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Improvements in Land

Not every improvement to land is a building or a structure.  The labor involved in clearing a site of trees and rocks to make it possible to farm it constitutes an improvement, and that improvement is rightly the property of the landholder in the same way that a building is.  He may sell that product of his labor to the next holder, and neither of them should be taxed on it.   Similarly, one who takes sterile barren land and transforms it into something fertile, through his own labor and his legitimate share of the planet's natural resources, is entitled to consider private the value he has added, at least for some period of time. This might have some useful applications when we consider brownfields.

But the natural fertility of a plot of land is different. That is our common property.

I live in a 75-year-old house on a hillside. When it was built, it was sited on a property that might have been 6 or 8 acres, and the architect doubtless chose what he felt was the best location on the property available to him. During construction, some grading was done to create a level building site. Initially, that improvement of the site would have been treated as similar to the building. As time goes on, and as more sites around it were developed, and perhaps as one owner gives way to another, that "improvement" to the land becomes part of the site. Perhaps the same thing could be said of the ubiquitous stone walls and the clearing of the stumps that gave way to lawn.

H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty: Chapter 9. Alleged Difficulty of Distinguishing Land From Improvements (in the unabridged P&P: Part VIII — Application of the Remedy: Chapter 4 — Indorsements and objections

The only objection to the tax on rent or land values which is to be met with in standard politico-economic works is one which concedes its advantages — for it is, that from the difficulty of separation, we might, in taxing the rent of land, tax something else. McCulloch, for instance, declares taxes on the rent of land to be impolitic and unjust because the return received for the natural and inherent powers of the soil cannot be clearly distinguished from the return received from improvements and meliorations, which might thus be discouraged. Macaulay somewhere says that if the admission of the attraction of gravitation were inimical to any considerable pecuniary interest, there would not be wanting arguments against gravitation — a truth of which this objection is an illustration. For admitting that it is impossible invariably to separate the value of land from the value of improvements, is this necessity of continuing to tax some improvements any reason why we should continue to tax all improvements? If it discourage production to tax values which labor and capital have intimately combined with that of land, how much greater discouragement is involved in taxing not only these, but all the clearly distinguishable values which labor and capital create?

But, as a matter of fact, the value of land can always be readily distinguished from the value of improvements.

  • In countries like the United States there is much valuable land that has never been improved; and in many of the States the value of the land and the value of improvements are habitually estimated separately by the assessors, though afterward reunited under the term real estate.
  • Nor where ground has been occupied from immemorial times, is there any difficulty in getting at the value of the bare land, for frequently the land is owned by one person and the buildings by another, and when a fire occurs and improvements are destroyed, a clear and definite value remains in the land.
  • In the oldest country in the world no difficulty whatever can attend the separation, if all that be attempted is to separate the value of the clearly distinguishable improvements, made within a moderate period, from the value of the land, should they be destroyed.

This, manifestly, is all that justice or policy requires. Absolute accuracy is impossible in any system, and to attempt to separate all that the human race has done from what nature originally provided would be as absurd as impracticable. A swamp drained or a hill terraced by the Romans constitutes now as much a part of the natural advantages of the British Isles as though the work had been done by earthquake or glacier. The fact that after a certain lapse of time the value of such permanent improvements would be considered as having lapsed into that of the land, and would be taxed accordingly, could have no deterrent effect on such improvements, for such works are frequently undertaken upon leases for years. The fact is, that each generation builds and improves for itself, and not for the remote future. And the further fact is, that each generation is heir, not only to the natural powers of the earth, but to all that remains of the work of past generations. ... read the whole chapter

The Most Rev. Dr Thomas Nulty, Roman Catholic Bishop of Meath (Ireland): Back to the Land (1881)

Individuals May Rightfully Collect Payment for Improvements in Land.
The tracts of country known in England as the Bedford Level, and in Flanders as the Pays des waes, were, not so very long ago, as sterile, as barren, and even more useless than the bogs of our own country at this moment. By an enormous expenditure, however, of capital and labour they have been drained, reclaimed and fertilised, till they have at last become among the most productive lands in Europe. That productiveness is entirely the result of human labour and industry, for nature did hardly anything for these lands.

If the question, then, was asked: Who has a right to charge or demand a rent for the use of the soil of these lands for agricultural or industrial uses? the answer undoubtedly would be, the person who by his labour and capital had created all their productiveness, who had imparted to them all the value they possess. In charging, therefore, a rent for the use of what he had produced he is only demanding a most just and equitable return for his capital -- a fair and honest remuneration for his labour. His right to demand this could not possibly be disputed.

Now, the artificial productiveness of these tracts of country hardly equals, and certainly does not surpass, the natural fertility of large districts of rich, luxuriant, arable and pasture lands in the County of Meath, in this Diocese. If it were asked, then, who has a right to charge a rent for the use of the soil of these highly favoured districts in Meath for agricultural or industrial purposes, the answer should be that if human industry or labour had imparted to these lands a real and substantial amount of artificial productiveness, by the cultivation and permanent improvement of the soil, then the person who had created that productiveness had a perfect right to demand a rent for the use of it.

Exaction by Individuals of Rent for Land is Wanton Injustice.
But who, it may be further asked, has a right to demand a rent for the natural fertility of these lands "which no man made," and which, in fact, is not the result of human industry and labour at all? The answer here, also, should be, he who had produced it.

But who produced it? God. If God, then, demanded a rent for the use of these lands, He would undoubtedly be entitled to it. But God does not sell His gifts or charge a rent for the use of anything He has produced. He does not sell; but He gives or bestows, and in bestowing His gifts He shows no respect of persons.

If, then, all God's creatures are in a condition of perfect equality relatively to this gift of the land, no one can have an exceptional right to claim more than a fair share of what was intended equally for all, and what is, indeed, directly or indirectly, a necessary of life for each of them.

When all, therefore, relatively to this gift, are perfectly equal, and nobody has any real claim to it; when all equally need the liberality and generosity of God in it, and no one can afford, or is willing, to part with his share in it -- to alienate it from any or all of them would be to do them a wanton injustice and grievous wrong, and would be a direct disappointment to the intentions of the Donor besides.

The Whole People the True Owners of the Land.
When, therefore, a privileged class arrogantly claims a right of private property in the land of a country, that claim is simply unintelligible, except in the broad principle that the land of a country is not a free gift at all, but solely a family inheritance; that it is not a free gift which God has bestowed on His creatures, but an inheritance which he has left to His children; that they, therefore, being God's eldest sons, inherit this property by right of succession; that the rest of the world have no share or claim to it, on the ground that origin is tainted with the stain of illegitimacy. The world, however, will hardly submit to this shameful imputation of its own degradation, especially when it is not sustained by even a shadow of reason.

I infer, therefore, that no individual or class of individuals can hold a right of private property in the land of a country; that the people of that country, in their public corporate capacity, are, and always must be, the real owners of the land of their country -- holding an indisputable title to it, in the fact that they received it as a free gift from its Creator, and as a necessary means for preserving and enjoying the life He has bestowed upon them. ...

Public and Private Interests.
An usufructuary or farmer who labours might and main for his own self-interests, labours with the same amount of earnestness and zeal for the interests of the public as well. But it is the consideration of the public interests that will determine the continuity of his occupancy. The continuity of his occupancy entirely depends on the continuity of its real, practical effectiveness for the advancement of the interests of the public. The moment it ceases to be useful and beneficial to the public welfare, that moment it ceases to have a right to exist any longer. If individuals could have a right of Private Property in Land, that right would not be fettered by these responsibilities; in fact, it would not be liable to any responsibility at all.

The ownership of reclaimed tracts like the Bedford Level approximates closely, without, however, fully realising, to a right of private property in land. The Bedford Level owner is not responsible to society for the management of that property, nor is he bound to have any regard to its interests in the use he wishes to make of it. Being master of his own free actions, he was not bound to create that property for the benefit of society, but for his own, and he may now make whatever use he pleases of it. If through mismanagement it produces less than it is capable of yielding, that is his own affair altogether. If he allowed it to return to its original sterility society might regret that it suffered a great bas, but it could not complain that he did it an injustice or a wrong.

The distinction, therefore, between the two rights of property in land is essential and fundamental, and it is absolutely necessary to apprehend it clearly and to bear it distinctly in mind. ...

Land Monopoly Usurps God's Gifts to All.
Thus, on the highest and most unquestionable authority, are we forced to conclude that, owing to the monopoly which the landlords have usurped in the land of the nation, they sell out the "use of the original and indestructible powers of the soil"; of "the natural and inherent powers of the soil"; of "the natural powers of the soil"; that is to say, they sell the use of God's gifts like so many articles of private property, and as if they were purely the result of their own toil and labour.

If the "Bedford Level," and the rich tract of land in Meath with which I have compared it, were to be leased out to tenant farmers for a given term of years, the one would fetch quite as high a rent as the other. The farmer would not concern himself much in inquiring into the source from which the fertility of the land was derived; all his solicitude and inquiries would be directed to the existence of the fact that the fertility was there, and which of them possessed it in the higher degree. The rent which the owner of the "Bedford Level" would receive for the use of his land would be the just and equitable remuneration to which he was entitled for the expenditure of his labour and capital, while the Meath proprietor would receive as high a reward for having done nothing at all. Only that his income is so woefully wanting in justice, the condition of the Meath proprietor would certainly be enviable.   Read the whole letter

HG, Science of Political Economy, Book IV? Chap VI? Bedford Level

Henry George: The Condition of Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)

Your use, in so many passages of your Encyclical, of the inclusive term “property” or “private” property, of which in morals nothing can be either affirmed or denied, makes your meaning, if we take isolated sentences, in many places ambiguous. But reading it as a whole, there can be no doubt of your intention that private property in land shall be understood when you speak merely of private property. With this interpretation, I find that the reasons you urge for private property in land are eight. Let us consider them in order of presentation. You urge:

1. That what is bought with rightful property is rightful property. (RN, paragraph 5) ...
2. That private property in land proceeds from man’s gift of reason. (RN, paragraphs 6-7.) ...
3. That private property in land deprives no one of the use of land. (RN, paragraph 8.) ...
4. That Industry expended on land gives ownership in the land itself. (RN, paragraphs 9-10.) ...
5. That private property in land has the support of the common opinion of mankind, and has conduced to peace and tranquillity, and that it is sanctioned by Divine Law. (RN, paragraph 11.) ...
6. That fathers should provide for their children and that private property in land is necessary to enable them to do so. (RN, paragraphs 14-17.) ...
7. That the private ownership of land stimulates industry, increases wealth, and attaches men to the soil and to their country. (RN, paragraph 51.) ...
8. That the right to possess private property in land is from nature, not from man; that the state has no right to abolish it, and that to take the value of landownership in taxation would be unjust and cruel to the private owner. (RN, paragraph 51.) ...

4. That Industry expended on land gives ownership in the land itself. (9-10.)

Your Holiness next contends that industry expended on land gives a right to ownership of the land, and that the improvement of land creates benefits indistinguishable and inseparable from the land itself.

This contention, if valid, could only justify the ownership of land by those who expend industry on it. It would not justify private property in land as it exists. On the contrary, it would justify a gigantic no-rent declaration that would take land from those who now legally own it, the landlords, and turn it over to the tenants and laborers. And if it also be that improvements cannot be distinguished and separated from the land itself, how could the landlords claim consideration even for improvements they had made?

But your Holiness cannot mean what your words imply. What you really mean, I take it, is that the original justification and title of landownership is in the expenditure of labor on it. But neither can this justify private property in land as it exists. For is it not all but universally true that existing land titles do not come from use, but from force or fraud?

Take Italy! Is it not true that the greater part of the land of Italy is held by those who so far from ever having expended industry on it have been mere appropriators of the industry of those who have? Is this not also true of Great Britain and of other countries? Even in the United States, where the forces of concentration have not yet had time fully to operate and there has been some attempt to give land to users, it is probably true today that the greater part of the land is held by those who neither use it nor propose to use it themselves, but merely hold it to compel others to pay them for permission to use it.

And if industry give ownership to land what are the limits of this ownership? If a man may acquire the ownership of several square miles of land by grazing sheep on it, does this give to him and his heirs the ownership of the same land when it is found to contain rich mines, or when by the growth of population and the progress of society it is needed for farming, for gardening, for the close occupation of a great city? Is it on the rights given by the industry of those who first used it for grazing cows or growing potatoes that you would found the title to the land now covered by the city of New York and having a value of thousands of millions of dollars?

But your contention is not valid. Industry expended on land gives ownership in the fruits of that industry, but not in the land itself, just as industry expended on the ocean would give a right of ownership to the fish taken by it, but not a right of ownership in the ocean. Nor yet is it true that private ownership of land is necessary to secure the fruits of labor on land; nor does the improvement of land create benefits indistinguishable and inseparable from the land itself. That secure possession is necessary to the use and improvement of land I have already explained, but that ownership is not necessary is shown by the fact that in all civilized countries land owned by one person is cultivated and improved by other persons. Most of the cultivated land in the British Islands, as in Italy and other countries, is cultivated not by owners but by tenants. And so the costliest buildings are erected by those who are not owners of the land, but who have from the owner a mere right of possession for a time on condition of certain payments. Nearly the whole of London has been built in this way, and in New York, Chicago, Denver, San Francisco, Sydney and Melbourne, as well as in continental cities, the owners of many of the largest edifices will be found to be different persons from the owners of the ground. So far from the value of improvements being inseparable from the value of land, it is in individual transactions constantly separated. For instance, one-half of the land on which the immense Grand Pacific Hotel in Chicago stands was recently separately sold, and in Ceylon it is a not infrequent occurrence for one person to own a fruit-tree and another to own the ground in which it is implanted.

There is, indeed, no improvement of land, whether it be clearing, plowing, manuring, cultivating, the digging of cellars, the opening of wells or the building of houses, that so long as its usefulness continues does not have a value clearly distinguishable from the value of the land. For land having such improvements will always sell or rent for more than similar land without them.

If, therefore, the state levy a tax equal to what the land irrespective of improvement would bring, it will take the benefits of mere ownership, but will leave the full benefits of use and improvement, which the prevailing system does not do. And since the holder, who would still in form continue to be the owner, could at any time give or sell both possession and improvements, subject to future assessment by the state on the value of the land alone, he will be perfectly free to retain or dispose of the full amount of property that the exertion of his labor or the investment of his capital has attached to or stored up in the land.

Thus, what we propose would secure, as it is impossible in any other way to secure, what you properly say is just and right — "that the results of labor should belong to him who has labored.” But private property in land — to allow the holder without adequate payment to the state to take for himself the benefit of the value that attaches to land with social growth and improvement — does take the results of labor from him who has labored, does turn over the fruits of one man’s labor to be enjoyed by another. For labor, as the active factor, is the producer of all wealth. Mere ownership produces nothing. A man might own a world, but so sure is the decree that “by the sweat of thy brow shalt thou eat bread,” that without labor he could not get a meal or provide himself a garment. Hence, when the owners of land, by virtue of their ownership and without laboring themselves, get the products of labor in abundance, these things must come from the labor of others, must be the fruits of others’ sweat, taken from those who have a right to them and enjoyed by those who have no right to them.

The only utility of private ownership of land as distinguished from possession is the evil utility of giving to the owner products of labor he does not earn. For until land will yield to its owner some return beyond that of the labor and capital he expends on it — that is to say, until by sale or rental he can without expenditure of labor obtain from it products of labor, ownership amounts to no more than security of possession, and has no value. Its importance and value begin only when, either in the present or prospectively, it will yield a revenue — that is to say, will enable the owner as owner to obtain products of labor without exertion on his part, and thus to enjoy the results of others’ labor.

What largely keeps men from realizing the robbery involved in private property in land is that in the most striking cases the robbery is not of individuals, but of the community. For, as I have before explained, it is impossible for rent in the economic sense — that value which attaches to land by reason of social growth and improvement — to go to the user. It can go only to the owner or to the community. Thus those who pay enormous rents for the use of land in such centers as London or New York are not individually injured. Individually they get a return for what they pay, and must feel that they have no better right to the use of such peculiarly advantageous localities without paying for it than have thousands of others. And so, not thinking or not caring for the interests of the community, they make no objection to the system.

It recently came to light in New York that a man having no title whatever had been for years collecting rents on a piece of land that the growth of the city had made very valuable. Those who paid these rents had never stopped to ask whether he had any right to them. They felt that they had no right to land that so many others would like to have, without paying for it, and did not think of, or did not care for, the rights of all.... read the whole letter

Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)

Q53. How would the single tax effect the farmer?
A. It would greatly reduce his taxes. His buildings, stock, and crops would be exempt. His land is at present assessed at nearly twice its proper unimproved value, while town and city land is often valued at less than one half its actual value, thus subjecting him to a more than fourfold disadvantage.

Q66. What has the single tax to say about the taxation of forest lands?
A. Perhaps the majority opinion would be to tax annually all forests old or new on what would be the value of the land if denuded of all growth -- a stumpage tax to be collected upon old growth timber when cut, but not upon new growth such as may be reasonably classed as a cultivated crop.... read the whole article

Nic Tideman: Private Possession as an Alternative to Rental and Private Ownership for Agricultural Land

Implementation of a system of private possession of land requires a procedure for determining the rental value that land would have in an unimproved condition. This would be the responsibility of an assessor, whose job would be somewhat similar to that of property tax assessors. However, while property tax assessors specify the sale value of land, the task of the assessor under a system of private possession would be to specify the rental value that land would have in an unimproved condition.

Agricultural land is rarely found in an unimproved condition, except in places that have never been farmed, or have not been farmed for decades. Therefore the task of the assessor of agricultural land would entail making adjustments for any improvements to land such as drainage, irrigation, fencing, fertilization, and removal of stones. From an economic perspective, the return to these improvements is not rent, but rather interest on capital that has been invested. Keeping such returns untaxed ensured that those who possess land will have an incentive to maintain those improvements and make any new improvements that yield adequate returns.

To discover the rental value of agricultural land in an unimproved condition, assessors would monitor land rentals in the vicinity. From an agreed rental price, the assessor would subtract amounts for interest and depreciation on any improvements to the land. What remained would be the rental value of the land in an unimproved condition. However, if the assessor believed that some improvement added less to the rental value of land than its cost as measured by interest and depreciation, then for that improvement he would subtract not its cost, but his estimate of what it added to the rental value of the land. ... read the whole article


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

Now, what price should he get for it? He did not pay the government much for his title deed, but he has worked on this land for fifteen years, and deserves some compensation when he transfers it. By his labor and also, in part, by reason of his clearing, draining and fencing, he has been able to make twelve dollars an acre from his ground, while his economic rent had not until now gone above five dollars an acre. Furthermore, he has built on these parcels a barn and two storehouses.

The method of computing the proper selling price under such circumstances would have to be the result of experience, but that price would certainly include the present value of the improvements and probably some lump sum besides, as compensation for loss of farming opportunity. But just as certainly it would not include, (as it would do under our present conditions), the increased location value which the town itself has created by its own growth and public works, and which in all justice belongs to the town or community and not to the individual. ... read the whole article



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Wealth and Want
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