Most Georgists reading this will respond that it was Milton Friedman who called LVT the "least bad" tax -- at least twice, first in 1978 and then again in a newspaper interview in 2006, a few weeks before he died. And they'll add, "but he wasn't a Georgist" -- he never pursued the importance or implications of that observation.
But the answer to the question, I submit, is Lowell Harriss! I had occasion to read a report dated November 9, 1966 by Weld Carter (my
grandfather) reporting to a foundation he worked for [the Robert
Schalkenbach Foundation] about a symposium of the Tax Institute of
America which had occurred the previous week. He does not report
where it took place, but mentions that the program chairman was Dr.
Alfred Buehler, who pointed out that (the quotes here refer to Carter's
report): "this was the first time since 1939 that the Tax Institute
had selected the property tax for its annual symposium. Of the present
panelists, he, [Lowell] Harriss and [Harold] Groves had all been on the
1939 program. He praised Dick Netzer's book as being the most
important since the work of Jensen in the early '30's, calling
attention to Netzer's suggested alternatives to the general property
The report goes on to say,
"Lowell Harriss, had problems, which Miss [Dr. Mabel Walker]Walker explained later. When Dr. Groves had his heart attack, he (Groves) had already been scheduled to do a paper on "Growing Property Tax Burden: Effects and Upper Limits." After the attack, Lowell Harriss had kindly consented to substitute for Groves. But at the last minute, Groves sent in a paper, so Miss Walker had to change the title of Groves' paper and, I gues, get Harriss to modify his presentation somewhat accordingly. The Harriss paper was good. He spoke of the expanding potential of the property tax, saying that generally it should be able to meet advancing needs without increasing rates. He objected to the notion of "limits," point out that as services were expanded, land values would grow continuously higher. He called attention to the fixed quantity of land. He called attention to the effects of differential rates on land: higher rates forcing more intensive rates and lower rates tending to take the pressure off owners. He then spoke of some of the unfavorable effects of taxation on improvements, with their tendency to increase slums. He pointed out that there was no hitherto undiscovered alternative to the property tax, saying that the question is the comparison of more intensive use of other tax modes. Speaking negatively, he said, "The least bad tax I can imagine is a tax on land values. It will score better than any other tax." On the favorable side, he spoke of land value taxation as enhancing local autonomy, as providing equity, as aiding optimum resource allocation, as providing good competition between communities. At one point he also alluded to the fact that a lowering of the tax rate on land value would be of no benefit to prospective newcomers because any remission of such tax would only be capitalized into higher prices for land."
Congressman Curtis opened his luncheon address on "The Property Tax in the Perspective of our National Tax System" with the statement that the property tax is the cinderella of taxes, who, in shabby clothes, must stay home while her far less attractive sisters go to the ball. ..."
Most college students will pay taxes equal to more than 40 per cent of what they earn throughout their lives.
Those who are especially successful or live in localities with above average government spending may pay more than half of their lifetime incomes in direct and indirect taxes.
"All of us have a vital interest in making the tax system as 'least bad' as possible." This food for thought was served by Prof. C. Lowell Harriss at Hillsdale College, to students in the Constructive Alternatives Program.
"And taxes affect our lives in many kinds of ways other than extracting dollars," he added.
Prof. Harriss pointed out that government spending per capita in 1975 was $9,409 for a family of four, up, in today's dollars, from $1,130 just over 20 years ago. That's an increase during the lifetime of today's college student averaging $244 a year. Students should ask whether they are getting their money's worth, he suggested.
People create their own conditions and the framework within which they are free to use their capacities. If this freedom is "collectivised" by big governemnt to get all the "services" people want, do they really get them?
Certainly there has been some improvement accompanying the growth of big government, in some cases a lot of it. But would private deployment of, say, half of the increased tax burden have produced more of what the people want? "This question," said Prof. Harriss, "I leave with you as a challenge."
Lowell Harriss is a professor of economics, Columbia University.
This talk was given at Hillsdale College, which is libertarian in orientation. In July, 2006, in Hillsdale's publication Imprimis, Friedman had this to say. (The interview took place in May, 2006, at an event honoring the 25th anniversary of "Free to Choose: A Personal Statement.") He failed to see that there can be a difference between common property and government property. (Too few pixels in the picture, one might say.) But despite his language -- praising as "privatization" that which Georgists would consider the socialization -- he recognizes
LA: Let me ask you about demographic trends. Columnist Mark Steyn writes that in ten years, 40 percent of young men in the world are going to be living in oppressed Muslim countries. What do you think the effect of that is going to be?
MF: What happens will depend on whether we succeed in bringing some element of greater economic freedom to those Muslim countries. Just as India in 1955 had great but unrealized potential, I think the Middle East is in a similar situation today. In part this is because of the curse of oil. Oil has been a blessing from one point of view, but a curse from another. Almost every country in the Middle East that is rich in oil is a despotism.
LA: Why do you think that is so?
MF: One reason, and one reason only — the oil is owned by the governments in question. If that oil were privately owned and thus someone's private property, the political outcome would be freedom rather than tyranny. This is why I believe the first step following the 2003 invasion of Iraq should have been the privatization of the oil fields. If the government had given every individual over 21 years of age equal shares in a corporation that had the right and responsibility to make appropriate arrangements with foreign oil companies for the purpose of discovering and developing Iraq's oil reserves, the oil income would have flowed in the form of dividends to the people — the shareholders — rather than into government coffers. This would have provided an income to the whole people of Iraq and thereby prevented the current disputes over oil between the Sunnis, Shiites and Kurds, because oil income would have been distributed on an individual rather than a group basis.
LA: Many Middle Eastern societies have a kind of tribal or theocratic basis and long-held habits of despotic rule that make it difficult to establish a system of contract between strangers. Is it your view that the introduction of free markets in such places could overcome those obstacles?
MF: Eventually, yes. I think that nothing is so important for freedom as recognizing in the law each individual's natural right to property, and giving individuals a sense that they own something that they're responsible for, that they have control over, and that they can dispose of.
Those "shares" would be better implemented as a guaranteed share of the income, not shares which could be sold to others (say, as an alternative to a payday loan). And "natural right to property" obfuscates the distinction between (a) that which nature provides or the community creates (to which all of us have an equal right), and (b) that which individuals or corporations create (to which individuals and corporations should have an unfettered right, subject to (a)!
The Alaska Permanent Fund does something similar: some of the royalty revenue Alaska collects on oil extracted within the state is used to fund Alaska's services, and some goes to the Alaska Permanent Fund, which invests the proceeds in a broadly diversified portfolio and pays an annual income to every adult and child who is a permanent resident of Alaska. See http://lvtfan.typepad.com/lvtfans_blog/2008/09/pbss-now----8108-alaska-governor-palin-and-oil-resources----who-do-they-belong-to.html
Anyway, even if Lowell Harriss was not the first to apply the term "least bad tax" to land value taxation, he said it well before Milton Friedman said it.
If you're not a regular reader here, you might want to know that there are a few other posts about Lowell, who died in December, 2009, at the age of 97.
- http://lvtfan.typepad.com/lvtfans_blog/2010/01/reading-lowell-harriss.html which explores some of Lowell's writings on the property tax, and how we might best reform it.
To circle back to Milton Friedman, it is worth noting that he and his wife Rose were both at the University of Chicago in the early 1930s for economics PhDs. I don't know how large that program was, but I can only assume that students in it were aware of the research of others in the program. In 1933, Homer Hoyt's dissertation was entitled "100 Years of Land Values in Chicago." It was an analysis of 5 boom-bust cycles. I encourage you to read a couple of things which reference this book:
- Mason Gaffney's The Great Crash of 2008, at http://www.masongaffney.org/essays/Great_Crash_of_2008.pdf
- Weld Carter's "A Clarion Call to Sanity, to Honesty, to Justice," at http://www.wealthandwant.com/docs/Carter_Clarion.html