Wealth and Want
... because democracy alone is not enough to produce widely shared prosperity.
Home Essential Documents Themes All Documents Authors Glossary Links Contact Us

 

In One's Sleep

Henry George was not the first to notice the injustice of our current approach to land. John Stuart Mill (1806-1873) wrote clearly on the same theme.

"Landlords grow rich in their sleep without working, risking or economising.

If some of us grow rich in our sleep, where do we think this wealth is coming from?  It doesn't materialize out of thin air.  It doesn't come without costing someone, another human being.   It comes from the fruits of others' labors, which they don't receive.   Is it enough to promise "pie in the sky when we die"?  Or does living in a civilized society dedicated to the proposition that all of us are created equal and endowed with certain rights demand something else of us?

John Stuart Mill: Principles of Political Economy with some of their Applications to Social Philosophy (1848)

The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies?

Henry George: Thou Shalt Not Steal  (1887 speech)

Chattel slavery was incarnate theft of the worst kind. That system which made property of human beings, which allowed one person to sell another, which allowed one person to take away the proceeds of another’s toil, which permitted the tearing of the child from the mother, and which permitted the so-called owner to hunt with bloodhounds the person who escaped from the owner’s tyranny — that form of slavery is abolished. To that extent, the command, "Thou shalt not steal," has been vindicated; but there is another form of slavery.

We are selling land now in large quantities to certain English lords, who are coming over here and buying greater estates than the greatest in Great Britain or Ireland. We are selling them land; they are buying land. Did it ever occur to you that they do not want that land? They have no use whatever for American land; they do not propose to come over here and live on it. They cannot carry it over there to where they do live.

It is not the land that they want. What they want is the income from it. They are buying it not because they themselves want to use it, but because by and by, as population increases, numbers of American citizens will want to use it, and then they can say to these American citizens: "You can use this land provided you pay us one-half of all you make upon it." What we are selling those foreign lords is not really land; we are selling them the labor of American citizens; we are selling them the privilege of taking, without any return for it, the proceeds of the toil of our children.

So, here in New York, you will read in the papers every day that the price of land is going up. John Jones or Robert Brown has made a hundred thousand dollars within a year in the increase in the value of land in New York. What does that mean? It means he has the power of getting many more coats, many more cigars, dry goods, horses and carriages, houses or much more food and wine. He has gained the power of taking for his own a great number of these products of human labor.

But what has he done? He has not done anything. He may have been off in Europe or out west, or he may have been sitting at home taking it easy. If he has done nothing to get this increased income, where does it come from? The things I speak of are all products of human labor — someone has to work for them. When a man who does no work can get them, necessarily the people who do work to produce them must have less of the products of human labor than they ought to have. ...  read the whole article

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)

The truth is self-evident. Put to any one capable of consecutive thought this question:

"Suppose there should arise from the English Channel or the German Ocean a no man's land on which common labor to an unlimited amount should be able to make thirty shillings a day and which should remain unappropriated and of free access, like the commons which once comprised so large a part of English soil. What would be the effect upon wages in England?"

He would at once tell you that common wages throughout England must soon increase to thirty shillings a day.

And in response to another question, "What would be the effect on rents?" he would at a moment's reflection say that rents must necessarily fall; and if he thought out the next step he would tell you that all this would happen without any very large part of English labor being diverted to the new natural opportunities, or the forms and direction of industry being much changed; only that kind of production being abandoned which now yields to labor and to landlord together less than labor could secure on the new opportunities. The great rise in wages would be at the expense of rent.

Take now the same man or another — some hardheaded business man, who has no theories, but knows how to make money. Say to him: "Here is a little village; in ten years it will be a great city — in ten years the railroad will have taken the place of the stage coach, the electric light of the candle; it will abound with all the machinery and improvements that so enormously multiply the effective power of labor. Will, in ten years, interest be any higher?"

He will tell you, "No!"

"Will the wages of common labor be any higher; will it be easier for a man who has nothing but his labor to make an independent living?"

He will tell you, "No; the wages of common labor will not be any higher; on the contrary, all the chances are that they will be lower; it will not be easier for the mere laborer to make an independent living; the chances are that it will be harder."

"What, then, will be higher?"

"Rent; the value of land. Go, get yourself a piece of ground, and hold possession."

And if, under such circumstances, you take his advice, you need do nothing more. You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon, or down a hole in the ground; and without doing one stroke of work, without adding one iota to the wealth of the community, in ten years you will be rich! In the new city you may have a luxurious mansion; but among its public buildings will be an almshouse. ...

... For land is the habitation of man, the storehouse upon which be must draw for all his needs, the material to which his labor must be applied for the supply of all his desires; for even the products of the sea cannot be taken, the light of the sun enjoyed, or any of the forces of nature utilized, without the use of land or its products. On the land we are born, from it we live, to it we return again — children of the soil as truly as is the blade of grass or the flower of the field. Take away from man all that belongs to land, and he is but a disembodied spirit. Material progress cannot rid us of our dependence upon land; it can but add to the power of producing wealth from land; and hence, when land is monopolized, it might go on to infinity without increasing wages or improving the condition of those who have but their labor. It can but add to the value of land and the power which its possession gives. Everywhere, in all times, among all peoples, the possession of land is the base of aristocracy, the foundation of great fortunes, the source of power. ... read the whole chapter

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

Or, to state the same thing in another way: Land being necessary to life and labor, its owners will be able, in return for permission to use it, to obtain from mere laborers all that labor can produce, save enough to enable such of them to maintain life as are wanted by the landowners and their dependents.

Thus, where private property in land has divided society into a landowning class and a landless class, there is no possible invention or improvement, whether it be industrial, social or moral, which, so long as it does not affect the ownership of land, can prevent poverty or relieve the general conditions of mere laborers. For whether the effect of any invention or improvement be to increase what labor can produce or to decrease what is required to support the laborer, it can, so soon as it becomes general, result only in increasing the income of the owners of land, without at all benefiting the mere laborers. In no event can those possessed of the mere ordinary power to labor, a power utterly useless without the means necessary to labor, keep more of their earnings than enough to enable them to live. ... read the whole letter

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

Q42. Does not the growth of a community increase the value of other things as well as of land? For example, does it not add to the value of the services of professional men, or of any other business that is dependent upon the presence and growth of the community, as truly as it does to the value of land?
A. Granted that the growth of a community primarily tends to increase profits, the increased profits tend in turn to attract men there to share them. This intensifies competition and tends to lower profits. At the same time it increases demand for land and tends to enhance the value of that. It therefore cannot be said that the growth of a community finally increases the value of other things as well as of land. In fact it does not. Appropriate houses in cities are no dearer than appropriate houses in the country, differences in cost of production being allowed for. And although some professional men get very high wages in thickly populated cities, the average comfort of professional men in cities is no higher than in the country, if as high. Moreover, even if labor values as well as land values were increased by communal growth, it must never be forgotten that labor values must always be worked for by the individual, whereas land values are never worked for by the individual. A lawyer may command enormous fees, but he gets no fee at all unless he works for it; but when land commands enormous rent the owner gets it without doing the slightest work. ... read the book

Upton Sinclair: The Consequences of Land Speculation are Tenantry and Debt on the Farms, and Slums and Luxury in the Cities

I know of a woman — I have never had the pleasure of making her acquaintance, because she lives in a lunatic asylum, which does not happen to be on my visiting list. This woman has been mentally incompetent from birth. She is well taken care of, because her father left her when he died the income of a large farm on the outskirts of a city. The city has since grown and the land is now worth, at conservative estimate, about twenty million dollars. It is covered with office buildings, and the greater part of the income, which cannot be spent by the woman, is piling up at compound interest. The woman enjoys good health, so she may be worth a hundred million dollars before she dies.

I choose this case because it is one about which there can be no disputing; this woman has never been able to do anything to earn that twenty million dollars. And if a visitor from Mars should come down to study the situation, which would he think was most insane, the unfortunate woman, or the society which compels thousands of people to wear themselves to death in order to pay her the income of twenty million dollars?

The fact that this woman is insane makes it easy to see that she is not entitled to the "unearned increment" of the land she owns. But how about all the other people who have bought up and are holding for speculation the most desirable land? The value of this land increases, not because of anything these owners do — not because of any useful service they render to the community — but purely because the community as a whole is crowding into that neighborhood and must have use of the land.

The speculator who bought this land thinks that he deserves the increase, because he guessed the fact that the city was going to grow that way. But it seems clear enough that his skill in guessing which way the community was going to grow, however useful that skill may be to himself, is not in any way useful to the community. The man may have planted trees, or built roads, and put in sidewalks and sewers; all that is useful work, and for that he should be paid. But should he be paid for guessing what the rest of us were going to need?

Before you answer, consider the consequences of this guessing game. The consequences of land speculation are tenantry and debt on the farms, and slums and luxury in the cities. A great part of the necessary land is held out of use, and so the value of all land continually increases, until the poor man can no longer own a home. The value of farm land also increases; so year by year more independent farmers are dispossessed, because they cannot pay interest on their mortgages. So the land becomes a place of serfdom, that land described by the poet, "where wealth accumulates and men decay." The great cities fill up with festering slums, and a small class of idle parasites are provided with enormous fortunes, which they do not have to earn, and which they cannot intelligently spend. ...

In Philadelphia, as in all our great cities, are enormously wealthy families, living on hereditary incomes derived from crowded slums. Here and there among these rich men is one who realizes that he has not earned what he is consuming, and that it has not brought him happiness, and is bringing still less to his children. Such men are casting about for ways to invest their money without breeding idleness and parasitism. Some of them might be grateful to learn about this enclave plan, and to visit the lovely village of Arden, and see what its people are doing to make possible a peaceful and joyous life, even in this land of bootleggers and jazz orchestras. ... read the whole article

Winston Churchill: Land Price as a Cause of Poverty (1909 speech in Parliament)

Then the right hon. gentleman instanced the case of a new railway and a country district enriched by that railway. The railway, he explained, is built to open up a new district; and the farmers and landowners in that district are endowed with unearned increment in consequence of the building of the railway. But if after a while their business aptitude and industry create a large carrying trade, then the railway, he contends, gets its unearned increment in its turn.

But the right hon. gentleman cannot call the increment unearned which the railway acquires through the regular service of carrying goods, rendering a service on each occasion in proportion to the tonnage of goods it carries, making a profit by an active extension of the scale of its useful business - he cannot surely compare that process with the process of getting rich merely by sitting still? It is clear that the analogy is not true. ... Read the whole piece
Karl Williams: Landlording It Over Us
If we’re spending decades of our life trying to purchase what should be our common birthright – land, the Common Wealth – then just who is it who’s riding on our backs? Here [we] expose the extent by which the great landowners – in Britain, particularly – “get rich in their sleep.” ...

Geoism holds that there’s nothing necessarily wrong with being rich – indeed, an economic system exists whereby we could ALL be rich (in wealth, education or leisure time). The justification for riches all depends on whether a wealthy person has become so through creating wealth (in the form of goods and services that people willingly buy in a free and fair market) or through living off the wealth really created by others. Earned wealth might arise through talented or arduous inventing, writing, sports ability, entertaining, entrepreneurialship or whatever. ...

Here we’re going to look at one of the most obvious examples of unearned wealth – the massive riches accumulated by the great landowners of Britain. Remember, it’s not the acreage of land that is important, but the value of the land.  ...

Britains' wealthiest man gets rich the easy way -- he has his underlings collect and bank his rent. And if the rents from his vast land holdings weren’t enough, soaring property prices have escalated his net worth sky high – to be exact, UK£11.5 billion. To give him his full title, he is His Grace, Gerald Grosvenor, OBE, Sixth Duke of Westminster.

Forget the vast tracts of rural land, including a 100,000-acre estate in Scotland which contains no less than three mountains. The 300 acres the duke owns in central London, comprising Mayfair and Belgravia, are today one of the most valuable patches of ground on the planet.

It was a handy marriage which brought this fortune into the Grosvenor family’s hands – in 1677, Sir Richard Grosvenor married Mary Davies, heir to the hundred acres north of Piccadilly and the “Five Fields” south of Knightsbridge. During the 18th and 19th centuries, Mayfair and Belgravia were built up as residential areas for London’s wealthy classes, a position they have occupied ever since. Unlike many other great landowners who have cashed in, the Grosvenors held on and have benefited enormously from the latest boom in London property prices.

The duke has nowadays diversified his land portfolio. His commercial property company, Grosvenor, has become a serious player, with a vast array of investments and developments around the world. These include office blocks in San Francisco, business parks in Vancouver, luxury apartments in Hong Kong and shopping centres in Spain and Portugal. In the UK, Grosvenor has developed Festival Place shopping centre in Basingstoke and is set to undertake a £700m. mixed-use redevelopment in the centre of Liverpool. Back in his tract of Mayfair, land values are in the stratosphere: in 2001, BP’s pension fund sold ten acres of Mayfair for a cool £335m.

Is it any wonder that, given how there is little or no land value taxation, the duke has all his many eggs in the land investment basket? But it’s not just for economic considerations that he could never contemplate selling his vast acreage, for he has a philosophical reason for not selling. (Have a bucket ready before reading the following!) “This is part of my heritage, my birthright. It is not to do with anything materialistic, but is deeply ingrained.”   Read the whole article

Winston Churchill: The People's Land  
Fancy comparing these healthy processes with the enrichment which comes to the landlord who happens to own a plot of land on the outskirts or at the centre of one of our great cities, who watches the busy population around him making the city larger, richer, more convenient, more famous every day, and all the while sits still and does nothing. Roads are made, streets are made, railway services are improved, electric light turns night into day, electric trams glide swiftly to and fro, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits still. Every one of those improvements is effected by the labour and at the cost of other people. Many of the most important are effected at the cost of the municipality and of the ratepayers. To not one of those improvements does the land monopolist as a land monopolist contribute, and yet by every one of them the value of his land is sensibly enhanced. He renders no service to the community, he contributes nothing to the general welfare; he contributes nothing even to the process from which his own enrichment is derived. If the land were occupied by shops or by dwellings, the municipality at least would secure the rates upon them in aid of the general fund, but the land may be unoccupied, undeveloped, it may be what is called 'ripening' -- ripening at the expense of the whole city, of the whole country, for the unearned increment of its owner. Roads perhaps may have to be diverted to avoid this forbidden area. The merchant going to his office, the artisan going to his work, have to make a detour or pay a tram fare to avoid it. The citizens are losing their chance of developing the land, the city is losing its rates, the State is losing its taxes which would have accrued if the natural development had taken place; and that share has to be replaced at the expense of the other ratepayers and taxpayers, and the nation as a whole is losing in the competition of the world -- the hard and growing competition of the world -- both in time and money. And all the while the land monopolist has only to sit still and watch complacently his property multiplying in value, sometimes manifold, without either effort or contribution on his part; and that is justice! ...

Every form of enterprise only undertaken after the land monopolist has skimmed the cream off for himself   It does not matter where you look or what examples you select, you will see that every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream off for himself, and everywhere today the man or the public body who wishes to put land to its highest use is forced to pay a preliminary fine in land values to the man who is putting it to an inferior use, and in some cases to no use at all. All comes back to the land value, and its owner for the time being is able to levy his toll upon all other forms of wealth and upon every form of industry. A portion, in some cases the whole, of every benefit which is laboriously acquired by the community is represented in the land value, and finds its way automatically into the landlord's pocket. If there is a rise in wages, rents are able to move forward, because the workers can afford to pay a little more. If the opening of a new railway or a new tramway or the institution of an improved service of workmen's trains or a lowering of fares or a new invention or any other public convenience affords a benefit to the workers in any particular district, it becomes easier for them to live, and therefore the landlord and the ground landlord, one on top of the other, are able to charge them more for the privilege of living there. ...

Now let the Manchester Ship Canal tell its tale about the land. It has a story to tell which is just as simple and just as pregnant as its story about Free Trade. When it was resolved to build the Canal, the first thing that had to be done was to buy the land. Before the resolution to build the Canal was taken, the land on which the Canal flows -- or perhaps I should say 'stands' -- was, in the main, agricultural land, paying rates on an assessment from 30s. to L2 an acre. I am told that 4,495 acres of land purchased fell within that description out of something under 5,000 purchased altogether. Immediately after the decision, the 4,495 acres were sold for L777,000 sterling -- or an average of L172 an acre -- that is to say, five or six times the agricultural value of the land and the value on which it had been rated for public purposes.

Now what had the landowner done for the community; what enterprise had he shown; what service had he rendered; what capital had he risked in order that he should gain this enormous multiplication of the value of his property! I will tell you in one word what he had done. Can you guess it! Nothing.

But it was not only the owners of the land that was needed for making the Canal, who were automatically enriched. All the surrounding land either having a frontage on the Canal or access to it rose and rose rapidly, and splendidly, in value. By the stroke of a fairy wand, without toil, without risk, without even a half-hour's thought many landowners in Salford, Eccles, Stretford, Irlam, Warrington Runcorn, etc., found themselves in possession of property which had trebled, quadrupled, quintupled in value.

Apart from the high prices which were paid, there was a heavy bill for compensation, severance, disturbance, and injurious affection where no land was taken -- injurious affection, namely, raising the land not taken many times in value -- all this was added to the dead-weight cost of construction. All this was a burden on those whose labour skill, and capital created this great public work. Much of this land today is still rated at ordinary agricultural value, and in order to make sure that no injustice is done, in order to make quite certain that these landowners are not injured by our system of government, half their rates are, under the Agricultural Rates Act, paid back to them. The balance is made up by you. The land is still rising in value, and with every day's work that every man in this neighbourhood does and with every addition to the prosperity of Manchester and improvement of this great city, the land is further enhanced in value. ... Read the whole piece

Bill Batt: How Our Towns Got That Way   (1996 speech)
Two-factor economics, however, had advantages to influential individuals and special interests. Land speculators who were positioned to profit from knowing where locational values would increase, or were in a position to cause those increases, could quickly and easily reap a private gain. Simply by holding title to parcels of real property, without doing anything at all to increase their value, one could quickly turn a profit. This is because the increment of unearned increases resulting from social investments were left for owners to reap rather than recovered by society. In three-factor economics, land rent reverted to society in an automatic and efficient manner. When a railroad magnate like George Leland Stanford extended the Southern Pacific track to the east of Los Angeles on land that he was granted by the government, all he then needed to do was to sit back and wait for the land sales to give him a return on that which was made more valuable by his investment in the line. All across America, land speculators learned that capturing monopoly titles to tracts of land allowed them to quickly and easily turn a "profit" on their investment yet hardly raising a finger.... read the whole article

Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
Rent becomes critically important in Georgist economics, because rent is the increment of market gain that accrues to choice land parcels. This insight arose originally in the context of agricultural societies, where differential qualities of land were recognized by varied payment in rent. An individual’s return on investment was represented by his labor — that was his and his alone to keep. So also were whatever capital goods he acquired through the efforts of his past labor. On the other hand, whenever land offered a higher yield separate from whatever the individual’s labor investment might represent, this constituted a windfall gain above and beyond what might be minimally expected. This is land rent, and it exists even if it isn’t collected. Today, as earlier noted, the greatest land rents derive from their location, grown out of nearby social investment.

The concept of rent needs further explication precisely because it is so foreign to 20th century students, even those who have been schooled in economics at it is currently taught. Land rent has no relationship to the word rent as it is used in contemporary vernacular, that is, when one rents a car or an apartment. Rather, rent is a surplus, defined as the return on investment above and beyond what is minimally required to bring a service into production. To take just an elementary example, consider that there are three parcels of land available for farming and three farmers of equal ability and enterprise. But suppose the parcels differ in their productive capacity, due perhaps to their fertility, access to water, and so on. If planted with similar quality seed, the three parcels will yield different quantities of harvest, the one with the highest quality land having the best return. The one with the lowest quality land would in like fashion have the lowest return. Economic rent is defined as the amount of surplus harvest qualitatively measured by the difference between the parcel with the highest return and that with the lowest return.

Even though its originator, David Ricardo, had in mind the differential return from agricultural lands, the concept of rent applies to other natural services as well. Consider what happens in the case of urban communities, using the simplest comparison with a tic-tac-toe board. When the lattice is completely undeveloped and consists only of vacant land squares, the locational sites have inconsequential value. But let us suppose that each square is then settled — the first by a hotel, the second by a department store, the third by a restaurant and so on — and supposing that the owner of the center square is reticent to build at all. Reserving his prerogative as titleholder he may intend ultimately to sell. Given the rules of economics as they apply today he may be wise to do so, keeping his money for other uses, as his square will have increased in market value more than all the others despite his having done nothing to improve it. It was this that prompted John Stuart Mill to observe that “Landlords grow richer in their sleep without working, risking or economizing. The increase in the value of land, aris[es] from the efforts of an entire community.. . .” 27 As will be discussed later below, the single greatest factor in determining the economic rental value of land today results not from nutrients or access to water but rather due to site value determined by location. And that can be priced and collected easily.

Lastly, one must appreciate that the market value of “land” of every sort is entirely rent, as there is no human factor of labor that accounts for its origination. Services of nature have no prior cost to bring them into production existence — the electromagnetic spectrum, for example, exists regardless of human presence on earth and so presumably does time. Ocean fish, fossil fuels, and heavy metals are all found in nature, not the result of human creation. They are, in 19th century classical economics, the fruits not of man’s labor but of God’s. And it is to God, or at least to God’s representative on earth — the lords and kings — that rent was owed, just as much as it was their role to provide reciprocal services to the tenants of the land. That bargain, so well refined in feudal economic arrangements, was an equilibrium balance, disrupted, one might say, by the annulment of rent collection and the exploitation of land without recognition of its price. The practice effectively ended with what in Britain is known as the “enclosure movement” of the early Tudor reign, driving the peasants off the land into cities to provide cheap labor for the early English industrialists.28 But the theory continued long afterwards. Georgists today argue that land rent should be collected from titleholders so that it is not left to render economic distortions. This in turn affects the price of labor and the price of money. Government’s role, whatever else it does, is at the very least responsible for defending the commons, to ascertain titles and to collect rent. Although there are many differences about the proper role, scope and domain of government among Georgist adherents, the collection of rent and the supervision of open markets is central to its tenets.

Despite assiduous efforts to make clear the extent and the limits of the economic rent as a concept — known as well as land rent, Ricardian rent, and ground rent, even the best of contemporary neoclassical economists disagree. Some texts argue that certain athletes or other star performers with great natural ability reap returns for their efforts far above what is in fact necessary to “bring them into productive use.” The difference between what it would minimally take to entice them to perform and the price they are actually paid is all economic rent. Babe Ruth, Michael Jordan, Britney Spears, and the Beatles have all been compensated with impressive amounts of economic rent.29 Georgists and classical economists are of mixed minds, arguing sometimes that such payments are either wages or else are simply transfers that in no way reflect productivity.30   ... read the whole article

a synopsis of Robert V. Andelson and James M. Dawsey: From Wasteland to Promised land: Liberation Theology for a Post-Marxist World

The modern equivalent of removing one's neighbor's landmark is thus not the private ownership of land per se, but rather the private appropriation of land value. "The profit of the earth is for all" (Eccles. 5:9). The Old Testament ethic, to assure everyone the same natural opportunity, asserts that all people have an equal right to economic rent, and the Levite tithe demonstrates that the socialization of rent offsets the ethical and practical harm resulting from private land ownership. But there is another basis for its advocacy: Rent should be taken by society because it is a social product. Rent arises in large measure from two societal phenomena: the mere presence of population, and community activity in a particular area. More people means more demand for space on which to live and work. Community activities such as roads, schools, protection, parks, sewage, utilities and other public services, as well as the totality of private commercial and cultural operations, all make land more productive or desirable. It follows that a community which funds such improvements out of its rent fund will be provided with a stable and growing fund with which to maintain and improve them. And unlike conventional taxes, the collection of this fund will enhance, not penalize, the production of wealth.

Individuals, in their bare capacity as landowners, do nothing to produce land value. By withholding sites from use, whether for speculation or for other reasons, they may generate scarcity, artificially inflating rent, but this does not reflect any positive contribution to production on the part of landowners.

While land value is not the only type of unearned increment, unearned income resulting from such advantages as talent, genes or luck is not at the expense of others. Even Karl Marx admitted: "The monopoly of property in land is even the basis of the monopoly of capital." Marx could have -- but did not -- champion the abolition of land monopoly; instead he advocated its transfer from private into state hands. It was left to Henry George to expound how the universal principles of justice found in the Mosaic model could be applied to the modern age in all its economic aspects -- rural and urban, agricultural and industrial, technologically undeveloped or advanced.

What George advocated was to leave land titles in private hands but to appropriate land rent via the existing machinery of property taxation. "I do not propose either to purchase or to confiscate private property in land. The first would be unjust; the second, needless....It is not necessary to confiscate land; it is only necessary to confiscate rent." No owner or tenant would be expropriated or evicted. No limit would be placed on the quantity of land one could hold, as long as the annual rent were paid.

Coordinately with the capture of rent as public revenue, taxes on products of human labor -- improvements, personal property, services, commodities, wages, etc. -- would be reduced and ultimately eliminated.

George considered his remedy no mere human contrivance. He saw the growth of land value and the easy means of equitably distributing it as an expression of benevolent supernatural design: "As civilization goes on... so do the common wants increase and so does the necessity for public revenue arise. And so in that value which attaches to land, not by reason of anything the individual does, but by reason of the growth of the community, is a provision intended -- we may safely say intended -- to meet that social want."

George's remedy goes a long way to stop current inequity and prevent future inequity. While past inequity, in the form of accumulations of capital based on previous land speculation and monopoly cannot be accurately redressed, these fortunes can be impelled to serve the needs of the public via investment in production, not by further investment in land speculation and monopoly.

Dependency theory, to the degree that it hits upon one of the causes of Third World poverty in exploitation by foreign investors, can find in George's land value tax the constructive practical approach it lacks. Neither erection of trade barriers nor legal restriction of foreign ownership is called for. As one Australian writer puts it:

(W)hen investors from one country buy property in other countries they are seeking site rent, which they hope to obtain directly from tenants, or indirectly by selling land in the future when the price or capital value has increased.... The site rent that is so attractive to overseas investors can be kept in the country quite easily - - by shifting taxation from labor onto land."

Because George asserted, "We must make land common property," he is sometimes erroneously regarded as an advocate of land nationalization. But, as we have seen, he was nothing of the sort. The expropriation of land makes it practically impossible to fairly compensate people for the improvements to land, which are their legitimate property. George's system renders to the community what is due to the community, without doing any violence to the wealth that has been fairly earned by productive workers.  Read the whole synopsis

Bill Batt: Comment on Parts of the NYS Legislative Tax Study Commission's 1985 study “Who Pays New York Taxes?”

Little justification exists for taxing buildings, or improvements of any sort, so this question is easily disposed of. The practice is explained largely as a matter of historical inertia. Only in the recent century or two have buildings represented any significant capital value; prior to the rise of major cities, the value of real property lay essentially in land. American cities today typically record aggregate assessed land values – at least when the valuations are well-done – at about 40% to 60% of total taxable value, that is, of land and buildings taken together.31 Skyscrapers reflect enormous capital investment, and this expenditure is warranted because of the enormous value of locational sites. Each site gets its market price from the fact that the total neighborhood context creates an attractive market presence and ambience. By taxing buildings, however, we impose a penalty on their optimum development as well as on the incentives for their maintenance. Moreover, taxes on buildings take away from whatever burden would otherwise be imposed on sites, with the result that incentives for their highest and best use is weakened. Lastly, the technical and administrative challenges of properly assessing the value of improvements is daunting, particularly since they must be depreciated for tax and accounting purposes, evaluated for potential replacement, and so on. In fact most costs associated with administration of property taxation and appeal litigation involve disputes over the valuation of structures, not land values.

Land value taxation, on the other hand, overcomes all these obstacles. Locations are the beneficiaries of community services whether they are improved or not. As has been forcefully argued by this writer and others elsewhere,32 a tax on land value conforms to all the textbook principles of sound tax theory. Some further considerations are worth reviewing, however, when looking at ground rent as a flow rather than as a “present value” stock. The technical ability to trace changes in the market prices of sites – or as can also be understood, the variable flow of ground rent to those sites – by the application of GIS (geographic information systems) real-time recording of sales transactions invites wholesale changes in the maintenance of cadastral data. The transmittal of sales records as typically received in the offices of local governments for purposes of title registration over to Assessors’ offices allows for the possibility of a running real-time mapping of market values. Given also that GIS algorithms can now calculate the land value proportions reasonably accurately, this means that “landvaluescapes” are easily created in ways analogous to maps that portray other common geographic features. These landvaluescapes reflect the flow of ground rent through local or regional economies, and can also be used to identify the areas of greatest market vitality and enterprise. The flow of economic rent can easily be taxed in ways that overcomes the mistaken notion that it is a stock. Just as income is recognized as a flow of money, rent too can (and should) be understood as such.

The question still begs to be answered, “why tax land?” And what happens when we don’t tax land? Henry George answered this more than a century ago more forcefully and clearly, perhaps, than anyone has since. He recognized full well that the economic surplus not expended by human hands or minds in the production of capital wealth gravitates to land. Particular land sites come to reflect the value of their strategic location for market exchanges by assuming a price for their monopoly use. Regardless whether those who acquire title to such sites use them to the full extent of their potential, the flow of rent to such locations is commensurate with their full capacity. This is why John Stuart Mill more than a century ago observed that, “Landlords grow richer in their sleep without working, risking or economizing. The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold title.”33 Absent its recovery by taxation this rent becomes a “free lunch” to opportunistically situated titleholders. When offered for sale, the projected rental value is capitalized in the present value for purposes of attaching a market price and sold as a commodity. Yet simple justice calls for the recovery in taxes what is the community’s creation. Moreover, the failure to recover the land rent connected to sites makes it necessary to tax productive activities in our economy, and this leads to economic and technical inefficiency known as “deadweight loss.”34 It means that the economy performs suboptimally.

Land, and by this Henry George meant any natural factor of production not created by human hands or minds, is ours only to use, not to buy or sell as a commodity. In the equally immortal words of Jefferson a century earlier, “The earth belongs in usufruct to the living; . . . [It is] given as a common stock for men to labor and live on.”35 This passage likely needs a bit of parsing for the modern reader. The word usufruct, understood since Roman times, has almost passed from use today. It means “the right to use the property of another so long as its value is not diminished.”36 Note also that Jefferson regarded the earth as a “common stock;” not allotted to individuals with possessory titles. Only the phrase “to the living” might be subject to challenge by forward-looking environmentalists who, taking an idea from Native American cultures, argue that “we do not inherit the earth from our ancestors; we borrow it from our children.” The presumption that real property titles are acquired legitimately is a claim that does not withstand scrutiny; rather all such titles owe their origin ultimately to force or fraud.37

If we own the land sites that we occupy only in usufruct, and the rent that derives from those sites is due to community enterprise, it is not a large logical leap to argue that the community’s recovery of that rent should be the proper source of taxation. This is the Georgist argument: that the recapture of land rent is the proper – indeed the natural – source of taxation.38 ... read the whole commentary



To share this page with a friend: right click, choose "send," and add your comments.

Red links have not been visited; .
Green links are pages you've seen

Essential Documents pertinent to this theme:

Home
Top of page
Essential Documents
Themes
to email this page to a friend: right click, choose "send"
   
Wealth and Want
www.wealthandwant.com
   
... because democracy alone hasn't yet led to a society in which all can prosper