It seems to me that we should be exploring strategies that
promote job creation. That doesn't mean subsidies or privileges for
corporations; it means getting the incentives right for creating a
healthy marketplace. It means
reducing
or eliminating
the barriers to entry and
perverse
incentives that make it difficult for an entrepreneur to execute a
business plan (without
reducing the requirement that she not harm the environment or others
in the process). The excerpts on this page speak to how we go about creating
jobs.
Check the themes to the right for some issues related to these excerpts.
H.G. Brown: Significant
Paragraphs from Henry George's Progress & Poverty:
10. Effect of Remedy Upon Wealth Production (in the unabridged P&P: Part
IX — Effects of the Remedy: Chapter 1 — Of the effect upon the
production of wealth)
The elder Mirabeau, we are told, ranked the proposition of Quesnay, to substitute
one single tax on rent (the impôt unique) for all other taxes,
as a discovery equal in utility to the invention of writing or the substitution
of the use of money for barter.
To whosoever will think over the matter, this saying will appear an evidence
of penetration rather than of extravagance. The advantages which would be gained
by substituting for the numerous taxes by which the public revenues are now
raised, a single tax levied upon the value of land, will appear more and more
important the more they are considered. ...
Consider the effect upon the production of wealth.
To abolish the taxation which, acting and reacting, now hampers every wheel
of exchange and presses upon every form of industry, would be like removing
an immense weight from a powerful spring. Imbued with fresh energy, production
would start into new life, and trade would receive a stimulus which would be
felt to the remotest arteries. The present method of taxation operates upon
exchange like artificial deserts and mountains;
- it costs more to get goods through a custom house than it does to carry
them around the world.
- It operates upon energy, and industry, and skill, and thrift, like a
fine upon those qualities.
- If I have worked harder and built myself a good house while you have
been contented to live in a hovel, the taxgatherer now comes annually to
make
me pay a penalty for my energy and industry, by taxing me more than
you.
- If I have saved while you wasted, I am mulct, while you are exempt.
- If a man build a ship we make him pay for his temerity, as though he
had done an injury to the state;
- if a railroad be opened, down comes the tax collector upon it, as though
it were a public nuisance;
- if a manufactory be erected we levy upon it an annual sum which would
go far toward making a handsome profit.
- We say we want capital, but if any one accumulate it, or bring it among
us, we charge him for it as though we were giving him a privilege.
- We punish with a tax the man who covers barren fields with ripening
grain,
- we fine him who puts up machinery, and him who drains a swamp.
How heavily these taxes burden production only those realize who have attempted
to follow our system of taxation through its ramifications, for, as I have
before said, the heaviest part of taxation is that which falls in increased
prices.
To abolish these taxes would be to lift the whole enormous weight of taxation
from productive industry. The needle of the seamstress and the great manufactory;
the cart horse and the locomotive; the fishing boat and the steamship;
the farmer's plow and the merchant's stock, would be alike untaxed. All would
be
free to make or to save, to buy or to sell, unfined by taxes, unannoyed
by the taxgatherer. Instead of saying to the producer, as it does now, "The
more you add to the general wealth the more shall you be taxed!" the state
would say to the producer, "Be as industrious, as thrifty, as enterprising
as you choose, you shall have your full reward! You shall not be fined
for making two blades of grass grow where one grew before; you shall not
be taxed
for adding to the aggregate wealth."
And will not the community gain by thus refusing to kill the goose that lays
the golden eggs; by thus refraining from muzzling the ox that treadeth out
the corn; by thus leaving to industry, and thrift, and skill, their natural
reward, full and unimpaired? For there is to the community also a natural reward.
The law of society is, each for all, as well as all for each. No one can keep
to himself the good he may do, any more than he can keep the bad. Every productive
enterprise, besides its return to those who undertake it, yields collateral
advantages to others. If a man plant a fruit tree, his gain is that he gathers
the fruit in its time and season. But in addition to his gain, there is a gain
to the whole community. Others than the owner are benefited by the increased
supply of fruit; the birds which it shelters fly far and wide; the rain which
it helps to attract falls not alone on his field; and, even to the eye which
rests upon it from a distance, it brings a sense of beauty. And so with everything
else. The building of a house, a factory, a ship, or a railroad, benefits others
besides those who get the direct profits.
Well may the community leave to the individual producer all that prompts him
to exertion; well may it let the laborer have the full reward of his labor,
and the capitalist the full return of his capital. For the more that labor
and capital produce, the greater grows the common wealth in which all may share.
And in the value or rent of land is this general gain expressed in a definite
and concrete form. Here is a fund which the state may take while leaving to
labor and capital their full reward. With increased activity of production
this would commensurately increase.
And to shift the burden of taxation from production and exchange to the value
or rent of land would not merely be to give new stimulus to the production
of wealth; it would be to open new opportunities. For under this system no
one would care to hold land unless to use it, and land now withheld from use
would everywhere be thrown open to improvement. ...
Consider the effect of such a change upon the labor market. Competition
would no longer be one-sided, as now. Instead of laborers competing with
each other
for employment, and in their competition cutting down wages to the point
of bare subsistence, employers would everywhere be competing for laborers,
and
wages would rise to the fair earnings of labor. For into the labor market
would have entered the greatest of all competitors for the employment of
labor, a
competitor whose demand cannot be satisfied until want is satisfied — the
demand of labor itself. The employers of labor would not have merely to
bid against other employers, all feeling the stimulus of greater trade
and increased
profits, but against the ability of laborers to become their own employers
upon the natural opportunities freely opened to them by the tax which prevented
monopolization.
With natural opportunities thus free to labor;
- with capital and improvements exempt from tax, and exchange released
from restrictions, the spectacle of willing men unable to turn their labor
into
the things they are suffering for would become impossible;
- the recurring paroxysms which paralyze industry would cease;
- every wheel of production would be set in motion;
- demand would keep pace with supply, and supply with demand;
- trade would increase in every direction, and wealth augment on every
hand. ... read the whole chapter
Charles B. Fillebrown: A Catechism
of Natural Taxation, from Principles of
Natural Taxation (1917)
Q58. What expected result of the single tax needs studious emphasis?
A. That it would unlock the land to labor at its present value for use, instead
of locking out labor from the land by a prohibitive price based upon the future
value for use.... read the whole article
Winston Churchill: The
People's Land
Tax
on capital value of undeveloped land But there is another
proposal concerning land values which is not less
important. I mean the tax on the capital value of undeveloped urban or
suburban land. The income derived from land and its rateable value
under the present law depend upon the use to which the land is put,
consequently income and rateable value are not always true or complete
measures of the value of the land. Take the case to which I have
already referred of the man who keeps a large plot in or near a growing
town idle for years while it is ripening -- that is to say, while it is
rising in price through the exertions of the surrounding community and
the need of that community for more room to live. Take that case. I
daresay you have formed your own opinion upon it. Mr Balfour, Lord
Lansdowne, and the Conservative Party generally, think that is an
admirable arrangement. They speak of the profits of the land monopolist
as if they were the fruits of thrift and industry and a pleasing
example for the poorer classes to imitate. We do not take that view of
the process. We think it is a dog-in-the-manger
game. We see the evil, we see the imposture upon the public, and we see
the consequences in crowded slums, in hampered commerce, in distorted
or restricted development, and in congested centres of population, and
we say here and now to the land monopolist who is holding up his land
-- and the pity is it was not said before -- you shall judge for
yourselves whether it is a fair offer or not. We say to the land monopolist: 'This
property of yours might be put to immediate use with general advantage.
It is at this minute saleable in the market at ten times the value at
which it is rated. If you choose to keep it idle in the expectation of
still further unearned increment, then at least you shall he taxed at
the true selling value in the meanwhile.' And the Budget
proposes a tax of a halfpenny in the pound on the capital value of all
such land; that is to say, a tax which is a little less in equivalent
than the income tax would be upon the property if the property were
fully developed. That is the second main proposal of the Budget with
regard to the land, and its effects will be,
- first, to raise an expanding revenue for the needs of the
State;
- secondly, half the proceeds of this tax, as well as of the
other
land taxes, will go to the municipalities and local authorities
generally to relieve rates;
- thirdly, the effect
will be, as we believe, to bring land into the market, and thus
somewhat cheapen the price at which land is obtainable for every
object, public and private, and by so doing we shall liberate new
springs of enterprise and industry, we shall stimulate building,
relieve overcrowding, and promote employment.... Read the whole piece
Mason Gaffney: Land as a
Distinctive Factor of Production
Tip O'Neil, the former Speaker
of the US
Congress, is oft-quoted that "All politics is local politics." One
might say the same
of market power. Some lands are sold or leased with covenants against
competition, as Gimbel's Department Store holds a covenant
on a lot adjoining its parent store on 3rd Street and
Wisconsin Avenue, Milwaukee. Such anticompetitive
arrangements, however blatant, are intra-state, and apparently
immune from sanctions under US Federal anti-trust laws.
Scholars of industrial organization, many of them doing
outstanding work otherwise, pay these grass-roots matters little
heed. Researchers and activists concentrate on commodity markets
at national and world levels - the ones subject to Federal
sanctions, such as they are. They could probably find more
severe and blatant market failure in local land markets.
Bargaining power increases with the number of options one
has. A large landowner with a chain of holdings in different
jurisdictions is positioned to bargain, to play off one against the
other. Thus, the Disney Corporation, 1991-93, considered
rebuilding
and expanding Disneyland at its current site in Anaheim, or in Long
Beach
where it had tenure over another suitable site. Using this
leverage
it won concessions from both cities, "finally" choosing to
expand in Anaheim. It has yet to do so, however, and nothing is
really final. Disney has many other sites around the world.
Likewise, land is a basis for oligopsony power in local labor
markets.
A city's labor pool is often faced with a local employers'
association whose membership is limited by the amount of industrial
land
within reach of the labor pool. Migrant farm labor is
faced with statewide employers' associations who have the advantages of
limited numbers, wealth, ancient roots and stability. Labor
unions that organize a local plant are faced with the threat of
the "runaway shop", or merely reallocating work among
plants, when the employer owns plants elsewhere.
Custom has dulled us to it, but a corporation is a pool of
separate
individual landowners bargaining in concert. A century ago,
corporations and limited liability were viewed with suspicion and
apprehension. Today, hundreds and thousands of separate
landowners
pool their corporate strength against labor, as a matter of
course.
Some employees bargain through unions, but not as a matter of
course, and hardly ever with international options. In the
US, less than 20% of the labor force is unionized, yet many,
probably most economists treat labor as the only threatening
monopoly. They see corporations as benign; a prime cause
carried by many economists today is to eliminate the corporate
income tax completely. Would we saw such support
for eliminating the payroll tax, the most obvious cause of
unemployment. Read the whole
article
Mason Gaffney: George's
Economics of Abundance: Replacing dismal choices
with practical resolutions and synergies
George's tax program stimulates
both the demand side and the
supply side. Here is the gist of why it works where other methods
fail. A land tax spurs landowners to use land to earn cash to pay
the taxes. A land tax creates pressure on owners to hire and produce
more; other taxes create pressures to hire and produce less. That
works because it is a fixed charge: it cannot be avoided by
underusing land, and it is not increased by using it. It applies
leverage to landowners, just as would a fixed debt service. Leverage
means that a landowner, by raising gross output 20%, for example, may
raise his net income by 100%.
On the demand side, to repeat,
- it makes jobs by removing tax penalties from hiring
workers and creating capital.
- Second, a land tax creates pressure on owners to hire
more; other taxes create pressures to hire less.
- Third, untaxing capital and its income raises the
incentive to invest, answering those who still dispute Say's Law.
- Fourth, tax revenues are spent locally (whereas rents
paid to absentee owners are spent distantly). Read the whole article
Mason Gaffney: Full Employment, Growth
And Progress On A Small Planet:
Relieving Poverty While Healing The Earth
There is enough land, if only we
use it well. Poverty and
unemployment result from owners’ withholding better lands from
full or any use, creating an artificial and specious scarcity of land
relative to population.
Definition: “land” means all natural resources (Gaffney,
1998).
Lemma:. Factor proportions are
highly variable (Gaffney, 1976);
labor-stinting use of land (same as land-lavishing use) is a form of
withholding land from full use.
Lemma 2: Growth of jobs and output
are not coupled in lockstep
with resource extraction, or with preemption of more Lebensraum. Jobs
and output can and should grow by using given lands better. Processes
and products can and should be modified in more labor-intensive,
land-conserving ways.
Lemma 3: Tyrants, and tyrannical
landowning classes, circulate the
“overpopulation” concept to conceal their own roles in famines and
other extremes of deprivation. In this, George anticipated Amartya Sen.
Read the whole article
Bill Batt: How Our Towns Got That
Way (1996 speech)
There were many arguments to be
made for the classical tradition,
the result of which would be to rely upon payment of rent of land
according to its value to society. George recognized that land value
is largely a function of how society has elected to invest in any
general neighborhood; there is no argument for any one titleholder to
reap the reward of what others have invested. Gaffney points out
that, from the standpoint of economic theory, the framework had the
following virtues:
- It reconciled common land rights with private tenure, free
markets and modern capitalism, a growing and persistent problem as the
industrial society took hold.
- It enabled the lowering of taxes on labor without raising
taxes
on capital.
- It reconciled equity and efficiency. It constituted a
progressive
tax because land is concentrated so much among the wealthy and because
the tax cannot be shifted. It was efficient because it is neutral among
different land-use options.
- It constituted no disincentive to business location or
population
settlement. In this way it encouraged the most efficient land use and
discouraged sprawl.
- It created jobs without
inflation, and raised government revenue
without any penalty upon its base.
- It strengthened public revenues and at the same time
promotes
economy in government.
Those economists who today still
persistently hold to the view
that there is something special about land that make it unwise to
treat as a form of capital are known as Georgists. They represent a
small minority of the economics profession, but, little known as they
are, they are among its most esteemed members.... read
the whole article
Mason Gaffney: The Taxable Surplus
of Land: Measuring, Guarding and Gathering It
Taxable surplus is also what you
can tax without driving land into the wrong use. It is not enough
that the land supply is fixed: a tax must not force underuse or other
misuse of the fixed supply.
A great advantage of taxing rent is
that it does not change the ranking of land uses in the eyes of the landowner. Let
me explain.
In a free market, the function of rent is to sort and arrange land uses: landowners
allocate land to those uses yielding the most net product, or rent. Economists
have shown (and you can easily see) that this is socially advantageous: the net
product is the excess of revenue over all costs, so land yielding the highest
rent is adding its utmost to the national product.
When you base your tax on the net product (or rent), the ranking of rival land
uses remains the same after-tax as it was before-tax. That is, if use "A" yields
20% more rent than use "B", and a tax takes 50% of the rent, then use A still
yields the owner 20% more after-tax than use B, and the owner still prefers use
A. We will see below, (Section
D), that when you tax something other than rent (say the Gross Revenue, G),
you will drive the land into less intensive uses, or out of use altogether.
A related advantage of taxing rent
is that you can often levy the tax on the land's potential to
yield rent, regardless of what use the owner actually chooses. This is,
indeed, a standard way of taxing rent in most capitalist nations. It is possible
because buyers and sellers trade land based on their careful estimates of its
maximum rent-yielding capability. The tax valuer observes and records these value
data, and uses them to place a value on all comparable lands. Many books and
manuals and professional journals have been published on the techniques used:
it is a well established art, with its own professional associations, of which
our speaker Mr. Gwartney is a leading member.
Such a tax is limited to the maximum possible
rent, and so will not exceed a landowner's ability to pay - provided he uses
the land in the most economical manner (which is not always the most intensive
manner). It will surely not interfere with his using the land in the best way,
but will discourage using it any other way. ...
When you base a tax on taxable surplus,
and keep the tax proportional to taxable surplus, you levy taxes without
twisting and inverting the landowner's or land manager's ranking of land
uses. As noted before, the owner's preferred use after tax remains
the same as it would be without any tax. On
the other hand, if you
tax on some other basis (Gross Revenue, for example), you
bias the owner
against uses more heavily taxed. To keep the example simple, and
generally
realistic, we assume here that the seller is a "price-taker," meaning he sells
on a world market and cannot raise the price, and so has no choice but to bear
the tax.
Bear in mind that Net Revenue is the Taxable Surplus: you cannot tax more than
that without aborting the land use. The ratio of Costs (C) to Gross Revenue (G)
varies over a wide range, from zero up nearly to one (and even above one for
subeconomic uses which, however, you do not want). Let's compare two rival uses,
A and B, for the same piece of land. Use "A" yields more Net Revenue (N), but
has a higher ratio of C/G. We levy a tax of 10% on Gross Revenue (G). To simplify,
Expenses and Capital Costs are consolidated as "C", so N = G-C. Table 1 shows
the effects of the tax on Net Revenue after Tax
(NAT).
|
Table 1: Effect on Net Revenues
of a 10% Tax on Gross Revenues
|
|
Revenues/ %
|
Gross
$
|
Costs
$
|
Net Product
$
|
Gross/ Net
|
Tax
$
|
Net After Tax $
|
Tax/ Net
%
|
|
Land Use
|
G
|
C
|
G-C
|
G/N
|
T
|
NAT
|
T/N
|
|
A
|
$100
|
$90
|
$10
|
10 x
|
$10
|
0
|
100%
|
|
B
|
$20
|
$15
|
$5
|
4 x
|
$2
|
$3
|
40%
|
The higher use, A, produces more goods, makes more jobs, and yields more
Net Product: it is clearly the higher use. The tax on G [Gross Revenue],
however, turns A into a lower use than B, in the eyes of the landowner or
manager. A 10% tax on G is a 100% tax on the N from use A, wiping out the
entire incentive to put land to use A. It is a 40% tax on the N from use
B, leaving 60% of the Net Product for the landowner. The landowner would
choose use A in the absence of taxes, or with a tax on N; but the tax on
G forces him to choose use B, which is socially inferior. This,
in a nutshell, expresses the damage done by imposing taxes on bases other
than N, the Net Revenue of land.
- The tax lowers output, employment, and investment opportunities for capital,
all three.
- Fourth, it lowers tax revenues well below their maximum possible level
of $10k, the Net Revenue from use A. ... read the whole article
Martin Luther King, Jr: Where
Do We Go From Here? (1967)
... read the book excerpt
and whole speech
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