Why should we tax labor? Why would we tax labor at
a higher rate than we tax rent? Why should we tax labor
at all until we have completely taxed the rental value of land and natural
These are important questions if we are trying to create
shared prosperity and economic justice. But if these ideas are new
to you, you may need to spend some time getting to understand what rent
is. Rent matters a lot!
Louis Post: Outlines of Louis F. Post's
Lectures, with Illustrative Notes and Charts (1894) — Appendix:
Q2. Would the single tax yield revenue sufficient for all kinds of government?
A. Thomas G. Shearman, Esq., of New York, estimates that sixty-five per
cent of the rent that the land in the United States now yields actually
and potentially to its owners, would be sufficient. But whether it
would or not is as yet an unimportant question. If all revenues ought
to be raised from land values, then no revenues should be drawn from
other sources while any land value remains in private possession. Until
land values are exhausted the taxation of labor cannot be excused. ... read the book
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 Condition of
Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)
Your Holiness will see from the explanation I have given that the reform
we propose, like all true reforms, has both an ethical and an economic side.
By ignoring the ethical side, and pushing our proposal merely as a reform
of taxation, we could avoid the objections that arise from confounding ownership
with possession and attributing to private property in land that security
of use and improvement that can be had even better without it. All that we
seek practically is the legal abolition, as fast as possible, of taxes on
the products and processes of labor, and the consequent concentration of
taxation on land values irrespective of improvements. To put our proposals
in this way would be to urge them merely as a matter of wise public expediency.
... read the whole letter
Charles B. Fillebrown: A Catechism
of Natural Taxation, from Principles of
Natural Taxation (1917)
Q48. But would it not be an injustice to the landowner?
A. If it be an injustice to tax hard-earned incomes (wages) to maintain an
unearned income (net economic rent) that bears no tax burden, how can it
be an injustice to stop doing so? There can be no injustice in taking for
the benefit of the community the value that is created by the community.
... read the whole article
Ted Gwartney: Estimating
The economic market rental value
of land should be sufficient to
finance public services and to obviate the need for raising revenue
from taxes, such as income or wage taxes; sales, commodity or
value-added taxes; and taxes on buildings, machinery and industry.
Public revenue should not be supplied by taxes on people and
enterprise until after all of the available revenue has been first
collected from the natural and community created value of land. Only
if land rent were insufficient would it be necessary to collect any
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
HOW MUCH LAND RENT
SHOULD THE COMMUNITY COLLECT?
In order to preserve the
environment, it is necessary and possible
to better utilize our communities. If the producers of the land
market value (nature, government and people) don't utilize land rent,
someone else will. This is why efficient land use fails under
contemporary land systems in most countries. All countries collect
some of the land rent, perhaps 10%, 20% or 30%, but none yet, collect
all of the market rent of land.
Studies have been produced that
demonstrate that communities
prosper and succeed in proportion to the percentage of the land rent
that they collect. The first communities that decide to collect all
of the ground rent will have an enormous competitive advantage over
all other communities. They will be able to reduce or eliminate
regressive taxes on labor and capital. They will attract new business
and industry and become prosperous.
To determine how much land rent
the community should collect
let's consider the alternatives. Whatever is not collected will be
capitalized into market value by land owners. Buying land at inflated
market prices is a block to new industry. Land owners sell the
capitalized land rent (known as land value) which is uncollected by
the community even though it is unearned income. This causes a
disparity between landowners and non-landowners. In the United States
5% of the population, which does not include many homeowners or
farmers, own 70% of the total national land and natural resource
People will come to a well run
community because they will be
better off than living by themselves or in an impoverished locale. A
city must secure revenue in order to provide good quality
This revenue can best be procured
when the community recaptures
the value of the benefits and services that it provides. This is done
by collecting the rental revenue from land that reflects the value of
the services and facilities provided in that community. The land rent
belongs equally to all people that live in the locale who helped to
produce that value. In a well run community. there is sufficient land
rent to provide adequate funding for the social purposes requested
of, and provided by, the local city government
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
Each person has a right to keep
what he or she produces, but no
one has the right to waste what belongs to all people, the land which
includes the natural environment. Each person should have an
opportunity to use the best land for his business or personal needs,
as long as they are willing to pay the land rent that other land
users are willing to pay.
If the value of land rent exceeds
the community's needs for public
services a method of dispensing of the surplus revenue can easily be
found. To maintain an equitable society, where nobody has special
benefits that they do not pay for, it is important to collect all of
the land rent. The community should use what is needed for public
services and improvements such as schools, hospitals, parks, police,
roadways, utilities and defense -- and reserve a fund for
An ethical proposal might be to
then divide the excess revenue
that is not needed for public facilities and services at the end of
each year and send each citizen in that community an equal portion of
the remaining revenue. This is similar to the method used in Alaska
and Alberta. Equality of opportunity to be productive can only be
accomplished by recapturing all of the market rent of land and
ensuring that all people benefit from its value.
Not only is land rent potentially
an important source of public
revenue, collecting all of it would ensure that the equal opportunity
to be productive would be available to all citizens. People could
fund useful buildings, equipment and wages, rather than having to buy
land at inflated prices. Many countries, including the United States,
were started on the premise of using land rent to fund public
services. Many countries suffer economic loss because they no longer
collect the market rent of land.
The value of land can be estimated
with an acceptable accuracy, at
a cost which is very small compared to the revenue to be obtained. A
proper system of assessment and taxation of land can provide for the
proper economic use of the land. A land site should be available to
the user who can make the highest and best use of the site and
maximize the site benefits for all people. A land tax can provide a
major source of public revenue which the local governing body could
use for the benefit of all people. A land tax can prevent the
dispossession of our children, the future producers in the society.
Justice requires that land values, which are created by society and
nature, be made available for public improvements. This is the
responsibility of good government. Read
the whole article
Bill Batt: How Our Towns Got That
Way (1996 speech)
There were many arguments to be
made for the classical tradition,
the result of which would be to rely upon payment of rent of land
according to its value to society. George recognized that land value
is largely a function of how society has elected to invest in any
general neighborhood; there is no argument for any one titleholder to
reap the reward of what others have invested. Gaffney points out
that, from the standpoint of economic theory, the framework had the
- It reconciled common land rights with private tenure, free
markets and modern capitalism, a growing and persistent problem as the
industrial society took hold.
- It enabled the lowering of
taxes on labor without raising taxes
- It reconciled equity and efficiency. It constituted a
tax because land is concentrated so much among the wealthy and because
the tax cannot be shifted. It was efficient because it is neutral among
different land-use options.
- It constituted no disincentive to business location or
settlement. In this way it encouraged the most efficient land use and
- It created jobs without inflation, and raised government
without any penalty upon its base.
- It strengthened public revenues and at the same time
economy in government.
Those economists who today still
persistently hold to the view
that there is something special about land that make it unwise to
treat as a form of capital are known as Georgists. They represent a
small minority of the economics profession, but, little known as they
are, they are among its most esteemed members. ... read
the whole article
Mason Gaffney: Full
Employment, Growth And Progress On A Small Planet: Relieving Poverty
While Healing The Earth
common land with private markets. Use the tax system. Levy heavy
taxes based on the market value of land, thus socializing most or all
of the ground rent, while prompting landowners to put land to its
best uses, as defined by market forces. At the same time, untax labor
and its products, untax exchange, freeing up labor and markets to
perform at their best, and encouraging labor-using uses of land.
... read the whole article
Mason Gaffney: The Taxable Surplus
of Land: Measuring, Guarding and Gathering It
Taxing the Net Product of
Land Permits Untaxing Labor
The IMF and its allies advise you to impose
heavy taxes on the payrolls of labor, and on employers who hire labor, and on
the goods labor must buy to survive and support families. Then they turn
around and tell you that labor-intensive operations, like some of your coal mines,
are inefficient because labor is so costly, even though the workers are getting
very little after taxes. They advise you to downsize or close these operations,
throwing labor out of work. They even lend you money for the purpose: not to
develop and build up Russia, but to dismantle its industry, which they
call "restructuring," and throw its workers onto welfare. In a few specific cases
they may be right, but in general, this is a strange way to develop Russia's
economy and living standards! It is enough to make
one wonder whose welfare they have in mind.
To restructure your industry, first uplift incentives to build and man new plants;
then let managers close old ones by their own free individual choice, as their
workers leave for better jobs. We see from Table 1, and the analysis following
You will also collect more taxes, as shown,
by shifting the tax base to the Net Product of land.
- a tax on labor artificially discourages
labor-using land uses like A, in favor of labor-sparing uses like B,
or even D, which uses no labor at all.
- If, on the other hand, you untax labor, you lower its cost to employers.
When you change the tax system to relieve labor, many lands will be shifted
to the more intensive uses, soaking up your surplus labor and "restructuring" your
industries in the most constructive, efficient ways. Employers will want
to upsize, not downsize. Workers will move off welfare and produce more
goods either for export, or for your own consumers, lowering your need
to import. Both of those will strengthen the ruble: production is the key,
in either case.
Lower welfare costs,
coupled with higher tax collections, will balance your budget and lead to the
day when you can even run a surplus. With these new surplus funds you can pay
off old debts, if you choose to. I take no position and offer no advice on
whether you should pay off old debts from the Soviet era: that is a judgment
call for you to make, based on your evaluation of the history of those debts,
and how obligated you feel. I do know, though, that if you have good public
revenues for the future, you will have good credit, regardless of the past.
Lenders will seek you out, eager to become your creditors again. That is the
clear lesson of U.S. history. We have had two centuries of experience in which
many of our states and cities repudiated debts, many of them owed to foreigners,
only to borrow from them again within a few 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
rests on the claim that a sound and successful tax regime for any government
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
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
which are the rightful province of public obligation. ... read the whole article