most of it to the wrong party. The aggregate economic rent of the territory occupied by any political unit is, as has been stated above, always sufficient, usually more than sufficient, for the legitimate expenses of the government of that unit. As also stated above, the economic rent belongs to the community, and not to individual landowners.

On the other hand, the result of every utilization or enhancement of the natural advantages of land (such as farm profits, the rent and selling value of buildings and other improvements), when accomplished by an individual, belongs wholly to that individual, and should never, and need never, be taken from him by taxation. ...

But again the voice of the objector is heard, possibly to this effect: "This plan may be all right for the community, but how about poor Mr. Rhinelastor?"

In reality the landowner would not suffer so much from the restoration of the public revenue as might at first appear. For one thing, whereas he is now taxed, at least in theory, not only on land, but on buildings, cash, bonds, and all other personal property, and perhaps on his income as well, he would then have no taxes at all to pay. Furthermore the economic rent is not the full measure of the possible earning capacity of the land, but will always be less than the offerer expects to make out of its use.

Again, while it must be firmly insisted that the economic rent is the rightful property of the community and not of the landowner, the community would probably never take it all. Communal ownership of land is not desirable, even if it were practicable. Individual ownership and management are best, and it is not at all improper for the community to allow the owner something for caring for the land to which he holds title, and for collecting and transmitting to the treasury the economic rent.

But — and right here is one of the prime advantages of the abolition of taxation — Mr. Rhinelastor, in order to get satisfactory return from his land, must improve it. Unless he is satisfied with a small income from it, to wit, the proportion of the economic rent which the community chooses to leave in his hands, he must put upon his land the best building the location will warrant. The rents of this building will be his in their entirety, not one dollar of them being taken from him by taxation. If he is not prepared or not willing to do this he would probably find it more profitable, before he leaves the country, to sell the land to some one of the many persons who are eager to build upon it. It will always be salable, although not by any means at present figures.

Now imagine for a moment the effect upon the appearance of a city and upon the comfort of its population which would result from the change of fiscal policy which this article proposes. At present, a tempting premium is placed upon keeping land unimproved or inadequately improved, while a heavy penalty is imposed upon improvement. Most land appreciates constantly. All buildings depreciate from the moment of completion. Yet the building is taxed equally with the land.

What incentive does such a system offer the speculative landowner to put up a commodious, well-lighted modern structure in place of the old ruin which now pays him so well? The old one cannot depreciate much more, and while paying a trifling tax because of its physical worthlessness, he is thereby enabled to collect and pocket the economic rent of the ground, which the community is continually rendering more valuable. The new building would absorb a large amount of capital, would begin to run down even before it could be occupied, and would be taxed to the limit. Why then is not the landlord justified in letting well enough alone, enjoying the growing economic rent, and waiting till he can get a fancy price for the right to collect it?

But reverse the conditions. Reclaim for the community its natural income, making it expensive either to keep needed land vacant or to withhold it from the ready and willing to improve it to the full extent of its possibilities.

Does it require severe intellectual effort to foresee the results? Better and better houses, apartments, tenements, offices and stores, more employment for labor in all enterprises now held back by the shadow of the tax-gatherer, an end of all tax-lying, tax-evasion and tax-injustice, and withal, a public revenue adequate to all real public needs.

What a contrast to the existing plan of pouring public money into the laps of individual landowners ... read the whole article