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


Productivity and Land Value

Some land is more fertile than other land, and those differences in fertility influence land value. But it isn't just differences in fertility that produce differences in land value: much larger differences in land value are due to the effects of other forces: population growth, public spending on infrastructure and services, private sector activity of the community.

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

Whoever calmly reflects and candidly decides upon the merits of indirect taxation must reject it in all its forms. But to do that is to make a great stride toward accepting the single tax. For the single tax is a form of direct taxation; it cannot be shifted.11

11. This is usually a stumbling block to those who, without much experience in economic thought, consider the single tax for the first time. As soon as they grasp the idea that taxes upon commodities shift to consumers they jump to the conclusion that similarly taxes upon land values would shift to the users. But this is a mistake, and the explanation is simple. Taxes upon what men produce make production more difficult and so tend toward scarcity in the supply, which stimulates prices; but taxes upon land, provided the taxes be levied in proportion to value, tend toward plenty in supply (meaning market supply of course), because they make it more difficult to hold valuable land idle, and so depress prices.

"A tax on rent falls wholly on the landlord. There are no means by which he can shift the burden upon anyone else. . . A tax on rent, therefore, has no effect other than its obvious one. It merely takes so much from the landlord and transfers it to the state." — John Stuart Mill's Prin. of Pol. Ec., book v, ch. iii, sec. 1.

"A tax laid upon rent is borne solely by the owner of land." — Bascom's Tr., p.159.

"Taxes which are levied on land . . . really fall on the owner of the land." — Mrs. Fawcett's Pol. Ec. for Beginners, pp.209, 210.

"A land tax levied in proportion to the rent of land, and varying with every variation of rents, . . . will fall wholly on the landlords." — Walker's Pol. Ec., ed. of 1887, p. 413, quoting Ricardo.

"The power of transferring a tax from the person who actually pays it to some other person varies with the object taxed. A tax on rents cannot be transferred. A tax on commodities is always transferred to the consumer." — Thorold Rogers's Pol. Ec., ch. xxi, 2d ed., p. 285.

"Though the landlord is in all cases the real contributor, the tax is commonly advanced by the tenant, to whom the landlord is obliged to allow it in payment of the rent." — Adam Smith's Wealth of Nations, book v, ch. ii, part ii, art. i.

"The way taxes raise prices is by increasing the cost of production and checking supply. But land is not a thing of human production, and taxes upon rent cannot check supply. Therefore, though a tax upon rent compels land-owners to pay more, it gives them no power to obtain more for the use of their land, as it in no way tends to reduce the supply of land. On the contrary, by compelling those who hold land on speculation to sell or let for what they can get, a tax on land values tends to increase the competition between owners, and thus to reduce the price of land." — Progress and Poverty, book viii, ch. iii, subd. i.

Sometimes this point is raised as a question of shifting the tax in higher rent to the tenant, and at others as a question of shifting it to the consumers of goods in higher prices. The principle is the same. Merchants cannot charge higher prices for goods than their competitors do, merely because they pay higher ground rents. A country storekeeper whose business lot is worth but few dollars charges as much for sugar, probably more, than a city grocer whose lot is worth thousands. Quality for quality and quantity for quantity, goods sell for about the same price everywhere. Differences in price are altogether in favor of places where land has a high value. This is due to the fact that the cost of getting goods to places of low land value, distant villages for example, is greater than to centers, which are places of high land value. Sometimes it is true that prices for some things are higher where land values are high. Tiffany's goods, for instance, may be more expensive than goods of the same quality at a store on a less expensive site. But that is not due to the higher land value; it is because the dealer has a reputation for technical knowledge and honesty (or has become a fad among rich people), for which his customers are willing to pay whether his store is on a high priced-lot or a low-priced one.

Though land value has no effect upon the price of good, it is easier to sell goods in some locations than in others. Therefore, though the price and the profit of each sale be the same, or even less, in good locations than in poorer ones, aggregate receipts and aggregate profits are much greater at the good location. And it is out of his aggregate, and not out of each profit, that rent is paid, For example: A cigar store on a thoroughfare supplies a certain quality of cigar for fifteen cents. On a side street the same quality of cigar can be bought no cheaper. Indeed, the cigars there are likely to be poorer, and therefore really dearer. Yet ground rent on the thoroughfare is very high compared with ground rent on the sidestreet. How, then, can the first dealer, he who pays the high ground rent, afford to sell as good or better cigars for fifteen cents than his competitor of the low priced location? Simply because he is able to make so many more sales with a given outlay of labor and capital in a given time that his aggregate profit is greater. This is due to the advantage of his location, and for that advantage he pays a premium in higher ground rent. But that premium is not charged to smokers; the competing dealer of the side street protects them. It represents the greater ease, the lower cost, of doing a given volume of business upon the site for which it is paid; add if the state should take any of it, even the whole of it, in taxation, the loss would be finally borne by the owner of the advantage which attaches to that site — by the landlord. Any attempt to shift it to tenant or buyer would be promptly checked by the competition of neighboring but cheaper land.

"A land-tax, levied in proportion to the rent of land, and varying with every variation of rent, is in effect a tax on rent; and as such a tax will not apply to that land which yields no rent, nor to the produce of that capital which is employed on the land with a view to profit merely, and which never pays rent; it will not in any way affect the price of raw produce, but will fall wholly on the landlords." — McCulloch's Ricardo (3d ed.), p. 207

... read the book



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:

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