Wealth and Want
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Absentee Ownership

In many towns and cities, some of the best sites in the downtown are owned not by residents of the town, who might spend some of their rent receipts in local stores or restaurants, but by out of town individuals, family trusts, real estate trusts, pension funds, individual retirees, American corporations and their shareholders, individual foreigners, foreign corporations and their shareholders. The rent that individual tenants and small businesses and other commercial tenants pay is siphoned off to these landholders, instead of being recycled to meet the needs of the local community.

What would life be like in your town if the portion of the rent money that local tenants paid to their landlords for locations (that is, not for the building, but for its location) was kept by the town and used to support the schools, pave the highways, fund emergency services and libraries and social services? What would life be like in your home town if, when someone died or left town, instead of them leaving with (or leaving to their heirs) the value of their land, that land value was recycled back into local projects?

We could stop taxing buildings. We could stop taxing sales. We could stop local wage taxes, which afflict cities like Philadelphia.

And if we collected the land rent from owners of property, our children would be able to afford to buy homes in the towns in which they grew up.

THEY WANT OUR RENT! Rent is higher here than in many other parts of the world. No wonder "investors" from other countries seek it.

Henry George:  The Irish Land Question (1881)
The best measure of rent is, of course, its proportion to the produce. The only estimate of Irish rent as a proportion of which I know is that of Buckle, who puts it at one-fourth of the produce. In this country I am inclined to think one-fourth would generally be considered a moderate rent. Even in California there is considerable land rented for one-third the crop, and some that rents for one-half the crop; while, according to a writer in the Atlantic Monthly, the common rent in that great wheat-growing section of the New Northwest now being opened up is one-half the crop! ...

... In New York, in San Francisco, in Washington, Boston, Chicago, and St. Louis, live men who own large tracts of land which they seldom or never see. A resident of Rochester is said to own no less than four hundred farms in different States, one of which (I believe in Kentucky) comprises thirty-five thousand acres. Under the plantation system of farming and that of stock-raising on a grand scale, which are developing so rapidly in our new States, very much of the profits go to professional men and capitalists who live in distant cities. Corporations whose stock is held in the East or in Europe own much greater bodies of land, at much greater distances, than do the London corporations possessing landed estates in Ireland. To say nothing of the great land-grant railroad companies, the Standard Oil Company probably owns more acres of Western land than all the London companies put together own of Irish land. And, although landlordism in its grosser forms is only beginning in the United States, there is probably no American, wherever he may live, who cannot in his immediate vicinity see some instance of absentee landlordism. The tendency to concentration born of the new era ushered in by the application of steam shows itself in this way as in many others. To those who can live where they please, the great cities are becoming more and more attractive.

And it is further to be remarked that too much stress is laid upon absenteeism, and that it might be prevented without much of the evil often attributed to it being cured. That is to say, that to his tenantry and neighborhood the owner of land in Galway or Kilkenny would be as much an absentee if he lived in Dublin as if he lived in London, and that, if Irish landlords were compelled to live in Ireland, all that the Irish people would gain would be, metaphorically speaking, the crumbs that fell from the landlords' tables. For if the butter and eggs, the pigs and the poultry, of the Irish peasant must be taken from him and exported to pay for his landlord's wine and cigars, what difference does it make to him where the wine is drunk or the cigars are smoked? ... read the whole article

Henry George: The Crime of Poverty  (1885 speech)
  Is it not a self-evident truth, as Thomas Jefferson said, that "the land belongs in usufruct to the living," and that they who have died have left it, and have no power to say how it shall be disposed of? Title to land! Where can a man get any title which makes the earth his property? There is a sacred right to property — sacred because ordained by the laws of nature, that is to say, by the laws of God, and necessary to social order and civilisation. That is the right of property in things produced by labour; it rests on the right of a man to himself. That which a man produces, that is his against all the world, to give or to keep, to lend, to sell or to bequeath; but how can he get such a right to land when it was here before he came? Individual claims to land rest only on appropriation. I read in a recent number of the "Nineteenth Century," possibly some of you may have read it, an article by an ex-prime minister of Australia in which there was a little story that attracted my attention. It was of a man named Galahard, who in the early days got up to the top of a high hill in one of the finest parts of western Australia. He got up there, looked all around, and made this proclamation: "All the land that is in my sight from the top of this hill I claim for myself; and all the land that is out of sight I claim for my son John."

That story is of universal application. Land titles everywhere come from just such appropriations. Now, under certain circumstances, appropriation can give a right. You invite a company of gentlemen to dinner and you say to them: "Be seated, gentlemen," and I get into this chair. Well, that seat for the time being is mine by the right of appropriation. It would be very ungentlemanly, it would be very wrong for any one of the other guests to come up and say: "Get out of that chair; I want to sit there!" But that right of possession, which is good so far as the chair is concerned, for the time, does not give me a right to appropriate all there is on the table before me. Grant that a man has a right to appropriate such natural elements as he can use, has he any right to appropriate more than he can use? Has a guest in such a case as I have supposed a right to appropriate more than he needs and make other people stand up? That is what is done.

Why, look all over this country — look at this town or any other town. If men only took what they wanted to use we should all have enough; but they take what they do not want to use at all. Here are a lot of Englishmen coming over here and getting titles to our land in vast tracts; what do they want with our land? They do not want it at all; it is not the land they want; they have no use for American land. What they want is the income that they know they can in a little while get from it. Where does that income come from? It comes from labour, from the labour of American citizens. What we are selling to these people is our children, not land. ... read the whole speech
Henry George: Thou Shalt Not Steal  (1887 speech)
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

What is the difference, economically speaking, between the slaves of South Carolina, Missouri, Mississippi, and Georgia and the free peasantry of Ireland or the agricultural laborer of England? (Cheers) Go to one of those slave states in the slave days, and there you would find a planter, the owner of five hundred slaves, living in elegant luxury, without doing a stroke of work, having a fine mansion, horses, [and a] carriage — all the things that work produces, but doing none of it himself. The people who did the work were living in negro huts, on coarse food; they were clothed in coarse raiment. If they ran away, he had the privilege of chasing them back, tying them up and whipping them and making them work.

Come to this side of the Atlantic, in a place where you saw the same state of development. There you found also five hundred people living in little cabins, eating coarse food, clothed in coarse raiment, working hard, yet getting only enough of the things that work produces to keep them in good times, when bad times came having to appeal to the world for charity. But you found among those little cabins, too, the lordly mansion of the man who did no work. (Hear, hear, and groans)

You found the mansion; you did not often find the man. (Laughter and cheers) As a general rule he was off in London, or in Paris, enjoying himself on the fruits of their labor. (Hear, hear) He had no legal right to make them work for him. Oh! no. If they ran away he could not put bloodhounds on their track and bring them back and whip them; but he had, in hunger, in starvation, a ban dog40 more swift, more keen, more sure than the bloodhound of the south. (Cheers)

The slaveowner of the south — the owner of men — had to make those men work for him. He went to all that trouble. The landlord of Ireland did not have to make men work for him. He owned the land, and without land men cannot work; and so men would come to him — equal children of the Creator, equal citizens of Great Britain — would come to him, with their hats in their hands, and beg to be allowed to live on his land, to be allowed to work and to give to him all the produce of their work, except enough to merely keep them alive, and thank him for the privilege. . . . ... read the whole speech

Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)

PRIVATE property in land, no less than private property in slaves, is the violation of the true rights of property. They are different forms of the same robbery — twin devices, by which the perverted ingenuity of man has sought to enable the strong and the cunning to escape God's requirement of labor by forcing it on others. — The Condition of Labor, an Open Letter to Pope Leo XIII 

ROBINSON CRUSOE, as we all know, took Friday as his slave. Suppose, however, that instead of taking Friday as his slave, Robinson Crusoe had welcomed him as a man and a brother; had read him a Declaration of Independence, an Emancipation Proclamation and a Fifteenth Amendment, and informed him that he was a free and independent citizen, entitled to vote and hold office; but had at the same time also informed him that that particular island was his (Robinson Crusoe's) private and exclusive property. What would have been the difference? Since Friday could not fly up into the air nor swim off through the sea, since if he lived at all he must live on the island, he would have been in one case as much a slave as in the other. Crusoe's ownership of the island would be equivalent of his ownership of Friday. — Social Problems — Chapter 15, Slavery and Slavery

THEY no longer have to drive their slaves to work; want and the fear of want do that more effectually than the lash. They no longer have the trouble of looking out for their employment or hiring out their labor, or the expense of keeping them when they cannot work. That is thrown upon the slaves. The tribute that they still wring from labor seems like voluntary payment. In fact, they take it as their honest share of the rewards of production — since they furnish the land! And they find so-called political economists, to say nothing of so-called preachers of Christianity, to tell them so. — Social Problems — Chapter 15, Slavery and Slavery

IF the two young Englishmen I have spoken of had come over here and bought so many American citizens, they could not have got from them so much of the produce of labor as they now get by having bought land which American citizens are glad to be allowed to till for half the crop. And so, even if our laws permitted, it would be foolish for an English duke or marquis to come over here and contract for ten thousand American babies, born or to be born, in the expectation that when able to work he could get out of them a large return. For by purchasing or fencing in a million acres of land that cannot run away and do not need to be fed, clothed or educated, he can, in twenty or thirty years, have ten thousand full-grown Americans, ready to give him half of all that their labor can produce on his land for the privilege of supporting themselves and their families out of the other half. This gives him more of the produce of labor than he could exact from so many chattel slaves. — Protection or Free Trade — Chapter 25: The Robber That Takes All That Is Left - econlib 

OF the two systems of slavery, I think there can be no doubt that upon the same moral level, that which makes property of persons is more humane than that which results from making private property of land. The cruelties which are perpetrated under the system of chattel slavery are more striking and arouse more indignation because they are the conscious acts of individuals. But for the suffering of the poor under the more refined system no one in particular seems responsible. . . . But this very fact permits cruelties that would not be tolerated under the one system to pass almost unnoticed under the other. Human beings are overworked, are starved, are robbed of all the light and sweetness of life, are condemned to ignorance and brutishness, and to the infection of physical and moral disease; are driven to crime and suicide, not by other individuals, but by iron necessities for which it seems that no one in particular is responsible.

To match from the annals of chattel slavery the horrors that day after day transpire unnoticed in the heart of Christian civilization, it would be necessary to go back to ancient slavery, to the chronicles of Spanish conquest in the New World, or to stories of the Middle passage. — Social Problems — Chapter 15, Slavery and Slavery

... go to "Gems from George"

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


Charles T. Root — Not a Single Tax! (1925)

Let us take an example in a large city. Let us take a corner lot centrally located in New York City, the title to which lot is held by, say, Mr. John William Rhinelastor. This lot was a part of an old Dutch farm, and is an heirloom. It did not cost the present owner anything, nor his father nor his grandfather. There is a little old building on it, which has always been rented at a figure ten times as large as the taxes imposed, so that the owner has been handsomely subsidized each year for storing his title-deeds during a period of the city's growth in which the increase in population and the expenditure of public money in that neighborhood have raised the value of this corner location to, say, two hundred times its early value.

About now, Mr. Rhinelastor decides that he will go abroad to live, and can't be bothered with this piece of property. But knowing that the pressure of population is sure to increase and that the expenditure of public money to the benefit of this land must continue, he will not sell it. So he gives a twenty-one year lease to the corner for, say, $20,000 a year net, with a privilege to the lessee of renewals at advancing figures. The lessee agrees to pay all taxes.

Now what is this net $20,000 a year, which will be regularly remitted to Mr. Rhinelastor, in Europe or wherever he may be, given in payment for? Not for the old building — the first thing the lessee does is to pull it down. Not for the land itself — it is all rock, which has got to be blasted out as part of its improvement.

Clearly it is paid for a location or site value, which the community, and the community only, has built up and paid for. In other words, the present $20,000 rental, and the larger one which that location will command in later years, is strictly a community product, and as such belongs to the community and not to Mr. Rhinelastor.

That the latter has no good right to it is at once evident when we remember that "When one man gets something for nothing somebody else has got to give something for nothing." Here are $20,000 that some men and women have got to work to earn every year to hand over to a man who does not render, and does not feel any obligation to render, one dollar's worth of public or private service in return. Such is the wild travesty of justice which we call law. It is not comical only because it is frankly tragic in its social results.

Now suppose this $20,000 and all the rest of this same community product — i.e., the site or location rent of its ground — were paid every year to its rightful owner, the treasurer of New York City, what would become of taxation, with its inseparable retinue, Fraud, Evasion, Perjury, Inequality, and an all-pervading public sense of injustice?

An authority on municipal taxation estimates the present economic rent of the land embraced in the City of New York at from $350,000,000 to $400,000,000. Assuming the lesser of these figures and adding the receipts from licenses, fees and fines, New York City should receive, of her own income, enough to pay all her own legitimate bills, to make her proper contributions to county and state and build a new subway or its equivalent every year.

And this with nobody paying a dollar of taxes, or, if we except the fines, a dollar that he was not ready and glad to pay for his own advantage.

We repeat, this is not taxation; but for the sake of those who cannot grasp the idea of public revenue without taxation, let us state the matter in their own language. ... 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


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

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
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.

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.

A 19th century California editor turned economist had observed the same: "The great cause of inequality in the distribution of wealth is inequality in the ownership of land ..." (Henry George, Progress and Poverty,1879). It was a recurring theme: a century before, Thomas Jefferson, Tom Paine, Adam Smith and others were of the same opinion. A century later Robert Fellmeth et al. redocumented the point for California (The Nader Report: Politics of Land, 1973). Between George and Fellmeth, scholars like Walter Goldschmidt, Paul S. Taylor, Paul Gates, Adon Poli and many others had documented the same point. Carey McWilliams (Factories in the Field), and novelists like Frank Norris (The Octopus) and John Steinbeck (The Grapes of Wrath) found popular success with the theme.

The Fellmeth-Nader study was too ambitious for its resources, and flawed by haste. Critics seized on the flaws to discredit or dismiss the substance. Nevertheless its main theme, the concentration of landownership, may be tested by reference to more conventional sources today. That is our method here. ... read the whole article
Mason Gaffney: Nonpoint Pollution: Tractable Solutions to Intractable Problems
The Special Challenge to Economic Thinking
The Search for Surrogates
Sources of Nonpoint Pollution
What Problems are Created?
What Problems are Unsolved by Excise Taxes on Surrogates?
The Case of Forestry
The Case of Urban Settlement
The Case of Agriculture
The Common Theme from Forest, City and Farm
... In fact, land use decisions are superimposed on a settlement pattern based on massive market failure in land.  The phenomena rather imprecisely called "land speculation" and "absentee ownership" betray market failure; and no one disputes there is massive regulatory failure in pricing and subsidizing transportation, which in turn determine land rents and values.  Result: the land market is not efficient; land is not properly priced and allocated to begin with.  This is the thread I will follow, although it may run afoul of The Great Secular Superstition.   ...

This perversion does not occur by accident.  Spread and sprawl in forestry, cities and agriculture are common results of the dominant force driving American politics, the quest for unearned increments to land value.   

Thorstein Veblen in his final testament, Absentee Ownership, noted that American farmers  
...have always, ... wanted something more than their ... share of the soil; not because they were driven by a felt need of doing more than their fair share of work ..., but with a view to ... getting a little something for nothing in allowing their holdings to be turned to account (Veblen, pp. 138-40).  

To enhance those values they will now invoke any complaisant higher power, and since God already did His bit by donating the Earth, they turn to Government.   

But the profile of land values is like a volcanic island.  To raise the top and the slopes and the shores we must also raise the shallows above sea level, where they shed the waters and come into use.   

Rising population is one factor pushing up the profile of values, but not the strongest one.  Increased demand per capita is the main factor.  These demands include all the spurious demands described above, like the demand of government for land to "bank" and hold idle, and the demand of speculators "with a view to getting a little something for nothing."   

Veblen went on to say that farm technology adapts to the Procrustean bed of absentee ownership: rather than leading, technology lags changes wrought by the ownership pattern.  Thus it is not "society" or "efficiency" alone that mandate inorganic monocultural chemical farming, but also the peculiar needs of absentee owners holding more land than they can work themselves or with their families.  Logic of, by and for this minority is set up as logic for all.   

If this be true, or (more likely) partly true, it must be admitted that most academics go along and get along with this dominant minority.  Organic farming, biological controls, appropriate technology, IPM, and other countervailing logics had to come from screwballs outside the system, plus a few martyrs and kamikazes inside it, dominated as it is by accommodating "regular fellows," "good old boys," noncontroversial administrators who "understand local needs" and "work with community leaders," and complaisant faculty who enjoy "credibility."  Are we part of the problem?  Let everyone debate that with his own conscience, and be fair enough to lose a few points.   Read the entire article

Mason Gaffney:  Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth

Where land is valued less for amenities, and more for cash crops, absentee ownership runs high in much of Iowa and central Illinois, with rents going to Chicago lawyers and European investors. Likewise the oven-like Imperial and San Joaquin Valleys of California, whose absentee owners are more likely to live in coastal California, but also have addresses all over the world – some real, and some in tax havens (Gaffney, 1982).

In such regions, land values per capita run high. Vilas County, for example, an abandoned old “cutover” county centered on Eagle River, now has the highest land value per capita in Wisconsin, thanks to its many little lakes, and the high social status of summering there. ...

Owner-occupancy and operation. There is considerable evidence that the result of heavy land-value taxation is to discourage absentee owners, and induce sales to residents, and operators. Rural Denmark is one case in point. Urban New Westminster, B.C., is another – it long boasted the highest rate of resident-ownership in Canada, at a time when it was the only city in B.C. exempting buildings 100% (and before a boom in apartments, which I suspect changed the data). On the east side of the San Joaquin Valley, small farms and small businesses are related to resident-ownership and owner-operation, both urban and rural. Another Goldschmidt-type study or two are needed to establish the relationship definitely, for skeptical scholars.  Read the whole article

Mason Gaffney: Land as a Distinctive Factor of Production
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."29
29.  For those unfamiliar with the American township survey system, as "section" is 640 acres or one square mile; a quarter is 160 acres.

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).

Just why some should want to expand so much as to be "alone in the midst of the earth" has puzzled man gentler souls than Isaiah.  Thorstein Veblen never turned his acidic irony to better account than in his last book, Absentee Ownership, describing acquisition for acquisition's sake:
Subtraction is the aim of this pioneer cupidity, not production; ... being in no way related quantitatively to a person's workmanlike powers or to his tangible performance, it has no 'saturation point'.

"Their passion for acquisition has driven them ... ; their slavery has been not to an imperative bent of workmanship and human service, but to an indefinitely extensible cupidity ... [which] is one of those 'higher wants of man' which the economists have found to be 'indefinitely extensible', and like other spiritual needs it is self-authenticating, its own voucher.

"The Latin phrase is auri sacra fames (fanatical30 lust for gold), ... They [the Romans] had reached a realization of the essentially sacramental virtue of this indefinitely extensible need of more; ... The object of this 'higher want of man' is no longer [gold], but some form of [certificate] which conveys title to a run of free income; and it can accordingly have no saturation point', even in fancy, inasmuch as [certificates of title are] also indefinitely extensible and stand in no quantitative relation to tangible fact....

"They have always, ... wanted something more than their ... share of the soil; not because they were driven by a felt need of doing more than their fair share of work .... but with a view to ... getting a little something for nothing in allowing their holdings to be turned to account.......
T. Veblen, Absentee Ownership, 1923, pp. 138-40.
30. The Latin sacra means either accursed or holy, the emphasis depending presumably on whether described by a critical observer or one possessed.  "Fanatical" seems to capture the double-edged meaning being relished by Veblen.  It should give pause to many modern economists with their weakness for treating self-interest as The Holy Spirit.

As Veblen taught, what is true of Nebraska sections and quarters is equally true of giant and small world corporations.  The worldwide merger mania of the insatiable '80s followed the same pattern.  Beneath the corporate veil, most corporations are large collections of real estate: industrial, commercial, agricultural, mineral, transportation, communications, and utility real estate.  Read the whole article

Mason Gaffney: Two-Rate in Reverse
In 1955, Spiro Agnew was a Maryland State Assemblyman on the rise. He carried a new law that let tax assessors value farmland on its "use-value" as farmland, instead of market value. It let owners who were farming for unearned increments around Baltimore and D.C. hold out with low carrying costs. "Farmland" meant land used for farming, and any play at farming would qualify. Under this law, a relative of mine with 102 acres in Maryland near Western Avenue, the D.C. line, kept just two steers thereon to validate his farmland assessment status. Holding for the rise "never crossed his mind." Right -- except, whenever such land is condemned for public use, courts everywhere have held that compensation must be based on speculative market value. ...

It is not just peri-urban land speculators who gain. A large chunk of land value in rural regions is not based on cash flow from food and fiber, but on amenities. Wisconsin is a major playground for rich urbanites from nearby Chicago, Milwaukee, Minneapolis and St. Paul. "Use-value" assessment exempts this chunk of value completely, for use-value is based on capitalizing the net cash farm income from growing crops, and, in the Wisconsin law, specifically corn. The highest land values per capita in the State are in Vilas County up in the north woods, once dismissed as worthless "cutovers." Vilas' barren podzol soils are worthless for corn, but sparkling lakes bedizen the County. Values per capita in Vilas are 6 times those in Milwaukee. Rich recreationists and "investors" (read speculators) are gobbling up the "wild forties." Shoreline parcels are like diamonds among coal. ...

100 years ago, American Georgists made a big point that city land outvalues rural land many times over. One implication is that taxing city land is taxing the rich, and we can ignore farmland. Some land-taxers counsel that farmers are easily misled to oppose us, so leave them alone and convert the cities. But rich city folks also own choice rural lands.

  • The Hearst palace at San Simeon sits amid 82,000 manorial acres, including miles of prime shoreline, "improved" with just one home per 82,000 acres. This home, jammed with imported treasures, had become a white elephant even before Citizen Kane uttered his final "Rosebud." The heirs were glad to fob it off onto the taxpayers of California, deducting its alleged value from their taxable incomes, while they kept the 82,000 acres.
  • Craig McCaw, who made his billions by amassing spectrum licenses, turned some of the pile into a spread of many thousands of acres stretching north from Big Sur -- land he never got around to using.
  • The O'Neill families and Donald Bren of Orange County,
  • the Newhall family of Ventura County,
  • the Chandler family that owns the Tejon and Boswell empires that spread over several counties,
  • Ted Turner who owns over a million acres around the U.S.;
  • the Koch brothers of Kansas with all their oil wells,
  • the Kleberg tribe with their million-acre King Ranch in Texas;
  • the Southern Pacific Railroad (now Catellus Co.),
  • Standard Oil:
those are a few of the struggling family farmers whom use-value assessment of farmland saves from destitution.

The privilege of use-value assessment stretches even beyond farmlands, vast as they are. Timberland in most states gets the same preferred treatment, only better. About 1/3 of the privately owned land in the U.S. is in timber. In California, owners (mostly huge corporations) may put the land into the "TPZ" class. The standing timber is then exempt, and taxed only at harvest, at 2.9%, much too low a rate to make up for a 60-year lifetime of exemption. County assessors have to value the land separately on its putative value for growing timber, following a State-legislated formula that is tailored drastically to understate even that low value (California Revenue and Tax Code, Section 434.5). Much of that land, though, has alternative uses, e.g. for retirement and vacation homes and resorts, the outliers and pioneers of urban sprawl. There are also mineral values, hunting, fishing, rifle ranges, grazing, campsites, tourism, rights of way, lumber camps, loading sites, water sources, lakes, log storage, landings - there are many things to do with 1/3 of a nation's land. Those uses are all declared "compatible" with timber, hence land values derived therefrom are tax-exempt.  Read the whole article

Mason Gaffney: George's Economics of Abundance: Replacing dismal choices with practical resolutions and synergies

a. Taxing land sharpens market incentives via the leverage effect noted earlier. Thus it makes the land market work better, and follow its natural infilling, centralizing tendency. Curbing urban sprawl does not overrule the land market; it is a byproduct of making the market work better. Richard Hurd, as cited above, noted that land values are marked by continuity in space. That means the market is telling owners to develop land contiguously; to anchor new building to established strength. Sprawl, then, is not market driven, but market-defying. It is the product of market failure. Georgist taxation makes the market work better.

b. Fosters resident ownership, civic participation  Riverside, CA built itself a lovely downtown pedestrian mall, back when that was in vogue, and has been sorry ever since. Nothing worked out, retailers deserted, and half the stores are empty. Recently I asked the developer of Tyler Galleria, a success, why he thought downtown failed, and got the answer in two words: "absentee ownership". I should have known, I've preached it for years.

An agricultural adviser in Fresno once told an impressionable boy "The best dressing for soil is the owner's shadow, applied daily". In town they say "Who's keeping the store?" Absentees aren't the only negligent owners, nor are they all bad. Torpid owners are the problem and they come in many forms. Basically, to make a city go you want to be rid of owners who see real estate mainly as a cash cow for their retirement, and replace them with owners who see it as a vehicle for their enterprise, who "apply their shadows" daily. Those shadows will also follow them into local civic clubs, and enterprising downtown and neighborhood associations for making joint improvements.  Read the whole article

Mason Gaffney: How to Revive a Dying City

Riverside built a downtown pedestrian mall when they were in vogue, and has been sorry ever since. It did not work; retailers deserted, and half the stores are empty. I asked the developer of a successful mall why he thought downtown failed, and got a two word answer: "absentee ownership." I should have known, having preached it for years.

Farm advisers say, "The best dressing for soil is the owner's shadow, applied daily." In town they ask, "Who's keeping the store?" Absentees aren't the only negligent owners, nor are they all bad. Torpid owners are the problem, and they come in many forms. A city wants to be rid of owners who see real estate as a cash cow for their retirement, and to replace them with owners who see it as a vehicle for enterprise and who apply their shadows daily. The shadows follow them to local civic clubs and to enterprising downtown or neighborhood associations for making joint improvements.

The surplus to land attracts outside buyers. Absentees, redundant parties in production, are often top bidders for pure ownership, which is the legal right to receive land rent plus unearned increments that accrue over time. Georgist taxation cuts directly into rents and unearned increments, which attract absentee owners; it spares the rewards of enterprise. It thereby effects a market transfer of ownership from absentees to occupants, with the community benefits that follow. In a period of rising concern over alien takeovers of U.S. real estate, these points merit focused attention.  Read the whole article

Mason Gaffney -- Canada's System of Revenue Sharing

It seems to me therefore that we need to face up to the question that is known in my trade as Fiscal Federalism, that is, how is money going to be distributed by the federal government out of its so-called surplus, either to people or the States, or localities? ...

The reason it's so hard to sell growth policies at the local level today in the United States is very much due to the fact that the United States federal government taxes people and it gives subventions to landlords. So the landlords can get the subventions without having the people. So who needs people? That's it in a nutshell. We need to reverse that, I think, if we're going to be able to make Georgism work at the local level. ...

At any rate, let's begin by looking at the similarities between the federal systems in the United States and Canada. In both countries we find something called 'vertical balancing' which means that the senior governments send money to the junior governments. We find also something called 'horizontal balancing' which means that the payments are made more to the poorer governments, those that are poorer on a per capita basis, than to richer ones. ...

 ... Cannan's Law. ... But the general idea is, you may think you have tenure control of land but if the municipal government can tax that land and use that money to finance public welfare services, public education and other things that are open to all comers, then you will end up with an uneconomical distribution of population. ...

At the same time, in both countries you find something I will call Hammer's Law. This is not a carpenter's tool but again the name of a man, an economist in Missouri, who observed in 1935 that if you compared population to land values in the different counties of his State (in the very poor counties of the Ozarks the land was hard scrabble land of very little value, with the very rich lands in the north-western part of the State, which resembles Iowa) you found that the population density was much greater on the very poor land of the Ozarks than it was on the very rich land of the northwest. ...

Now another similarity to the two countries us that the subventions that do go from the federal government to the provinces in Canada (and you find a similar thing in the United States) do not come from the richer provinces. They come instead from the general fund, the general taxpayer. There is in other words more vertical balancing than there is horizontal balancing (horizontal balancing you remember means equalization among the different jurisdictions). It's a little like what somebody said about foreign aid. 'Foreign aid is a device by which poor people in rich countries are taxed to subsidize rich people in poor countries.'

We'll see that equalisation in most countries works something like that; that is, in addition to this inter-provincial equalisation, there's a tax shift involved where local sources of taxation like the property tax are being displaced by the federal income tax. I suppose Ferdinand Marcos would be a splendid example of the kind of person I was talking about in the poor country and in West Virginia you have all these coal companies whose owners live in Palm Beach, whose shareholders live in Palm Beach and such places, who benefit from an inter-state equalisation that benefits West Virginia. Well these are similarities.  ...

The federal aid in Canada goes to provinces, whereas in the United States it goes to specific cities, The U.S. Congressman likes to have his fingerprint, as they say, on every dollar that goes from Washington. ... So in the States the idea has been: Tax the States according to their population and then give the money back according to political power. In the United States Senate it means that the smallest State has just as much clout as the biggest State or would have if their senators weren't so merchantable. (I mean, in California when we need something we just look to Nevada or one of those places for a Senator who is having difficulty raising funds for his next election. But that's another story.) ...

But the most delightful distinction about Canadians is the strong and explicit recognition among almost everyone, even if he's an economist, who discusses this subject, that different resource endowments are the basis of inter-provincial differences. Equalisation in Canadian politics means sharing the economic rent. Everybody talks that way. Canadian economists even when they come to the States talk that way. Just as though rent were a permissible word in polite discourse. It's very refreshing. However there's a very selective attitude towards rent -- towards what rents are shareable, I should say.

  • Rents from oil and gas are fair game.
  • Forest revenues are fair game.
  • Mineral revenues of other kinds are fair game.
  • Water power is fair game.

But now how about the rents that are generated by the valuable lands of Montreal, or Toronto, or some of those other big and powerful cities in the east? They are not fair game. As a matter of fact, if you pore through the fine print of the equalization law, which I did on the airplane, you find the most interesting exception to what's included in the formula. I'll explain the formula to you in a moment if you are still awake.

The formula says that the greater the capacity to raise taxes that a province enjoys, the less will be its equalization payment. And various potential tax bases are included in this formula. And one of those is the property tax. But then you look at the fine print and only the improvements are included. The land is specifically excluded. Very pecular. In the formula as it's commonly printed you don't see that exclusion; it's only in the footnote. But in the footnote it says 'Instead of the value of land we will substitute the gross provincial product.' Of course, all right thinking people know that land value is in direct proportion to the growth of the provincial product. Or do they? I always thought that was the product of other inputs. What it means is that if a province has a great deal of valuable land which is not being used to a highest and best use, that valuable land will not be included in its potential tax base, and it can continue to get subventions from the federal government. Whereas on the other hand if its potential tax base includes oil and gas, then the revenues that it receives from that, or the ability it has to receive revenues from that, is counted against it in the sharing formula. So this is a very peculiar sort of rent sharing. Some rents are shared and others are not. You might even call it a conspiracy against Alberta. I'm sure that's the way they look at it.

Now another difference is the high degree of foreign ownership. Actually there's no higher degree of absentee ownership in Canada than there is in the United States but it is much more visible because it's international absentee ownership, whereas our absentee owners live in some other corner of the United States, at least some of them do, or in Canada -- we have quite a few of them. Of course Hong Kong, Belgium, you name it. This high degree of absentee ownership, as Bob Williams more than hinted this morning, is one of the reasons for the success of the populist parties. They recognise property ownership is an alien phenomenon in some considerable measure and therefore a legitimate target for attack. Some economists say that the ideal taxpayer is a non-resident alien. In the case of these foreign owned resources you're getting pretty close. ...

Now let's look at the sharing formula. The sharing formula in Canada is essentially based on population and potential tax base. And it can be made to look very complicated but I think I've boiled it down to its essence. You take a province's percentage of the population of Canada, and then you take the percentage of the tax base that it has, subtract that and that gives you another percentage. And then you multiply that times the total tax revenue that's collected throughout Canada from that tax source, and then you pay them that amount out of the provincial treasury. ...

The conclusion of all this is that the Canadian system is really better in terms of its Georgist implications because the payments to the provinces, with all the faults that I've described, are essentially based on population. Population is in the formula. And if you compare this with the way things are done in the States, population plays a very minor role in the formula for equalisation payments in the United States.

Now, how should it be done? Well, there's a well known Georgist economist who figured this out a long time ago and wrote an article about it. His name is Colin Clark. ... He came up with a plan for collecting economic rent at the federal level, and he said what we really should do, and this I think is the ultimate equalisation payment, is we should classify local jurisdictions according to land value per capita, and those that have the least land value per capita, we'll leave all of that land value for them to use for local purposes. But then we will graduate the federal land tax according to the amount of land value per capita in the jurisdiction, and thus we will have a federal tax that automatically achieves inter-regional equity, without all this razzmatazz that I've been describing about inter-regional equalisation payments. Read the whole article

Mason Gaffney:  Sounding the Revenue Potential of Land: Fifteen Lost Elements
Multiplier effect of taxing absentee owners to spend funds locally  Transferring rents from absentees to be spent locally improves the State economic base and balance of payments (except to the extent the State outsources its work). Focusing taxes on land means absentees cannot remove the tax base from our state. The worst they can do is sell it to residents, thus raising the quality of life. California's legislative analyst, William Hamm, estimated in 1978 that over fifty per cent of the value of taxable property in California was owned by residents of other states or nations. The potential impact of this factor is enormous.

There is a curious silence on the matter. When it comes to discriminating against immigrant workers, xenophobia fills the air. There is a hue and cry against outsourcing. Taxing alien property, however, pushes a different button. Yet, here is one instance where localism may be harnessed to help create a more healthy society. The purpose of democracy is to represent the electorate, not the absentee who stands between the resident and the resources of his homeland Read the whole article

Mason Gaffney:  The Taxable Capacity of Land

  The question I am assigned is whether the taxable capacity of land without buildings is up to the job of financing cities, counties, and schools. Will the revenue be enough? The answer is "yes."

 The universal state and local revenue problem today is whether we must cap tax rates to avoid driving business away. It is exemplified by Governor Pete Wilson of the suffering State of California. He keeps repeating we must make a hard choice: cut taxes and public services, or drive out business and jobs. (When a public figure gives you two choices you know they're both bad, and he wants one of them.)

 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 of it will put on a track shoe and hop 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 this attitude is the problem.

 There is the answer to Governor Wilson' dilemma. I hope here in The Empire State you will supply a practical demonstration of the answer, one we may then use to inspire The Golden State. California now, following Proposition 13, has become a morality play, a gruesome object lesson in what happens when the property tax is pushed down toward zero. It forces higher taxes on production and exchange. Non-property taxes, you know, mostly have the character that they "shoot anything that moves," penalizing and discouraging economic activity. New buildings gain by having a lower property tax burden, it is true; but they bear the brunt of these new taxes and impost fees up front, at the time they are built. These offset the benefits of their lower property tax rate.

 Most California land, on the other hand, is now taxed at well below the allowable max of 1%. Speculators may sit on it at little tax cost, however many highways and water and sewer lines run to and past it, however many policemen are guarding it from trespass. Little wonder that California enterprise, once so dynamic, flexible, and vital, is giving way to stasis and decay. We used to lead the nation in making jobs; now in losing them. We used to lead in school quality; now in jail population.

  • When you tax land, the market moves each owner to join it with labor and capital as a vehicle for enterprise or shelter.
  • When you untax it, the market moves each owner to hold it more passively and obstructively as a "store of value," like a dog burying a bone. The market not only moves the sitting owners, it moves ownership itself to new owners whose needs are compatible with the tax system you impose. ...
 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

Mason Gaffney: California's Governor-Elect

A high fraction of California real estate is absentee owned. The Sultan of Brunei, for example, owns several houses and sites in Beverly Hills and Bel Air. California's official Legislative Analyst, the highly respected William Hamm, estimated in 1978 that over fifty per cent of the value of taxable property in California was absentee-owned. This is such a bold, bare, and enormous fact it is hard to understand how Californians have been misled into resisting the urge to levy land taxes on all this foreign wealth. They may be put off by the argument that they need to attract outside capital, but that carries no weight when considering the large percentage of this property which is land value, and which may be taxed separately from buildings.

Some half of any reduction in California property taxes leaks to out-of-state owners. Nor is this the only leakage.

  • Net federal income tax payments have risen because sales and nuisance taxes raised to replace lost property taxes are not deductible.
  • Sales of local general obligation bonds have stopped and will stay stopped. Revenue bonds are sold instead, with higher interest rates.
  • Fire insurance rates must rise.
  • Private spending, even by local landowners, has a higher propensity to import than public spending that goes for policemen, firemen, teachers, local contractors, and so on.
This substantial leakage of economic base results in multiple declines in state income. Cities love to commission "economic base" studies, and a small industry of moonlighting economists love to perform them, usually to rationalize subsidizing some transnational conglomerate to put in a branch plant. They use canned "input-output" models to show how every dollar invested generates $2-3 of induced investment locally. Yet no one has seized on this obvious case to show that local property taxes, substituted for absentee rent payments, creates multiple increases in local income. The whole intellectual apparatus is dominated by absentee investors and used for their benefit.... read the whole essay

Karl Williams: Landlording It Over Us
Geoism seeks to expose the many forms of unearned wealth, or privilege, that exist in our monstrous economic system. Monopoly rights are the more obvious examples of economic privilege, but less noticeable is the massive wealth to be gained by using the Global Commons (especially land) without reimbursing the rest of us. ...

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. ...

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

Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)
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. ...

Is ownership of land value concentrated? More so than other wealth? It's hard to unveil the largest landowners who own land under different names or corporations, or together with partners and family members. Best guesses tend to underestimate the concentration. One study of a Pennsylvania town of 15,000 found that 1.5 percent of landowners owned 53 percent of the land value. Under a land tax, they would pay 53 percent of the revenue.

How much of the central business district (CBD) is owned by absentees? One argument for a hotel tax is that it taxes out-of-state visitors who don't vote (locally). Yet in North Carolina, for example, nine of the ten largest private landowners are headquartered out-of-state. In Los Angeles, more than half of the CBD is owned abroad. In all of LA, an even greater amount of land is held by absentee Americans due to chain stores owning land there but being based elsewhere.  ...

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. ...

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

Jeff Smith: Subsidies at Their Worst: Privileges
Money is the mother's milk of politics. Yet the milk invested by lobbyists and those they represent is a drop in the bucket compared to the flow they get back from the public tit, thanks to the milkmaid state. Politicians grant well-connected big businesses:
a. direct cash outlays, such as cash to corporations for advertising overseas,

b. lucrative contracts, such as with weaponeers et al campaign contributors, and

c. tax breaks that burden would-be competitors, such as tariffs that protect GM and Ford but not autoworkers. Even if we were to abolish subsidies (a) and taxes, eliminating the advantage of tax breaks (c), and negotiate responsible contracts (b), that'd still leave in place

d. seven subtle privileges, mere pieces of paper that government grants its customers at nowhere near market value, positioning the privileged to claim all the surplus value of society.

1. The corporate charter's salient feature is to limit the liability of those choosing to profit by putting others at risk. ...

2. Pollution permits, performance waivers, land use exemptions -- whether granted by bureaucracies, legislatures, or courts - are worth much more than however much government charges and business pays. ...

3. Patents protect the basement inventor, right? Wrong. ...

4. Utility franchises create monopolies in exchange for some public service, such as providing electricity, phone communication, etc. ...

5. Communication licenses for TV, radio, cell phones, and the like are given away for free or for far less than market value, turning recipients into "instant billionaires" (the business press gleefully notes). ...

6. Resource leases for public oil, minerals, forests, and grazing land, are often let at "fire-sale" prices. ...

7. Land titles do protect the average homeowners but because they cost virtually nothing (a paltry filing fee often about $2.00), they also protect enormously wealthy absentee landlords. ... 

Land titles are the granddaddy of all privileges. Historically, titles preceded all others and created a class of elite owners with the power to win the six other indirect subsidies, along with the more direct ones – grants, contracts, and tax favors. To undo and reverse this history, it's necessary to collect and share the natural rents from all seven inconspicuous privileges.

For these pieces of paper, government should charge full market value. ... 

Getting a Citizens Dividend would not only eliminate poverty, it'd also erase any rationale for subsidies - direct or indirect - to the poor or to the privileged. Repealing the free ride of privileges would be like repealing capitalism. Without those subtle detours imposed upon public revenue, owners would have to work to amass a fortune, and work is one of the worst ways known to strike it rich.

What you can do: Dry up the milkmaid state. Dispense with the notion that the state must meddle in enterprise. Dispense the notion from others, too. Focus government on its lone raison d'etre - defend rights. Demand your right to a fair share of natural revenue. ...  Read the whole article

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

As for their treatment of the New York Local Property Tax, the authors first identified seven separate categories of real property: owner-occupied, rental, commercial, industrial, public utilities, farmland, and unimproved. This is a somewhat unusual classification, different even than those universally used in New York State.7 One can see immediately that there will necessarily be some overlap – “unimproved” parcels can sometimes be assigned in other categories according to their zoning. And rental property is commercial, whomever the tenants may be, whether households or businesses.

To their credit, however, the authors devoted considerable attention to the issue of tax shifting, which is never an easy subject, including a discussion of taxes on real property. They recognized that no shifting occurs for vacant parcels and titleholders therefore bear the full burden. So also for homeowners. For rental properties they assigned 50% of the burden to tenants, 25% to corporate stockowners, and 25% to real estate owners. For commercial, industrial, farmers, and public utility parcels, the shifting was put at 67%. In every instance where shifting is recognized, the part never shifted, of course, is the land component, and this is implicit in their assumption. These were referred to as “consensus incidence assumptions regarding the property tax.”8

A third consideration they recognized is the potential for tax exporting to other states, more often important for classes other than residential property but still significant. It occurs both on account of titleholders being out-of-state and also because of what is known as the “federal offset,” i.e., the deductibility of state and local taxes for federal tax itemizing. For all New York State and local taxes taken together, they estimated that roughly 10% percent of total revenue is exported, but for real property taxes, the total exported is only about half that.

... read the whole commentary

James Kiefer: James Huntington and the ideas of Henry George

Henry George, author of Progress and Poverty, argued that, while some forms of wealth are produced by human activity, and are rightly the property of the producers (or those who have obtained them from the previous owners by voluntary gift or exchange), land and natural resources are bestowed by God on the human race, and that every one of the N inhabitants of the earth has a claim to 1/Nth of the coal beds, 1/Nth of the oil wells, 1/Nth of the mines, and 1/Nth of the fertile soil. God wills a society where everyone may sit in peace under his own vine and his own fig tree.

The Law of Moses undertook to implement this by making the ownership of land hereditary, with a man's land divided among his sons (or, in the absence of sons, his daughters), and prohibiting the permanent sale of land. (See Leviticus 25:13-17,23.) The most a man might do with his land is sell the use of it until the next Jubilee year, an amnesty declared once every fifty years, when all debts were cancelled and all land returned to its hereditary owner.

Henry George's proposed implementation is to tax all land at about 99.99% of its rental value, leaving the owner of record enough to cover his bookkeeping expenses. The resulting revenues would be divided equally among the natural owners of the land, viz. the people of the country, with everyone receiving a dividend check regularly for the use of his share of the earth (here I am anticipating what I think George would have suggested if he had written in the 1990's rather than the 1870's).

This procedure would have the effect of making the sale price of a piece of land, not including the price of buildings and other improvements on it, practically zero. The cost of being a landholder would be, not the original sale price, but the tax, equivalent to rent. A man who chose to hold his "fair share," or 1/Nth of all the land, would pay a land tax about equal to his dividend check, and so would break even. By 1/Nth of the land is meant land with a value equal to 1/Nth of the value of all the land in the country.

Naturally, an acre in the business district of a great city would be worth as much as many square miles in the open country. Some would prefer to hold more than one N'th of the land and pay for the privilege. Some would prefer to hold less land, or no land at all, and get a small annual check representing the dividend on their inheritance from their father Adam.

Note that, at least for the able-bodied, this solves the problem of poverty at a stroke. If the total land and total labor of the world are enough to feed and clothe the existing population, then 1/Nth of the land and 1/Nth of the labor are enough to feed and clothe 1/Nth of the population. A family of 4 occupying 4/Nths of the land (which is what their dividend checks will enable them to pay the tax on) will find that their labor applied to that land is enough to enable them to feed and clothe themselves. Of course, they may prefer to apply their labor elsewhere more profitably, but the situation from which we start is one in which everyone has his own plot of ground from which to wrest a living by the strength of his own back, and any deviation from this is the result of voluntary exchanges agreed to by the parties directly involved, who judge themselves to be better off as the result of the exchanges.

Some readers may think this a very radical proposal. In fact, it is extremely conservative, in the sense of being in agreement with historic ideas about land ownership as opposed to ownership of, say, tools or vehicles or gold or domestic animals or other movables. The laws of English-speaking countries uniformly distinguish between real property (land) and personal property (everything else). In this context, "real" is not the opposite of "imaginary." It is a form of the word "royal," and means that the ultimate owner of the land is the king, as symbol of the people. Note that English-derived law does not recognize "landowners." The term is "landholders." The concept of eminent domain is that the landholder may be forced to surrender his landholdings to the government for a public purpose. Historically, eminent domain does not apply to property other than land, although complications arise when there are buildings on the land that is being seized.

I will mention in passing that the proposals of Henry George have attracted support from persons as diverse as Felix Morley, Aldous Huxley, Woodrow Wilson, Helen Keller, Winston Churchill, Leo Tolstoy, William F Buckley Jr, and Sun Yat-sen. To the Five Nobel Prizes authorized by Alfred Nobel himself there has been added a sixth, in Economics, and the Henry George Foundation claims eight of the Economics Laureates as supporters, in whole or in part, of the proposals of Henry George (Paul Samuelson, 1970; Milton Friedman, 1976; Herbert A Simon, 1978; James Tobin, 1981; Franco Modigliani, 1985; James M Buchanan, 1986; Robert M Solow, 1987; William S Vickrey, 1996).

The immediate concrete proposal favored by most Georgists today is that cities shall tax land within their boundaries at a higher rate than they tax buildings and other improvements on the land. (In case anyone is about to ask, "How can we possibly distinguish between the value of the land and the value of the buildings on it?" let me assure you that real estate assessors do it all the time. It is standard practice to make the two assessments separately, and a parcel of land in the business district of a large city very often has a different owner from the building on it.) Many cities have moved to a system of taxing land more heavily than improvements, and most have been pleased with the results, finding that landholders are more likely to use their land productively -- to their own benefit and that of the public -- if their taxes do not automatically go up when they improve their land by constructing or maintaining buildings on it.

An advantage of this proposal in the eyes of many is that it is a Fabian proposal, "evolution, not revolution," that it is incremental and reversible. If a city or other jurisdiction does not like the results of a two-level tax system, it can repeal the arrangement or reduce the difference in levels with no great upheaval. It is not like some other proposals of the form, "Distribute all wealth justly, and make me absolute dictator of the world so that I can supervise the distribution, and if it doesn't work, I promise to resign." The problem is that absolute dictators seldom resign. ... read the whole article



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