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Concentration of Wealth
Henry George: The Common Sense of Taxation (1881 article)
John Dewey: Steps to Economic Recovery
H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty, Chapter 5: The Basic Cause of Poverty (in the unabridged: Book V: The Problem Solved)
Henry George: Thy Kingdom Come (1889 speech)
If Adam, when he got out of Eden, had sat down and commenced to pray, he might have prayed till this time without getting anything to eat unless he went to work for it. Yet food is God’s bounty. He does not bring meat and vegetables all prepared. What He gives are the opportunities of producing these things — of bringing them forth by labour. His mandate is — it is written in the Holy Word, it is graven on every fact in nature — that by labour we shall bring forth these things. Nature gives to labour and to nothing else.
What God gives are the natural elements that are indispensable to labour. He gives them, not to one, not to some, not to one generation, but to all. They are His gifts, His bounty to the whole human race. And yet in all our civilised countries what do we see? That a few people have appropriated these bounties, claiming them as theirs alone, while the great majority have no legal right to apply their labour to the reservoirs of Nature and draw from the Creator’s bounty.
Thus it happens that all over the civilised world that class that is called peculiarly ‘the labouring class’ is the poor class, and that people who do no labour, who pride themselves on never having done honest labour, and on being descended from fathers and grandfathers who never did a stroke of honest labour in their lives, revel in a superabundance of the things that labour brings forth. ... Read the whole speechHenry George: The Land Question (1881)
Henry George: The Land Question (1881)
I doubt not that whichever way a man may turn to inquire of Nature, he will come upon adjustments which will arouse not merely his wonder, but his gratitude. Yet what has most impressed me with the feeling that the laws of Nature are the laws of beneficent intelligence is what I see of the social possibilities involved in the law of rent. Rent (4) springs from natural causes. It arises, as society develops, from the differences in natural opportunities and the differences in the distribution of population. It increases with the division of labor, with the advance of the arts, with the progress of invention. And thus, by virtue of a law impressed upon the very nature of things, has the Creator provided that the natural advance of mankind shall be an advance toward equality, an advance toward cooperation, an advance toward a social state in which not even the weakest need be crowded to the wall, in which even for the unfortunate and the cripple there may be ample provision. For this revenue, which arises from the common property, which represents not the creation of value by the individual, but the creation by the community as a whole, which increases just as society develops, affords a common fund, which, properly used, tends constantly to equalize conditions, to open the largest opportunities for all, and utterly to banish want or the fear of want.
(4) I, of course, use the word in its economic, not in its common sense, meaning by it what is commonly called ground-rent.
The squalid poverty that festers in the heart of our civilization, the vice and crime and degradation and ravening greed that flow from it, are the results of a treatment of land that ignores the simple law of justice, a law so clear and plain that it is universally recognized by the veriest savages. What is by nature the common birthright of all, we have made the exclusive property of individuals; what is by natural law the common fund, from which common wants should be met, we give to a few that they may lord it over their fellows. And so some are gorged while some go hungry, and more is wasted than would suffice to keep all in luxury. ...
We have here abolished all hereditary privileges and legal distinctions of class. Monarchy, aristocracy, prelacy, we have swept them all away. We have carried mere political democracy to its ultimate. Every child born in the United States may aspire to be President. Every man, even though he be a tramp or a pauper, has a vote, and one man's vote counts for as much as any other man's vote. Before the law all citizens are absolutely equal. In the name of the people all laws run. They are the source of all power, the fountain of all honor. In their name and by their will all government is carried on; the highest officials are but their servants. Primogeniture and entail we have abolished wherever they existed. We have and have had free trade in land. We started with something infinitely better than any scheme of peasant proprietorship which it is possible to carry into effect in Great Britain. We have had for our public domain the best part of an immense continent. We have had the preemption law and the homestead law. It has been our boast that here every one who wished it could have a farm. We have had full liberty of speech and of the press. We have not merely common schools, but high schools and universities, open to all who may choose to attend. Yet here the same social difficulties apparent on the other side of the Atlantic are beginning to appear. It is already clear that our democracy is a vain pretense, our make-believe of equality a sham and a fraud.
Already are the sovereign people becoming but a roi fainéant, like the Merovingian kings of France, like the Mikados of Japan. The shadow of power is theirs; but the substance of power is being grasped and wielded by the bandit chiefs of the stock exchange, the robber leaders who organize politics into machines. In any matter in which they are interested, the little finger of the great corporations is thicker than the loins of the people. Is it sovereign States or is it railroad corporations that are really represented in the elective Senate which we have substituted for an hereditary House of Lords? Where is the count or marquis or duke in Europe who wields such power as is wielded by such simple citizens as our Stanfords, Goulds, and Vanderbilts? What does legal equality amount to, when the fortunes of some citizens can be estimated only in hundreds of millions, and other citizens have nothing? What does the suffrage amount to when, under threat of discharge from employment, citizens can be forced to vote as their employers dictate? when votes can be bought on election day for a few dollars apiece? If there are citizens so dependent that they must vote as their employers wish, so poor that a few dollars on election day seem to them more than any higher consideration, then giving them votes simply adds to the political power of wealth, and universal suffrage becomes the surest basis for the establishment of tyranny. "Tyranny"! There is a lesson in the very word. What are our American bosses but the exact antitypes of the Greek tyrants, from whom the word comes? They who gave the word tyrant its meaning did not claim to rule by right divine. They were simply the Grand Sachems of Greek Tammanys, the organizers of Hellenic "stalwart machines." ... read the whole article
Henry George: What the Railroad Will Bring Us [Californians, and particularly San Franciscans] (1868)
The truth is, that the
completion of the railroad and the consequent great increase of
business and population, will not be a benefit to all of us, but only
to a portion. As a general rule (liable of course to exceptions) those
who have it will make wealthier; for those who have not, it will make
it more difficult to get. Those who have lands, mines, established
businesses, special abilities of certain kinds, will become richer for
it and find increased opportunities; those who have only their own
labor will be come poorer, and find it harder to get ahead -- first,
because it will take more capital to buy land or to get into business;
and second, because as competition reduces the wages of labor, this
capital will be harder for them to obtain.
But there is another side: we are to become a great, populous,
wealthy community. And in such a community many good things are
possible that are not possible in a community such as ours has been.
There have been artists, scholars, and men of special knowledge and
ability among us, who could and some of whom have since won distinction
and wealth in older and larger cities, but who here could only make a
living by digging sand, peddling vegetables, or washing dishes in
restaurants. It will not be so in the San Francisco of the future. We
shall keep such men with us, and reward them, instead of driving them
away. We shall have our noble charities, great museums, libraries and
universities; a class of men who have leisure for thought and culture;
magnificent theatres and opera houses; parks and pleasure gardens. ...
We boast of equality before the law; yet notoriously justice is deaf to the call of those who have no gold and blind to the sin of those who have.Henry George: Thou Shalt Not Steal (1887 speech)
We pride ourselves upon our common schools; yet after our boys and girls are educated we vainly ask: "What shall we do with them?" And about our colleges children are growing up in vice and crime, because from their homes poverty has driven all refining influences. We pin our faith to universal suffrage; yet with all power in the hands of the people, the control of public affairs is passing into the hands of a class of professional politicians, and our governments are, in many cases, becoming but a means for robbery of the people.
We have prohibited hereditary distinctions, we have forbidden titles of nobility; yet there is growing up an aristocracy of wealth as powerful and merciless as any that ever held sway. ... read the whole speech
Not work enough! Why, what is work? Productive work is simply the application of human labor to land, it is simply the transforming, into shapes adapted to gratify human desires, of the raw material that the Creator has placed here. Is there not opportunity enough for work in this country? Supposing that, when thousands of men are unemployed and there are hard times everywhere, we could send a committee up to the high court of heaven to represent the misery and the poverty of the people here, consequent on their not being able to find employment.
What answer would we get?
What could we ask the Creator to furnish us with that is not already here in abundance? He has given us the globe amply stocked with raw materials for our needs. He has given us the power of working up this raw material.
If there seems scarcity, if there is want, if there are people starving in the midst of plenty, is it not simply because what the Creator intended for all has been made the property of the few? And in moving against this giant wrong, which denies to labor access to the natural opportunities for the employment of labor, we move against the cause of poverty. ... read the whole article
Henry George: The Wages of Labor
We see that the law of justice, the law of the Golden Rule, is not a mere counsel of perfection, but indeed the law of social life. We see that, if we were only to observe it, there would be work for ail, leisure for all, abundance for all; and that civilisation would tend to give to the poorest not only necessaries, but all reasonable comforts and luxuries.
We see that Christ was not a mere dreamer when He told men that if they would seek the kingdom of God and its right doing they might no more worry about material things that do the lilies of the field about their raiment; but that He was only declaring what political economy in the light of modern discovery shows to be a sober truth.
There are many who, feeling bitterly the monstrous wrongs of the present distribution of wealth, are animated only by a blind hatred of the rich and fierce desire to destroy existing social adjustments. This class is indeed only less dangerous than those who proclaim that no social improvement is needed or is possible. ...
The organisation of man is such, his relations to the world in which he is placed are such – that is to say, the immutable laws of God are such that it is beyond the power of human ingenuity to devise any way by which the evils born of the injustice that robs men of their birthright can be removed otherwise than by opening to all the bounty that God has provided for all!
Since man can live only on land and from land since land is the reservoir of matter and force from which man’s body itself is taken, and on which he must draw for all that he can produce – does it not irresistibly follow that to give the land in ownership to some men and to deny to others all right to it is to divide mankind into the rich and the poor, the privileged and the helpless?
Does it not follow that those who have no rights to the use of land can live only by selling their labor to those who own, the land?
Does it not follow that what the Socialists call “the iron law of wages,” what the political economists term “the tendency of wages to a minimum,” must take from the landless mass of mere laborers – who of themselves have no power to use their labor – the benefits of any advance or improvement that does not alter this unjust division of land?
Having no Power to employ themselves, they must, either as labor-sellers or land-renters, compete with one another for permission to labor; and this competition with one another of men shut out from God’s inexhaustible storehouse, must ultimately force wages to their lowest point, the point at which life can just be maintained. ...
It is assumed that there are in the natural order two classes, the rich and the poor, and that laborers naturally belong to the poor. It is true that there are differences in capacity, in diligence, in health and in strength, that may produce differences in fortune. These, however, are not the differences that divide men into rich and poor. The natural differences in powers and aptitudes are certainly not greater than are natural differences in stature. But while it is only by selecting giants and dwarfs that we can find men twice as tall as others, yet in the difference between rich and poor that exists today we find some men richer than others by the thousand-fold and the million-fold!
Nowhere do these differences between wealth and poverty coincide with differences in individual powers and aptitudes. The real difference between rich and poor is the difference between those who hold the toll gates and those who pay toll; between tribute receivers and tribute yielders.
To assume that laborers, even ordinary manual laborers, are naturally poor is to ignore the fact that labor is the producer of wealth, and to attribute to the Natural Law of the Creator an injustice that comes from man’s impious violation of His benevolent intention.
In the rudest stage of the arts it is possible, where justice prevails, for all well men to earn a living. With the labor-saving appliances of our time, it should be possible for all to earn much more. And so, to say that poverty is no disgrace, is to convey an unreasonable implication; since, in a condition of social justice, it would, except where sought from religious motives or imposed by unavoidable misfortune, imply recklessness or laziness. ... read the whole articleHenry George: The Single Tax: What It Is and Why We Urge It (1890)
From the Single Tax
may expect these
(c) The taxation of the processes and products of labor on one hand, and the insufficient taxation of land values on the other, produce an unjust distribution of wealth which is building up in the hands of a few, fortunes more monstrous than the world has ever before seen, while the masses of our people are steadily becoming relatively poorer. These taxes necessarily fall on the poor more heavily than on the rich; by increasing prices, they necessitate a larger capital in all businesses, and consequently give an advantage to large capitals; and they give, and in some cases are designed to give, special advantage and monopolies to combinations and trusts. On the other hand, the insufficient taxation of land values enables men to make large fortunes by land speculation and the increase of ground values -- fortunes which do not represent any addition by them to the general wealth of the community, but merely the appropriation by some of what the labor of others creates.
This unjust distribution of wealth develops on the one hand a class idle and wasteful because they are too rich, and on the other hand a class idle and wasteful because they are too poor. It deprives men of capital and opportunities which would make them more efficient producers. It thus greatly diminishes production.
(d) The unjust distribution which is giving us the hundred-fold millionaire on the one side and the tramp and pauper on the other, generates thieves, gamblers, and social parasites of all kinds, and requires large expenditure of money and energy in watchmen, policemen, courts, prisons, and other means of defense and repression. It kindles a greed of gain and a worship of wealth, and produces a bitter struggle for existence which fosters drunkenness, increases insanity, and causes men whose energies ought to be devoted to honest production to spend their time and strength in cheating and grabbing from each other. Besides the moral loss, all this involves an enormous economic loss which the Single Tax would save.
(e) The taxes we would abolish fall most heavily on the poorer agricultural districts, and tend to drive population and wealth from them to the great cities. ... read the whole article
Ted Gwartney: Estimating Land Values
Not only is land rent a potentially important source of public revenue, the tax on land is a means of limiting excessive speculation in land prices. This would ensure that the equal opportunity to be productive would be available to all citizens. With limited money to invest, people could invest in productive equipment and wages, rather than in high land prices which produce no additional tangible wealth. ...
THE SOURCE OF PUBLIC REVENUE
What are the factors that cause land to have market value and to whom does this market revenue advantage properly belong? Land has market value for three reasons:
Land rent is the price that people and businesses are willing to pay for the exclusive right to possess and use a good land site for a period of time. For example, people prefer to use sites of good location because it gives them an advantage of spending less time in travel by being near what they choose to do and where they work. A businessman can sell more goods at a site where many people pass each day, compared to a site where only a few people would pass.
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.
It is the responsibility of the local communities to insure that the market rent of land is collected for public purposes. When a major part of land rent is not collected, which is the case in most of the world today, land title holders obtain rights to sell the value of the public improvements which were made by the whole community. The community added to the market value to land by making improvements which increases demand and rent for the land. The longer the possessors hold the land out of use the greater will be the bonus they obtain.
By prohibiting people from using good land, the possessors force the premature use of other less desirable land, which is more distant from the city. This raises the cost of community improvements and the rental value of the unused, but better located, land. This precipitates the degradation of the rural environment by using city land inefficiently -- and creates huge unnecessary pressures on the natural environment. ...
As new inventions and more efficient ways of producing goods are discovered, people's economic well-being is not improved, because they have lost access to land and must pay both rent and taxes. (5) Instead of rent being used to provide community services, capital and wages must be depleted, which obstructs private enterprise. When the rent of land is taken for public purposes production and distribution are not held back. This is because the same amount of rent would otherwise have been taken by some private individual. The rent would be the same, the difference is how it is utilized. There is evidence that communities who raise their revenue from land, rather than from labor and capital, are more prosperous, many increasing productivity by more than 25%.
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 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. ... Read
the whole article
Kris Feder: Progress and Poverty Today
Most economists deem it their business to evaluate the efficiency of policy choices, but, claiming no special knowledge of ethics, they leave it to philosophers and the political process to evaluate questions of justice. Can it be true that society's arrangements to provide for common needs must always confront a divisive choice between equity and efficiency - between what is fair and what is feasible?
Henry George not only denied it; he asserted the reverse: Full recognition of economic rights and responsibilities would reveal the goals of equity and efficiency to be mutually reinforcing. Neither social justice nor a well-functioning free market system can long be enjoyed without the other. "The laws of the universe are harmonious," George proclaimed. His analysis showed that the root cause of widening inequality lies not in the laws of nature, but in social maladjustments which ignore them. Moreover, the breach of justice which underlies the problem of poverty is not merely incidental to economic development; it impedes development, leading to wider and wider inequality.
George emphasized that unequal distribution is itself wasteful of wealth.
Unemployment and underemployment of labor mean that energy and intelligence go untapped. For those who find work, he said, high wages stimulate creativity, invention, and improvement, while low wages encourage carelessness. Inadequate education of the poor multiplies the loss. There are the damages done by poverty-related vice and crime, and the substantial costs of protecting society against them. There is the burden upon the wealthy of providing welfare support for the very poor - or risking social upheaval if they do not. Moreover, said George, social institutions by which some prosper at others' expense cause talent and resources to be diverted from productive enterprise to unproductive conflict, as individuals find that competing for political advantage can be more lucrative than competing for market success.
In short, an unjust system of privileges and entitlements tends to cause misallocation of resources, macroeconomic instability and stagnation, political corruption, and social conflict that ultimately may threaten whole civilizations.
George's central contribution was to show that the distinction between individual property and common property forms a rational basis for distinguishing the domain of public activity from that of the private. This distinction leads him to a theory of public finance that reconciles the competing insights of socialism and laissez-faire capitalism. By a simple fiscal device, the revenue arising from common property can be captured for the public treasury and applied to the common benefit, so that government may assume needed general functions without interfering with individual incentives.
Georgist (or "geoclassical") economic analysis
A civilization which tends to concentrate wealth and power in the hands of a fortunate few, and to make of others mere human machines, must inevitably evolve anarchy and bring destruction. But a civilization is possible in which the poorest could have all the comforts and conveniences now enjoyed by the rich; in which prisons and almshouses would be needless, and charitable societies unthought of. Such a civilization waits only for the social intelligence that will adapt means to ends. Powers that might give plenty to all are already in our hands. Though there is poverty and want, there is, yet, seeming embarrassment from the very excess of wealth-producing forces. "Give us but a market," say manufacturers, "and we will supply goods without end!" "Give us but work!" cry idle men....
The progress of civilization requires that more and more intelligence be devoted to social affairs, and this not the intelligence of the few, but that of the many. We cannot safely leave politics to politicians, or political economy to college professors. The people themselves must think, because the people alone can act.
In a "journal of civilization" a professed teacher declares the saving word for society to be that each shall mind his own business. This is the gospel of selfishness, soothing as soft flutes to those who, having fared well themselves, think everybody should be satisfied. But the salvation of society, the hope for the free, full development of humanity, is in the gospel of brotherhood -- the gospel of Christ. Social progress makes the well-being of all more and more the business of each; it 'binds all closer and closer together in bonds from which none can escape. He who observes the law and the proprieties, and cares for his family, yet takes no interest in the general weal, and gives no thought to those who are trodden under foot, save now and then to bestow alms, is not a true Christian. Nor is he a good citizen. The duty of the citizen is more and harder than this. . . .
The mere growth of society involves danger of the gradual conversion of government into something independent of and beyond the people, and the gradual seizure of its powers by a ruling class -- though not necessarily a class marked off by personal titles and a hereditary status, for, as history shows, personal titles and hereditary status do not accompany the concentration of power, but follow it. ...
But to the changes produced by growth are, with us, added the changes brought about by improved industrial methods. ...
It is not merely positively, but negatively, that great aggregations of wealth, whether individual or corporate, tend to corrupt government and take it out of the control of the masses of the people. "Nothing is more timorous than a million dollars -- except two million dollars." Great wealth always supports the party in power, no matter how corrupt it may be. It never exerts itself for reform, for it instinctively fears change. It never struggles against misgovemment. When threatened by the holders of political power it does not agitate, nor appeal to the people; it buys them off. It is in this way, no less than by its direct interference, that aggregated wealth corrupts government, and helps to make politics a trade. Our organized lobbies, both legislative and Congressional, rely as much upon the fears as upon the hopes of moneyed interests. When "business" is dull, their resource is to get up a bill which some moneyed interest will pay them to beat. So, too, these large moneyed interests will subscribe to political funds, on the principle of keeping on the right side of those in power, just as the railroad companies deadhead [transport for free] President [Chester A.] Arthur when he goes to Florida to fish.
The more corrupt a government the easier wealth can use it. Where legislation is to be bought, the rich make the laws; where justice is to be purchased, the rich have the ear of the courts. And if, for this reason, great wealth does not absolutely prefer corrupt government to pure government, it becomes none the less a corrupting influence. A community composed of very rich and very poor falls an easy prey to whoever can seize power. The very poor have not spirit and intelligence enough to resist; the very rich have too much at stake.
Developments in America
The rise in the United States of monstrous fortunes, the aggregation of enormous wealth in the hands of corporations, necessarily implies, the loss by the people of governmental control. Democratic forms may be maintained, but there can be as much tyranny and misgovemment under democratic forms as any other -- in fact, they lend themselves most readily to tyranny and misgovernment. Forms count for little. The Romans expelled their kings, and continued to abhor the very name of king. But under the name of Caesars and Imperators, that at first meant no more than our "Boss," they crouched before tyrants more absolute than kings. We have already, under the popular name of "bosses," developed political Caesars in municipalities and states. If this development continues, in time there will come a national boss. We are young; but we are growing. The day may arrive when the "Boss of America" will be to the modem world what Caesar was to the Roman world. This, at least, is certain: Democratic government in more than name can exist only where wealth is distributed with something like equality-where the great mass of citizens are personally free and independent, neither fettered by their poverty nor made subject by their wealth. There is, after all, some sense in a property qualification. The man who is dependent on a master for his living is not a free man. To give the suffrage to slaves is only to give votes to their owners. That universal suffrage may add to, instead of decreasing, the political power of wealth we see when mill-owners and mine operators vote their hands. The freedom to earn, without fear or favor, a comfortable living, ought to go with the freedom to vote. Thus alone can a sound basis for republican institutions be secured. How can a man be said to have a country where he has no right to a square inch of soil; where he has nothing but his hands, and, urged by starvation, must bid against his fellows for the privilege of using them? When it comes to voting tramps, some principle has been carried to a ridiculous and dangerous extreme. I have known elections to be decided by the carting of paupers from the almshouse to the polls. But such decisions can scarcely be in the interest of good government.
Beneath all political problems lies the social problem of the distribution of wealth. This our people do not generally recognize, and they listen to quacks who propose to cure the symptoms without touching the disease. "Let us elect good men to office," say the quacks. Yes; let us catch little birds by sprinkling salt on their tails!
It behooves us to look facts in the face. The experiment of popular government in the United States is clearly a failure. Not that it is a failure everywhere and in everything. An experiment of this kind does not have to be fully worked out to be proved a failure. But speaking generally of the whole country, from the Atlantic to the Pacific, and from the Lakes to the Gulf, our government by the people has in large degree become, is in larger degree becoming, government by the strong and unscrupulous. ...
That he who produces should have, that he who saves should enjoy, is consistent with human reason and with the natural order. But existing inequalities of wealth cannot be justified on this ground. As a matter of fact, how many great fortunes can be truthfully said to have been fairly earned? How many of them represent wealth produced by their possessors or those from whom their present possessors derived them? Did there not go to the formation of all of them something more than superior industry and skill? Such qualities may give the first start, but when fortunes begin to roll up into millions there will always be found some element of monopoly, some appropriation of wealth produced by others. Often mere is a total absence of superior industry, skill or self-denial, and merely better luck or greater unscrupulousness. ...
Sources of Great Wealth
An acquaintance of mine died in San Francisco recently, leaving $4,000,000, which will go to heirs to be looked up in England. I have known many men more industrious, more skilful, more temperate than he -- men who did not or who will not leave a cent. This man did not get his wealth by his industry, skill or temperance. He no more produced it than did those lucky relations in England who may now do nothing for the rest of their lives. He became rich by getting hold of a piece of land in the early days, which, as San Francisco grew, became very valuable. His wealth represented not what he had earned, but what the monopoly of this bit of the earth's surface enabled him to appropriate of the earnings of others.
A man died in Pittsburgh, the other day, leaving $3,000,000. He may or may not have been particularly industrious, skilful and economical, but it was not by virtue of these qualities that he got so rich. It was because he went to Washington and helped lobby through a bill which, by way of "protecting American workmen against the pauper labor of Europe," gave him the advantage of a sixty-per-cent, tariff. To the day of his death he was a stanch protectionist, and said free trade would ruin our "infant industries." Evidently the $3,000,000 which he was enabled to lay by from his own little cherub of an "infant industry" did not represent what he had added to production. It was the advantage given him by the tariff that enabled him to scoop it up from other people's earnings.
This element of monopoly, of appropriation and spoliation will, when we come to analyze them, be found largely to account for all great fortunes....
Take the great Vanderbilt fortune. The first Vanderbilt was a boatman who earned money by hard work and saved it. But it was not working and saving that enabled him to leave such an enormous fortune. It was spoliation and monopoly. As soon as he got money enough he used it as a club to extort from others their earnings. He ran off opposition lines and monopolized routes of steamboat travel. Then he went into railroads, pursuing the same tactics. The Vanderbilt fortune no more comes from working and saving than did the fortune that Captain Kidd buried.
Or take the great Gould fortune. Mr. Gould might have got his first little start by superior industry and superior self-denial. But it is not that which has made him the master of a hundred millions. It was by wrecking railroads, buying judges, corrupting legislatures, getting up rings and pools and combinations to raise or depress stock values and transportation rates.
So, like wise, of the great fortunes which the Pacific railroads have created. They have been made by lobbying through profligate donations of lands, bonds and subsidies, by the operations of Credit Mobilier and Contract and Finance Companies, by monopolizing and gouging. And so of fortunes made by such combinations as the Standard Oil Company, the Bessemer Steel Ring, the Whisky Tax Ring, the Lucifer Match Ring, and the various rings for the "protection of the American workman from the pauper labor of Europe."
Or take the fortunes made out of successful patents. Like that element in so many fortunes that comes from the increased value of land, these result from monopoly, pure and simple. And though I am not now discussing the expediency of patent laws, it may be observed, in passing, that in the vast majority of cases the men who make fortunes out of patents are not the men who make the inventions.
Through all great fortunes, and, in fact, through nearly all acquisitions that in these days can fairly be termed fortunes, these elements of monopoly, of spoliation, of gambling run. The head of one of the largest manufacturing firms in the United States said to me recently, "It is not on our ordinary business that we make our money; it is where we can get a monopoly." And this, I think, is generally true.
I am not denouncing the rich, nor seeking, by speaking of these things, to excite envy and hatred; but if we would get a clear understanding of social problems, we must recognize the fact that it is due
that some men are enabled to get so enormously rich while others remain so miserably poor. If we look around us and note the elements of monopoly, extortion and spoliation which go to the building up of all, or nearly all, fortunes, we see on the one hand now disingenuous are those who preach to us that there is nothing wrong in social relations and that the inequalities in the distribution of wealth spring from the inequalities of human nature; and on the other hand, we see how wild are those who talk as though capital were a public enemy, and propose plans for arbitrarily restricting the acquisition of wealth. Capital is a good; the capitalist is a helper, if he is not also a monopolist. We can safely let any one get as rich as he can if he will not despoil others in doing so. There are deep wrongs in the present constitution of society, but they are not wrongs inherent in the constitution of man nor in those social laws which are as truly the laws of the Creator as are the laws of the physical universe. They are wrongs resulting from bad adjustments which it is within our power to amend. The ideal social state is not that in which each gets an equal amount of wealth, but in which each gets in proportion to his contribution to the general stock. And in such a social state there would not be less incentive to exertion than now; there would be far more incentive. Men will be more industrious and more moral, better workmen and better citizens, if each takes his earnings and carries them home to his family, than where they put their earnings in a "pot" and gamble for them until some have far more than they could have earned, and others have little or nothing. ... Read the entire article
Albert Jay Nock — Henry George: Unorthodox American
Alanna Hartzok: In the History of Thought: Henry George's "Single Tax"
One day, while riding horseback in the Oakland hills, merchant seaman and journalist Henry George had a startling epiphany. He realized that speculation and private profiteering in the gifts of nature were the root causes of the unjust distribution of wealth. The insights presented in Progress and Poverty, George's masterwork, launched him to fame. His policy approach was known at that time as the "single tax" - meaning that taxation should be shifted off of labor and onto the socially created surplus value of land and other natural resources. His message reached as far as the great Russian Leo Tolstoy, who was so taken with the idea that he frequently referred to George and "Georgism" in his novel Resurrection.
During the last 20 years of the 19th century George built an impressive populist movement bent on solving the problem of the wealth gap, and he died in 1897 while campaigning to be New York's mayor. The "Georgists" were determined to free labor and all productive effort from the burden of taxation. Land and natural resources were gifts of nature to be fairly shared by all. The role of government would be to secure democratic rights to the earth for all people via the collection of resource rents, the surplus value accruing to natural wealth, which would be distributed in social goods, services or by direct citizen dividends.
But just as this solution to the rich/poor gap was gaining momentum, the Georgist movement was stopped in its tracks. Wealthy individuals poured their money into leading schools of economics to encourage the writing of treatises against George and the movements he had spawned. The ethical perspective that land is a common heritage and the policy approach of land value taxation were subsequently eliminated from the field of economics. The newly dominant theory focused on only two primary factors -- labor and capital -- with capital having the upper hand as "employing labor." "Labor," of course, is quite capable of self-employment given access to land. This is what the elites and the plutocrats feared most - that labor would gain full power to directly produce capital given conditions of equal rights to the resources of the earth. ... Read the whole article
The wealth gap is increasing in the US. According to the latest Federal Reserve data, the top 1% of the population has $2 trillion more wealth than the bottom 90 percent.
Perceptions of the causal factors of these statistics and the suffering of so many who lack basic necessities in this wealthy country are most often simplistic explanations - these people lack money and they lack money because they lack jobs or their wages are too low, or housing costs are too high. For those concerned about the growing wealth gap in America and worldwide, and the resultant poverty, homelessness, hunger and food insecurity, the dilemma usually bogs down into supply or demand side efforts to find solutions. But the root cause is a deeper injustice.
The primary cause of the enormous and growing wealth gap is that the land and natural resources of the earth are treated as if they are mere market commodities from which a few are allowed to reap massive private profits or hold land and resources out of use in anticipation of future profits. Henry George, the great 19th century American political economist and social philosopher, proposed a solution to a problem that too few understood at the time and too few understand today. Early Christian teachings drew upon deep wisdom teachings of the Jubilee justice tradition when they addressed this problem. The problem is the Land Problem.
The Land Problem takes two primary forms: land price escalation and concentrated land ownership.
In order to show that there was NO NEED for land reform in Central America because our land in the US is even more concentrated in ownership than Central America, Senator Jesse Helms read these facts into the Congressional Record in 1981:
A United Nations study of 83 countries showed that less than 5% of rural landowners control three-quarters of the land. Other studies on land ownership report these facts:
The basic human need for food and shelter requires access of labor to land. With access to land people can produce the basic requirements of life. Access to land provides an enabling environment for life itself and thus meets the minimum requirement of love, meaning fairness in human relations based on the fundamental equal right to exist. The Land Problem in its two forms - the inequitable ownership and control of land and natural resources and the treatment of land as a market commodity - is the root cause of the great amount of human deprivation and suffering from lack of the basic necessities of life. And yet the human right to the earth is missing from the Bill of Rights, the Universal Declaration of Human Rights, and the Covenant on Economic, Social and Cultural Human Rights.Nic Tideman: The Shape of a World Inspired by Henry George
Democratic governance has not yet concerned itself with a "first principle" question. This question concerns property rights in land - property rights in the earth itself. The question is, "Who Should Own the Earth?" The question of "Who Should Own the Earth?" is a fundamental question. In venues when this question is asked, the answer is always the same. The answer is, "everyone should own the earth and on an equal basis as a birthright."
The right to the earth has yet to be pronounced in human rights covenants. Democracy is unclear, ethically weak, and on shaky ground when it comes to the question of the right to the land and resources of the earth. Democracy as presently constituted lacks this most fundamental and basic human right - the equal right to earth. The right to the earth is the great undiscovered revolution in both American and global politics. ... read the whole article
How would the world look if its political institutions were shaped by the conception of social justice advanced by Henry George?Mason Gaffney: Property Tax: Biases and Reforms
Priority #1. Safeguarding the property tax
Priority #2: Enforce Good Laws
Priority #3. De-Balkanize Tax Enclaves
Priority #4. What Tax to Fight First?
Priority #5: Make Landowners Pay Their Taxes
Throughout history - and even today - wealth and privilege has been based upon ownership of land and monopoly. Economics, unchecked and in ignorance of the land and rent question, remains "the caveman's law, the law of the sharpest tooth, the angriest brow and the greediest maw." (so said Al Smith, Governor of New York and presidential candidate during the 1920s)
But we know there is a better way. The recognition that "territoriality" may be necessary as the law of survival for lower species is not borne out for mankind; for humanity there is a higher order. The human condition, the dignity of man and the aspiring benevolence that are made material by way of man's free association and the free exchange of labor and its handmaiden - capital.
Land rent is socially created, it is the fruit of the loins of unfettered labor and capital. Monopoly and privilege are the highwaymen who rob us of the means to end poverty, slums and depression. This is the promise of LVT. This is the big idea. The hope. Something to believe in - its time surely has come. Read the whole article
Mason Gaffney: The Taxable Capacity of Land
Another attractive feature of land taxation is its interesting positive effect on the economic base of a city. It strengthens it by its tendency to hit absentee owners harder than resident owners. The land fraction in real estate is generally highest in the CBD of any city, so that is a favorite place for absentees to buy and hold. They like the steady income, and the "trophy" quality. The surplus in real estate is what attracts outside buyers, and land is what yields the surplus. About 2/3 of downtown Los Angeles is owned by non-resident aliens, for example. In a more workaday city, Milwaukee, the absentee owners consist of former residents, or their heirs, who grew too rich to abide the harsh winters.
Consider the effect on your balance of payments. When you get more tax money from absentees, money that used to flow to Tehran, Zurich, or Palm Beach now flows into your local treasury to pay your local teachers and city workers, and relieve your builders and building managers. In this way taxing land actually acts to undergird the value of its own base. ... Read the whole article
Introduction: Resolutions vs. trade-offs
1. Equity, Efficiency, and Incentives
a. Equity and efficiency
b. Reconciling progressivity and motivation.
2. Reconciling demand side and supply side economics
a. Aggregate. Consumption and production
b. Investing and Saving
3. Micro "structural" reform coupled with macro reform
4. Local, state, and national applications
5. Relieving labor without burdening capital
6. Urban renewal without subsidizing evictions
7. Contains urban sprawl, improves urban linkages among complementary land uses, without overriding market choices.
a. Taxing land sharpens market incentives via the leverage effect noted earlier.
b. Fosters resident ownership, civic participation
8. Reconciles common rights to land with private tenure
9. Paying the debt while also making jobs
10. Making labor cheaper to hire without lowering wage rates
11. Adding people and capital w/o diluting resource base
12. Fostering economy in government in the very process of raising revenue
13. Enhance evironment and conserve resources while making jobs
A summary of reconciliations
1. Couples equity with efficiency.
2. Couples progressivity with motivation. Abates concentration of wealth and power while widening the scope of productive ambition and enterprise.
3. Makes more jobs without inflation. Raises demand-side and supply-side together, "leveling them upwards."
4. Raises both inducement to invest and inducement to save, at any income level. Also raises saving by raising income level.
5. Couples structural reform and macro reform.
6. May be applied at local, state, and national levels, together or jointly, in small degrees or large.
7. Relieves labor of taxation without burdening capital, and vice versa.
8. Renews cities without subsidizing evictions.
9. Contains urban sprawl, infills and coordinates cities without superimposing planning on the market.
10. Fosters resident ownership and civic participation without laws against absentee ownership, or other use of compulsion, but in the very process of lubricating land markets.
11. Asserts common rights to land while strengthening private tenure. Permits of privatizing without giveaway.
12. Allows paying off public debts while fostering full employment through (true) fiscal stimulus.
13. Makes labor cheaper to hire while raising real wage rates (take-home pay, disposable income). Thus makes jobs without lowering wage rates or "making work."
14. Lets regions, nations, and the world add population and capital without diluting their resource bases.
15. Fosters economy in government in the process of raising revenue.
16. Saves the environment in the process of intensifying land use.
17. Smoothes business cycles without depending solely on contra-cyclical fiscal or monetary policy. Stabilizes and secures financial institutions with only minimal regulation.
18. Effects land reform and redistribution abroad and at home, urban as well as rural, without government expense, and without acreage limitations, working through free markets.
19. Equalizes credit ratings for land buyers without any controls over lenders.
Dismal trade-offs, deadlocks, and standoffs are just mental blocks and smokescreens. Henry George began with a quest for justice in sharing the rent surplus. He found that justice and efficiency are not at odds, we can have both. This trade-off that many economists expound is a stall, a put-off to enervate and unman us so we won't do anything. It may ease the conscience to think justice must be sacrificed for efficiency, and schools starved and libraries closed to free up incentives, so nothing, really, can ever be done. We all feel compassion by nature but, to survive and stay whole in this world of beggars and bandits, learn to harden our hearts and cork it in. We learn to screen out evidence of suffering and injustice, and rationalize what we cannot deny. This mindset, while understandable, is unaffordable in a period of dangerous national decline, and growing division between haves and have-nots.
What we have shown here is not just that we can have both justice and efficiency, but more, we cannot have either one without the other. If we don't share rents efficiently, in the Georgist manner, social and political pressures will continue to cause inefficient sharing and eventual dissipation.
Economic discourse is afflicted with pessimists who firmly cling to mutually inconsistent positions at the same time, each posing an insoluble problem. Some, for example, believe the world is racing to starvation, and favor limiting demand through birth control, while in another context they deplore "overproduction," or "underconsumption," and favor choking off farm production to keep farmers from losing money. George, of course, would see demand as the answer to supply, and land as the field on which the twain may meet and satisfy each other, leveling them upwards.
Again, some favor cheap power and good roads for rural areas, regardless of cost, and then favor low-density zoning to keep people out. George, of course, would favor infilling to make full use of short interior lines at high capacity, and lower cost per customer.Epilogue: how the public demonstrates its preference for resolutions over dismal choices
A land tax abates concentration of wealth and power without limiting ambition or enterprise. It taxes wealth while sparing both capital and income. It puts no cap on ambition and enterprise, except to redirect those useful traits into creation, production, hiring, and capital formation, and away from the zero-sum game of land-grabbing.
It requires no incentive-warping progressive rate: all land is taxed at the same rate, in proportion to value. The tax achieves progressivity by using the observed reality that wealth rises with income, faster than income; and landholdings rise with wealth, faster than wealth. Otherwise put, the land tax offsets concentration because ownership of wealth is more concentrated than income; and ownership of land is more concentrated than other forms of wealth. As George said, "The great cause of the concentration of wealth is concentration of the ownership of land."
At the state or local level, George's program is the answer to California Governor Pete Wilson' dilemma, and every governor's dilemma:
The unique, remarkable quality of a property tax based on land ex buildings is that you may raise the rate with no fear of driving away business, construction, people, jobs, or capital! You certainly will not drive away the land, however high the tax rate. Not one square foot will walk out of town. The only bad thing to say about this tax's incentive effects is that it stimulates revitalization, and makes jobs. If some people think that is bad, maybe they are the problem. So George's simple program not only reconciles efficiency and equity, it squares taxes and incentives. Read the whole article
Mason Gaffney: Privatizing Land Without Giveaway (1990)
Credit follows collateral. In periods of high and rising land prices, borrowers get used to pledging land to secure loans, and lenders get used to demanding it. Socializing land rent, as proposed herein, lowers or eliminates the value of land as loan collateral.
On the good side, this lack of land collateral would stop lenders' discriminating in favor of landowners, as they do now. It would remove a major cause of the concentration of economic power and control, that is the clustering of credit around original nuclei of large, superior landholdings. The credit is often used to buy still more land, to reserve for possible future use and at the same time to withhold from competitors. Such concentration and market control form the ugly side of extant Western "capitalism," when enterprise degenerates into greed and acquisitions supplant innovations.... read the whole articleMason Gaffney: The Property Tax is a Progressive Tax
Property Ownership Is More Concentrated Than Income
To begin, a large share of the adult population -- half, as a rough measure -- are renters and own no meaningful value of taxable property at all. Most of these essentially propertyless adults do earn taxable wage income. (We consider later whether property taxes are shifted onto them.)
Savings rise with income, faster than income. With savings one acquires property, and we would naturally expect therefore higher income groups to own property in proportion to their greater saving, which is a disproportionately high share of their high incomes. And we would also expect a high share of high incomes to come from property.
Musgrave et al. support this. They rank 1948 U.S. "Spending Units" by income and group them, using Treasury sources of data. The highest class got 23% of the income, but 78% of dividend income and 45% of rental income, and only 12% of the wage and salary income.(14) Other sources might be cited, too.
Musgrave et al. omitted capital gains. These are probably the most concentrated source of income, and of course property-derived. Realized gains swell from virtually nothing at the $10,000 income level to about half of income at the million dollar level.(15) Unrealized accrued gains, which we should include in a proper Haig-Simons income concept, are probably larger yet, and more concentrated. There are no easy data on this, but several a priori and indirect reasons to think them concentrated. The rich have a comparative advantage in waiting for deferred cash. They are known to favor growth stocks, undistributed profits, speculative landholdings and unripe minerals, major sources of unrealized accruals.
Among those who do own material amounts of property, concentration is high relative to that of income. The top 10% of income receivers, as income is usually defined and reported, get about 30% of all income. Every study of property owners shows figures in another ballpark altogether. Table I summarizes what several such studies show about the top group. Note that most of these figures show only concentration among those who own enough property to be counted, thus understating concentration among the whole population. ...
Corporate shares are not taxable property, but of course corporate income is mostly derived from taxable property.(18) Some will object that corporations have many owners and should not be treated as single units. That is true, but again, it smacks of regression fallacy. Wealthy owners also have many corporations, and in general corporate shares are the most concentrated kind of asset.
Ownership of large property gives one control of other assets. Property is borrowing power and credit rating: all studies show interest rates to be very regressive with size and quality of collateral, and terms easier. But simple borrowing is only the beginning. With great wealth one goes into banking and exerts multiple leverage. The story has been told many times, if not as well, since Brandeis' Other Peoples' Money: collateral, leverage, conglomerates, interlocking directorates, mergers, lender suasion, industrial leadership, pyramiding, the Wallenberg Grip, subcontracting market power, control of dealerships, . . . . Control is power and status (psychic income), and control is a source of additional income, as revealed by the premium prices of shares during battles for control.
Data in Table I probably understate concentration, for four general reasons: omitting the unpropertied, accepting and reporting regressive assessments, accepting the bias in partial inventories, and accepting and reporting straw owners as separate owners.
1. Omitting the unpropertied. ...
2. Accepting regressive assessments as fact. ...
3. The bias in partial inventories ...
As to housing, it is the rich who have second homes, hobby farms, summer resorts, tax shelters, ski houses, Caribbean hideaways, lake frontage, and advance sites for future building. Yet studies of income and housing, from which some would damn the property tax, compare a full statement of income (at least wage income) with housing narrowly defined. Walter Morton (p. 143) goes so far as to judge the entire property tax on the basis of housing alone. He not only omitted second homes, but other property comprising half the total: commerce, industry, rental, vacant, farm, forest, mineral, water, and miscellaneous. Again, ownership of these is concentrated among those ranking high in the housing scale.
4. Accepting straw owners as separate owners ...
Here is an outline rationale for the property tax.
1. "Ability-to-pay" derives from wealth as well as current income. James Tobin, Arnold Zellner, Taylor and Houthakker, Harold Somers, and others have stressed this lately. The old cliche that "taxes are paid out of income" is as empty as the one that we consume "out of income." We spend money, and it is not labelled.
2. The property tax asserts a public equity in land which was won and is defended by joint efforts, and whose value derives from public works and spillovers, not from the owners' efforts. It exempts human effort, thus rewarding service to the community and denying the state any equity in the bodies of its citizens whose freedom and dignity is thus enhanced in their capacity as human beings, as distinct from owners of wealth.
3. Property taxes reduce the differential effect of inherited wealth on the current generation. They strike directly at concentration of economic and other power based on wealth, promoting competition and equal opportunity. Property as collateral is a source of invisible income (credit rating). Taxing property reduces the differential advantage of the rich in credit rationing.
4. Property income of a given dollar value places the receiver on a higher welfare plane than labor income, because he needn't work for it. $10,000 a year received by dint of working long hours in a coal mine with black lung disease is not the same as $10,000 plus a life of ease.
5. The property tax is needed to plug loopholes in the income tax, which is inexorably devolving into a payroll tax. Read the whole article
Mason Gaffney: Land as a Distinctive Factor of Production
The origin of property in land is not economic
After land is appropriated by a nation the original distribution is political. The nature of societies, cultures and economies for centuries afterwards are molded by that initial distribution, exemplified by the differences between Costa Rica (equal partition) and El Salvador with its fabled "Fourteen Families" (Las Catorce), or between Canada and Argentina.
Political redistribution also occurs within nations, as with the English enclosures and Scottish "clearances," when one part of the population in effect conquered the rest by political machinations, and took over their land, their source of livelihood. Reappropriation and new appropriation of tenures is not just an ancient or a sometime thing but an ongoing process. This very day proprietary claims to water sources, pollution rights, access to rights of way, radio spectrum, signal relay sites, landing rights, beach access, oil and gas, space on telephone and power poles (e.g. for cable TV), taxi licenses, etc. are being created under our noses. In developing countries of unstable government the current strong man, perhaps hanging by a thread, often grants concessions to American adventurers who can bolster his hold on power by supplying both cash up front, and help from various US and UN agencies from the IMF to the United States Marine Corps. ...
Selling land in large blocks under frontier conditions is to sell at a time before it begins yielding much if any rent. It is bid on by those few who have large discretionary funds of patient money. Politicians, meantime, treat the proceeds as current revenues used to hold down other taxes today, leaving the nation with inadequate revenues in the future.
Ownership and tenure rights derive only from appropriation, not saving, investment or production. Capital, by contrast, is owned by those who formed it. Only after that does capital bear much resemblance to land in that they coexist. Standard micro‑economics obscures the differences because it deals mainly with relations of coexistence, ignoring the continual formation and destruction of capital, ignoring time and relations of sequence. Thus it excludes from its purview the differences between land and capital. Micro deals mainly with how existing resources are allocated at a moment in time, not how they originate, grow, flourish, reproduce, age, senesce and die.
Inertia, both financial and political, transmitted through generations by inheritance, is a major control over the distribution of wealth and income. How else can one explain their exceedingly distorted distributions, in contrast with the normal distribution of most human abilities? Inertia extends the original pattern for generations. More, the advantages given by controlling discretionary funds (those not needed for subsistence) magnify the original political result. ...
The corollary of high land price is high carrying cost relative to cash flow.
Carrying cost is interest on the price of land. It varies with one's internal interest rate (IIR). For those with high IIRs, the carrying cost of land normally exceeds cash flow. Otherwise put, cash flow from land seldom covers carrying cost, while cash flow from depreciable capital covers more than its carrying cost because it normally has to be priced low enough for cash flow to cover both interest and depreciation. As to inventories of rising assets like steers or timber, they are like zero-coupon bonds: there is no cash flow before sale, but the famine leads to a feast of total recovery.
Since land lasts forever while demands for land grow, the normal expectation over long periods is that ground rents will rise. Present land value includes the discounted values of expected higher future rents. This makes current land values very high relative to current cash flows, which are less than expected future flows. In stock market terms, the Price/Earnings ratio of land is high, like that of a growth stock. This is more than an analogy, since a large share of the assets of corporations consist of land. In the USA, corporations are the major landholders. ...
Few people can invest heavily in an asset of high price and deferred yields. Those who can do so have a field with fewer competitors than most, and tend to expand widely. As Loyd Fisher, a rustic Nebraska land economist twanged to me and others 30 years ago, "When a rancher buys these days it ain't the quarters roundin' out, it's the sections gobblin' the quarters."
Those with existing cores of rent-yielding land -- “existing nuclei” -- enjoy a continual flow of discretionary funds they can use to buy more land. The advantage of a head start snowballs over time.
Buying with equity funds is only the beginning. Land is the basis for extending credit. The "sections" go to the banks for accommodation to buy the "quarters." As Rainer Schikele wrote, "The basis of credit is not marginal productivity, but collateral security." A major factor giving one a good credit rating is the prior ownership of land.
Thus, owning land is not just dominated by, but also dominates access to long-term credit. Here is a positive feedback loop: it takes good credit to buy land, and prior ownership of land gives one good credit. Those already owning land have access to more land at a lower carrying cost than those trying to enter the market from poverty. The result is a tendency for land to agglomerate in the hands of the financially strong (cf. B-8). ...
It follows that landownership is highly concentrated.
Land is a major basis, probably the major basis of the concentration of wealth. Political distribution, if egalitarian, may stave this off for a considerable time. There is also evidence that heavy land taxation, where that is applied, motivates subdivision. However, experience is that, in the absence of heavy taxation, the surplus of rent attracts absentee investors, and large concentrations reconstitute themselves inexorably. The writer and others have documented such concentration elsewhere.
What concentration means for bargaining power has been foreshadowed in B-3. What it means for market power is treated in B-11. ...
Amassing land is always done, can only be done, by shrinking the holdings of others. To expand is to preempt. If A is to have more then B, C, D et al. must have less, there is no other way. A can amass more capital by saving, creating new capital, leaving B, C, D et al. with as much as before. A can increase his labor income by working longer, or harder, or smarter, producing more, leaving others with as much as before. He and she together can also spawn more children: labor, like capital, is reproducible, and indefinitely augmentable. Possessing land, however, means just one thing: bumping others.
In the region of the mind, the thing possessed may be shared by all with no diminution to anyone. No one's pleasure In Shakespeare, or Beethoven, or understanding physics is any less because at the same time millions of others have the same pleasure. Art, letters and science are the common property of mankind, open to all who care to acquire them. The creative producer's pleasure is in proportion to the number with whom he shares. The gratification is from sharing, not excluding. The contrast with landholding is nearly total.
Amassing claims on wealth by creating and producing is not, therefore, a threat to others. Amassing capital through saving does not weaken or impoverish others. Producing goods does not interfere with others' doing the same. One producer may drive another from a particular limited market, but glutting one market increases real demand for the products of other markets, and raises the real value of others' incomes by lowering prices. Amassing land, however, has to deprive others, both relatively and absolutely. Concentrated holding and control of land, therefore, have always been threats to the well-being of those left out.
Conversely, the only way the landless, e.g. in South Africa, can get land is from those who now have it. "Growth" is often advanced as the solution to maldistribution, injustice and poverty, but that is mere temporizing because land does not grow. When production and demand grow, land rents rise. Of land it is starkly true, "the problem is not production, but distribution". There is no production; only distribution.
Massed control of land is the most natural base for monopolizing markets because land is limited. Buying land always does double duty: when A expands he ipso facto preempts opportunities from B. For example, a chain of service stations with most of the best comers in a town has market power, the more so if it also holds a large share of oil sources, of refinery sites, of "offset rights" to pollute air, transmission rights of way, harbor sites, and other such limited lands.
Preemption is not always just a by-product of expansion; it may be the main point. For example, in 1993 Builders' Emporium, a large chain of California hardware stores with large parking lots in good locations, closed down and sold out. The sites were bought up by the largest grocery chain in southern California, Vons Company. According to news reports, this is "a shut-out strategy against competitors." Vons will convert 6-8 Emporium stores to Vons' markets, and "hold onto the others until commercial rents rebound -- then market them to non-rivals."
Salomon Bros. analyst Jonathan Ziegler, far from being shocked, praises this as "ingenious." "You're controlling who's in your market area." Ralphs, another grocery chain, had been looking for sites and is now shut out. The stores remain empty today; the land idle. Read the whole article
Mason Gaffney: Oil and Gas Leasing: a Study in Pseudo-Socialism
Who buys to hold these vast reserves for distant future use? They are of investment grade only for those with waiting power. Unripe lands and resources are probably the most closely held assets there are. Poor people and small businessmen need busy capital right now. Only a few of the wealthiest people have the deep pockets and slack money to buy far ahead, to maintain high reserve/output ratios. These markets in far future values are their special preserve.
What is being bought? Are these not "leases," contracts to pay rent? No, these leases are not that. Here is the heart of Pseudo-Socialism. The U.S. Government leases mineral-prone lands under the "Bonus Bid System," whereby most of the payment is required up front in spot cash. This makes a "lease" more like a sale, a sale in which buyers are screened by their banking connections rather than by their ability to find and produce hydrocarbons.
The bonus system originated on private uplands. It was a way for big oil firms to dazzle various rustics, pressed for cash, by tempting them with front money for their mineral rights. The companies had the cash, the connections, and intimidating expertise; they wrote the rules their way. The rules included a cap of 12.5% on the long-term "royalty," the only means by which lessors participated over the long pull, and retained a share in gushers and bonanzas that proved in excess of original estimates - estimates much better known to the bidders than the lessors. When the companies moved onto public lands they brought the same system with them. It was by then an industry standard.
The only "bid variable" in this system is the bonus. With the royalty capped, there are large potential surpluses to attract bonus bids. The Physiocratic rule of compensation applies: a low royalty translates into a high leasehold value. The advantage of this to "the industry" - meaning the largest firms that are its most visible spokesmen and exemplars - is that it screens out many bidders, those pressed for front money. It reserves the field for a much smaller number of players, increasing their bargaining power.
All that may sound familiar to students of 19th Century American history, and the privatization of the vast Federal domain. It is a long story of conflict between cash sales and more democratic means of placing lands. Those with cash and bank connections naturally favored cash sales. President Jefferson saw the merit in credit sales, so from 1801-20, sales were on credit. The system was badly administered, but so were all other systems of land disposal tried in that era. Collections became a problem, yet landownership was democratized. It enabled Andrew Jackson to proclaim on Thanksgiving Day, 1835, "We thank Thee for the absence of unemployment which in the King-ridden countries of the world is causing widespread suffering among the toiling masses and has led to riots ... (and that) there will be none to freeze, starve, or be beset by the fear of want this winter or the winters yet to come." Read the entire article
Mason Gaffney: Rising Inequality and Falling Property Tax Rates
Vanishing Farmers and Unaffordable Farms
The Vanishing Middle Class; Gini Ratio
The Rise of Land Quality in Vast Farms
Rising Land Share and Rising Ratio of Price to Cash Flow
THE LESSER IMPROVEMENT OF BIGGER FARMS
Concentration of irrigated land
Land Concentration for Farms Ranked by Sales
Lack of buildings on latifundia
Lack of family labor on latifundia
Comparisons Among States
Lesser Improvement of Land in States with Larger Farms
Association of Property Taxation and Land Improvement
It is a common belief that property tax relief is "good for farmers." It certainly raises the private share of economic rent. That in turn raises the investment grade of farmland and encourages its purchase as a store of value, a place to park slack money. This may be at odds, however, with using it as a vehicle for enterprise and an outlet for workmanship. Lower farm property taxes are associated with lower ratios of capital to land, and labor to land, both over time and among states. They are also associated with bigger mean farm size and less equal distribution of farm sizes.
In the sections that follow, I first document the rise of inequality in the distribution of farmland that followed a sharp drop in farm property tax rates after 1930. Then I show, by cross-sectional analysis, a positive relationship between higher property tax rates and more intensive use of farmland, which in turn is associated with more equal distribution of farmland. Conversely, I find property tax relief associated with underuse and underimprovement of land.
A priori, a tax on buildings works to suppress building and to penalize smaller farmers, whose building to land ratio is higher than that of bigger farmers. The findings seem to show, therefore, a stronger countereffect, proincentive and pro-subdivision, of the other part of the property tax, the part based on land value.
Now, however, 34 percent of all irrigated land is in the top bracket, farms of 2,000 acres and over. (10) Control of irrigated land means control over water. Control of water gives control over arid lands roundabout. Ownership and control based on water have become highly concentrated. For farms with irrigated land, GR = .82, (11) substantially higher than the GR of .76 for all farms. ...
To sum up,
The combination means the agricultural ladder has been pulled up. Entry is nearly impossible for farmers lacking outside finance; exit and latifundiazation proceed apace. These changes accompanied and followed a 40 percent drop in farm property tax rates. ...
THE LESSER IMPROVEMENT OF BIGGER FARMS
A result of rising concentration is the separation of land from capital. With some exaggeration, American latifundia are now lands without buildings, but buildings cluster on smaller farms, many without enough land. This implies at least three points.
It is awkward that the 1987 Census of Agriculture defines "farm size," and ranks farms, only by acres rather than value. ...
Concentration of irrigated land
The yield per acre of most crops stays level or rises with harvested acres per farm. At the same time, sales per dollar of real estate fall somewhat. (21) The most likely reason is that the quality of harvested land rises with quantity. There is, to be sure, a trade-off between quality and quantity, but there is also a bond. Whoever can afford more can afford better. Which effect is stronger? The question must be resolved by data. ...
Comparing different crops, high values of GR go with crops that are mostly irrigated. For example, 85 percent of tomato acres and 14 percent of silage corn are irrigated. For tomatoes, GR = .91; for silage corn, GR = .52. (26)
(26) Those who find GR index numbers too abstract will find more meaning in these raw data. For tomatoes, the top acreage bracket contains 1.1 percent of the farms, 45 percent of the harvested acres, and 52 percent of the irrigated acres in tomatoes. For silage corn, the top bracket contains 1.0 percent of the farms, 11.3 percent of the harvested acres, and 26 percent of the irrigated acres in silage corn. ...
Lack of buildings on latifundia
The 1940 Census of Agriculture was the last to separate $L from $B, overall. In 1940 the building share of real estate value ($B/[$L+B], or BSREV) was .69 in the lowest acreage bracket, .31 for all farms, and .12 for farms of 1,000 acres and over.
AELOS (1988) gives no comparable comprehensive data, but it does give two series that test the point and have the advantage of disaggregation. One is for "owner-operators" and one for "landlords with debt." For the owner-operators, ranked by acres per farm, BSREV was .63 for farms under 10 acres; .29 for all farms; and .12 for farms of 2,000 acres and over. (37) Building values are much more equally distributed among these farms than land values. ...
The inverse relationship between PTR and GR is particularly consistent and noteworthy. ...
One may at least firmly conclude that large farm units are less improved and less peopled than small and medium-sized farms. There are two possible interpretations. One is that big farms are more efficient, getting more from less, but that is refuted by their getting less output per $L. The other is that Veblen was right, many of them are oversized stores of value, held first to park slack money and only secondly to produce food and fiber, and complement the owner's workmanship. The Florida 9 [the high LSREV states] may represent a home grown rural "third world" of large, underutilized landholdings that preempt the best land and force median farmers onto small farms on low-grade land.
The issue cannot be settled in a few words, but the implications for tax policy are the same either way. If large units are more efficient, they can bear heavier taxes. If they are less efficient, heavier PTRs will induce them to release surplus land for others, which will tend at the margins to equalize factor proportions, moving more states from the Florida toward the Wisconsin model. Read the whole article
Walt Rybeck: Have We Forgotten The Foundation?
The land ethic and land practices, which served our economy and cities so well, sadly fell into disrepair. Here are five of the more important reasons:
It calls to mind the routine where Jimmy Durante got caught steeling an elephant from a circus. A cop says, "Hey, where 'ya going with that elephant?" And Durante replies, "What elephant?" A century later, few question that we have an elephantine land problem.
However, too few have a clue about how to deal with land issues, or any notion that archeological digs into our history might provide useful answers. Instead, consider what's happening:
Urbanologists and the public need to be awakened to the central role played by taxation. They need to see that loss of our historic land tax has made speculation our top national sport -- a treacherous one at that. Read the entire articleMason Gaffney: The Red and the Blue
It is not just average incomes per capita that define the economic position of most people in a state or city. The distribution of income and wealth makes a lot of difference. But wait again: IRS data, and other data derived from IRS sources, vastly misstate the concentration of real income because they omit the imputed income of owner-occupied housing. Thus, a salary-earner paying high rent in the Gold Coast of Chicago has the same reported income as one on the same salary on the same Gold Coast who owns his own million dollar house or coop or condo, and pays no rent. More: the renter’s income is actually reported as higher, because the owner gets to deduct the costs of ownership, interest and property taxes. It’s the renters who turn Chicago blue - along with most big cities. ...Mason Gaffney: Who Owns Southern California?
The difference between tenants and owners is stark and obvious. There are also differences among owners. In poorer cities, the “skew” of home values is much less than in richer cities. “Skew” means inequality, and is measured in many ways. An easy way is the ratio of the mean home value to the median value: the higher the ratio, the greater the skew. In southern California, as we move from the red interior to the blue coast, the skew rises a lot, meaning the top values rise faster than the other values. Thus, in the blue counties the homeowners are less equal to each other. Here, too, there is a greater gap between tenants and homeowners; and there are more tenants.
The blue counties report higher incomes per person than the red inland counties. You might think this would compensate for their higher home values, but you’d be wrong. Moving from red to blue, home values rise faster than incomes. The National Association of Realtors (NAR) and its state affiliates report “Affordability Indexes” for different cities. These indexes show what fraction of the residents can afford to buy the median-priced home. The higher the median income, the lower the Affordability Index. Counter-intuitive? Again, that is because home values rise faster than incomes. The blue counties are those with lower affordability indexes.
The same pattern prevails nationwide. Median income ranges from a low of $36.3K in El Paso to a high of $91.5K in Washington, D.C., a ratio of 2.5/1. Median home values range from a low of $87K in Buffalo/Niagara Falls to a high of $531K in the San Francisco Bay area, a ratio of 6.1/1. This is a general pattern: incomes vary a little among places; home prices vary a lot. Blue states and blue counties are generally those where land is out of reach of a high fraction of the people.
What that means for social psychology and voting patterns I leave to you. One thing is clear: “income” is a catchword that has obscured analysis for Willkie’s fifty years, and more. To solve the red-blue voting puzzle, we must study land values. Read the whole article
These notes on concentration of landholdings were originally compiled in 1988 and have been updated from time to time since then. The most recent revisions were made in 1997.
1. HOLDINGS BY ALIENS
2. AMERICANS FROM OTHER STATES
Several million persons, perhaps half the resident adult population, hold titles to land in southern California. With so many holders, the median holding is perforce small, although well above the national median. But the mean holding is well above the median, indicating a skewed distribution.
All wealth distributions are skewed; so, to a lesser degree, are income distributions. Landholding, however, is more skewed than other distributions. In 1985 the Internal Revenue Service released a Report based on a study of 1983 estate tax returns. According to the Report, "More than one half of his (the mean top wealth-holder's) wealth was held as real estate and corporate stock, with real estate surpassing corporate stock as the most prominent asset in the top wealth-holder's portfolio." (AP dispatch by Jim Luther, Riverside Press Enterprise, 8 March 1985, p. A3.) This Report warrants careful study. ...
1. HOLDINGS BY ALIENS ... Non-resident aliens own about 75% of the "major" buildings in the L.A. CBD west of Broadway ...Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)
2. AMERICANS FROM OTHER STATES ... A second kind of holder is the out-of-state American, individual or corporate.
3. CALIFORNIANS Many of our largest landholders also live in California. This is partly because the lands are here, but moreso because certain places in California are good places to live. One of the advantages of receiving property as opposed to labor income is it lets one choose his residence. California ranks after New York in the number of rich Americans (using Forbes' list) who reside here.
Also included here are California-based corporations. A corporation's "base" refers simply to the site of its headquarters: its shareholders are scattered around the world, and the major shareholders, who exercise control, are effectively screened behind layers of trusts and financial institutions, so they are impossible to identify with certainty.
Institutions acquire land for their operations and then it tends to stick to them for various reasons. It is tax free, for one, so long as they retain it (and do not use it commercially). They are not subject to corporate raids. Thus there is no mechanism whereby the current opportunity cost of land is felt by management. It never appears in their budgets; they never need compete for or justify it. College Boards are not accountable to any public body, a precedent set by Marshall's U.S. Supreme Court in Dartmouth College v. Woodward, 1819.
John Muir is right. "Tug on any one thing and find it connected to everything else in the universe." Tug on the property tax and find it connected to urban slums, farmland loss, political favoritism, and unearned equity with disrupted neighborhood tenure. Echoing Thoreau, the more familiar reforms have failed to address this many-headed hydra at its root. To think that the root could be chopped by a mere shift in the property tax base -- from buildings to land -- must seem like the epitome of unfounded faith. Yet the evidence shows that state and local tax activists do have a powerful, if subtle, tool at their disposal. The "stick" spurring efficient use of land is a higher tax rate upon land, up to even the site's full annual value. The "carrot" rewarding efficient use of land is a lower or zero tax rate upon improvements. ...Jeff Smith Share Rent, Transform Society
Eventho' almost everyone would worry about paying more tax, the PTS is inherently progressive. Studies of the towns in Pennsylvania that have shifted some tax from buildings to land show that about 75% come out ahead (nearly the entire bottom four quintiles of income earners), 20% break even and 5% pay more (together a bit larger than the top quintile of income recipients), who are usually absentee owners.
Without coercion or remote planning, the PTS improves our settlement patterns. Regulations and zoning, some assume, might be vitiated or obviated, become obsolete. Instead, the PTS makes it easier for regulations and zoning to do their job. Since the land tax lowers land price, buying land for parks and reserves is more easily afforded. The loss in revenue from removing the newly public lands from the tax rolls would be offset somewhat by the corresponding rise in value of sites near the protected open space. Creating green spaces raises the density of already developed land, and thus its value. Furthermore, land dues reduce the profit from land development, making it a less attractive investment, and land use decisions of less economic consequence. After a while, people with deep pockets would turn to investments that, post-shift, would be untaxed. Reserving land for recreational or natural uses becomes less contentious; people could more easily determine an optimum proportion of green space to developed space. ...
Might the PTS fall heavily on low-income land holders and elderly homeowners? The land-rich, money-poor old widow could suffer if society were to levy sites. Eventho' the vast majority of poor people would come out ahead, there probably will be the rare exception. To deal with "the widow on a valuable lot", the new policy could include deferments.
Just as some poor could pay more, some rich could pay less, such as the owners of a skyscraper that'd be the highest (literally) and best use of a site. While a PTS could be a tax break for a few, the intent of the shift is not so much to whittle away fortunes as it is to promote prosperity, equity, and sustainability. Were society to attain such goals, letting some fortunes escape unscathed is a small price to pay. Also, putting a site to best use, while profitable, also benefits the community by providing convenient employment, bringing money into the local economy, and by precluding less efficient development, such as sprawl.
Since the shift is progressive, then the rich are footing the bill for everyone else. To answer this charge that one group will pay more (those who can afford it), proponents could note that the amount one pays is scaled according to the value of what one takes -- a parcel of nature. The payment is for exclusive use to our common heritage. Those who exclude the rest from the best must expect to pay the most. ...
In the final analysis, can those who would redefine progress and other social reformers avoid the issue of what to do with the immensity of Earth's worth? No. The present policy of low land taxes and the movement to abolish all taxes on landed property assume that Earth is ours for the exploiting. It is a mindset that must be contradicted and laid to rest -- as was the justification for slavery -- if environmental and planetary values are ever to ascend to the same level as property rights. The profit from speculation or over-extraction withers away when land dues are put in place. ...
A big problem needs a big solution which in turn needs a matching shift of our prevailing paradigm. Geonomics -- advocating that we share the social value of sites and natural resources and untax earnings -- does just that. Read the whole article
If society decided to share among its members all the annual value of society's sites and resources and air space, what would happen?Jeff Smith: What the Left Must Do: Share the Surplus
What other social relations might change? Increase land ownership participation in community and it benefits community, with town hall meetings and block parties. Those kinds of communities have less crime. Read the whole article
What would you do if you could work two days and take five off? Write? Play soccer? Tend to the community garden? Time off is an option made increasingly viable by our relentlessly rising rate of productivity. French Marxist and media critic Jean Baudrillard, while still advancing the interests of labor, implores the Left to move on from seeing humans as workers to seeing workers as human beings, with more needs than merely the material. Enabling people to live their lives more fully is an issue made to order for rescuing the Left from the doldrums that descended when “history ended”.
What would single mothers do with enough income to stay home? What would minorities do with the wherewithal to begin their own businesses? What would communities do if they did not leak resources up to an upper class and out to a distant lender or tax collector? What would the elite do without our commonwealth? The means to these ends is an extra income apart from labor or capital (savings), that is, a “social salary” from society’s surplus, a “Citizens Dividend” from all the rents, natural and governmental, that people pay for land and to the privileged, redirected to everyone equally. Merely demanding a fair sharing of the bounty from nature and modern society would raise people’s self-esteem, a key component for political involvement. Actually receiving an income supplement would transform our lives and restructure society.
Unless humanity needs militarism, corporate welfare, and debt service, it’s fair to say most public revenue gets wasted. Demanding a dividend – similar to Alaska paying residents a share from oil royalties – forces a new dialog on spending priorities. Beyond arguing “bread not bombs”, a dividend replaces expenditures by politicians (necessarily influenced by donors) with spending by citizens, the people who generate the surplus in the first place. With a dividend, citizens get to see themselves as direct beneficiaries from reigning in the wild spending spree on imperial aggression, disloyal multinationals, and on “borrowing” money that never existed until “lent” by the Federal Reserve. ...
The Left requests and the Right promises jobs – the Left for the income, the Right in order to keep people in their place. Workers want to be paid for going along with the program. Bosses want to accommodate them, albeit not fully; maintaining some unemployment spooks workers and keeps wages down. Since jobs are the knee-jerk cure of everyone, they can not be the signature issue of the Left. Nor can they lift our sights. The call for jobs does not come from a place of respect but from a willingness to accept the status quo, with prevailing hierarchy left intact.
To deliver a bigger pie, the Right touts efficiency and growth; to better distribute the pie, the Left urges equity and jobs. Yet jobs are less for distributing, more for producing – if that. As automation and globalisation expand the pie, they contract the workforce. Even when, or especially when, people take time off to go to war, output increases, proving we’re well over over-capacity. Juliet Schor in her Overworked American notes this rise in productivity does not bless us with leisure but curses us with unemployment.
Demanding jobs rather than a fair share of society’s surplus implies that there is no commonwealth or that expropriating it by a few is OK. Neither is true. Rents are real, and they are ours. There is a free lunch (just ask the privileged), as those downing it do get money for nothing. And since society, not lone owners, generates these values, that flow of funds belongs to everyone.
RENT – THE STUFF OF FORTUNES – ROCKS AND RULES
The value of a parcel of land is initially based on the natural endowments of the location (“location, location, location”), created not by an owner but by whatever created all of us. Next, land value rises with the presence of society, and grows with the population of society. It’s highest where society is densest, in the city centers, typically 2000 times more valuable than sites in the boondocks. Land values as economic values disappear whenever society quits respecting one’s claim, as in a war zone; there, real estate offices nimbly shut down. And while land titles may be the holy grail of wannabe homeowners, they’re also the ticket to pocket unearned rent by absentee landlords, such as Donald Trump.
Making land public does not guarantee that the public end up with the rent. The public’s steward, the state, often lets public resources at “fire-sale” prices, unduly enriching Chevron, Arco, Kerr-McGee, Weyerhauser, etc. The state gifts enormously valuable licenses for TV, radio, and cell phones to GE, Disney, Time Warner, and Clear Channel. The metaphor, “field of knowledge”, lets us see patents and copyrights as flags; by excluding innovative outsiders, they not only skew techno-progress (thus addicting civilization to oil) but also enrich those few who can afford to corral them: GM, DuPont, and Microsoft. Similarly, a utility franchise lets AT&T pay investors, and Enron insiders, handsomely. ...
Buying a land title – the granddaddy of all privileges – typically requires a mortgage, which disguises rent as “interest”. Pierre Joseph Proudhon (1809-1865), French journalist/anarchist, noted: "As long as land monopoly is maintained, the few can take possession of what Nature free of charge has granted to everyone, and usury will penetrate the whole society, and we will have banks, which instead of being servants for the exchange of goods will become powerful extorters." He called this one; today’s banks do bleed the economy.
What does the central bank, the private consortium dubbed the Federal Reserve, lend to the US? Nothing. Given the power to create money by Congress (which the Constitution had given to Congress), from no savings at all but merely from legal standing, it manufactures credit, which the US borrows, at interest. The US exempts this interest from its income tax; people who hold US bonds – mainly the wealthy – keep this income tax-free.
The much and justifiably criticized corporation is in essence its corporate charter, given value by limiting the liability of managers, directors, and investors. It’s worth at least the cost of the insurance payments not made by the corporation, which would equal the costs imposed upon worker, customer, and nature. As the “need” arises, legislatures extend limited liability even further: Congress legally lowered the greater risk of nuclear power to benefit Westinghouse, of the Valdez oil transport spill for Exxon, and the Y2K software design bug for Microsoft. Politicians define legally “safe” amounts of polluted air and water for GM and Monsanto, keeping safe the wealth of those responsible.
Not to be outdone by any legislature, the Supreme Court has ruled in favour of compensating landowners for environmental “takings”, but has remained silent about landowners compensating the public for any “givings”, as when site values skyrocket near a new light rail stop. Molly Ivins wrote,
"Henry George must be in his grave spinning' like a cyclotron. We, the people at large, make the land more desirable; and then the landowners want us to pay them because we won't allow them to poison the air or to pollute the rivers." (1995 March)
That’s how great fortunes are made: by sloughing off private costs (which become “negative externalities”) while soaking up public benefits (some “positive externalities”). Land titles, corporate charters, and other privileges – mere pieces of paper – are worth trillions each year. The corporations – from the Federal Reserve to Exxon (both founded by the “oiligarchy”) – that receive these privileges make their owners rich or richer. Their wealth is not compensation for the exertions of either labor or capital, not profit in the market from output, but rent from present lobbying of legislatures or past conquest of others’ lands. Thus laws (“privilege” means “private law”) funnel multi-trillions of dollars each year from the many to the few. Read the whole articleJeff Smith: How Sharing Earth Brought Peace
Besides rent from land titles, resource leases, broadcast licenses, and standards waivers, revenue could be raised, too, from monopoly patents, utility franchises, and corporate charters. Charging full market value for these pieces of papers, we'd rake in trillions each year from the privileged elite. We'd still be the envy of the world but no longer the master of the world. The terrorist crisis would make America better; it'd get us to do what we should have been doing all along. ...
Early last century, Gifford Pinchot, first head of the US Forest Service, said: "The earth belongs of right to all its people and not to a minority, insignificant in numbers but tremendous in wealth and power. The people shall get their fair share of the benefit which comes from the development of the country which belongs to us all with equal opportunity for all and special privileges for none." A man in a Republican administration could say that then. We need to hear it again now. Read the whole articleJeff Smith: Sharing Natural Rents to Sustain Human Society
To get rich, or more likely to stay rich, some of us can develop land, especially sprawling shopping centers, and extract resources, especially oil. While sprawl and oil depletion are not necessary, they are more profitable than a car-free functionally integrated city. Under the current rules of doing business, waste returns more than efficiency. We let a few privatize rent -- ground rent and resource rent -- although rent is a social surplus. As if rent were not profit enough, winners of rent have also won further state favors -- tax breaks, liability limits, subsidies, and a host of others designed to impel growth (20 major ones follow herein).
If we are to sustain our selves, our civilization, and our eco-system, we must make some hard choices about property. What we decide to do with rent, whether we let it reward our exploiting or our attaining eco-librium, matters. Imagine society waking up to the public nature of rent. Then it would collect and share its surplus that manifests as the market value of sites, resources, the spectrum, and government-granted privileges. Then we could forego taxing labor and capital. On such a level playing field, this freed market would favor efficiency - the compact city - not waste - the mall and automobile. ...
Hudson: Lies of the Land
Michael Hudson and Kris Feder: Real Estate and the Capital Gains Debate
Capital gains taxation has been a divisive issue in Congress at least since the debates surrounding the Tax Reform Act of 1986, which, aiming to eliminate tax loopholes and shelters and preferences, repealed preferentially low tax rates for long-term gains.1 To bring effective capital gains tax rates back down again was President Bush’s “top priority in tax policy.“2 In 1989, Senate Democrats blocked a determined drive to reduce effective tax rates on the part of Bush, Republican Senators Packwood, Dole and others, and a few Democratic allies.3 The administration argued that the tax cuts would stimulate economic growth and induce asset sales, thereby actually increasing federal tax revenues; Congressional Democrats countered that the plan benefited mainly the wealthy, and that tax revenues would in fact decline.4 The Joint Committee on Taxation projected that budget shortfalls beginning in 1991 would sum to about $24 billion by 1994 -- and that most of the direct benefits would go to individuals with over $200,000 in taxable income. House Speaker Thomas S. Foley said that a third of the savings would be enjoyed by those with gross incomes over one million dollars. ...
The most frequently heard arguments for reducing capital gains taxes are:
(1) to reduce the “lock-in” effect, by which high tax rates at realization deter asset sales;14
(2) to relieve a disproportionate burden on homeowners;
(3) to compensate for the erosion of capital gains by inflation, as an alternative to indexing;15
(4) to end alleged double taxation of both capital stocks and income flows;
(5) to spur productive enterprise and investment; and
(6) to generate more tax revenue from the consequent growth in asset sales and productivity.
This report calls attention to a neglected aspect of the capital gains issue -- one which bears importantly on the fifth- and sixth-named consequences.
Much of the capital gains debate today focuses on the stock market. Business recipients of capital gains are characterized as small innovative firms making initial public offerings (IPOs). In recent years such firms have been responsible for a disproportionate share of new hiring. It is hoped that corporations will be able to raise money to employ more labor and invest in more plant and equipment if buyers of their stocks can sell these securities with less of a tax bite. Stock market gains thus are held to stimulate new direct investment, employment, and output.
Typical of the campaign to reduce capital gains taxes is a Wall Street Journal editorial, “Capital Gains: Lift the Burden.” Author W. Kurt Hauser argues that when the capital gains tax rate was increased from 20 percent to 28 percent in 1989, the effect was to deter asset sales, causing a decline in the capital gains to be reaped and taxed. He refers, however, only to stock market gains, and specifically, to equity in small businesses. Citing the example of yacht producers, he suggests that taxing capital gains on stocks issued by these businesses “locks in” capital asset sales, thereby deterring new investment and hiring, and reducing the supply of yachts.
Others contend that new productive investment is relatively insensitive to capital gains tax rates, arguing, for example, that most of the money placed in venture-capital funds come from tax-exempt pension funds, endowments, and foundations.
What is missing from the discussion is a sense of proportion as to how capital gains are made. Data that is available from the Department of Commerce, the IRS, and the Federal Reserve Board indicate that roughly two thirds of the economy's capital gains are taken, not in the stock market -- much less in new offerings -- but in real estate. ...
No capital gains duties are levied
on estates passing to heirs. Indeed,
inheritors of real estate may begin re-depreciating their
income-yielding buildings afresh at the new (typically higher) transfer
price. The estates bequeathed by the richest one percent of the
population (over $600,000
in value) are now taxed at a 55 percent rate if not sheltered, but of
course these are the estates most likely to shelter inheritance and
gift bequests. For instance, assets given as gifts are taxed only at
the time they come to be sold. If
the capital gains tax were reduced or abolished, the deferral would
31 Homeowners do receive imputed rental income, which is not subject to the income tax.
Major commercial real estate investors such as pension funds, insurance companies and other large institutions are exempt from capital gains taxes, as are foreign investors. In addition to playing a dominant role in real estate, these institutional investors own nearly half of all U.S. equities. ...
Reported capital gains in real estate were understated as a result of exclusions. On the other hand, much direct investment included the cost of land, commercial buildings, and plant and equipment. Taking this into account, we estimate that roughly 70 percent of the capital gains calculated by the IRS for 1985 probably represent real estate. Even this estimate may understate the role of land and real estate. In 1985, anticipating the planned 1986 tax reform which would raise the capital gains tax rate from 20 to 28 percent, many investors sold their securities that had registered the largest advances. Some 40 percent of the capital gains reaped by selling these stocks probably represented real estate gains. A major spur to the LBO movement driving up the stock market was an awareness that real estate gains were not being reflected in book values and share prices;36 as land prices leapt upward-funded in part by looser regulatory restrictions on S&L lending against land -- raiders bought publicly traded companies and sold off their assets, including real estate, to pay off their junk-bond backers. In effect, not only were rental income and profits being converted into a flow of interest payments; so also were capital gains. ...
Context of Real Estate Taxation
Academic economists likewise have been remarkably slow to address this shift away from earned income to capital gains. It is true that nineteenth-century land reformers such as John Stuart Mill and Leon Wahas defined land-value gains as an “unearned increment,” and urged that they be collected by the community at large, whose economic activity was, after all, responsible for creating these gains. Ever since Henry George brought matters to a head in Progress and Poverty (1879), however, economics has largely dropped the analysis of land-value gains, and indeed, of land itself.
Wealthy investors have won congressional support for real estate exemptions in large part by mobilizing the economic ambitions of homeowners. Most families’ major asset, after all, is their home. Two Federal Reserve studies trace the rise in gross house value from 26 percent of household wealth in 1962 to 30.1 percent in 1983 (falling back to 28.5 percent in 1989). Household real estate assets substantially exceeded holdings of stocks, bonds and trust funds (20.5 percent in 1989), liquid assets (17 percent) and total debt (14 percent). The giveaway to real estate interests is thus presented ostensibly as a popular middle class measure. The real estate industry (and the financial sector riding on its shoulders) have found that the middle classes are willing to cut taxes on the wealthy considerably, as long as their own taxes are cut even lightly. It is no surprise that President Clinton’s first major concession to the pressure for cutting capital gains taxation is directed at homeowners, despite the fact that preferences for home ownership cannot be justified as a boost to entrepreneurial investment. Such is the foreshortened economic perspective of our times.
The LBO movement epitomizes the real estate industry‘s strategy,
applying the developer’s traditional debt-pyramiding techniques to the
buying and selling of manufacturing companies. Raiders emulated
developers who borrowed money to buy or construct buildings and make
related capital improvements, agreeing to pay interest to their
mortgage bankers or other lenders, putting down as little equity of
their own as possible. Having set things in motion, the landlord uses
the rental income to carry the interest, principal, taxes and
maintenance charges while he waits for a capital gain to accrue. The
idea is to amortize the loan as slowly as possible so as to minimize
annual carrying charges, while paying them out of the CCA.
43 Wolff (1995), p. 27. “The top one percent of wealth holders has typically held in excess of one-quarter of total household wealth, in comparison to the 8 or 9 percent share of income received by the top percentile of the income distribution.”
Given the current US depreciation laws and related institutions, to lower the capital gains tax rate across the board is to steer capital and entrepreneurial resources into a search for unearned rather than earned income. It rewards real estate speculators and corporate raiders as it shifts the burden of taxation to people whose primary source of income is their labor. The budget crisis aggravated by such a policy also ends up forcing public resources to be sold off to meet current expenses -- sold to the very wealth-holders being freed from taxation. In this way wealth consolidates its economic power relative to the rest of society, and translates it into political power so as to shit? the tax burden onto the shoulders of others. The first element of this strategy has been to defer revenue into channels that are taxed only later, as capital gains. The second has been to tax these gains at a lower rate than earned income -- a fight that has broken out in earnest following the 1996 presidential elections.
Taxation of capital gains is widely attacked as a “soak the rich” scheme, a program of wealth redistribution that will adversely affect growth in productivity and efficiency. Kurt Hauser’s Wall Street Journal editorial counters this with the observation that over half of all taxpayers reporting capital gains have adjusted gross incomes of under $50,000, implying that a tax cut would not preferentially benefit the wealthy. He neglects to observe, however, that the poorer half of taxpayers account for less than ten percent of the total dollar value of capital gains46 -- or that the capital gains tax is virtually the only remaining federal levy on real estate income.Low capital gains tax rates and the tax deductibility of mortgage interest have contributed to the polarization of wealth distribution. A further reduction in the capital gains rate would worsen this maldistribution by making real estate virtually tax-free except for local property taxes, which fell from 10 percent to just 7.4 percent of all taxes at all levels of government between 1955 and 1989.47
46 Hauser (1995); Wolff (1995).
47 Rosen (1992), p. 22.
Time columnist John Rothschild recently accused opponents of a capital gains tax cut of resisting “any reform, no matter how it may benefit society in general,” simply “so that the rich cannot benefit."48The point, however, is that the tax code encourages the wealthy to enrich themselves in ways that are detrimental to the economy at large. The presumed trade-off between equity and efficiency is mythical, at least with respect to real estate under the current federal tax code. The implication is that any resulting growth in income inequality is the price a free society must pay for an efficient system of economic incentives. Indeed, it would be difficult to oppose widely shared progress simply because the rich are gaining faster than the rest of society.
An inordinate focus on stock market gains -- especially the
selection of small industrial companies such as a yacht producer just making
stock offering -- diverts attention from the extent to which a low capital
gains tax benefits real estate investors preferentially. The irony of casting
in terms of the stock market rather than real estate investment is that financial
investors have already devised an array of strategies to evade taxation on
stock gains. Institutional investors already are exempt from capital gains
securities, as they are on their real estate holdings. Wealthy individual investors
can arrange fictitious “short” sales (“sales against the box”),
obtaining the proceeds of their stocks without having to actually sell them,
by collateralizing them with a bank and borrowing an amount of money equal to
the value of the stocks. This is the equivalent of a sale, for it provides immediate
proceeds -- but without incurring taxes
on the securities’ rise in value. Bankers find this a lucrative business,
while the Treasury foregoes revenue at the expense of less affluent taxpayers.
To abolish capital gains taxes would enable these
fictitious “against the box” maneuverings finally to be liquidated
without having paid any taxes. Also freed would be the accumulated over-depreciation
of buildings that has sheltered past real estate
49 A capital gains tax cut may relieve a lock-in effect caused by taxing capital gains upon realization instead of accrual. However, Gaffney (199 l), p. 50, writes that “the locked-in effect results mainly from stepup at death, rather than from a high rate per se.”
One reason often cited for taxing capital gains at lower rates than ordinary income is to exempt “phantom income” arising from inflation. The logic of indexing is that if prices rise by, say, 50 percent between the time of purchase and the time of sale, then this amount should not be taxed; to do so would be to tax investors just for “staying in place.” However, inflation erodes all monetary assets, not just capital gains,50 and may erode the purchasing power of labor income, as has occurred for most wage-earners in recent years. Equity in the face of inflation is thus a poor argument for preferential capital gains tax rates. ... Read the whole article
Henry George: How to Help the Unemployed (1894)
... For the question of the unemployed is but a more than usually acute phase of the great labor question -- a question of the distribution of wealth. Now, given any wrong, no matter what, that affects the distribution of wealth, and it follows that the leading class must be averse to any examination or question of it. For, since wealth is power, the leading class is necessarily dominated by those who profit or imagine they profit by injustice in the distribution of wealth. Hence, the very indisposition to ask the cause of evils so great as to arouse and startle the whole community is but proof that they spring from some wide and deep injustice.
What that injustice is may be seen by whoever will really look. We have only to ask to find. ...
"Scarcity of employment" is a comparatively new complaint in the United States. In our earlier times it was never heard of or thought of. There was "scarcity of employment " in Europe, but on this side of the Atlantic the trouble -- so it was deemed by a certain class -- was "scarcity of labor." It was because of this "scarcity of labor " that negroes were imported from Africa and indentured apprentices from the Old Country, that men who could not pay their passage sold their labor for a term of years to get here, and that that great stream of immigration from the Old World that has done so much to settle this continent set in. Now, why was there "scarcity of employment" on one side of the Atlantic and "scarcity of labor" on the other? What was the cause of this difference, of which all other social and political differences were but consequences? Adam Smith saw it, and in his "Wealth of Nations" states it, but it did not need an Adam Smith for that, as everyone who knew anything of the two countries knew it. It was, that in this country land was cheap and easy to get, while in Europe land was dear and hard to get. Land has been steadily growing dear in the United States, and as a consequence we hear no longer of "scarcity of labor." We hear now of "scarcity of employment."
In the first quarter of this century an educated and thoughtful Englishman, Edward Gibbon Wakefield, visited this country. He saw its great resources, and noted the differences between the English-speaking society growing up here and that to which he had been used. Viewing everything from the standpoint of a class accustomed to look on the rest of mankind as created for their benefit, 'what he deemed the great social and economic disadvantage of the United States was "the scarcity of labor." It was to this he traced the rudeness of even what he styled the upper class, its want of those refinements, enjoyments, and delicacies of life common to the aristocracy of England. How could an English gentleman emigrate to a country where labor was so dear that he might actually have to black his own boots; so dear that even the capitalist might have to work, and no one could count on a constant supply ready to accept as a boon any opportunity to perform the most menial, degrading, and repulsive services? Mr. Wakefield was not a man to note facts without seeking their connection. He saw that this "scarcity of labor" came from the cheapness of land where the vast area of the public domain was open for settlement at nominal prices. A man of his class and time, without the slightest question that land was made to be owned by landlords, and laborers were made to furnish a supply of labor for the upper classes, he was yet a man of imagination. He saw the future before the English-speaking race in building up new nations in what were yet the waste spaces of the earth. But he wished those new nations to be socially, politically, and economically newer Englands; not to be settled as the United States had been, from the "lower classes" alone, but to contain from the first a proper proportion of the "upper classes" as well. He saw that "scarcity of employment" would in time succeed "scarcity of labor" even in countries like the United States by the growth of speculation in land; but he did not want to wait for that in the newer Britains which his imagination pictured. He proposed at once to produce such salutary "scarcity of employment " in new colonies as would give cheap and abundant labor, by a governmental refusal to sell public land, save at a price so high as to prevent the poorer from getting land, thus compelling them to offer their labor for hire.
This was the essential part of what was once well known as the Wakefield plan of colonization. It is founded on a correct theory. In any country, however new and vast, it would be possible to change "scarcity of labor" into "scarcity of employment" by increasing the price put on the use of land. If three families settled a virgin continent, one family could command the services of the others as laborers for hire just as fully as though they were its chattel slaves, if it was accorded the ownership of the land and could put its own price on its use. Wakefield proposed only that land should be held at what he called "a sufficient price" -- that is, a price high enough to keep wages in new colonies only a little higher than wages in the mother-country, and to produce not actual inability to get employment on the part of laborers, but only such difficulty as would keep them tractable, and ready to accept what from his standpoint were reasonable wages. Yet it is evident that it would only require a somewhat greater increase in the price of land to go beyond this point and to bring about in the midst of abundant natural opportunities for the employment of labor, the phenomena of laborers vainly seeking employment. Now, in the United States we have not attempted to create "scarcity of employment" by Wakefield's plan. But we have made haste by sale and gift to put the public domain in the hands of private owners, and thus allowed speculation to bring about more quickly and effectually than he could have anticipated, more than Wakefield aimed at. The public domain is now practically gone; land is rising to European prices, and we are at last face to face with social difficulties which in the youth of men of my time we were wont to associate with "the effete monarchies of the Old World." Today, as the last census reports show, the majority of American farmers are rack-rented tenants, or hold under mortgage, the first form of tenancy; and the great majority of our people are landless men, without right to employ their own labor and without stake in the land they still foolishly speak of as their country. This is the reason why the army of the unemployed has appeared among us, why by pauperism has already become chronic, and why in the tramp we have in more dangerous type the proletarian of ancient Rome.
These recurring spasms of business stagnation; these long-drawn periods of industrial depression, common to the civilized world, do not come from our treatment of money; are not caused and are not to be cured by changes of tariffs. Protection is a robbery of labor, and what is called free trade would give some temporary relief, but speculation in land would only set in the stronger, and at last labor and capital would again resist, by partial cessation, the blackmail demanded for their employment in production, and the same round would be run again. There is but one remedy, and that is what is now known as the single-tax -- the abolition of all taxes upon labor and capital, and of all taxes upon their processes and products, and the taking of economic rent, the unearned increment which now goes to the mere appropriator, for the payment of public expenses. Charity can merely demoralize and pauperize, while that indirect form of charity, the attempt to artificially "make work" by increasing public expenses and by charity woodyards and sewing-rooms, is still more dangerous. If, in this sense, work is to be made, it can be made more quickly by dynamite and kerosene.
But there is no need for charity; no need for "making work." All that is needed is to remove the restrictions that prevent the natural demand for the products of work from availing itself of the natural supply. Remove them today, and every unemployed man in the country could find for himself employment tomorrow, and his "effective demand" for the things he desires would infuse new life into every subdivision of business and industry, even that of the dentist, the preacher, the magazine writer, or the actor.
The country is suffering from "scarcity of employment." But let anyone to-day attempt to employ his own labor or that of others, whether in making two blades of grass grow where one grew before, or in erecting a factory, and he will at once meet the speculator to demand of him an unnatural price for the land he must use, and the tax-gatherer to fine him for his act in employing labor as if he had committed a crime. The common-sense way to cure "scarcity of employment" is to take taxes off the products and processes of employment and to impose in their stead the tax that would end speculation in land.
But, it will be said, this is not quick enough. On the contrary, it is quicker than anything else. Even the public recognition of its need, by but a part of the intelligence and influence that is now devoted to charity appeals and schemes, would have such an effect upon the speculative price of land as to at once set labor and capital to work. Read the entire article
Henry George: Justice the Object -- Taxation the Means (1890)
Now see, take it in its lowest aspect — take it as a mere fiscal change, and see how in accord with every dictate of expediency, with every principle of justice, is the Single Tax. We have invented and invented, improved and improved, yet the great fact is, that today we have not wealth enough. There are in the United States some few men richer than it is wholesome for men to be. But the great masses of our people are not so rich as civilised Americans at the close of the nineteenth century ought to be. The great mass of our people only manage by hard work to live. The great mass of our people don't get the comforts, the refinements, the luxuries that in the present age of the world everyone ought to have. All over this country there is a fierce struggle for existence. ...
This is the shore of the Pacific. This is the Golden Gate. The westward march of our race is terminated by the ocean, which has the ancient East on its farther shore; no farther can we go. And yet here, in this new country, in this golden State, there are men ready to work, anxious to work, and yet who, for longer or shorter periods, cannot get the opportunity to work. The farther east you go, the worse it grows. To the man from San Francisco, who has never realised it before, there are sights in New York that are appalling. Cross the ocean to the greater city — the metropolis of the civilised world — and there poverty is deeper and darker yet. What is the reason? If there is more wealth wanted, why don't they get more?
We cannot cure this evil of poverty by dividing up wealth, monstrous as are some of the fortunes that have arisen — and fortunes are concentrating in this country faster than ever before in the history of the world. But divide them and still there would not be enough. Read the entire articleHenry George: The Great Debate: Single Tax vs Social Democracy (1889)
Capital does not come first. Land and labour are the only two absolutely necessary factors to the production of wealth. (Hear, hear.) Capital is the child of labour exerted upon land. (Cheers.) Give labour access to land and it will produce capital. Give labour access to land and the power of the capitalists to grind the masses must disappear. (Hear, hear.) What does that power came from? Merely from the fact that men are unable to employ themselves upon the land. It is the poverty of the labourers, not the wealth of the capitalist, that is the evil to be removed. ...
What we want is full competition. (Hear, hear.) What we want to do is to abolish monopolies, and it is to these monopolies, and not to the earnings of capital, that the great fortunes to which my opponent has alluded are due.
What are the causes of these big fortunes? In the United States, go wherever you please, you find that the real element is land ownership. It is a great mistake to think that the only landlords are those which pose as such. today, who are the great owners of the Irish estates? Not so much the Irish landlords as the English banks and insurance societies. (Hear, hear.) Take our, Jay Gould, the most conspicuous example of a great fortune made outside the rise of land values. He made his first stride by getting hold of a piece of land and taking advantage of its rise in value, and he is today the owner of millions of acres. He made his money in what? In a public franchise, that we would abolish. ... Read the entire article
Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
The heart of George’s economics was, in a way, Biblical. As the son of a religious book publisher born in Philadelphia, he had adequate opportunity to witness the early growth of the American republic in a unique way. On his own in San Francisco and responsible for a wife and child at a young age, his first effort at resolving the puzzles of injustice were a manuscript printed in 1871. But only after additional exposure to Ricardian rent theory was he able to refine his ideas such that they could form the basis of his Progress and Poverty eight years later. His Christian roots led him to a deep commitment to the basic moral equality of all people; his challenge was to find a way to ensure that this equality was manifest in economic fairness.
As noted earlier, the starting point of Georgist philosophy is that nature belongs to owners only in usufruct and not in freehold. Because any monetary wealth that accrued to that nature stemmed directly from the physical presence of people and was therefore social in character, the resulting added increment of value that constituted rent belonged in turn to the community that created it. Nature would have no economic price without people. Hence rent was the community’s entitlement and not that of individuals, and the land rent that accrued to parcels as a result of social investment should be returned to — recaptured by — the community. It was obvious to George that the wealthiest people in the nation usually owed their fortune not to the sweat of their brow or the inventiveness of their minds. Rather their position was due to their success as land speculators, to an increase in rent on land they had captured title to, land rightfully belonging to all. The earth and all its product, he argued, was the common heritage of humanity, a birthright of all people.
Any failure to pay back that increment to society, or of government to recapture it in the form of taxes, constituted not only an injustice to the poor but a distortion of economic equilibrium. He witnessed first hand the perverted configurations of land use that today we know as sprawl development— even in his time it was apparent that urban, high value land parcels were being held off the market for speculative gain by meretricious interests. He witnessed also the boom and bust cycles of the land markets on account of such speculation, effects which spread far wider than just land prices. These inevitable cycles would dislocate labor and capital supply, giving impetus to the impoverishment and suffering which he himself had experienced. He understood that holding the most strategically valuable landsites out of circulation constituted a burden on the economy. He understood that financial resources spent to pay exorbitant land prices had a depressing effect on capital and labor. And because government was taxing labor and capital instead of recovering land rent, it was further restricting the job market and the growth of capital. He realized that people who captured monopoly control of strategically valuable landsites could do so because they were privy to information prior to its public release. It was not by any means his insight alone; it was captured also by George Washington Plunkett writing at the same time:
There’s an honest graft, and I’m an example of how it works. I might sum up the whole thing by sayin’: “I seen my opportunities and I took ‘em.”
Just let me explain by examples. My party’s in power in the city, and it’s goin’ to undertake a lot of public improvements. Well, I’m tipped off, say, that they’re going to lay out a new park in a certain place.
I see my opportunity and I take it. I go to that place and I buy up all the land I can in the neighborhood. Then the board of this or that makes its plan public, and there is a rush to get my land, which nobody cared particularly for before.
Ain’t it perfectly honest to charge a good price and make a profit on my investment and foresight? Of course, it is. Well, that’s honest graft. 32
32William L. Riordan, Plunkett of Tammany Hall. New York: Dutton, 1963, p. 3.
All society needed to do was to collect the economic rent from landholders as its rightful due, a solution that became part of the subtitle of his book, “the remedy.” Taxing the land (or, alternatively, collecting the economic rent) was something common citizens could understand.Weld Carter: A Clarion Call to Sanity, to Honesty, to Justice (1982)
They knew well the enormous disparity in fortune between the landed and the landless. They knew also that there was in fact land enough for all, except for a system of ownership that made no distinction between the right of land use and the right of land gain. George had no doubt read Frenchman P. J. Proudhon’s more strident pamphlet that “property is theft.” 33 He knew that there was a long tradition of land taxation, well articulated by a French school of philosophers known as the Physiocrats. It was a natural and comprehensible solution for him to advocate the adoption of the “single tax” on land, according to its market value, to collect the economic rent. ... read the whole article
Let us begin this study of the likely causes of our troubles by asking two questions:
Our stage, of course, for making this study will be this world of ours, for it is upon this world that the drama of human living is played out, with all its joys and all its sorrows, with all its great achievements and all its failures, with all its nobilities and all its wickedness.
Regardless of its size relative to other planets, with its circumference of about twenty-five thousand miles, to any mere mortal who must walk to the station and back each day, it is huge. Roughly ninety-six million miles separate the sun from the earth on the latter's eliptical journey around the sun. At this distance, the earth makes its annual journey in its elliptical curve and it spins on its own canted axis. Because of this cant, the sun's rays are distributed far more evenly, thus minimizing their damage and maximizing their benefits.
Consider the complementarity of nature in the case of the two forms of life we call vegetable and animal, in their respective uses of the two gases, oxygen and carbon dioxide, the waste product of each serving as the life-giving force of the other. Any increase in the one will encourage a like response in the other.
Marvel at the manner in which nature, with no help from man or beast, delivers pure water to the highest lands, increasing it as to their elevation, thus affording us a free ride downstream and free power as we desire it. Look with awe at the variety and quantity of minerals with which this world is blessed, and finally at the fecundity nature has bestowed so lavishly throughout both animal and vegetable life: Take note of the number of corn kernels from a single stalk that can be grown next year from a single kernel of this year's crop; then think of the vastly greater yields from a single cherry pit or the seeds of a single apple, or grape or watermelon; or, turning to the animal world, consider the hen who averages almost an egg a day and the spawning fish as examples of the prolificacy that is evident throughout the whole of the animal world, including mankind.
If this marvelous earth is as rich in resources as portrayed in the foregoing paragraph, then the problem must be one of distribution:
Land is universally treated as either public property or private property. Wars are fought over land. Nowhere is it treated as common property.
George has described this world as a "well-provisioned ship" and when one considers the increasingly huge daily withdrawals of such provisions as coal and petroleum as have occurred say over the past one hundred years, one must but agree with this writer. But this is only a static view. Consider the suggestion of some ten years ago that it would require the conversion of less than 20% the of the current annual growth of wood into alcohol to fuel all the motors then being fueled by the then-conventional means. The dynamic picture of the future is indeed awesome, and there is every indication that that characteristic has the potential of endless expansion. So how is it that on so richly endowed a Garden of Eden as this world of ours we have only been able to make of it a hell on earth for vast numbers of people?
The answers are simple: we have permitted, nay we have even more than that, encouraged, the gross misallocation of resources and a viciously wicked distribution of wealth, and we choose to be governed by those whom we, in our ignorance, have elected. ...
In our economy, land is a ready object of speculation, and its value is constantly reflecting this evil. What happens in a rising market, the up side of a business cycle, is that investors see rising prices in land as indicative of a boom. Thereupon, they try to increase their holdings in such land, only to discover that their present returns will not pay for the present costs of land; the current price of land is not based on what the yield of that land is today, but on what it is projected to be two or three years from now. The difference tends to increase until a point is reached where the imarginal buyer of land suddenly finds himself unable to meet the rising costs to which he has subjected himself. With bankruptcy threatening him or having already been forced upon him, the land passes from his hands, and the market temporarily becomes overpriced. The bankruptcies increase, and ultimately land values are brought back to levels which represent current productivity, at which point the new boom will have started. ...
The wringing out of land speculation from the dynamics of economics will remove that unacknowledged offence which has so labored the economic profession and the public at large. As Henry George discovered and as Homer Hoyt so brilliantly depicted speculative land prices as the cause of this bitter cycle, so will its removal rid society of this hitherto hidden defect. It will put the land market on a current value basis and eliminate the terrible risks to which that market has always been subject in the past.
The reason for such speculation under the present practices is obvious. All products of labor are subject to increases or decreases depending on supply and demand. When an oversupply of any commodity begins to rear its ugly head, prices tend downward and production is thereby lessened until there is a contrary swing upward. Land, on the other hand, is of fixed supply. Nothing man does can increase or decrease the amount of land, and therefore that brake that operates in the field of production does not apply to land values and prices.
Just think of the social benefits that would accrue to a society that could, at a stroke, rid itself of the potential hazards to which all prior societies have been so subject. Production will then occur on a steadily rising level, demand increases as the well-being of society improves, new techniques develop, new inventions are made, and all these will be benefits to the community as a whole, and not just to the land-owners as in the past.
Back in the early days of this century, Winston Churchill saw and recorded an example of this. There had been a ferry fare over the river Thames for the common laborers who lived on the wrong side of the river to pay in order to get to work. A spirit of nobility prompted the absorption of this fare by the City, and almost immediately rents in the working class area were increased by the same amount as the fare had been. When this thing was done, the guys who got the benefit were not the poor working class people, but the owners of the homes in which they lived, or, more accurately and more critically, the owners of the land on which those homes stood. The laborers were thus charged a higher rent, and that rent diverted the benefit from the seemingly intended beneficiary (i.e., the public) to landowners in the affected area.
This occurs every day in this country. A new road is built, or a superhighway is constructed, which makes access to a particular site much easier. We tell ourselves that we justify this as an expenditure of public funds by the benefits that accrue to the traveling public; but the benefits go, in the form of higher land prices and rents, to the owners of the sites that are served by this new road. If you doubt this, consider the jockeying for the insider information or for influence over the selection.
Robert Caro, in his biography of Robert Moses, recalls the time in the early 1920s that Moses suggested to the authorities the building of a causeway from the Long Island mainland over to Jones Island. This proposal was rejected outright by the Long Island Park Commission. Some months later, Moses presented them with a drawing showing precisely where this causeway would run, and, after a suitable period of during which these public employees could buy up the land along the proposed highway, he resubmitted his proposal. This time, they officially approved the suggested construction.
In the town of Antioch, Illinois, there were two developments underway almost simultaneously. In the one, roads were provided, together with water and sewer lines, but no sidewalks; in the other, just across a main road from the first, the mayor of the city had storm sewers, curbs and sidewalks installed at public expense, for which of course, any prospective buyer or tenant would gladly pay for use of that land the higher price these added benefits provided. Any reader will recognize this chain of events and set of economic relationships as being the course of everyday life and business at the local, state and national level. The cynic would say that a primary motivation for entering local or even national politics would be the opportunity for personal gain offered daily by publicly financed improvements. ...
Thus, the benefits of a tax-supported public work accrued once more not to the benefit of the public at large, but to that of a very limited and narrowly defined class, those who were rich enough to own land in that location.
There are undoubtedly many other problems to be resolved before the ills of our society are cured; but what many do not recognize and understand is the primacy of the adoption of land value taxation over all these other corrections. The reason for that can be very simply stated: If any of these other measures already adopted have no merit and have only added to the burden of our problems, then they are disqualified at the outset. On the other hand, if they are of themselves beneficial, any benefit from them will be immediately capitalized into land values and will therefore exacerbate the very problems which otherwise might be helped toward a cure. Thus it is that our first step toward any possible remedy for the awesome plight into which we have been led increasingly over the recent years must be the adoption of land value taxation. ... read the whole essay
Mason Gaffney: The Taxable Capacity of Land
Nic Tideman: The Case for Site Value Rating
Frank Stilwell and Kirrily Jordan: The Political Economy of Land: Putting Henry George in His Place
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper