Effect of Taxing Land Value

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)

... 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.

The selling price of land would fall; land speculation would receive its death blow; land monopolization would no longer pay.* Millions and millions of acres from which settlers are now shut out by high prices would be abandoned by their present owners or sold to settlers upon nominal terms. And this not merely on the frontiers, but within what are now considered well settled districts.

* The fact that a tax on the rental value of land cannot be shifted by landowners to tenants, though recognized by all competent economists, is sometimes a stumbling block to persons untrained in economics. The reason such a tax cannot be shifted is that it cannot limit the supply of land. Landowners are presumably, before the tax is laid, charging all the rent they can get. There is nothing in a tax on the rental value of land to make tenants willing to pay more or to make land more difficult to hire. On the contrary, more land will be on the market, because of such a tax, rather than less, since the tax puts a heavy penalty on holding land out of use and unimproved for mere speculation. The competition of former vacant land speculators to get their land used will make land cheaper to rent rather than more expensive. And since only the net rent remaining after the tax is subtracted is capitalized into salable value, land will be very much cheaper to buy. H.G.B.

And it must be remembered that this would apply, not merely to agricultural land, but to all land. Mineral land would be thrown open to use, just as agricultural land; and in the heart of a city no one could afford to keep land from its most profitable use, or on the outskirts to demand more for it than the use to which it could at the time be put would warrant. Everywhere that land had attained a value, taxation, instead of operating, as now, as a fine upon improvement, would operate to force improvement. Whoever planted an orchard, or sowed a field, or built a house, or erected a manufactory, no matter how costly, would have no more to pay in taxes than if he kept so much land idle.

• The monopolist of agricultural land would be taxed as much as though his land were covered with houses and barns, with crops and with stock.
• The owner of a vacant city lot would have to pay as much for the privilege of keeping other people off of it until he wanted to use it, as his neighbor who has a fine house upon his lot.
• It would cost as much to keep a row of tumble-down shanties upon valuable land as though it were covered with a grand hotel or a pile of great warehouses filled with costly goods.

Thus, the bonus that wherever labor is most productive must now be paid before labor can be exerted would disappear.

• The farmer would not have to pay out half his means, or mortgage his labor for years, in order to obtain land to cultivate;
• the builder of a city homestead would not have to lay out as much for a small lot as for the house he puts upon it*;
• the company that proposed to erect a manufactory would not have to expend a great part of its capital for a site.
• And what would be paid from year to year to the state would be in lieu of all the taxes now levied upon improvements, machinery, and stock.

  *Many persons, and among them some professional economists, have never succeeded in getting a thorough comprehension of this point. Thus, the editor has heard the objection advanced that the greater cheapness of land is no advantage to the poor man who is trying to save enough from his earnings to buy a piece of land; for, it is said, the higher taxes on the land after it is acquired, offset the lower purchase price. What such objectors do not see is that even if the lower price of land does no more than balance the higher tax on it, (and this overlooks, for one thing, the discouragement to speculation in land), the reduction or removal of other taxes is all clear gain. It is easier to save in proportion as earnings and commodities are relieved of taxation. It is easier to buy land, because its selling price is lower, if the land is taxed. And although the land, after its purchase, continues to be taxed, not only can this tax be fully paid out of the annual interest on the saving in the purchase price, but also there is to be reckoned the saving in taxes on buildings and other improvements and in whatever other taxes are thus rendered unnecessary. H.G.B.

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

H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty: 12. Effect of Remedy Upon Various Economic Classes (in the unabridged P&P: Part IX: Effects of the Remedy — Chapter 3. Of the effect upon individuals and classes)

When it is first proposed to put all taxes upon the value of land, all landholders are likely to take the alarm, and there will not be wanting appeals to the fears of small farm and homestead owners, who will be told that this is a proposition to rob them of their hard-earned property. But a moment's reflection will show that this proposition should commend itself to all whose interests as landholders do not largely exceed their interests as laborers or capitalists, or both. And further consideration will show that though the large landholders may lose relatively, yet even in their case there will be an absolute gain. For, the increase in production will be so great that labor and capital will gain very much more than will be lost to private landownership, while in these gains, and in the greater ones involved in a more healthy social condition, the whole community, including the landowners themselves, will share.

• It is manifest, of course, that the change I propose will greatly benefit all those who live by wages, whether of hand or of head -- laborers, operatives, mechanics, clerks, professional men of all sorts.
• It is manifest, also, that it will benefit all those who live partly by wages and partly by the earnings of their capital -- storekeepers, merchants, manufacturers, employing or undertaking producers and exchangers of all sorts from the peddler or drayman to the railroad or steamship owner -- and
• it is likewise manifest that it will increase the incomes of those whose incomes are drawn from the earnings of capital. ... read the whole chapter

H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty: 13 Effect of Remedy Upon Social Ideals (in the unabridged P&P: Part IX: Effects of the Remedy — 4. Of the changes that would be wrought in social organization and social life)

... Give labor a free field and its full earnings; take for the benefit of the whole community that fund which the growth of the community creates, and want and the fear of want would be gone. The springs of production would be set free, and the enormous increase of wealth would give the poorest ample comfort. Men would no more worry about finding employment than they worry about finding air to breathe; they need have no more care about physical necessities than do the lilies of the field. The progress of science, the march of invention, the diffusion of knowledge, would bring their benefits to all.

With this abolition of want and the fear of want, the admiration of riches would decay, and men would seek the respect and approbation of their fellows in other modes than by the acquisition and display of wealth. In this way there would be brought to the management of public affairs, and the administration of common funds, the skill, the attention, the fidelity, and integrity that can now be secured only for private interests. ...

To remove want and the fear of want, to give to all classes leisure, and comfort, and independence, the decencies and refinements of life, the opportunities of mental and moral development, would be like turning water into a desert. The sterile waste would clothe itself with verdure, and the barren places where life seemed banned would ere long be dappled with the shade of trees and musical with the song of birds. Talents now hidden, virtues unsuspected, would come forth to make human life richer, fuller, happier, nobler. For

• in these round men who are stuck into three-cornered holes, and three-cornered men who are jammed into round holes;
• in these men who are wasting their energies in the scramble to be rich;
• in these who in factories are turned into machines, or are chained by necessity to bench or plow;
• in these children who are growing up in squalor, and vice, and ignorance, are powers of the highest order, talents the most splendid.

They need but the opportunity to bring them forth.

Consider the possibilities of a state of society that gave that opportunity to all. Let imagination fill out the picture; its colors grow too bright for words to paint.

• Consider the moral elevation, the intellectual activity, the social life.
• Consider how by a thousand actions and interactions the members of every community are linked together, and how in the present condition of things even the fortunate few who stand upon the apex of the social pyramid must suffer, though they know it not, from the want, ignorance, and degradation that are underneath.
• Consider these things and then say whether the change I propose would not be for the benefit of every one — even the greatest landholder? ... read the whole chapter

Henry George: Why The Landowner Cannot Shift The Tax on Land Values (1887)

• The one, a country where the available land is all in use, and the competition of tenants has carried rents to a point at which the tenant pays the landlord all he can possibly earn save just enough to barely live.
• The other, a country where all the available land is not in use and the rent that the landlord can get from the tenant is limited by the terms on which the tenant can get access to unused land.

Here, let us say, is a lot on the principal select street of a city having an annual or rental value of $10,000. Such a lot would now command a selling price of some $250,000. An increased tax upon Land Values would not reduce its rental value, except as it might have an effect in forcing into use unoccupied land at a greater distance from the center of the city. But as less of this rental value could be retained by the owner, the selling price would be diminished. And if a tax on Land Values could be imposed with such theoretical perfection that the whole rental value would be taken by the community, the owner would lose both his income from its present value and any expectation of profit from its future increase in value. While it would be still worth as much as before to the user, it would be worth nothing at all to the mere owner. Instead of having a selling value of $250,000, it would not sell for anything, since what the user paid for the privilege of using it would go in full to the community. Under a tax of this kind, even though it could not be imposed with theoretical nicety, the mere owner of land would disappear. No one would care to own land unless he wanted to improve or use it.

The general principle which determines the incidence of taxation is this: A tax upon anything or upon the methods or means of production of anything, the price of which is kept down by the ability to produce increased supplies, will, by increasing the cost of production, check supply, and thus add to the price of that thing, and ultimately fall on the consumer. But a tax upon anything of which the supply is fixed or monopolized, and of which the cost of production is not therefore a determining element, since it has no effect in checking supply, does not increase prices, and falls entirely on the owner. ... read the whole article

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

d. Effect of Confiscating Rent to Private Use.

By giving Rent to individuals society ignores this most just law, 99 thereby creating social disorder and inviting social disease. Upon society alone, therefore, and not upon divine Providence which has provided bountifully, nor upon the disinherited poor, rests the responsibility for poverty and fear of poverty.

99. "Whatever dispute arouses the passions of men, the conflict is sure to rage, not so much as to the question 'Is it wise?' as to the question 'Is it right?'

"This tendency of popular discussions to take an ethical form has a cause. It springs from a law of the human mind; it rests upon a vague and instinctive recognition of what is probably the deepest truth we can grasp. That alone is wise which is just; that alone is enduring which is right. In the narrow scale of individual actions and individual life this truth may be often obscured, but in the wider field of national life it everywhere stands out.

"I bow to this arbitrament, and accept this test." — Progress and Poverty, book vii, ch. i.

The reader who has been deceived into believing that Mr. George's proposition is in any respect unjust, will find profit in a perusal of the entire chapter from which the foregoing extract is taken.

Let us try to trace the connection by means of a chart, beginning with the white spaces on page 68. As before, the first-comers take possession of the best land. But instead of leaving for others what they do not themselves need for use, as in the previous illustrations, they appropriate the whole space, using only part, but claiming ownership of the rest. We may distinguish the used part with red color, and that which is appropriated without use with blue. Thus: [chart]

But what motive is there for appropriating more of the space than is used? Simply that the appropriators may secure the pecuniary benefit of future social growth. What will enable them to secure that? Our system of confiscating Rent from the community that earns it, and giving it to land-owners who, as such, earn nothing.100

100. It is reported from Iowa that a few years ago a workman in that State saw a meteorite fall, and. securing possession of it after much digging, he was offered $105 by a college for his "find." But the owner of the land on which the meteorite fell claimed the money, and the two went to law about it. After an appeal to the highest court of the State, it was finally decided that neither by right of discovery, nor by right of labor, could the workman have the money, because the title to the meteorite was in the man who owned the land upon which it fell.

Observe the effect now upon Rent and Wages. When other men come, instead of finding half of the best land still common and free, as in the corresponding chart on page 68, they find all of it owned, and are obliged either to go upon poorer land or to buy or rent from owners of the best. How much will they pay for the best? Not more than 1, if they want it for use and not to hold for a higher price in the future, for that represents the full difference between its productiveness and the productiveness of the next best. But if the first-comers, reasoning that the next best land will soon be scarce and theirs will then rise in value, refuse to sell or to rent at that valuation, the newcomers must resort to land of the second grade, though the best be as yet only partly used. Consequently land of the first grade commands Rent before it otherwise would.

As the sellers' price, under these circumstances, is arbitrary it cannot be stated in the chart; but the buyers' price is limited by the superiority of the best land over that which can be had for nothing, and the chart may be made to show it: [chart]

And now, owing to the success of the appropriators of the best land in securing more than their fellows for the same expenditure of labor force, a rush is made for unappropriated land. It is not to use it that it is wanted, but to enable its appropriators to put Rent into their own pockets as soon as growing demand for land makes it valuable.101 We may, for illustration, suppose that all the remainder of the second space and the whole of the third are thus appropriated, and note the effect: [chart]

At this point Rent does not increase nor Wages fall, because there is no increased demand for land for use. The holding of inferior land for higher prices, when demand for use is at a standstill, is like owning lots in the moon — entertaining, perhaps, but not profitable. But let more land be needed for use, and matters promptly assume a different appearance. The new labor must either go to the space that yields but 1, or buy or rent from owners of better grades, or hire out. The effect would be the same in any case. Nobody for the given expenditure of labor force would get more than 1; the surplus of products would go to landowners as Rent, either directly in rent payments, or indirectly through lower Wages. Thus: [chart]

101. The text speaks of Rent only as a periodical or continuous payment — what would be called "ground rent." But actual or potential Rent may always be, and frequently is, capitalized for the purpose of selling the right to enjoy it, and it is to selling value that we usually refer when dealing in land.

Land which has the power of yielding Rent to its owner will have a selling value, whether it be used or not, and whether Rent is actually derived from it or not. This selling value will be the capitalization of its present or prospective power of producing Rent. In fact, much the larger proportion of laud that has a selling value is wholly or partly unused, producing no Rent at all, or less than it would if fully used. This condition is expressed in the chart by the blue color.

"The capitalized value of land is the actuarial 'discounted' value of all the net incomes which it is likely to afford, allowance being made on the one hand for all incidental expenses, including those of collecting the rents, and on the other for its mineral wealth, its capabilities of development for any kind of business, and its advantages, material, social, and aesthetic, for the purposes of residence." — Marshall's Prin., book vi, ch. ix, sec. 9.

"The value of land is commonly expressed as a certain number of times the current money rental, or in other words, a certain 'number of years' purchase' of that rental; and other things being equal, it will be the higher the more important these direct gratifications are, as well as the greater the chance that they and the money income afforded by the land will rise." — Id., note.

"Value . . . means not utility, not any quality inhering in the thing itself, but a quality which gives to the possession of a thing the power of obtaining other things, in return for it or for its use. . . Value in this sense — the usual sense — is purely relative. It exists from and is measured by the power of obtaining things for things by exchanging them. . . Utility is necessary to value, for nothing can be valuable unless it has the quality of gratifying some physical or mental desire of man, though it be but a fancy or whim. But utility of itself does not give value. . . If we ask ourselves the reason of . . . variations in . . . value . . . we see that things having some form of utility or desirability, are valuable or not valuable, as they are hard or easy to get. And if we ask further, we may see that with most of the things that have value this difficulty or ease of getting them, which determines value, depends on the amount of labor which must be expended in producing them ; i.e., bringing them into the place, form and condition in which they are desired. . . Value is simply an expression of the labor required for the production of such a thing. But there are some things as to which this is not so clear. Land is not produced by labor, yet land, irrespective of any improvements that labor has made on it, often has value. . . Yet a little examination will show that such facts are but exemplifications of the general principle, just as the rise of a balloon and the fall of a stone both exemplify the universal law of gravitation. . . The value of everything produced by labor, from a pound of chalk or a paper of pins to the elaborate structure and appurtenances of a first-class ocean steamer, is resolvable on analysis into an equivalent of the labor required to produce such a thing in form and place; while the value of things not produced by labor, but nevertheless susceptible of ownership, is in the same way resolvable into an equivalent of the labor which the ownership of such a thing enables the owner to obtain or save." — Perplexed Philosopher, ch. v.

The figure 1 in parenthesis, as an item of Rent, indicates potential Rent. Labor would give that much for the privilege of using the space, but the owners hold out for better terms; therefore neither Rent nor Wages is actually produced, though but for this both might be.

In this chart, notwithstanding that but little space is used, indicated with red, Wages are reduced to the same low point by the mere appropriation of space, indicated with blue, that they would reach if all the space above the poorest were fully used. It thereby appears that under a system which confiscates Rent to private uses, the demand for land for speculative purposes becomes so great that Wages fall to a minimum long before they would if land were appropriated only for use.

In illustrating the effect of confiscating Rent to private use we have as yet ignored the element of social growth. Let us now assume as before (page 73), that social growth increases the productive power of the given expenditure of labor force to 100 when applied to the best land, 50 when applied to the next best, 10 to the next, 3 to the next, and 1 to the poorest. Labor would not be benefited now, as it appeared to be when on page 73 we illustrated the appropriation of land for use only, although much less land is actually used. The prizes which expectation of future social growth dangles before men as the rewards of owning land, would raise demand so as to make it more than ever difficult to get land. All of the fourth grade would be taken up in expectation of future demand; and "surplus labor" would be crowded out to the open space that originally yielded nothing, but which in consequence of increased labor power now yields as much as the poorest closed space originally yielded, namely, 1 to the given expenditure of labor force.102 Wages would then be reduced to the present productiveness of the open space. Thus: [chart]

102. The paradise to which the youth of our country have so long been directed in the advice, "Go West, young man, go West," is truthfully described in "Progress and Poverty," book iv, ch. iv, as follows :

"The man who sets out from the eastern seaboard in search of the margin of cultivation, where he may obtain land without paying rent, must, like the man who swam the river to get a drink, pass for long distances through half-titled farms, and traverse vast areas of virgin soil, before he reaches the point where land can be had free of rent — i.e., by homestead entry or preemption."

If we assume that 1 for the given expenditure of labor force is the least that labor can take while exerting the same force, the downward movement of Wages will be here held in equilibrium. They cannot fall below 1; but neither can they rise above it, no matter how much productive power may increase, so long as it pays to hold land for higher values. Some laborers would continually be pushed back to land which increased productive power would have brought up in productiveness from 0 to 1, and by perpetual competition for work would so regulate the labor market that the given expenditure of labor force, however much it produced, could nowhere secure more than 1 in Wages.103 And this tendency would persist until some labor was forced upon land which, despite increase in productive power, would not yield the accustomed living without increase of labor force. Competition for work would then compel all laborers to increase their expenditure of labor force, and to do it over and over again as progress went on and lower and lower grades of land were monopolized, until human endurance could go no further.104 Either that, or they would be obliged to adapt themselves to a lower scale of living.105

103. Henry Fawcett, in his work on "Political Economy," book ii, ch. iii, observes with reference to improvements in agricultural implements which diminish the expense of cultivation, that they do not increase the profits of the farmer or the wages of his laborers, but that "the landlord will receive in addition to the rent already paid to him, all that is saved in the expense of cultivation." This is true not alone of improvements in agriculture, but also of improvements in all other branches of industry.

104. "The cause which limits speculation in commodities, the tendency of increasing price to draw forth additional supplies, cannot limit the speculative advance in land values, as land is a fixed quantity, which human agency can neither increase nor diminish; but there is nevertheless a limit to the price of land, in the minimum required by labor and capital as the condition of engaging in production. If it were possible to continuously reduce wages until zero were reached, it would be possible to continuously increase rent until it swallowed up the whole produce. But as wages cannot be permanently reduced below the point at which laborers will consent to work and reproduce, nor interest below the point at which capital will be devoted to production, there is a limit which restrains the speculative advance of rent. Hence, speculation cannot have the same scope to advance rent in countries where wages and interest are already near the minimum, as in countries where they are considerably above it. Yet that there is in all progressive countries a constant tendency in the speculative advance of rent to overpass the limit where production would cease, is, I think, shown by recurring seasons of industrial paralysis." — Progress and Poverty, book iv, ch. iv.

105. As Puck once put it, "the man who makes two blades of grass to grow where but one grew before, must not be surprised when ordered to 'keep off the grass.' "

They in fact do both, and the incidental disturbances of general readjustment are what we call "hard times." 106 These culminate in forcing unused land into the market, thereby reducing Rent and reviving industry. Thus increase of labor force, a lowering of the scale of living, and depression of Rent, co-operate to bring on what we call "good times." But no sooner do "good times" return than renewed demands for land set in, Rent rises again, Wages fall again, and "hard times" duly reappear. The end of every period of "hard times" finds Rent higher and Wages lower than at the end of the previous period.107

106. "That a speculative advance in rent or land values invariably precedes each of these seasons of industrial depression is everywhere clear. That they bear to each other the relation of cause and effect, is obvious to whoever considers the necessary relation between land and labor." — Progress and Poverty, book v, ch. i.

107. What are called "good times" reach a point at which an upward land market sets in. From that point there is a downward tendency of wages (or a rise in the cost of living, which is the same thing) in all departments of labor and with all grades of laborers. This tendency continues until the fictitious values of land give way. So long as the tendency is felt only by that class which is hired for wages, it is poverty merely; when the same tendency is felt by the class of labor that is distinguished as "the business interests of the country," it is "hard times." And "hard times" are periodical because land values, by falling, allow "good times" to set it, and by rising with "good times" bring "hard times" on again. The effect of "hard times" may be overcome, without much, if any, fall in land values, by sufficient increase in productive power to overtake the fictitious value of land.

The dishonest and disorderly system under which society confiscates Rent from common to individual uses, produces this result. That maladjustment is the fundamental cause of poverty. And progress, so long as the maladjustment continues, instead of tending to remove poverty as naturally it should, actually generates and intensifies it. Poverty persists with increase of productive power because land values, when Rent is privately appropriated, tend to even greater increase. There can be but one outcome if this continues: for individuals suffering and degradation, and for society destruction.

e. Effect of Retaining Rent for Common Use.

If society retained Rent for common purposes, all incentive to hold land for any other object than immediate use would disappear. The effect may be illustrated by a comparison of the last preceding chart with the following: [chart]

There is but one difference between this chart and the chart immediately preceding. In that Rent is confiscated to private use, whereas in this Rent is retained for common use. All the labor force indicated with red in the first of the two charts would not more than utilize the space to the left and part of the adjoining one, which would elevate Wages to what, with the given labor force, could be produced from the poorer of the two spaces. After that, increase of Rent would not enrich land-owners at the expense of other classes; it would enrich the whole community.108

108. The laborer would receive in Distribution all that he earned and no more than he earned in Production; and that is the natural law.

In social conditions, where industry is subdivided and trade is intricate, it is impossible to say arbitrarily what is the equivalent of given labor. Hence no statute fixing the compensation for labor can really be operative. All that we can say is that labor is worth what men freely contract to give and take for it. But it must be what they freely contract to take as well as what they freely contract to give; and men are not free to contract for the sale of their labor when labor generally is so divorced from land as to abnormally glut the labor market and make men's sale of their labor for almost anything the buyer offers, the alternative of starvation. Laborers may be as truly enslaved by divorcing labor from land as by driving them with a whip.

f. The Single Tax Retains Rent for Common Use.

To retain Rent for common use it is not necessary to abolish land-titles, nor to let land out to the highest bidder, nor to invent some new mechanism of taxation, nor in any other way to directly change existing modes of holding land for use, or existing machinery for collecting public revenues. "Great changes can be best brought about under old forms."109 Let land be held nominally as it is now. Let taxes be collected by the same kind of machinery as now. But abolish all taxes except those that fall upon actual and potential Rent, that is to say, upon land values.

109. "Such dupes are men to custom, and so prone
To rev'rence what is ancient and can plead
A course of long observance for its use,
That even servitude, the worst of ills,
Because delivered down from sire to son
Is kept and guarded as a sacred thing." —Cowper.

It is only custom that makes the ownership of land seem reasonable. I have frequently had occasion to tell of the necessity under which the city of Cleveland, Ohio, found itself, of paying a land-owner several thousand dollars for the right to swing a bridge-draw over his land. When I described the matter in that way, the story attracted no attention; it seemed perfectly reasonable to the ordinary lecture audience. But when I described the transaction as a payment by the city to a land-owner of thousands of dollars for the privilege of swinging the draw "through that man's air," the audience invariably manifested its appreciation of the absurdity of such an ownership. The idea of owning air was ridiculous; the idea of owning land was not. Yet who can explain the difference, except as a matter of custom?

To the same effect was the question of the Rev. F. L. Higgins to a friend. While stationed at Galveston, Tex., Mr. Higgins fell into a discussion with his friend as to the right of government to make land private property. The friend argued that no matter what the abstract right might be, the government had made private property of land, and people had bought and sold upon the strength of the government title, and therefore land titles were morally absolute.

"Suppose," said Mr. Higgins, "that the government should vest in a corporation title to the Gulf of Mexico, so that no one could fish there, or sail there, or do anything in or upon the waters of the Gulf without permission from the corporation. Would that be right?"

"No," answered the friend.

"Well, suppose the corporation should then parcel out the Gulf to different parties until some of the people came to own the whole Gulf to the exclusion of everybody else, born and unborn. Could any such title be acquired by these purchasers, or their descendants or assignees, as that the rest of the people if they got the power would not have a moral right to abrogate it?"

"Certainly not," said the friend.

"Could private titles to the Gulf possibly become absolute in morals?"

"No."

"Then tell me," asked Mr. Higgins, "what difference it would make if all the water were taken off the Gulf and only the bare land left."

If that were done it is doubtful if land-owners could any longer confiscate enough Rent to be worth the trouble. Even though some surplus were still kept by them, it would be so much more easy to secure Wealth by working for it than by confiscating Rent to private use, to say nothing of its being so much more respectable, that speculation in land values would practically be abandoned. At any rate, the question of a surplus — Rent in excess of the requirements of the community — may be readily determined when the principle that Rent justly belongs to the community and Wages to the individual shall have been recognized by society in the adoption of the Single Tax. 110

110. Thomas G. Shearman, Esq., of New York, author of the famous magazine article on "Who Owns the United States," estimates that sixty-five per cent of the present annual value of the land in the United States would pay all the present expenses of American government — federal, state, county, and municipal. ... read the book

Lindy Davies: Land and Justice

Now it is interesting to note that the economic vision presented in the bible is not a precursor of communism. Two of the ten commandments explicitly support the institution of private property, and the prophets consistently railed against landlords and rulers who robbed the people of the fruits of their labor. The laws of Leviticus, which Jesus said he "came not to destroy but to fulfill," envisioned a community in which everyone was secure in his own home and property, "beneath his vine and fig tree".

(Incidentally, the quote on the American Liberty Bell, from Leviticus, chapter 25, was a direct reference to these principles : "Proclaim liberty throughout the land and to all the people thereof." It was a reference to the Jubilee, and the freedom it provided was from debt and servitude.)

The division is clear: there is to be a sacred right of private property in the things that are made by people. But people were not to own the things that were made by God. The 7th commandment sums up both principles in 4 words: Thou shalt not steal.

Modern society has looked away from these principles, calling them quaint, naive, inapplicable to the complexities of our time — yet, modern society finds itself mired in chronic economic and social problems for which it can find no solutions — and which threaten to pull down all the advances of civilization into a dark age — occasioned by some combination of war, financial implosion or ecological collapse.

If there is any way out of this dark future, it can only come by way of solving the problem of land and justice.

Fortunately, there exists a plan for that.

This plan takes the shape of a "fiscal reform", because it applies a definition of the relationship between the individual and the society that is consistent with both economic efficiency and moral law. It calls for us to respect the right of labor to create and to save wealth, and we acknowledge that the value of land is created not by its “owners”, but by the entire community.

Therefore, we will abolish all taxes on income, products and sales — and collect the full rental value of land and other natural resources for public revenue.

What would happen, if we did this?

Let’s consider the great problems we were discussing earlier.

Land in cities would be used efficiently. Cities would not become over-crowded; regulation of land use would still be in their power, as it is now. But urban blight and decay would be banished. Public transportation, like other public services, could be provided free, funded out of the value of locational advantages that it created.

The unnatural pressure on farm land near cities would be eliminated as development proceeded to “infill”. It would no longer be necessary to haul produce halfway across the world.

Wealth production and employment would be released from the burden of taxation that currently weighs it down. The banking system would be freed from its unhealthy dependence on land for collateral. Combined with the newly-efficient use of urban infrastructure, unemployment could be cut or even eliminated, even while inflation decreased!

But the best benefits of all would be in the developing world. If they were charged the market rental value of the land they hold, then neither the land-baron cronies nor the multinationals would hold onto it. Access to good farmland would be restored, and the disastrous migration of peasants to ill-equipped poor cities would be reversed. The resulting vitality would bring these poor nations new sources of domestic economic strength — no longer would they have to grovel to maintain foreign credit.

Despite the current flood of bad news on just about every conceivable topic — and although I do accept that many things in my children’s world will probably get worse before they get better — I am optimistic about our long-term prospects.

Eventually, I believe that human society will adopt the biblical and georgist wisdom, and organize itself as it must, to achieve justice, efficiency and sustainability.

Eventually we will have tried everything else. That's how Clarence Darrow — one of the reform's many prominent supporters — saw things. He said this: “The “single tax” is so simple, so fundamental, and so easy to carry into effect that I have no doubt that it will be about the last reform the world will ever get. People in this world are not often logical.”

True enough. Yet I have to believe that eventually the obvious truth will start to dawn on us. ... read the whole speech

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

An illustration has already been given of the case of a piece of farm land. 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.

Think of a tax which both assesses itself and collects itself, which burdens no one, which is paid voluntarily, and only by those who do so for their own profit or other advantage. Compare this with our present system of taxes, which everyone despises, which can be collected in full only from the very scrupulous and from the helpless, from trust funds of widows and orphans, or from estates which lie naked before the tax gatherer on the records of court; a system which drives men of property from state to state and town to town in flight from the assessor, and well-nigh forces many worthy citizens to practices of evasion which must make it hard for them to look into their own mirrors during the season for "Correction of Assessments;" there can be but one verdict upon such comparison.

But again the voice of the objector is heard, possibly to this effect: "This plan may be all right for the community, but how about poor Mr. Rhinelastor?"

In reality the landowner would not suffer so much from the restoration of the public revenue as might at first appear. For one thing, whereas he is now taxed, at least in theory, not only on land, but on buildings, cash, bonds, and all other personal property, and perhaps on his income as well, he would then have no taxes at all to pay. Furthermore the economic rent is not the full measure of the possible earning capacity of the land, but will always be less than the offerer expects to make out of its use.

Again, while it must be firmly insisted that the economic rent is the rightful property of the community and not of the landowner, the community would probably never take it all. Communal ownership of land is not desirable, even if it were practicable. Individual ownership and management are best, and it is not at all improper for the community to allow the owner something for caring for the land to which he holds title, and for collecting and transmitting to the treasury the economic rent.

But — and right here is one of the prime advantages of the abolition of taxation — Mr. Rhinelastor, in order to get satisfactory return from his land, must improve it. Unless he is satisfied with a small income from it, to wit, the proportion of the economic rent which the community chooses to leave in his hands, he must put upon his land the best building the location will warrant. The rents of this building will be his in their entirety, not one dollar of them being taken from him by taxation. If he is not prepared or not willing to do this he would probably find it more profitable, before he leaves the country, to sell the land to some one of the many persons who are eager to build upon it. It will always be salable, although not by any means at present figures.

Now imagine for a moment the effect upon the appearance of a city and upon the comfort of its population which would result from the change of fiscal policy which this article proposes. At present, a tempting premium is placed upon keeping land unimproved or inadequately improved, while a heavy penalty is imposed upon improvement. Most land appreciates constantly. All buildings depreciate from the moment of completion. Yet the building is taxed equally with the land.

What incentive does such a system offer the speculative landowner to put up a commodious, well-lighted modern structure in place of the old ruin which now pays him so well? The old one cannot depreciate much more, and while paying a trifling tax because of its physical worthlessness, he is thereby enabled to collect and pocket the economic rent of the ground, which the community is continually rendering more valuable. The new building would absorb a large amount of capital, would begin to run down even before it could be occupied, and would be taxed to the limit. Why then is not the landlord justified in letting well enough alone, enjoying the growing economic rent, and waiting till he can get a fancy price for the right to collect it?

But reverse the conditions. Reclaim for the community its natural income, making it expensive either to keep needed land vacant or to withhold it from the ready and willing to improve it to the full extent of its possibilities.

Does it require severe intellectual effort to foresee the results? Better and better houses, apartments, tenements, offices and stores, more employment for labor in all enterprises now held back by the shadow of the tax-gatherer, an end of all tax-lying, tax-evasion and tax-injustice, and withal, a public revenue adequate to all real public needs.

What a contrast to the existing plan of pouring public money into the laps of individual landowners to their own moral disadvantage and that of their children, as well as the economic disadvantage of their neighbors, while constantly cudgeling the civic brains, straining the public credit, impoverishing widows and orphans, and increasing the exactions from every citizen and corporation that can be caught, in the effort to raise more and more money to bestow upon the same beneficiaries.

If the reader has followed thus far, he is perhaps ready to inquire why, if the abolition of taxation is so desirable and so feasible, it should not be put into effect without more delay. In partial answer, it may be said that the body social has slid so far down from the right path in this matter that climbing back to it is no short or easy process. The way up bristles with problems, one of which is of course the opposition of a class of land speculators. ... read the whole article

Bill Batt: The Nexus of Transportation, Economic Rent, and Land Use

However, what is the effect on production of taxes levied on products and of taxes levied on the value of land?

Of taxes levied on products, George said: "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 taxcollector 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 anyone 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" (1879, rpt. 1958, p. 434).

Turning to taxation levied on the value of land, George went on to say:

For this simple device of placing all taxes on the value of land would be in effect putting up the land at auction to whosoever would pay the highest rent to the state. The demand for land fixes its value, and hence, if taxes were placed so as very nearly to consume that value, the man who wished to hold land without using it would have to pay very nearly what it would be worth to anyone who wanted to use it.

And it must be remembered that this would apply, not merely to agricultural land, but to all land. Mineral land would be thrown open to use, just as agricultural land; and in the heart of a city no one could afford to keep land from its most profitable use, or on the outskirts to demand more for it than the use to which it could at the time be put would warrant. Everywhere that land had attained a value, taxation, instead of operating, as now, as a fine upon improvement, would operate to force improvement (1879, rpt. 1958, p. 437).

A few pages before this he had told us that, "It is sufficiently evident that with regard to production, the tax upon the value of land is the best tax that can be imposed. Tax manufactures, and the effect is to check manufacturing; tax improvements, and the effect is to lessen improvement; tax commerce, and the effect is to prevent exchange; tax capital, and the effect is to drive it away. But the whole value of land may be taken in taxation, and the only effect will be to stimulate industry, to open new opportunities to capital, and to increase the production of wealth" (1879, rpt. 1958, p. 414).

In other words, according to George, taxation of products checks production, whereas taxation of land values stimulates production.... read the whole article

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

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