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

Henry George: The Savannah (excerpt from Progress & Poverty, Book IV: Chapter 2: The Effect of Increase of Population upon the Distribution of Wealth; also found in Significant Paragraphs from Progress & Poverty, Chapter 3: Land Rent Grows as Community Develops)

Here, let us imagine, is an unbounded savannah, stretching off in unbroken sameness of grass and flower, tree and rill, till the traveler tires of the monotony. Along comes the wagon of the first immigrant. Where to settle he cannot tell — every acre seems as good as every other acre. As to wood, as to water, as to fertility, as to situation, there is absolutely no choice, and he is perplexed by the embarrassment of richness. Tired out with the search for one place that is better than another, he stops — somewhere, anywhere — and starts to make himself a home. The soil is virgin and rich, game is abundant, the streams flash with the finest trout. Nature is at her very best. He has what, were he in a populous district, would make him rich; but he is very poor. To say nothing of the mental craving, which would lead him to welcome the sorriest stranger, he labors under all the material disadvantages of solitude. He can get no temporary assistance for any work that requires a greater union of strength than that afforded by his own family, or by such help as he can permanently keep. Though he has cattle, he cannot often have fresh meat, for to get a beefsteak he must kill a bullock. He must be his own blacksmith, wagonmaker, carpenter, and cobbler — in short, a "jack of all trades and master of none." He cannot have his children schooled, for, to do so, he must himself pay and maintain a teacher. Such things as he cannot produce himself, he must buy in quantities and keep on hand, or else go without, for he cannot be constantly leaving his work and making a long journey to the verge of civilization; and when forced to do so, the getting of a vial of medicine or the replacement of a broken auger may cost him the labor of himself and horses for days. Under such circumstances, though nature is prolific, the man is poor. It is an easy matter for him to get enough to eat; but beyond this, his labor will suffice to satisfy only the simplest wants in the rudest way.

Soon there comes another immigrant. Although every quarter section* of the boundless plain is as good as every other quarter section, he is not beset by any embarrassment as to where to settle. Though the land is the same, there is one place that is clearly better for him than any other place, and that is where there is already a settler and he may have a neighbor. He settles by the side of the first comer, whose condition is at once greatly improved, and to whom many things are now possible that were before impossible, for two men may help each other to do things that one man could never do.

*The public prairie lands of the United States were surveyed into sections of one mile square, and a quarter section (160 acres) was the usual government allotment to a settler under the Homestead Act.

Another immigrant comes, and, guided by the same attraction, settles where there are already two. Another, and another, until around our first comer there are a score of neighbors. Labor has now an effectiveness which, in the solitary state, it could not approach. If heavy work is to be done, the settlers have a logrolling, and together accomplish in a day what singly would require years. When one kills a bullock, the others take part of it, returning when they kill, and thus they have fresh meat all the time. Together they hire a schoolmaster, and the children of each are taught for a fractional part of what similar teaching would have cost the first settler. It becomes a comparatively easy matter to send to the nearest town, for some one is always going. But there is less need for such journeys. A blacksmith and a wheelwright soon set up shops, and our settler can have his tools repaired for a small part of the labor it formerly cost him. A store is opened and he can get what he wants as he wants it; a postoffice, soon added, gives him regular communication with the rest of the world. Then come a cobbler, a carpenter, a harness maker, a doctor; and a little church soon arises. Satisfactions become possible that in the solitary state were impossible. There are gratifications for the social and the intellectual nature — for that part of the man that rises above the animal. The power of sympathy, the sense of companionship, the emulation of comparison and contrast, open a wider, and fuller, and more varied life. In rejoicing, there are others to rejoice; in sorrow, the mourners do not mourn alone. There are husking bees, and apple parings, and quilting parties. Though the ballroom be unplastered and the orchestra but a fiddle, the notes of the magician are yet in the strain, and Cupid dances with the dancers. At the wedding, there are others to admire and enjoy; in the house of death, there are watchers; by the open grave, stands human sympathy to sustain the mourners. Occasionally, comes a straggling lecturer to open up glimpses of the world of science, of literature, or of art; in election times, come stump speakers, and the citizen rises to a sense of dignity and power, as the cause of empires is tried before him in the struggle of John Doe and Richard Roe for his support and vote. And, by and by, comes the circus, talked of months before, and opening to children whose horizon has been the prairie, all the realms of the imagination — princes and princesses of fairy tale, mailclad crusaders and turbaned Moors, Cinderella's fairy coach, and the giants of nursery lore; lions such as crouched before Daniel, or in circling Roman amphitheater tore the saints of God; ostriches who recall the sandy deserts; camels such as stood around when the wicked brethren raised Joseph from the well and sold him into bondage; elephants such as crossed the Alps with Hannibal, or felt the sword of the Maccabees; and glorious music that thrills and builds in the chambers of the mind as rose the sunny dome of Kubla Khan.

Go to our settler now, and say to him: "You have so many fruit trees which you planted; so much fencing, such a well, a barn, a house — in short, you have by your labor added so much value to this farm. Your land itself is not quite so good. You have been cropping it, and by and by it will need manure. I will give you the full value of all your improvements if you will give it to me, and go again with your family beyond the verge of settlement." He would laugh at you. His land yields no more wheat or potatoes than before, but it does yield far more of all the necessaries and comforts of life. His labor upon it will bring no heavier crops, and, we will suppose, no more valuable crops, but it will bring far more of all the other things for which men work. The presence of other settlers — the increase of population — has added to the productiveness, in these things, of labor bestowed upon it, and this added productiveness gives it a superiority over land of equal natural quality where there are as yet no settlers. If no land remains to be taken up, except such as is as far removed from population as was our settler's land when he first went upon it, the value or rent of this land will be measured by the whole of this added capability. If, however, as we have supposed, there is a continuous stretch of equal land, over which population is now spreading, it will not be necessary for the new settler to go into the wilderness, as did the first. He will settle just beyond the other settlers, and will get the advantage of proximity to them. The value or rent of our settler's land will thus depend on the advantage which it has, from being at the center of population, over that on the verge. In the one case, the margin of production will remain as before; in the other, the margin of production will be raised.

Population still continues to increase, and as it increases so do the economies which its increase permits, and which in effect add to the productiveness of the land. Our first settler's land, being the center of population, the store, the blacksmith's forge, the wheelwright's shop, are set up on it, or on its margin, where soon arises a village, which rapidly grows into a town, the center of exchanges for the people of the whole district. With no greater agricultural productiveness than it had at first, this land now begins to develop a productiveness of a higher kind. To labor expended in raising corn, or wheat, or potatoes, it will yield no more of those things than at first; but to labor expended in the subdivided branches of production which require proximity to other producers, and, especially, to labor expended in that final part of production, which consists in distribution, it will yield much larger returns. The wheatgrower may go further on, and find land on which his labor will produce as much wheat, and nearly as much wealth; but the artisan, the manufacturer, the storekeeper, the professional man, find that their labor expended here, at the center of exchanges, will yield them much more than if expended even at a little distance away from it; and this excess of productiveness for such purposes the landowner can claim just as he could an excess in its wheat-producing power. And so our settler is able to sell in building lots a few of his acres for prices which it would not bring for wheatgrowing if its fertility had been multiplied many times. With the proceeds, he builds himself a fine house, and furnishes it handsomely. That is to say, to reduce the transaction to its lowest terms, the people who wish to use the land build and furnish the house for him, on condition that he will let them avail themselves of the superior productiveness which the increase of population has given the land.

Population still keeps on increasing, giving greater and greater utility to the land, and more and more wealth to its owner. The town has grown into a city — a St. Louis, a Chicago or a San Francisco — and still it grows. Production is here carried on upon a great scale, with the best machinery and the most favorable facilities; the division of labor becomes extremely minute, wonderfully multiplying efficiency; exchanges are of such volume and rapidity that they are made with the minimum of friction and loss. Here is the heart, the brain, of the vast social organism that has grown up from the germ of the first settlement; here has developed one of the great ganglia of the human world. Hither run all roads, hither set all currents, through all the vast regions round about. Here, if you have anything to sell, is the market; here, if you have anything to buy, is the largest and the choicest stock. Here intellectual activity is gathered into a focus, and here springs that stimulus which is born of the collision of mind with mind. Here are the great libraries, the storehouses and granaries of knowledge, the learned professors, the famous specialists. Here are museums and art galleries, collections of philosophical apparatus, and all things rare, and valuable, and best of their kind. Here come great actors, and orators, and singers, from all over the world. Here, in short, is a center of human life, in all its varied manifestations.

So enormous are the advantages which this land now offers for the application of labor, that instead of one man — with a span of horses scratching over acres, you may count in places thousands of workers to the acre, working tier on tier, on floors raised one above the other, five, six, seven and eight stories from the ground, while underneath the surface of the earth engines are throbbing with pulsations that exert the force of thousands of horses.

All these advantages attach to the land; it is on this land and no other that they can be utilized, for here is the center of population — the focus of exchanges, the market place and workshop of the highest forms of industry. The productive powers which density of population has attached to this land are equivalent to the multiplication of its original fertility by the hundredfold and the thousandfold. And rent, which measures the difference between this added productiveness and that of the least productive land in use, has increased accordingly. Our settler, or whoever has succeeded to his right to the land, is now a millionaire. Like another Rip Van Winkle, he may have lain down and slept; still he is rich — not from anything he has done, but from the increase of population. There are lots from which for every foot of frontage the owner may draw more than an average mechanic can earn; there are lots that will sell for more than would suffice to pave them with gold coin. In the principal streets are towering buildings, of granite, marble, iron, and plate glass, finished in the most expensive style, replete with every convenience. Yet they are not worth as much as the land upon which they rest — the same land, in nothing changed, which when our first settler came upon it had no value at all.

That this is the way in which the increase of population powerfully acts in increasing rent, whoever, in a progressive country, will look around him, may see for himself. The process is going on under his eyes. The increasing difference in the productiveness of the land in use, which causes an increasing rise in rent, results not so much from the necessities of increased population compelling the resort to inferior land, as from the increased productiveness which increased population gives to the lands already in use. The most valuable lands on the globe, the lands which yield the highest rent, are not lands of surpassing natural fertility, but lands to which a surpassing utility has been given by the increase of population.

The increase of productiveness or utility which increase of population gives to certain lands, in the way to which I have been calling attention, attaches, as it were, to the mere quality of extension. The valuable quality of land that has become a center of population is its superficial capacity — it makes no difference whether it is fertile, alluvial soil like that of Philadelphia, rich bottom land like that of New Orleans; a filled-in marsh like that of St. Petersburg, or a sandy waste like the greater part of San Francisco.

And where value seems to arise from superior natural qualities, such as deep water and good anchorage, rich deposits of coal and iron, or heavy timber, observation also shows that these superior qualities are brought out, rendered tangible, by population. The coal and iron fields of Pennsylvania, that today [1879] are worth enormous sums, were fifty years ago valueless. What is the efficient cause of the difference? Simply the difference in population. The coal and iron beds of Wyoming and Montana, which today are valueless, will, in fifty years from now, be worth millions on millions, simply because, in the meantime, population will have greatly increased.

It is a well-provisioned ship, this on which we sail through space. If the bread and beef above decks seem to grow scarce, we but open a hatch and there is a new supply, of which before we never dreamed. And very great command over the services of others comes to those who as the hatches are opened are permitted to say, "This is mine!" ... read the whole chapter of Significant Paragraphs

Henry George: The Condition of Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)

God’s laws do not change. Though their applications may alter with altering conditions, the same principles of right and wrong that hold when men are few and industry is rude also hold amid teeming populations and complex industries. In our cities of millions and our states of scores of millions, in a civilization where the division of labor has gone so far that large numbers are hardly conscious that they are land-users, it still remains true that we are all land animals and can live only on land, and that land is God’s bounty to all, of which no one can be deprived without being murdered, and for which no one can be compelled to pay another without being robbed. But even in a state of society where the elaboration of industry and the increase of permanent improvements have made the need for private possession of land wide-spread, there is no difficulty in conforming individual possession with the equal right to land. For as soon as any piece of land will yield to the possessor a larger return than is had by similar labor on other land a value attaches to it which is shown when it is sold or rented. Thus, the value of the land itself, irrespective of the value of any improvements in or on it, always indicates the precise value of the benefit to which all are entitled in its use, as distinguished from the value which, as producer or successor of a producer, belongs to the possessor in individual right.

To combine the advantages of private possession with the justice of common ownership it is only necessary therefore to take for common uses what value attaches to land irrespective of any exertion of labor on it. The principle is the same as in the case referred to, where a human father leaves equally to his children things not susceptible of specific division or common use. In that case such things would be sold or rented and the value equally applied.

It is on this common-sense principle that we, who term ourselves single-tax men, would have the community act.

We do not propose to assert equal rights to land by keeping land common, letting any one use any part of it at any time. We do not propose the task, impossible in the present state of society, of dividing land in equal shares; still less the yet more impossible task of keeping it so divided.

We propose — leaving land in the private possession of individuals, with full liberty on their part to give, sell or bequeath it — simply to levy on it for public uses a tax that shall equal the annual value of the land itself, irrespective of the use made of it or the improvements on it. And since this would provide amply for the need of public revenues, we would accompany this tax on land values with the repeal of all taxes now levied on the products and processes of industry — which taxes, since they take from the earnings of labor, we hold to be infringements of the right of property.

This we propose, not as a cunning device of human ingenuity, but as a conforming of human regulations to the will of God.

God cannot contradict himself nor impose on his creatures laws that clash.

If it be God’s command to men that they should not steal — that is to say, that they should respect the right of property which each one has in the fruits of his labor;

And if he be also the Father of all men, who in his common bounty has intended all to have equal opportunities for sharing;

Then, in any possible stage of civilization, however elaborate, there must be some way in which the exclusive right to the products of industry may be reconciled with the equal right to land.

If the Almighty be consistent with himself, it cannot be, as say those socialists referred to by you, that in order to secure the equal participation of men in the opportunities of life and labor we must ignore the right of private property. Nor yet can it be, as you yourself in the Encyclical seem to argue, that to secure the right of private property we must ignore the equality of right in the opportunities of life and labor. To say the one thing or the other is equally to deny the harmony of God’s laws.

But, the private possession of land, subject to the payment to the community of the value of any special advantage thus given to the individual, satisfies both laws, securing to all equal participation in the bounty of the Creator and to each the full ownership of the products of his labor. ...

Nor do we hesitate to say that this way of securing the equal right to the bounty of the Creator and the exclusive right to the products of labor is the way intended by God for raising public revenues. For we are not atheists, who deny God; nor semi-atheists, who deny that he has any concern in politics and legislation.

It is true as you say — a salutary truth too often forgotten — that “man is older than the state, and he holds the right of providing for the life of his body prior to the formation of any state.” Yet, as you too perceive, it is also true that the state is in the divinely appointed order. For He who foresaw all things and provided for all things, foresaw and provided that with the increase of population and the development of industry the organization of human society into states or governments would become both expedient and necessary.

No sooner does the state arise than, as we all know, it needs revenues. This need for revenues is small at first, while population is sparse, industry rude and the functions of the state few and simple. But with growth of population and advance of civilization the functions of the state increase and larger and larger revenues are needed.

Now, He that made the world and placed man in it, He that pre-ordained civilization as the means whereby man might rise to higher powers and become more and more conscious of the works of his Creator, must have foreseen this increasing need for state revenues and have made provision for it. That is to say: The increasing need for public revenues with social advance, being a natural, God-ordained need, there must be a right way of raising them — some way that we can truly say is the way intended by God. It is clear that this right way of raising public revenues must accord with the moral law.

Hence:

It must not take from individuals what rightfully belongs to individuals.

It must not give some an advantage over others, as by increasing the prices of what some have to sell and others must buy.

It must not lead men into temptation, by requiring trivial oaths, by making it profitable to lie, to swear falsely, to bribe or to take bribes.

It must not confuse the distinctions of right and wrong, and weaken the sanctions of religion and the state by creating crimes that are not sins, and punishing men for doing what in itself they have an undoubted right to do.

It must not repress industry. It must not check commerce. It must not punish thrift. It must offer no impediment to the largest production and the fairest division of wealth.

Let me ask your Holiness to consider the taxes on the processes and products of industry by which through the civilized world public revenues are collected — the octroi duties that surround Italian cities with barriers; the monstrous customs duties that hamper intercourse between so-called Christian states; the taxes on occupations, on earnings, on investments, on the building of houses, on the cultivation of fields, on industry and thrift in all forms. Can these be the ways God has intended that governments should raise the means they need? Have any of them the characteristics indispensable in any plan we can deem a right one?

All these taxes violate the moral law. They take by force what belongs to the individual alone; they give to the unscrupulous an advantage over the scrupulous; they have the effect, nay are largely intended, to increase the price of what some have to sell and others must buy; they corrupt government; they make oaths a mockery; they shackle commerce; they fine industry and thrift; they lessen the wealth that men might enjoy, and enrich some by impoverishing others.

Yet what most strikingly shows how opposed to Christianity is this system of raising public revenues is its influence on thought.

Christianity teaches us that all men are brethren; that their true interests are harmonious, not antagonistic. It gives us, as the golden rule of life, that we should do to others as we would have others do to us. But out of the system of taxing the products and processes of labor, and out of its effects in increasing the price of what some have to sell and others must buy, has grown the theory of “protection,” which denies this gospel, which holds Christ ignorant of political economy and proclaims laws of national well-being utterly at variance with his teaching. This theory sanctifies national hatreds; it inculcates a universal war of hostile tariffs; it teaches peoples that their prosperity lies in imposing on the productions of other peoples restrictions they do not wish imposed on their own; and instead of the Christian doctrine of man’s brotherhood it makes injury of foreigners a civic virtue.

“By their fruits ye shall know them.” Can anything more clearly show that to tax the products and processes of industry is not the way God intended public revenues to be raised?

But to consider what we propose — the raising of public revenues by a single tax on the value of land irrespective of improvements — is to see that in all respects this does conform to the moral law.

Let me ask your Holiness to keep in mind that the value we propose to tax, the value of land irrespective of improvements, does not come from any exertion of labor or investment of capital on or in it — the values produced in this way being values of improvement which we would exempt. The value of land irrespective of improvement is the value that attaches to land by reason of increasing population and social progress. This is a value that always goes to the owner as owner, and never does and never can go to the user; for if the user be a different person from the owner he must always pay the owner for it in rent or in purchase-money; while if the user be also the owner, it is as owner, not as user, that he receives it, and by selling or renting the land he can, as owner, continue to receive it after he ceases to be a user.

Thus, taxes on land irrespective of improvement cannot lessen the rewards of industry, nor add to prices,* nor in any way take from the individual what belongs to the individual. They can take only the value that attaches to land by the growth of the community, and which therefore belongs to the community as a whole.

* As to this point it may be well to add that all economists are agreed that taxes on land values irrespective of improvement or use — or what in the terminology of political economy is styled rent, a term distinguished from the ordinary use of the word rent by being applied solely to payments for the use of land itself — must be paid by the owner and cannot be shifted by him on the user. To explain in another way the reason given in the text: Price is not determined by the will of the seller or the will of the buyer, but by the equation of demand and supply, and therefore as to things constantly demanded and constantly produced rests at a point determined by the cost of production — whatever tends to increase the cost of bringing fresh quantities of such articles to the consumer increasing price by checking supply, and whatever tends to reduce such cost decreasing price by increasing supply. Thus taxes on wheat or tobacco or cloth add to the price that the consumer must pay, and thus the cheapening in the cost of producing steel which improved processes have made in recent years has greatly reduced the price of steel. But land has no cost of production, since it is created by God, not produced by man. Its price therefore is fixed —

1 (monopoly rent), where land is held in close monopoly, by what the owners can extract from the users under penalty of deprivation and consequently of starvation, and amounts to all that common labor can earn on it beyond what is necessary to life;
2 (economic rent proper), where there is no special monopoly, by what the particular land will yield to common labor over and above what may be had by like expenditure and exertion on land having no special advantage and for which no rent is paid; and,
3 (speculative rent, which is a species of monopoly rent, telling particularly in selling price), by the expectation of future increase of value from social growth and improvement, which expectation causing landowners to withhold land at present prices has the same effect as combination.

Taxes on land values or economic rent can therefore never be shifted by the landowner to the land-user, since they in no wise increase the demand for land or enable landowners to check supply by withholding land from use. Where rent depends on mere monopolization, a case I mention because rent may in this way be demanded for the use of land even before economic or natural rent arises, the taking by taxation of what the landowners were able to extort from labor could not enable them to extort any more, since laborers, if not left enough to live on, will die. So, in the case of economic rent proper, to take from the landowners the premiums they receive, would in no way increase the superiority of their land and the demand for it. While, so far as price is affected by speculative rent, to compel the landowners to pay taxes on the value of land whether they were getting any income from it or not, would make it more difficult for them to withhold land from use; and to tax the full value would not merely destroy the power but the desire to do so.

To take land values for the state, abolishing all taxes on the products of labor, would therefore leave to the laborer the full produce of labor; to the individual all that rightfully belongs to the individual. It would impose no burden on industry, no check on commerce, no punishment on thrift; it would secure the largest production and the fairest distribution of wealth, by leaving men free to produce and to exchange as they please, without any artificial enhancement of prices; and by taking for public purposes a value that cannot be carried off, that cannot be hidden, that of all values is most easily ascertained and most certainly and cheaply collected, it would enormously lessen the number of officials, dispense with oaths, do away with temptations to bribery and evasion, and abolish man-made crimes in themselves innocent.

But, further: That God has intended the state to obtain the revenues it needs by the taxation of land values is shown by the same order and degree of evidence that shows that God has intended the milk of the mother for the nourishment of the babe.

See how close is the analogy. In that primitive condition ere the need for the state arises there are no land values. The products of labor have value, but in the sparsity of population no value as yet attaches to land itself. But as increasing density of population and increasing elaboration of industry necessitate the organization of the state, with its need for revenues, value begins to attach to land. As population still increases and industry grows more elaborate, so the needs for public revenues increase. And at the same time and from the same causes land values increase. The connection is invariable. The value of things produced by labor tends to decline with social development, since the larger scale of production and the improvement of processes tend steadily to reduce their cost. But the value of land on which population centers goes up and up. Take Rome or Paris or London or New York or Melbourne. Consider the enormous value of land in such cities as compared with the value of land in sparsely settled parts of the same countries. To what is this due? Is it not due to the density and activity of the populations of those cities — to the very causes that require great public expenditure for streets, drains, public buildings, and all the many things needed for the health, convenience and safety of such great cities? See how with the growth of such cities the one thing that steadily increases in value is land; how the opening of roads, the building of railways, the making of any public improvement, adds to the value of land. Is it not clear that here is a natural law — that is to say a tendency willed by the Creator? Can it mean anything else than that He who ordained the state with its needs has in the values which attach to land provided the means to meet those needs?

That it does mean this and nothing else is confirmed if we look deeper still, and inquire not merely as to the intent, but as to the purpose of the intent. If we do so we may see in this natural law by which land values increase with the growth of society not only such a perfectly adapted provision for the needs of society as gratifies our intellectual perceptions by showing us the wisdom of the Creator, but a purpose with regard to the individual that gratifies our moral perceptions by opening to us a glimpse of his beneficence.

Consider: Here is a natural law by which as society advances the one thing that increases in value is land — a natural law by virtue of which all growth of population, all advance of the arts, all general improvements of whatever kind, add to a fund that both the commands of justice and the dictates of expediency prompt us to take for the common uses of society. Now, since increase in the fund available for the common uses of society is increase in the gain that goes equally to each member of society, is it not clear that the law by which land values increase with social advance while the value of the products of labor does not increase, tends with the advance of civilization to make the share that goes equally to each member of society more and more important as compared with what goes to him from his individual earnings, and thus to make the advance of civilization lessen relatively the differences that in a ruder social state must exist between the strong and the weak, the fortunate and the unfortunate? Does it not show the purpose of the Creator to be that the advance of man in civilization should be an advance not merely to larger powers but to a greater and greater equality, instead of what we, by our ignoring of his intent, are making it, an advance toward a more and more monstrous inequality? ... read the whole letter

Henry George: The Wages of Labor

But the value of land on which population centres goes up and up.

If you are to leave to the man who gets possession of a piece of land in the centre of London the whole rent you give him an enormous advantage over the man who for his purposes, to get his land, has to go to some out of the way district or up to the Highlands of Scotland. (Hear, hear.)

The importance that we attribute to this taking of rent is that it is not merely taking that much from a source that will not restrict industry, will not oppress labour, will not hamper production; but it will make mere landownership utterly valueless. (Applause.) By taking the rent

• we make it unprofitable to hold land in expectation of future increase in its value. (Cheers.)
• We make it impossible to extort from the worker a monopoly rent (Hear, hear.)
• We make it impossible for great landowners to hold vast tracts of land – which their fellow citizens would be glad to make fruitful – in idleness or for purposes of pleasure. (Loud cheers.)

Think about what the value of land is. It has no reference to the cost of production, as has the value of houses, horses, ships, clothes, or other things produced by labor, for land is not produced by man, it was created by God. The value of land does not come from the exertion of labor on land, for the value thus produced is a value of improvement. That value attaches to any piece of land means that that piece of land is more desirable than the land which other citizens may obtain, and that they are willing to pay a premium for permission to use it. Justice therefore requires that this premium of value shall be taken for the benefit of all in order to secure to all their equal rights.

Consider the difference between the value of a building and the value of land. The value of a building, like the value of goods, or of anything properly styled wealth, is produced by individual exertion, and therefore properly belongs to the individual; but the value of land only arises with the growth and improvement of the community, and therefore properly belongs to the community. It is not because of what its owners have done, but because of the presence of the whole great population, that land in New York is worth millions an acre. This value therefore is the proper fund for defraying the common expenses of the whole population; and it must be taken for public use, under penalty of generating land speculation and monopoly which will bring about artificial scarcity where the Creator has provided in abundance for all whom His providence has called into existence.

It is thus a violation of justice to tax labor, or the things produced by labor, and it is also a violation of justice not to tax land values. ...  read the whole article

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

Q43. Is there any land question in places where land is cheap? In Texas, for example, you can get land as cheap as two dollars an acre. Is there a land question there?
A. There is no place where land is cheap in the sense implied by the question. Land commands a low price in many places, but it is poor land; it is not cheap land. It is true that in Texas there is land that can be had for two dollars an acre, but it would yield less profit to each unit of labor and capital expended upon it than land in New York City which costs hundreds of thousands of dollars an acre. The valuable New York land is the cheaper of the two. The land question is the question in every place where land costs more than it is worth for immediate use.

... read the book

Lindy Davies: Land and Justice

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

Chicago School economists insist that no free lunch exists. But when one begins to look beneath the surface of national income statistics and the national balance sheet of assets and liabilities, one can see that modern economies are all about obtaining a free lunch. However, to make this free ride go all the faster, it helps if the rest of the world does not see that anyone is getting the proverbial something for nothing - what classical economists called unearned income, most characteristically in the form of land rent. You start by using a method of appraising that undervalues the real income producer, land. Here's how it's done.

• The land-residual approach subtracts the value of buildings from this overall value, designating the remainder as the value of land.  ...
• The building-residual approach starts by valuing the land, and treats the difference as representing the building's value. ...

Note that the Fed's land-residual appraisal methods do not acknowledge the possibility that the land itself may be rising in price. Site values appear as the passive derivative, not as the driving force. Yet low-rise or vacant land sites tend to appreciate as much as (or in many cases, even more than) the improved properties around them. Hence this price appreciation cannot be attributed to rising construction costs. If every property in the country were built last year, the problem would be simple enough. The land acquisition prices and construction costs would be recorded, adding up to the property's value. But many structures were erected as long ago as the 19th century. How do we decide how much their value has changed in comparison to the property's overall value?

The Federal Reserve multiplies the building's original cost by the rise in the construction price index since its completion. The implication is that when a property is sold at a higher price (which usually happens), it is because the building itself has risen in value, not the land site. However, if the property must be sold at a lower price, falling land prices are blamed.

If it is agreed that any explanation of land/building relations should be symmetrical through boom and bust periods alike, then the same appraisal methodology should be able to explain the decline of property values as well as their rise. The methodology should be as uniform and homogeneous as possible. By that, I mean that similar land should be valued at a homogeneous price, and buildings of equivalent worth should be valued accordingly.

If these two criteria are accepted, then I believe that economists would treat buildings as the residual, not the land. Yet just the opposite usually is done.

... This leaves in limbo the macro-economists and business analysts whose business is to explain the finance, insurance and real estate (FIRE) sector's dominant role in the economy. According to the land-residual appraisal technique, high-rise buildings seem to have the lowest land values. Real estate interests argue that this is realistic, because at least in New York City the higher a building is, the more of a subsidy its developers need, given the economics of space involved for elevators, surrounding air space and so forth. The land itself is assigned a negative value as a statistically balancing residual reflecting the difference between the building's high construction costs and its lower market value.

On this basis much of New York's most highly built-up land would seem to have a negative value, including the World Trade Center even before its Sept. 11 destruction. While a low-rise building might be built on this site without subsidy, a skyscraper would need a subsidy, implying a negative land value.

Land holds a unique and pivotal position in social, political, environmental and economic theory. Land supports all life and stands at the center of human culture and institutions. All people, at all times, must make use of land. Land has no cost of production. It is nature's gift to mankind, which enables life to continue and prosper.

Land's uniqueness stems from its fixed supply and immobility. Land cannot be manufactured or reproduced. Land is required directly or indirectly in the production of all goods and services. Land is our most basic resource and the source of all wealth.

Land rent is the price paid annually for the exclusive right (a monopoly) to use a certain location, piece of land or other natural resource. People receive wages for work, capital receives interest for investment, and land receives rent for the exclusive use of a location. Equity and efficiency require that the local general public, who created land value, should be paid for the exclusive use of a land site. That Payment is in the form of a land tax.

Land that lacks utility and scarcity also lacks value, since utility arouses desire for use and has the power to give satisfaction. The air we breathe has utility and is generally considered important, since it sustains and nourishes life. However, in the economic sense, air is not valuable because it hasn't been appropriated and there is enough for everyone. Thus there is no scarcity -- at least at the moment. This may not be true in the future, however, as knowledge of air pollution and its effect on human health make people aware that clean and breathable air may become scarce and subsequently valuable.

By themselves, utility and scarcity confer no value on land. User desire backed up by the ability to pay value must also exist in order to constitute effective demand. The potential user must be able to participate in the market to satisfy their desire. ...

• quality of location, fertility and climate;
• convenience to shopping, schools and parks;
• availability of water, sewers, utilities and public transportation;
• absence of bad smells, smoke and noise; and
• patterns of land use, frontage, depth, topography, streets and lot sizes.

The legal or governmental forces include

• the type and amount of taxation,
• zoning and building laws,
• planning and restrictions.

The social factors include

• population growth or decline,
• changes in family sizes,
• typical ages,
• attitudes toward law and order,
• prestige and
• education levels.

• value and income levels,
• growth and new construction,
• vacancy and
• availability of land.

It is the influences of these forces, expressed independently and in relationship to one another, that help the people and the assessor measure value.

The economics of production should provide the atmosphere for the most efficient use to be made of all land. The assessment process is based on the highest, best and most profitable use of land. The highest and best use considers only the uses that are legally permissible (meeting zoning, health, and public restrictions), physically possible (has adequate size, soil conditions, and accessibility), and is economically feasible (income is anticipated). The use that meets these criteria and produces the greatest net earnings (best returns) is the highest and best use.

• the limited supply and "natural" productivity of the soil and natural resources,
• the publicly provided services, including planning, improvements that increase the market value of land and
• the growth of communities and peoples' competitive demand for the exclusive use of prime locations.

The collection of land rent should be used as revenue, by the community for supplying public needs. This returns the advantage an individual land possessor receives from the exclusive use of a land site, to the balance of the people who live within the community and have allowed the land possessor the exclusive use of the land site for the period of time. ...

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 values.

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 services.

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

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.

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 emergencies.

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

James Kiefer: James Huntington and the ideas of Henry George

Henry George, author of Progress and Poverty, argued that, while some forms of wealth are produced by human activity, and are rightly the property of the producers (or those who have obtained them from the previous owners by voluntary gift or exchange), land and natural resources are bestowed by God on the human race, and that every one of the N inhabitants of the earth has a claim to 1/Nth of the coal beds, 1/Nth of the oil wells, 1/Nth of the mines, and 1/Nth of the fertile soil. God wills a society where everyone may sit in peace under his own vine and his own fig tree.

The Law of Moses undertook to implement this by making the ownership of land hereditary, with a man's land divided among his sons (or, in the absence of sons, his daughters), and prohibiting the permanent sale of land. (See Leviticus 25:13-17,23.) The most a man might do with his land is sell the use of it until the next Jubilee year, an amnesty declared once every fifty years, when all debts were cancelled and all land returned to its hereditary owner.

Henry George's proposed implementation is to tax all land at about 99.99% of its rental value, leaving the owner of record enough to cover his bookkeeping expenses. The resulting revenues would be divided equally among the natural owners of the land, viz. the people of the country, with everyone receiving a dividend check regularly for the use of his share of the earth (here I am anticipating what I think George would have suggested if he had written in the 1990's rather than the 1870's).

This procedure would have the effect of making the sale price of a piece of land, not including the price of buildings and other improvements on it, practically zero. The cost of being a landholder would be, not the original sale price, but the tax, equivalent to rent. A man who chose to hold his "fair share," or 1/Nth of all the land, would pay a land tax about equal to his dividend check, and so would break even. By 1/Nth of the land is meant land with a value equal to 1/Nth of the value of all the land in the country.

Naturally, an acre in the business district of a great city would be worth as much as many square miles in the open country. Some would prefer to hold more than one N'th of the land and pay for the privilege. Some would prefer to hold less land, or no land at all, and get a small annual check representing the dividend on their inheritance from their father Adam.

Note that, at least for the able-bodied, this solves the problem of poverty at a stroke. If the total land and total labor of the world are enough to feed and clothe the existing population, then 1/Nth of the land and 1/Nth of the labor are enough to feed and clothe 1/Nth of the population. A family of 4 occupying 4/Nths of the land (which is what their dividend checks will enable them to pay the tax on) will find that their labor applied to that land is enough to enable them to feed and clothe themselves. Of course, they may prefer to apply their labor elsewhere more profitably, but the situation from which we start is one in which everyone has his own plot of ground from which to wrest a living by the strength of his own back, and any deviation from this is the result of voluntary exchanges agreed to by the parties directly involved, who judge themselves to be better off as the result of the exchanges.

Some readers may think this a very radical proposal. In fact, it is extremely conservative, in the sense of being in agreement with historic ideas about land ownership as opposed to ownership of, say, tools or vehicles or gold or domestic animals or other movables. The laws of English-speaking countries uniformly distinguish between real property (land) and personal property (everything else). In this context, "real" is not the opposite of "imaginary." It is a form of the word "royal," and means that the ultimate owner of the land is the king, as symbol of the people. Note that English-derived law does not recognize "landowners." The term is "landholders." The concept of eminent domain is that the landholder may be forced to surrender his landholdings to the government for a public purpose. Historically, eminent domain does not apply to property other than land, although complications arise when there are buildings on the land that is being seized.

I will mention in passing that the proposals of Henry George have attracted support from persons as diverse as Felix Morley, Aldous Huxley, Woodrow Wilson, Helen Keller, Winston Churchill, Leo Tolstoy, William F Buckley Jr, and Sun Yat-sen. To the Five Nobel Prizes authorized by Alfred Nobel himself there has been added a sixth, in Economics, and the Henry George Foundation claims eight of the Economics Laureates as supporters, in whole or in part, of the proposals of Henry George (Paul Samuelson, 1970; Milton Friedman, 1976; Herbert A Simon, 1978; James Tobin, 1981; Franco Modigliani, 1985; James M Buchanan, 1986; Robert M Solow, 1987; William S Vickrey, 1996).

The immediate concrete proposal favored by most Georgists today is that cities shall tax land within their boundaries at a higher rate than they tax buildings and other improvements on the land. (In case anyone is about to ask, "How can we possibly distinguish between the value of the land and the value of the buildings on it?" let me assure you that real estate assessors do it all the time. It is standard practice to make the two assessments separately, and a parcel of land in the business district of a large city very often has a different owner from the building on it.) Many cities have moved to a system of taxing land more heavily than improvements, and most have been pleased with the results, finding that landholders are more likely to use their land productively -- to their own benefit and that of the public -- if their taxes do not automatically go up when they improve their land by constructing or maintaining buildings on it.

An advantage of this proposal in the eyes of many is that it is a Fabian proposal, "evolution, not revolution," that it is incremental and reversible. If a city or other jurisdiction does not like the results of a two-level tax system, it can repeal the arrangement or reduce the difference in levels with no great upheaval. It is not like some other proposals of the form, "Distribute all wealth justly, and make me absolute dictator of the world so that I can supervise the distribution, and if it doesn't work, I promise to resign." The problem is that absolute dictators seldom resign. ... read the whole article

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

Case 1: Ithaca, New York: Tompkins County, where the city of Ithaca sits at the center, has land values many times those within a short walk. Dividing the county land parcels into quintiles, the highest fifth have values of $56,000 per acre and above. The lowest fifth have a value of less than $3,000 per acre. The high value area collectively constitutes only a minute proportion of the total number of square miles because most of it is farm or forest land. [see map]

Bill Batt: Stemming Sprawl: The Fiscal Approach

Mason Gaffney: Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth

• “One, political influence;
• two, social importance;
• three, power exercised over tenantry;
• four, residential enjoyment including what is called sport;
• five, the money return – the rent.”