Levels of Government
Fred E. Foldvary — The
Ultimate Tax Reform:
Public Revenue from Land Rent
From 1778 to the adoption of the U.S. Constitution in 1789, the United States
was governed by the Articles of Confederation. Article VII stated the expenses
of the Confederation shall be defrayed out of a common treasury, which shall
be supplied by the several states, in proportion to the value of all land within
each state, granted
to or surveyed for any person, as such land and the buildings and improvements
thereon shall be estimated according to such mode as the United States in Congress
assembled, shall from time to time direct and appoint. The taxes for paying
that proportion shall be laid and levied by the authority and direction of
the legislatures of the several states within the time agreed upon by the United
States in Congress assembled.17
Thus, the states would levy taxes and each would pass on a share of the federal
budget based on its land value. Individuals would pay taxes only to their state
and local governments.18 ...
Making up about one-fifth of national income, land value taxation would provide
about 60 percent of current U.S. federal, state, and local government revenue,
which would be more than adequate for government spending if it did not include
transfer payments. The taxable value of the land in the economy would increase
over time for two reasons.
- First, a shift from taxing production to taxing land values would eliminate
the lost output due to taxes — about $1 trillion per year.44
One-fifth of that would be rent, thus increasing rent by $300 billion.
- Secondly, the economy would grow faster, which also would increase rent
As a concrete example, the transition to land value taxation can be accomplished
in these steps:
- Each county expands its register of all real estate and the title holders
to include all lands owned by governments and previously non-registered
- Local real estate taxes are split into two taxes, one on land value
and one on improvements.
- The county real estate assessment function is transferred to land
value assessment boards, comprised of representatives from
the federal, state, county,
and municipal governments as well as real estate professionals
and scholars. These boards appoint assessors and establish an appeals
process, similar to
current real estate tax appeals.
- All land is assessed at its current market value.
- Over a period of years, depending on how much land values already
have fallen in anticipation of the tax shift, the tax
on improvements is reduced, while
the tax on land values is increased. (An immediate tax
shift to geo-rent, with other taxes reduced or abolished, could be compensated,
those with net
losses, with special bonds whose face-value interest
decrease over time; this would have an effect similar
to the gradual increase in the
geo-rent tax rate.)
- Sales taxes, tariffs, and excise taxes are reduced and eventually
- The personal exemption in federal income taxes is raised
each year, until it eventually includes all income,
at which time
all state and federal personal
income taxes are abolished. The taxation of corporate
profits is also phased out.
- The value of material land (minerals, oil, water, etc.),
the electromagnetic spectrum, naturally growing
forests, and other
is taxed at gradually increasing rates up to a
substantial amount, if not all, of the unimproved
- An amendment to the Constitution is enacted prohibiting
any taxation of wages, sales, profits, value-added,
or produced wealth
taxation of the value of land and other natural
resources, along with voluntary user fees and charges for pollution
as the only sources of
public revenues. The amendment also establishes
a land value tax commission with representatives from the
territorial, and Indian-nation
governments to divide the taxes raised. Generally,
taxes raised from off-shore oil and water, atmospheric pollution,
uses would be allocated to the federal government,
and the rest would be allocated to the state (or provincial,
governments. If the national government needs
additional revenue, it is obtained from the state or territorial
proportion to their land value,
as was specified in the Articles of Confederation
that preceded the U.S. Constitution.
- Top-down revenue sharing from federal to state
and from state to local government stops. Many
services, functions, and agencies
are transferred from
the central government to the state/provincial
Land Value Taxation and Decentralized Governance
The United States is a federation of states (and Indian-nation reservations),
with many government functions such as criminal law, education, and local services
provided by the states. Since the federal income tax was enacted in 1913, taxation
and authority have shifted increasingly to the federal government.
In 1902, federal taxes represented 37 percent of total revenue to governments
at all levels.45 By 2002, federal taxes represented 67 percent of the government
revenue pie.46 The share taken by state governments rose from 11.4 percent
in 1902 to 21.5 percent in 1986. Local governments’ share fell from
51.3 percent in 1902 to 13.7 percent in 1986.
The change in the share of tax revenues taken by each level of government
has occurred in large part because of the relative ease of increasing income
taxes at the federal level, and the relative difficulty of increasing local
and state taxes. Taxpayers find it much easier to respond to changes in
state and local taxes, by moving to lower-tax communities. It is far more
to avoid taxes imposed by the federal government — especially since
U.S. citizens are taxed even if they are abroad.
Revenue-sharing from the federal government to the states is, in effect, a
tax cartel among the states, collusion to tax the population and then divide
the funds among the states. Taxation at the federal level also encourages spending
by the federal government instead of the states, so now we have federal departments
and agencies for education, housing, health and welfare, energy, and other
fields that once were local, state, or private-sector matters.
Local and state governments, once willing to go along with the federal government’s
tax-and-revenue-sharing scheme, are beginning to realize centralized taxing
brings with it centralized authority, dramatically reducing local control.
Revenue-sharing comes with strings attached: Local and state governments
must abide by federal government mandates in order to obtain the funds, taken
their residents in the first place. Revenue-sharing allows the federal
government to sidestep the Tenth Amendment to the Constitution, which provides
not specifically delegated to the federal government are reserved to the
people and the states.
Land value taxation would shift economic power back to state and local governments.
Land is suited to local taxation because — unlike enterprise, capital,
and labor — it cannot be moved. Land is also the logical source of local
public finance because it does not burden enterprise, so that entrepreneurs
don’t even want to run from it. Indeed, entrepreneurs welcome a shift
to land value taxation, not only because their economic profits are not taxed
if all taxation is on land values, but also because land value taxation reduces
the price of land, so they do not need to borrow so much when they invest
funds in an enterprise.
When public finance is based on land value taxation, government revenues flow
up, instead of trickling down from the federal government to the states and
then to local governments. Real estate taxes today are assessed and collected
primarily by county governments; under a system of land value taxation, funds
raised would flow up from the counties to the states, and only then to the
Land value taxation would create a decentralizing force, shifting or “devolving” power
down to local government in accord with the principle of subsidiarity: that
which can be most efficiently done by individuals or smaller jurisdictions
should not be done by larger or higher-level jurisdictions. Government functions
would then come under more observation and control by the voters, who can
monitor and alter local governments much more easily than remote federal
agencies.... read the whole document
Louis Post: Outlines of Louis F. Post's
Lectures, with Illustrative Notes and Charts (1894) — Appendix:
Q3. In an interior or frontier town, where land has but little value, how
would you raise enough money for schools, highways, and other public needs?
A. There is no town whose finances are reasonably managed in which the land
values are insufficient for local needs. Schools, highways, and so forth,
are not local but general, and should be maintained from the land values
of the state at large.
... read the book
Charles T. Root — Not a Single Tax! (1925)
Every community, whatever its political name and extent -- village, city,
state or province or nation -- has its own normal, unfailing income, growing
with the growth of the community and always adequate to meet necessary governmental
To explain: Every community has an indefeasible original right to the land
on which it exists, and to all the natural, unmodified properties and advantages
of that particular area of the earth's surface. To this land in its natural
state, undrained, unfenced, unfertilized, unplanted and unoccupied, including
its waters, its contents and its location, every individual in the community
(which may consist of any political unit selected) has an equal right, while
all the individuals together have a joint right to the value for use which
society has conferred upon these natural advantages.
This value for use is known as "Land Value," or by the not particularly
descriptive but generally adopted name of "Economic Rent."
Briefly defined the land value or economic rent of any piece of ground is
the largest annual amount voluntarily offered for the exclusive use of that
ground, or of an equivalent parcel, independent of improvements thereon. Every
holder or user of land pays economic rent, but he now pays most of it to the
wrong party. The aggregate economic rent of the territory occupied by any political
unit is, as has been stated above, always sufficient, usually more than sufficient,
for the legitimate expenses of the government of that unit. As also stated
above, the economic rent belongs to the community, and not to individual landowners.
... read the whole article
share this page with a friend: right click, choose "send," and
add your comments.
links have not been visited; .
links are pages you've seen
pertinent to this theme: