Landed Gentry

film: White Cliffs of Dover

How do the landed gentry support themselves? They collect rent from their tenants. They don't need to work as much as others; they can devote themselves to philanthropy, to managing their property, the largest part of which is not buildings but land or site value. The phrase may conjure up images of gentleman farmers, but the far more important version is the urban landed gentry. And by that I don't mean the folks associated with gentrification, who may buy homes for themselves in deteriorated neighborhoods and fix them up to live in themselves, perhaps renting out some excess space. No, today's most significant landed gentry are the individuals, corporate shareholders, S-corp partners, REIT holders, trust beneficiaries, etc., who own chunks of urban land. A tiny lot in Harlem can be worth $1,000,000. An acre in midtown Manhattan can be worth $1 billion (yes, that's billion with a B! — that's $23,000 per square foot!) and it is increasing in value quite rapidly.

We tax them rather lightly. The city values their land at a tiny fraction of its market value. Then it places a very small annual tax on that amount. The federal government allows depreciation, and while property-owners are not supposed to depreciate land, they do, and in fact the same land gets depreciated over and over by a series of owners, while it is appreciating by large jumps. And that appreciation is not created by anything the landholder does, but by the presence of the community and by the taxpayers' spending on infrastructure and services.

Leona Helmsley and Brooke Astor, who died within a month of each other in 2007, both lived on fortunes made in New York real estate. Much of that was land rent, capitalized into increasingly high prices on land. The little people paid for that. The people who pay taxes — wage taxes, sales taxes, income taxes, taxes on their homes, etc. The people who pay mortgages — who pay not only the principal which went to the seller (who didn't create the land value either) and also pay interest to the lender — and then must pay taxes to pay for the services. The people who don't own any property, but pay rent to their landlords (residential and commercial) and then pay sales taxes and other taxes to provide the very services which allow their landlord to charge them higher rent next year!

Land value taxation would collect for the community the value that the community created. Far more effective than a once-a-generation tax on estates, or even a transaction tax. Far more just than paying for infrastructure and services through sales taxes, wage taxes, building taxes, etc.

Should the sons and daughters of those who collected a lot of land be entitled to more than the sons and daughters of their tenants? Should they be able to pocket the land rent — or should we be collecting that land rent as our common treasure, the rightful taxbase?

When a well-located neighborhood of obsolete buildings is "discovered" by people with higher income and a need for housing, the result is sometimes referred to as "gentrification." It is a form of sprawl; as transportation improves, or prices become too high for some in the closer-in neighborhoods, those with both housing needs and income will move in.

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

THE tax upon land values is the most just and equal of all taxes. It falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses. When all rent is taken by taxation for the needs of the community, then will the equality ordained by nature be attained. No citizen will have an advantage over any other citizen save as is given by his industry, skill, and intelligence; and each will obtain what he fairly earns. Then, but not till then, will labor get its full reward, and capital its natural return. — Progress & Poverty — Book VIII, Chapter 3, Application of the Remedy: The Proposition Tried by the Canons of Taxation

HERE is a provision made by natural law for the increasing needs of social growth; here is an adaptation of nature by virtue of which the natural progress of society is a progress toward equality not toward inequality; a centripetal force tending to unity growing out of and ever balancing a centrifugal force tending to diversity. Here is a fund belonging to society as a whole, from which without the degradation of alms, private or public, provision can be made for the weak, the helpless, the aged; from which provision can be made for the common wants of all as a matter of common right to each. — Social Problems — Chapter 19, The First Great Reform

NOT only do all economic considerations point to a tax on land values as the proper source of public revenues; but so do all British traditions. A land tax of four shillings in the pound of rental value is still nominally enforced in England, but being levied on a valuation made in the reign of William III, it amounts in reality to not much over a penny in the pound. With the abolition of indirect taxation this is the tax to which men would naturally turn. The resistance of landholders would bring up the question of title, and thus any movement which went so far as to propose the substitution of direct for indirect taxation must inevitably end in a demand for the restoration to the British people of their birthright. — Protection or Free Trade— Chapter 27: The Lion in the Way - econlib 

THE feudal system, which is not peculiar to Europe but seems to be the natural result of the conquest of a settled country by a race among whom equality and individuality are yet strong, clearly recognized, in theory at least, that the land belongs to society at large, not to the individual. Rude outcome of an age in which might stood for right as nearly as it ever can (for the idea of right is ineradicable from the human mind, and must in some shape show itself even in the association of pirates and robbers), the feudal system yet admitted in no one the uncontrolled and exclusive right to land. A fief was essentially a a trust, and to enjoyment was annexed obligation. The sovereign, theoretically the representative of the collective power and rights of the whole people, was in feudal view the only absolute owner of land. And though land was granted to individual possession, yet in its possession were involved duties, by which the enjoyer of its revenues was supposed to render back to the commonwealth an equivalent for the benefits which from the delegation of the common right he received. — Progress &Poverty — Book VII, Chapter 4, Justice of the Remedy: Private Property in Land Historically Considered

THE abolition of the military tenures in England by the Long Parliament, ratified after the accession of Charles II, though simply an appropriation of public revenues by the feudal landowners, who thus got rid of the consideration on which they held the common property of the nation, and saddled it on the people at large in the taxation of all consumers, has been long characterized, and is still held up in the law books, as a triumph of the spirit of freedom. Yet here is the source of the immense debt and heavy taxation of England. Had the form of these feudal dues been simply changed into one better adapted to the changed times, English wars need never have occasioned the incurring of debt to the amount of a single pound, and the labor and capital of England need not have been taxed a single farthing for the maintenance of a military establishment. All this would have come from rent, which the landholders since that time have appropriated to themselves — from the tax which land ownership levies on the earnings of labor and capital. The landholders of England got their land on terms which required them even in the sparse population of Norman days to put in the field, upon call, sixty thousand perfectly equipped horsemen, and on the further condition of various fines and incidents which amounted to a considerable part of the rent. It would probably be a low estimate to put the pecuniary value of these various services and dues at one-half the rental value of the land. Had the landholders been kept to this contract and no land been permitted to be inclosed except upon similar terms, the income accruing to the nation from English land would today be greater by many millions than the entire public revenues of the United Kingdom. England today might have enjoyed absolute free trade. There need not have been a customs duty, an excise, license or income tax, yet all the present expenditures could be met, and a large surplus remain to be devoted to any purpose which would conduce to the comfort or well-being of the whole people. — Progress &Poverty — Book VII, Chapter 4, Justice of the Remedy: Private Property in Land Historically Considered

WHAT the people of England are entitled to by natural right, and what we propose by the single tax to take for their use, is the value of land as it is, exclusive of the value or improvements as they are in or on the land privately owned. What would thus be left to the landowners would be their personal or moveable property, the value of all existing improvements in or on their land, and their equal share with all other citizens in the land value resumed. This is perfectly clear, and if not perfectly fair, is only so because it would leave to the landowners in their personal property and the value of their improvements much not due to any exertion of labor by themselves or their ancestors, but which has come to them through the unjust appropriation of the proceeds of others' labor. — A Perplexed Philosopher (Justice On The Right To Land) ... go to "Gems from George"