Land Value Taxation will solve many of the 21st century's most serious social, economic and environmental problems, and promote justice, fairness and sustainability. We CAN have a world in which all can prosper.
Progress and Poverty, by Henry George Here are links to online editions of George's landmark book, Progress & Poverty, including audio and a number of abridgments -- the shortest is 30 words! I commend this book to your attention, if you are concerned about economic justice, poverty, sprawl, energy use, pollution, wages, housing affordability. Its observations will change how you approach all these problems. A mind-opening experience!
Henry George: Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy This is perhaps the most important book ever written on the subjects of poverty, political economy, how we might live together in a society dedicated to the ideals Americans claim to believe are self-evident. It will provide you new lenses through which to view many of our most serious problems and how we might go about solving them: poverty, sprawl, long commutes, despoilation of the environment, housing affordability, wealth concentration, income concentration, concentration of power, low wages, etc. Read it online, or in hardcopy.
Bob Drake's abridgement of Henry George's original: Progress and Poverty: Why There Are Recessions and Poverty Amid Plenty -- And What To Do About It! This is a very readable thought-by-thought updating of Henry George's longer book, written in the language of a newsweekly. A fine way to get to know Henry George's ideas. Available online at progressandpoverty.org and http://www.henrygeorge.org/pcontents.htm
Where Else Might You Look?
Wealth and Want The URL comes from the subtitle to Progress & Poverty -- and the goal is widely shared prosperity in the 21st century. How do we get there from here? A roadmap and a reference source.
Reforming the Property Tax for the Common Good I'm a tax reform activist who seeks to promote fairness and reduce poverty. Let's start with the enabling legislation and state requirements for the property tax. There are opportunities for great good!
THAT land is only a passive factor in
production must be carefully kept in mind. . . . Land cannot
act, it can only be acted upon. . . . Nor is this principle
changed or avoided when we use the word land as expressive
of the people who own land. . . .
That the persons whom we call landowners may contribute
their labor or their capital to production is of course
true, but that they should contribute to production as
landowners, and by virtue of that ownership, is as
ridiculously impossible as that the belief of a lunatic in
his ownership of the moon should be the cause of her
Published weekly, by Henry George,
at the office of The Standard, 25 Ann Street, New York
October 22, 1887
printed in The Standard,
October 8, 15 and 22, 1887
Mr. Edward Atkinson is a gentleman of whom I have no disposition to
speak in any other terms than those of respect and esteem. He
has done a vast amount of useful work; he is sincerely desirous of
promoting the welfare of mankind; he has done much for the
dissemination of sound ideas on economic questions, and he is always
sincere and earnest. His weakness is mostly in a too strong
conviction of his own infallibility, in the full persuasion that he
knows just what needs to be done, how it is to be done and when it
must be done, and a consequent peremptory method of disposing of
everybody as something very like a fool who does not agree with him
upon all these details. Thus, he has been for many years in
favor of free trade, and in former years he strenuously insisted
upon the vital importance of reform in that direction. He has
not recanted his opinions; but he has become more interested in
other questions, and now he has very little patience with, and
indeed, something very like contempt for, men who hold his opinions
as to free trade and think that issue more important than the new
questions which have recently attracted Mr. Atkinson's mind.
In May last Mr. Atkinson addressed the Boston labor lyceum,
ostensibly on the subject of the proposed eight hour law, but really
on the question, "How are the profits divided?" His address,
as revised, has but just come into my hands, and it raises some
issues which need further consideration and a broader view. In
reviewing its conclusions, it may be as well to accept its statement
of facts and statistics without dispute, for it is so evident that
Mr. Atkinson has overlooked important elements of the problem, upon
his own showing, that it is not worth while to enter into
controversy as to the facts or figures.
Mr. Atkinson claims that in $1,100,000 worth of cotton sheeting
there is not more than $145,000 profit to capitalists, while $15,000
go in taxes and $940,000 to labor. He makes no allowance
whatever for rent, except perhaps for the rent of the ground upon
which the mill stands. He assumes that 1,400 bales of cotton
can be grown upon land which pays no rent and costs nothing to the
cotton grower. Of course he makes no allowance for rent in the
cost of supplies, machinery, repairs, freight, etc. In one
place he says that rent does enter into the cost; in another he says
that if the landlord is taxed upon his rent he will add the tax to
the rent, and so it will enter into the cost; and finally he says
that rent amounts to a trifle less than 1% of sales, anyway.
Now the truth is that before this $1,100,000 worth of cotton
sheeting can get into the hands of the people there must be paid out
of the proceeds rent, or the interest on the cost of the land, which
is the same thing, on the land where the cotton is grown, on which
the supplies are manufactured, on which the railroad is laid, on
which the repairs are done, on which the sheeting mill is situated,
on which the great stores where the sheetings are sold stand, and,
finally, on which the residences of the 3,400 persons said to be
engaged in producing these goods also stand. All this is
plainly stated in Mr. Atkinson's "Distribution of Products."
We will leave Mr. Atkinson to reckon the amount of these items,
simply remarking that upon his own estimates the single item of the
rent of the stores in which the goods are sold would add $100,000 to
their cost, and that, making the most moderate allowance for the
rent of the other land used in this work of production, it is
obvious that rent alone would far exceed the whole sum Mr. Atkinson
has allowed to go to compensation for capital.
In the next place, Mr. Atkinson has fallen, for the moment, into the
old idea, long ago exploded by Adam Smith, but still current among
unthinking people, that what is spent by the rich in their personal
luxuries is as truly employed for the general good as that which is
spent in productive enterprise. He seeks to reduce the
$145,000 appropriated by capital by showing that much of this is
spent in employing labor. He might just as well include the
whole of it, because even the money which he charges to waste, as
spent on champagne, etc., is all paid out for labor of some kind.
The true rule is that nothing should be charged to labor except that
which is expended usefully and so as to promote reproduction.
A lord who employs a hundred servants to wait upon his idle and
useless person, not only wastes the money which he pays to them, but
also wastes their time and skill in occupations which neither help
him nor them to serve mankind any better than they would have done
before. Every dollar thus spent is devoted to waste, not to
A sig-file on a listserv brought to my attention a quote from St. Ambrose, which, to my surprise, Ernest Crosbydidn't include in his Earth-for-All Calendar:
"You are not making a gift of what is yours to the poor man, but you are giving him back what is his. You have been appropriating things that are meant to be for the common use of everyone. The earth belongs to everyone, not to the rich."
In the very first pages of Scripture we read these words: "Fill the
earth and subdue it."(19) This teaches us that the whole of creation is
for man, that he has been charged to give it meaning by his intelligent
activity, to complete and perfect it by his own efforts and to his own
Now if the earth truly was created to provide man with
the necessities of life and the tools for his own progress, it follows
that every man has the right to glean what he needs from the earth. The
recent Council reiterated this truth: "God intended the earth and
everything in it for the use of all human beings and peoples. Thus,
under the leadership of justice and in the company of charity, created
goods should flow fairly to all." (20)
All other rights, whatever
they may be, including the rights of property and free trade, are to be
subordinated to this principle. They should in no way hinder it; in
fact, they should actively facilitate its implementation. Redirecting
these rights back to their original purpose must be regarded as an
important and urgent social duty.
The Use of Private Property
"He who has the goods of this world and sees his brother in need and
closes his heart to him, how does the love of God abide in him?" (21)
Everyone knows that the Fathers of the Church laid down the duty of the
rich toward the poor in no uncertain terms. As St. Ambrose put it: "You
are not making a gift of what is yours to the poor man, but you are
giving him back what is his. You have been appropriating things that are
meant to be for the common use of everyone. The earth belongs to
everyone, not to the rich." (22) These words indicate that the right to
private property is not absolute and unconditional.
No one may
appropriate surplus goods solely for his own private use when others
lack the bare necessities of life. In short, "as the Fathers of the
Church and other eminent theologians tell us, the right of private
property may never be exercised to the detriment of the common good."
When "private gain and basic community needs conflict with one another,"
it is for the public authorities "to seek a solution to these
questions, with the active involvement of individual citizens and social
The Common Good
certain landed estates impede the general prosperity because they are
extensive, unused or poorly used, or because they bring hardship to
peoples or are detrimental to the interests of the country, the common
good sometimes demands their expropriation.
Vatican II affirms
this emphatically. (24) At the same time it clearly teaches that income
thus derived is not for man's capricious use, and that the exclusive
pursuit of personal gain is prohibited. Consequently, it is not
permissible for citizens who have garnered sizeable income from the
resources and activities of their own nation to deposit a large portion
of their income in foreign countries for the sake of their own private
gain alone, taking no account of their country's interests; in doing
this, they clearly wrong their country. (25)
Those interested in Catholic Social Thought should look for a new book which came out of a 2007 conference held at the University of Scranton, and edited by Professor Kenneth R. Lord of UScranton, entitled "Two Views of Social Justice: A Catholic/Georgist Dialogue." The version I've seen is the October, 2012, issue of The American Journal of Economics and Sociology, and I understand that it will be made available in other forms as well.
The abstract for the book:
Sixteen scholars have come together in this issue to examine eight social-justice themses from the perspectives of Catholic Social Thought and the philosophy of Henry George. The themes they address are natural law, human nature, the nature of work, the nineteenth-century papal encyclical Rerum Novarum, causes of war, immigration, development, and wealth, and neighborhood revitalization. While they sometimes wrangle with each other, their common aspiration is the same as their nineteenth-century predecessors,: to find solutions to the human suffering caused by injustice.
The use of a certain area of the earth's surface is a primary
condition of anything that man can do; it gives him room for his own
actions, with the enjoyment of the heat and the light, the air and
the rain which nature assigns to the area; and it determines
his distance from, and in a great measure his relations to, other
things and other persons. We shall find that it is this
property of "land" which, though as yet insufficient prominence has
been given to it, is the ultimate cause of the distinction which all
writers on economics are compelled to make between land and other
— PROF. ALFRED MARSHALL, of the
University of Cambridge,
Principles of Economics, Vol. I., Book 4,
Chap. 2, Sec. I.
As you read this, recall that a single acre of urban land can be worth $250,000,000 or more -- over 23,000 times what the recently-doubled farmland described in this article sold for!! Also, it seems worthwhile to point out that 160 acres (one quarter of a square mile), at $10,700 each, works out to $1.7 million -- currently well below the threshold for the federal estate tax!
Consider, too, what it is that the land speculator brings to the process of production, and what he is rightly entitled to in a fair and just society, and what society is entitled to, and what the workers -- the farmer and his employees -- are entitled to, and what the capitalist -- the fellow who pays for the buildings and equipment -- is entitled to. Seems like the land speculator is making out awfully -- awefully! -- well but isn't producing or creating anything!! Why do we do things this way? Did the absentee landlord deserve a share of the crop the farmer created? If the farmer has to pay rent to someone, shouldn't it be the community? Wouldn't it be better if America's investors were motivated to put their funds into better equipment (capital) or employing people (labor)?
November 8, 2012
Howard Audsley has been driving through Missouri for the past 30 years to assess the value of farmland. Barreling down the flat roads of Saline County on a recent day, he stopped his truck at a 160-acre tract of newly tilled black land. The land sold in February for $10,700 per acre, double what it would have gone for five years ago.
Heading out into the field, Audsley picked up a clod of the dirt that makes this pocket of land some of the priciest in the state.
"This is a very loamy, very productive, but loamy soil," Audsley said. "A high-clay soil will just be like a rock and that's the difference between the ... soils. And the farmers know this and the investors know this. That's why they pay for it what they do."
A Steep Surge In Prices
not just the value of Missouri cropland that's rising. Corn Belt
farmland prices from Iowa to Illinois and Nebraska to Kansas have been
sky-high lately, boosted by $8-a-bushel corn.
paid about $3.3 million for [about 650 acres] in Southeast Illinois in
2009," said Diggle, who is the CEO of Singapore-based Vulpes Investment
Management. The company handles $250 million of investor money, about 15
percent of which is in farmland.The
high commodity prices have helped encourage investors like Steve
Diggle, who have no connection to farming, to compete for their very own
acreage in the Heartland.
year we sold it at auction and we got $5.1 million," he said, referring
to the Illinois farmland. "That's 55 percent higher than we paid. Plus
we got two yields — one of 3.5 percent and one of 5 percent. So, you
know, as an investment, that's 63 percent over three years. [It] is
great and we're extremely happy with it."
says his firm also purchased a 1,400-acre tract in Illinois two years
ago. The company plans to hold on to it to make money through cash rents
and land appreciation.
value of your land may go up or down. But as long as bond prices remain
where they are, it's very hard to see how we'll have a sustained bear
market for agriculture," Diggle said. By comparison, he said, the
extremely low returns in the bond market are "just so inferior."
A Safer Investment
You don't have to be a billionaire to invest in farmland.
professor Andy Trupin, who lives in Delray Beach, Fla., bought a
155-acre tract of farmland in Lebo, Kan., two years ago because it
looked like it would make him more money than gold or the stock market.
He also owns another tract that's primarily pastureland.
seemed like a much safer vehicle to get an income stream even though
... it's not a high-income stream. At least it's more than you would get
on Treasuries at any duration," Trupin said. "And at the same time,
[farmland offers] price appreciation or to at least [holds] its value in
the event of an inflation period."
investment has paid off so far, Trupin said. He rented out the land to a
local farmer who grows corn, soybeans and wheat. Even the brutal
drought failed to knock down the investment.
we managed to get 20 bushels to the acre of corn even though the place
was as dry as Las Vegas last year," Trupin said. "I'm willing to let the
income from this thing fluctuate. In bad years, it's a slight loss —
maybe a couple of thousand on the year — and in good years, you gain up
to $10,000 on it."
found the land online and got help purchasing it by Realty Executives
of Kansas City. The company says 90 percent of its new customers are
investors like Trupin, and it holds seminars for investors that walk
them through the process of evaluating and buying farmland and how to
find local farmers to rent the land.
probably a higher percentage now of people who are strictly investors,
stock market people, money-market-type investors, and ... they're buying
all types of land," said Dale Hermreck, a broker for Realty Executives
who says he sold $21 million worth of farmland in Kansas last year.
have a lot of outside interest from Texas, Chicago, New York," Hermreck
said. "I get calls and inquiries all over the United States."
The Specter Of A Bubble
to University of Missouri agriculture economist Ron Plain all of this
sounds a bit like the housing bubble burst of 2006. He is concerned a
similar bubble could be happening in farmland.
get several years going up faster than that long-term trend of 6
percent [annual increases] and you're then in a situation where you're
sort of due for a correction," Plain said. "And the way you correct is
pull those land values down — or 'pop the bubble' ... and so there's
concern about that and it's kind of reasonable to worry."
said that with mortgage rates at their lowest in 60 years, it's
reasonable to expect the cost of borrowing to go up eventually. And if
crop prices retreat from record highs, he said, that means "less income
per acre and therefore less ability to pay for farmland."
a bubble burst, farmland might be harder to sell, especially compared
with other more liquid investments. But investors argue that any bubble
is still far off, and they believe that farm acreage will remain a solid
long-term investment so long as the demand for food continues to grow.
remains to be seen whether investors will be able to compete with
farmers for the small supply of high-quality cropland available in the
Midwest, says broker Hermreck.
have people call me all the time and I just don't have what they're
looking for," Hermreck said. "Simply supply and demand. It's just not
there. I could sell an awful lot more of this land if it was available.
And people seem to hang on to something that's making some money and
real popular. It's just real popular now to own land."
Fentress Swanson reports from Missouri for Harvest Public Media, an
agriculture-reporting project involving six NPR member stations in the
Midwest. For more stories about farm and food, check out harvestpublicmedia.org
Equity, therefore, does not permit property in land. For if
one portion of the earth's surface may justly become the
possession of an individual and may be held by him for his sole use
and benefit as a thing to which he has an exclusive right, then
other portions of the earth's surface may be so held; and eventually
the whole of the earth's surface may be so held; and our planet may
thus lapse into private hands.
— HERBERT SPENCER, in 1850, Social
Statics, Chap. IX.
That any human being should dare to apply to another the epithet
"pauper" is, to me, the greatest, the vilest, the most unpardonable
crime that could be committed. Each human being by mere birth
has a birthright in this earth and all its productions; and if they
do not receive it, then it is they who are injured, and it is not
the "pauper," oh, inexpressibly wicked word! — it is the well-to-do
who are the criminal classes.
— RICHARD JEFFERIES, The Story of
My Heart, Chap. X., p. 122.
Land is not, and cannot be, property in the sense in which movable
things are property. Every human being born into this planet
must live upon the land if he lives at all. He did not ask to
be born, and, being born, room must be found for him. The land in
any country is really the property of the nation which occupies it.
— J. A. FROUDE, Ireland,
Nineteenth Century, September, 1880, p. 362.
Sustained by some of the greatest names — I will say by every name of the first rank in Political Economy from Turgot and Adam Smith to Mill — I hold that the land of a country presents conditions which separate it economically from the great mass of the other objects of wealth.
— PROF. J. E. CAIRNES, Essays in Political Economy, Essay VI., p. 189 (1870).
The essential principle of property being to assure to all persons what they have produced by their labor and accumulated by their abstinence, this principle cannot apply to what is not the product of labor, the raw material of the earth.
— JOHN STUART MILL, Political Economy, Book II., Chap. 2, Sec. 5.
When the "sacredness of property" is talked of, it should always be remembered that any such sacredness does not belong in the same degree to landed property.
— JOHN STUART MILL, Political Economy, Book II., Chap. 2, Sec. 6.
Seeing that men are born into the world without their own wills, and being in the world they must live upon the earth's surface, or they cannot live at all, no individual or set of individuals can hold over land that personal and irresponsible right which is allowed them in things of less universal necessity.
— J. A. FROUDE, The English in Ireland in the 18th Century,
I admit that there are things in which a man can have absolute property, and which without qualification or restriction he can buy or sell or bequeath at his pleasure. But I deny that the soil is among these things.
— GERRIT SMITH, Speech in the U. S. Congress, February 21, 1854,
To treat land, with the present privileges attached to the possession of it, as an article of sale, to be passed from hand to hand in the market like other commodities, is an arrangement not likely to be permanent either in Ireland or elsewhere.
— J. A. FROUDE, Ireland, Nineteenth Century, September, 1880, p. 369.
It is well known that these materials and agencies, as fast as they become available, are in the main appropriated by individuals, through the agency or consent of the government, and are then held as private property. Such is the case with the soil and the minerals beneath it. The owners of this property charge as much for the use of it as if it were their own creation, and not that of nature.
— PROF. SIMON NEWCOMB, The Labor Question, North American Review, July, 1870, p. 151.
Here's a piece from a 90 year old journal. There are acres in Manhattan whose value is far higher today -- and the landlords are still reaping what the working people and visitors to New York are sowing.
APPROPRIATING THE GIFTS OF NATURE By Walter Thomas Mills.
There are portions of New York City in which the land is valued at $40,000,000 an acre. That means $8000 each day from each acre for the landlord, and that entirely unearned by him, before there is a penny for any other purpose. Probably not less than two and one-half million dollars a day, or almost a billion dollars a year, must be earned by the people of New York City and turned over to landlords for permission to use the island, which is a gift of nature, and for the advantages that are protected and maintained by the industry and enterprise of all of the people.
In The Great Adventure, April, 1921
Think what NYC -- and America -- would be like if that "permission to use the island" money was treated as our logical public revenue source, instead of as individuals', corporations' and trusts' private revenue source.
Recall the wisdom of Leona Helmsley: "WE don't pay taxes. The little people pay taxes."
Wherever there is in any country uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labour and live on.
— THOMAS JEFFERSON (1785), Ford's Writings of Jefferson, Vol. VII., 36.
A tax upon ground-rents would not raise the rent of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist and exacts the greatest rent which can be got for the use of the ground.
— ADAM SMITH, Wealth of Nations (1776), Book V., Chap. 2, Art. I.
I'm reading a 1910 book by William Harbutt Dawson entitled "The Unearned Increment." I found these paragraphs particularly compelling. I think about the 2003 Schiller and Case article about the expectations of home buyers that their purchases would rise in value. The homebuyers of the last decade didn't understand why land should rise in value -- indeed, most of them weren't conscious of it being land appreciating, not the houses themselves -- but they seemed sure that it would rise forever, and they thought it essential to their own well-being that they get in on that appreciation.
100 years ago, there seemed to be a much better popular understanding of land economics than we have in 2012. It was widely discussed in quite a number of popular journals read by ordinary people. One might speculate on why we in the 21st century aren't better informed than we are on the subject. In whose interests is it that ordinary people not understand the importance and the dynamics land economics?
And here it will be convenient to refer to the plea often advanced that speculation in land is legitimate, and that there is no difference between making profits from the sale of land and making profits from the sale of ordinary commodities. Those who hold this view forget or ignore the fact that land differs from every product of man's hands in that, besides being a necessity of existence — the maintainer of life, it is a monopoly article. God made the earth as big as it is, and man cannot make it any bigger. There is so much land in the world, and no one, not even a Rothschild or a Vanderbilt, can add an inch to it. Hats, boots, and coats — manufactured goods in general — can be multiplied indefinitely. The supply is only regulated by the demand, and almost invariably the cost decreases as the demand is augmented. With the land it is otherwise: the absolute supply cannot be increased, and the cost grows with the growth of the demand. Moreover, in paying for the goods offered by the manufacturer, we pay largely for labour; but no amount of labour can produce land. It existed before man existed, and is not produced. Landed property is the one commodity of exchange in respect of which civilised society refuses to recognise absolute rights.
It may be granted at once, however, that it is impossible to artificially prevent the value of land from increasing. It would be absurd to try to check the operation of social forces which act from necessity. If there were no private ownership of land, but the State were the custodian and grand lessor, the value of that commodity would inevitably tend to increase owing to a multiplicity of causes which act independently of private and collective possession of the soil. Yet while it may not be possible artificially to prevent value-growth, it is possible and expedient to check artificial value-growth. Were the unearned increment secured wholly or even in part to society, there would be less inducement to speculation in land, and the increase in its value would be dependent upon healthier and socially more desirable causes. Men do not speculate commercially for amusement or the mere love of excitement, but for money, and if there were no prospect — or little prospect — of contingent gain, the great inducement to land speculation would be taken away.
At the idea of resistance to speculation the individualist will raise his hands in alarm and remonstrance. But these pages are written on the assumption that the interests of speculators cannot claim any partial consideration in the adjustment of the important problem under discussion — or, indeed, of any problem affecting the well-being of society. Those who hold the views here expressed would not dream of prohibiting speculation in land; all they say is, that society is not called upon to sacrifice its interests to the speculators, or to offer to the latter any facilities for doing it mischief. It cannot surely be considered a social advantage that a small class of men should be able, owing to their possession of a monopoly in land, to force up its value to fictitious and fabulous heights; nor can it be regarded as desirable that the value of land should be increased in order to allow of speculators enriching themselves. The result is to create extortionate rents, which, so far as trade and industry are concerned, make production dearer, and thus injure the consumer, and, so far as concerns dwellings, compel the householder to disburse an excessive proportion of his income in the mere sheltering of himself and his family within stone walls. Apart from the gains which fall to the intermediary speculator who does not buy land to keep, but to sell, the owners of the soil pocket the public tribute paid in the form of increasing rents. For their part, the house occupiers suffer in two ways by the growing value of land: they must pay more for the dwellings they live in, and more for the articles they use and consume. It cannot be to the interest of society that the rents of town dwellings should average, say, £20 instead of £15, and should increase 5% or even 2% every year. If such an increase fell to the whole community, the evil would not be so great, for those who paid it would in one way or another reap the benefit; but, as matters are, it all goes into the landlords' purse.
The relation of a state to its territory, which in modern times enters into the essential conception of the state, implies that the land cannot be looked upon, even provisionally, as a true subject of permanent individual appropriation.
— PROF. SHELDON AMOS, Science of Law, Chap. VIII., p. 166 (1874)
Property in land is always conditional. Land is the source of the life of the state, and the state must exist at any cost.
— MARMONTEL, Address in Favor of the Peasants of the North (1757),
At the outdoor mass you held in Wroclaw in Poland during your recent visit to that country, you said the following very true and sincere words:
"The Earth is capable of feeding everyone. Why therefore -- here at the end of the 20th century -- should thousands of people die from starvation" -- "Pray solidarity will prevail over the unrestrained thirst for profit and ways to handle laws of trade, which do not take into consideration inalienable human rights".
It was the same concern about the greed of the wealthy and the plight of the poor, that your predecessor, Pope Leo XIII, expressed in his Encyclical Letter of 1891, 'Rerum Novarum'. Yet, in the more than hundred years that have past, if there has been a change, it has been for the worse!
The wealth is there. The growth of industry and the discoveries of science about which Pope Leo spoke, are even more fantastic and surprising than he would have imagined in his most inspired dreams. The enormous fortunes of individuals, of which he also spoke, have become more enormous. Yet the poverty is still there. Even in countries that are considered wealthy, people are homeless and live in cardboard boxes; people die, not just by the thousands as your Holiness said in Wroclaw, but by the millions, from poverty related diseases, malnutrition and starvation. You are indeed right to ask the question:
THE EXCLUSION FROM THE GIFTS OF GOD
As your Holiness will know, the Encyclical Letter of 1891 was not only an attack on socialism, but also a strong defence of the right to hold land as private property, a right that Pope Leo XIII claimed to be natural.
But the right to hold land includes the right for the owner to exclude other people from it, and, as all usable land in industrially developed countries is owned in that way, people without such a right will be unable to enjoy the gifts of God unless they accept the conditions exacted of them by a landowner. Neither can they work, reside nor relax without land, and again they have to accept conditions exacted by a landowner.
Normally the landowner will ask people to pay the market-determined site rental, which is high because of the many excluded people who want land, or he will offer to let them work at a market-determined wage, which is low because of many excluded people wanting a working place.
Some people, in fact -- as a consequence of the many excluded -- a growing number of people, can neither qualify for a job nor afford to pay the site rental, and they have to live on the streets, on the roads, at the dumping grounds or wherever they can find a poor shelter, some clothes and a little to eat. Some of them find that crime and prison give them a better life than there is available through the legal opportunities open to them.
In some countries Social Security is implemented to mitigate the cruel consequences of the exclusion of people from the gifts of God. The Social Security bill is not paid by landowners, but by entrepreneurs, wage earners, pensioners, savers and consumers.
In other countries only private charity is available to relieve the hardships.
But neither Social Security nor charity will change the basic injustice that causes the horrible conditions of the people excluded, that increases the site rentals to be paid for the use of land, and reduces net-wages, widening the gap between poor and rich. The basic cause of these evils has to be destroyed.
Political leaders from all over the world, including representatives of the Holy See, agreed at the United Nations conference on Human Settlements (Habitat II) at Istanbul last year, that:
"The failure to adapt, at all levels, appropriate rural and urban land policies and land management practices remains a primary cause of inequity and poverty".
LETTER TO POPE LEO XIII
Allow us, your Holiness, to point to the Open Letter of September 11th, 1891, written in New York by Henry George and sent to your predecessor his Holiness Pope Leo XIII, as a response to 'Rerum Novarum'.
Published as a book this Open Letter has been read by many thousands, and still today the book is sold and read.
Henry George did consider 'inalienable human rights' and 'unrestrained thirst for profit and ways to handle laws of trade'. On exactly this background he spoke for all people's equal rights to the gifts of God.
To maintain this right for everybody and at the same time to allow exclusive right for some to own land as private property, he advocated that people who are given the exclusive right to own land -- and thereby the right to exclude other people from the gifts of Nature -- should pay a compensation to the people they exclude (in fact to all citizens).
The compensation, as a duty to be paid by the landowners, should be the market-determined rentals of the sites from which they can exclude others. This being a fair charge of justice as the rentals are not due to efforts or investments made by the landowners, but due to the development of society and to the growth of the population of human beings, all wanting a place to work, and a place to reside.
The rentals should be collected from all landowners by society, and the revenue should be used to the benefit of all citizens. In that way, Henry George emphasized, all citizens would be able to get their equal share of the gifts of God.
HOLY INCENTIVES OR HOLLOW FALSEHOOD
We do agree with your Holiness and with Henry George that people have private right to property created by man, the right to the fruits of their labour; and also that people can achieve private right to exclusive possession of land, from which they can exclude other people.
But we find it logically inconsistent to believe that people have equal right to life and to be on the Earth, when at the same time some of them have exclusive right to own land as private property without paying compensation to those people whom they exclude from their land.
Your Holiness' sincere words, as quoted initially in this letter, accord with Rerum Novarum of 1891 and with the Habitat II statement quoted above, but they will only become true if your Holiness will succeed in urging on the rulers/governments of this world to collect the annual market-determined Site Rentals of all land in their countries, and distribute the revenue thus acquired to the benefit of all their citizens.
If your Holiness could succeed in persuading the governments to do so, all people on Earth would gain equal access to the gifts of Nature, and true solidarity would become a reality. If not, all statements about equal right to life, to work, to education and to residence, will continue being hollow and false; and our successors will not see a change for the better; on the contrary, they will see the gap between very rich people and alienated poor people grow bigger, and the problems of poverty grow more serious than they are today.
We pray your Holiness may succeed in convincing the governments of this world of the importance of public collection of the annual market rental of all land, and the revenue to be used for equal benefit of all the citizens, thus to provide far all human beings, equal rights to the gifts of Nature.
Let this become the manifestation of the new Millennium, the 2000 year anniversary of the birth of Jesus Christ. Let it become a Jubilee in the original meaning of the word, striking unjust shackles from society; thereby preparing a new age of humanity, a social life in friendship and peace.
Nothing but the most horrible perversion of humanity and moral justice, under the specious name of political economy, could have blinded men to this truth as to the possession of land, the law of God having connected indissolubly the cultivation of every rood of earth with the maintenance and watchful labor of man. But money, stock, riches by credit, transferable and convertible at will, are under no such obligations, and, unhappily, it is from the selfish, autocratic possession of such property, that our landholders have learned their present theory of trading with that which was never meant to be an object of commerce.
— SAMUEL TAYLOR COLERIDGE, Table Talk, March 31, 1833.
Does the Single Tax discriminate between earned and unearned income?
It is the scientific way of doing what we have been feebly attempting to do in an unscientific way, that is, to distinguish between what Dr. Scott Nearing called "property income" and "services income," or between that form of wealth which is the result of individual effort in production and that which is purely the result of the collective effort of society; or between the two forms of wealth which Dr. Ellwood, of the University of Missouri, in a seemingly unwilling recognition of an unwelcome truth, calls "earnings" and "findings."
In the case of the great majority of us (whether as individuals or as partners in corporations) our incomes are so inextricably compounded of earnings and findings, of privilege income and service income, that it is hard for some of us to know whether we belong to the privileged or unprivileged classes, to the slave owners or the slaves, to the confiscators or the victims; and perhaps only those absolutely property less men at the bottom of the social scale can be said to have no share in the "findings" that spring from privilege. On the other hand it is equally true that all industry up to its highest strata, has to pay toll to privilege and provide those "findings" which distribute themselves with more or less inequality over almost the whole of society. How to distinguish between and separate these entirely different kinds of wealth is what all sincere sociologists and honest taxation commissioners have wanted to do and have hitherto failed in the doing.
If we take a handful of sand and a handful of iron filings and mix them thoroughly, and then set a man with the sharpest eyesight and the nimblest fingers to separate the particles, it will take him long to accomplish his task and he will never do it with more than an approximation to completeness. But apply a strong magnet to the mixture and the separation will be accomplished in ten minutes. Then see how the analogy applies to the economic problem in society. Let us imagine the return that should naturally flow to land in the form of rent to take the shape of blue coins made of steel. Let us fancy that the natural reward that goes to capital as interest takes the form of red coins made of wood. Finally let us figure the natural return to human service of all grades as being represented by white coins also made of wood. On examination it will be discovered that in the case of almost every member of society above the rank of the day laborer, his income is tri-colored or composed of all three coins. There are countless "captains of industry" among us who complacently assume their large incomes to be the rewards freely given by a free world in return for their invaluable services, who will be surprised to find how large a proportion of blue their income coins contain. There are multitudes of livers upon what they have called "interest" who will expect to find their coins red, who will be equally surprised to discover that they are almost entirely blue. To complete the parable, the taxation of land values will be like the application of the magnet which will draw away the blue steel coins in whatever stratum of society they may be found, and lay them aside for social purposes, being socially created wealth; leaving the red and white coins to be competed for in a world of free opportunity, without deduction or diminution by taxation or in any other way.
This is from Joseph Dana Miller, the editor of the Single Tax Year Book (1917), and it is a concise statement which might help make clear why I think this such an important reform in the 21st century.
Men have a right to land because they cannot live without it and because no man made it. It is a free gift of nature, like air, like sunshine. Men ought not to be compelled to pay other men for its use. It is, if you please, a natural right, because arising out of the nature of man, or if you do not like the term, an equal right, equal in that it should be shared alike. This is no new discovery, for it is lamely and imperfectly recognized by primitive man (in the rude forms of early land communism) and lamely and imperfectly by all civilized communities (in laws of "eminent domain", and similar powers exercised by the State over land). It is recognized by such widely differing minds as Gregory the Great and Thomas Paine (the religious and the rationalistic), Blackstone and Carlyle (the legal and the imaginative). All points of view include more or less dimly this conception of the peculiar nature of land as the inheritance of the human race, and not a proper subject for barter and sale.
This is the philosophy, the principle. The end to be sought is the establishment of the principle -- equal right to land in practice. We cannot divide the land -- that is impossible. We do not need to nationalize it that is, to take it over and rent it out, since this would entail needless difficulty. We could do this, but there is a better method.
The principle, which no man can successfully refute or deny even to himself, having been stated, we come now to the method, the Single Tax, the taking of the annual rent of land -- what it is worth each year for use -- by governmental agency, and the payment out of this fund for those functions which are supported and carried on in common -- maintenance of highways, police and fire protection, public lighting, schools, etc. Now if the value of land were like other values this would not be a good method for the end in view. That is, if a man could take a plot of land as he takes a piece of wood, and fashioning it for use as a commodity give it a value by his labor, there would be no special reason for taxing it at a higher rate than other things, or singling it out from other taxable objects. But land, without the effort of the individual, grows in value with the community's growth, and by what the community does in the way of public improvements. This value of land is a value of community advantage, and the price asked for a piece of land by the owner is the price of community advantage. This advantage may be an excess of production over other and poorer land determined by natural fertility (farm land) or nearness to market or more populous avenues for shopping, or proximity to financial mart, shipping or railroad point (business centers), or because of superior fashionable attractiveness, (residential centers). But all these advantages are social, community-made, not a product of labor, and in the price asked for its sale or use, a manifestation of community-made value. Now in a sense the value of everything may be ascribed to the presence of a community, with an important difference. Land differs in this, that neither in itself nor in its value is it the product of labor, for labor cannot produce more land in answer to demand, but can produce more houses and food and clothing, whence it arises that these things cost less where population is great or increasing, and land is the only thing that costs more.
To tax this land at its true value is to equalize all people-made advantages (which in their manifestation as value attach only to land), and thus secure to every man that equal right to land which has been contended for at the outset of this definition.
From this reform flow many incidental benefits -- greater simplicity of government, greater certainty and economy in taxation, and increased revenues.
But its greatest benefit will be in the abolition of involuntary poverty and the rise of a new civilization. It is not fair to the reader of a definition to urge this larger conclusion, the knowledge of which can come only from a fuller investigation and the dawning upon his apprehension of the light of the new vision. But this conclusion follows as certainly as do the various steps of reasoning which we have endeavored to keep before the reader in this purely elementary definition.
Man is a land animal as much as a fish is a water animal. Not only does man live on land but all of his wants are supplied by or from land. The earth is, literally, his mother. He will perish quickly if he has not access to the breast of his earth mother and will suffer and squall and become panicky if he has not free access to earth's breast and cannot obtain sufficient nutriment. His relation to land is fundamental and can be broken or disturbed only at great peril and loss to him and to society.
Production and consumption will always be in equilibrium and commerce and exchange will always flow smoothly, if all men at all times have equal and free access to nature's storehouse of wealth and if there are no dams -- tariff, -- etc. to interfere with the exchange of products. Free land and free trade are therefore, essential to economic justice; to give all an equal opportunity to produce goods and to exchange them without paying toll to anyone. When goods are produced and exchanged freely, it is reasonably certain that production and consumption will run so closely together that there can be no serious panics or long periods of depression. Serious maladjustment can and will occur only when production and exchange are interfered with and to the extent that they are interfered with.
The private ownership of land, that is, the taking of economic or land rent by private land owners, or landlords, most seriously interferes with some men's access to mother earth. Landlords are not only dogs in the manger; they are a class and about the only class, except the tariff beneficiaries, that consume without producing; that do not give a quid pro quo for what they get.
The capitalist supplies capital and is entitled to the interest that he gets. The laborer --wage, salary or fee earner -- produces goods or gives services and is entitled to what he gets in exchange. The landlord produces neither the land nor the land rent and is not, therefore, entitled to the rent that he takes. He is the only one who takes out of the economic pot without putting something into it. He is the only one who can and does live off the labor of others. He is the greatest of all economic leeches.
Professor Thorold Rogers said, in 1870:
"Every permanent improvement of the soil, every railroad and road, every bettering of the general condition of society, every facility given for production, every stimulus supplied to consumption, raises rent. The landowner sleeps, but thrives. He alone, among all the recipients in the distribution of products, owes everything to the labor of others, contributes nothing of his own. He inherits part of the fruits of present industry, and has appropriated the lion's share of accumulated intelligence."
If, as in ordinary times, the landlord takes only a moderate rent, that is, charges only the actual rental value of land to the capitalist and laborer who use land, production and consumption proceed normally, for society has fairly well adjusted itself to this unjust system. In times of great prosperity -- so-called -- when there is great speculation in land values and they rise rapidly, the landlords can and do take even more than the normal rental value of land; that is, more rent than is produced by society. Access to land then becomes so difficult and the prices that producers have to charge for food, clothing and shelter become so high that consumers are unable, after paying excessive rent, to purchase all of the goods produced. Hence, the glut in the market; the decline in the prices of commodities; the collapse of the over-extended credits; business failures; closed mills; idle labor and low wages. The business depression does not end until land values have declined to or below normal for the population. Soon thereafter business begins to revive, mills to open, unemployment to decrease, wages to advance and prosperity to return. Industry will continue on the up-grade until rents again become excessive. Most, if not all, periods of prosperity end with real estate booms. Even our present war prosperity will probably continue until there is a boom in city, farm, forest and mine land values.
I came across this rather good letter to the editor, from 1938. (Trinity Church Corporation, a major landlord in downtown Manhattan, was the subject of a NYT article this past week, as well as the subject of a major series in the NYT in December, 1894):
1938-09-03 Letters to The Times
Collecting Ground Rent Single-Tax System Regarded as No Detriment to Building
TO THE EDITOR OF THE NEW YORK TIMES:
Fabian Franklin, in his letter to THE TIMES discussing the demolition of John D. Rockefeller's Harlem tenements in order to save taxes, writes:
"That objection is simply that virtual abolition of land ownership, which the single-tax plan is designed to effect, would make the building of houses in a city an extra-hazardous business, because, under the single-tax regime, in the great majority of cases the investment would result in a disastrous loss to the owner of the building. I was neither blaming nor praising Mr. Rockefeller for the demolition of Harlem tenements."
What is the so-called single-tax system? It is the collection by the government, through the taxing officials, of the entire economic or ground rent of land and the repeal of all taxes on buildings and other products of labor and capital. That ground rent is estimated to be 9% of the capital value of the land. New York City is now collecting one-third of this ground rent. The market value of the lots is the remaining two-thirds, capitalized. Dr. Franklin's thesis is that if the entire ground rent is collected no one would erect buildings, because "in the great majority of cases the investment would result in a disastrous loss to the owner of the building."
Some of the finest buildings in New York City are erected on leased land and the lessee pays the ground rent 100% besides a tax on the building. There are hundreds of buildings erected by lessees of lots owned by Trinity Church, Astor estate, Rhinelander estate, Sailors Snug Harbor and others. The lessees must pay all the taxes, both on land and building, amounting to 3% of the assessed value of both, and to the landlord 6% of the market value of the land.
Thus the entire ground rent is paid by the lessee, but only one-third to the government representing the people who made that value by their presence and activities, the remaining two-thirds to the landlord. Notwithstanding that they are thus obliged to pay 100% of the economic rent, bankers and business men erect buildings costing millions. Under the Henry George plan they would have to pay less, for the taxes on these costly structures will have been repealed.
Perhaps if Mr. Rockefeller had not been obliged to pay taxes on the buildings he might not have pulled them down; or, if he had, would have erected better buildings in their place in order to get a return on his investment in buildings. The ones who will benefit most from the adoption of the Georgian philosophy are the owners of humble homes. The average small homeowner's house is assessed for at least twice the assessed value of the lot. If the house is relieved from taxation and the lot taxed the entire ground rent, his tax will be less than it is now. The difference will be made up from vacant lots and lots that are worth more than the improvements.
After all, the building of houses is like any other business. The builder takes the risk of lessened demand because of changes in fashion, obsolescence, competition. It is estimated that 95% of new businesses ultimately fail. With the adoption, however, of the philosophy of Henry George, commonly called the single tax, failures in the housing and other businesses will be much fewer. This is because neither houses nor goods nor anything else will be taxed. The collection of the entire ground rent will not lessen the area of the surface of the earth one inch. On the contrary, it will open to occupation and use land that is now held for speculation purposes.
The taxation of any product of labor and capital will add the amount of the tax to the price, lessen demand and thus curtail production. The result is unemployment and misery.
Frederic Cyrus Leubuscher Essex Fells, N. J., Aug. 31, 1938
8. The corporations which pump oil from beneath federal lands are paying low royalties into the federal treasury, despite the fact that the price of oil has risen significantly since their royalties were set. Should their royalties be raised?
A. No. A deal is a deal, and those corporations made their business plans in good faith. The spoils belong to them. They can sell those rights to whomever they choose to, at whatever price they can get, for the benefit of their shareholders and their management.
B. Yes. All persons have equal rights to the gifts of nature.
C. Yes. The resource is finite, and the oil companies don't create it.
D. Yes. We can now see that we will be running out of oil, and the price is rising, for reasons that have nothing to do with the oil companies.
How to Bring The Cost of Housing Back within Reach of All American Families C. Lowell Harriss, et al. [A pamphlet published by the Robert Schalkenbach Foundation, 1978]
Introduction by Dr. C. Lowell Harriss, Professor of Economics, Columbia University
1. Land Supply Constraints in the United States Excerpt from the Final Report of the Task Force on Housing Costs, William J. White, Chairman
2. The High Price of Land by P. I. Prentice, Chairman, National Council for Property Tax Reform
3. Modernize, Don't Abolish, the Property Tax From a report by the Subcommittee on the City of the House Committee on Banking, Finance, and Urban Affairs of the U. S. House of Representatives, Rep. Henry S. Reuss, Wisconsin, Chairman
Introduction by Dr. C. Lowell Harriss
The number of Americans who lack adequate housing is much too high. While both opportunity and promise life in the long-established principle of providing satisfactory shelter for everyone, many are still not well housed. Population grows, and the existing stock of housing grows older. For years to come, much new construction, expansion, and modernization will be needed.
Rapidly rising costs, however, present formidable obstacles. One of the heaviest costs is one which also rises most rapidly. And it is the cost of something created not by sweat and thrift, but by nature.
It is land.
The rising prices paid for land itself must be distinguished from the portion of the price of a building site which represents cost of preparation for use. The land elements alone go up and up in price. But land price increases do not change the quantity of land in existence. Here is a rising price which does not add to supply.
Land is different.
In these three articles on land value taxation, the first, "Land Supply Constraints in the United States," points out that the sharp rises in land prices result in part from man-made factors. Arbitrary, artificial, and unconstructive restrictions on land supply boost prices and threaten our housing future. New building will therefore be kept below levels which unfettered economic conditions would otherwise achieve. But tax policy which would encourage use, rather than underuse and withholding of land can increase the effective supply. Need more be said?
Yes. And in the second selection, "The High Price of Land," Mr. Prentice says more. He points to many avenues by which the harmful effects of restricted land supply spread through the economy. Developers and builders, laborers, supplier, subcontractors, and others all suffer. They have less work, operate under conditions of disadvantage, and receive poorer rewards because of essentially needless obstructions to the optimum use of land. The full and true price of land includes burdens above and beyond the dollar prices of building lots. We shoulder burdens of lost opportunity of many kinds. They are largely hidden but indeed real. The quality of too much new construction deteriorates instead of improving as an advancing society should expect. And, to repeat, the tragedy is that the rising prices for land do not create an more surface on the earth.
What to do? The third article, "Modernize, Don't Abolish, The Property Tax," points to the reform outlined generations ago but here presented in modern form: reduce the property tax burdens on structures and make up the revenue by higher tax rates on land value.
The benefits from relying more fully on taxation of land values, rather than taxation of buildings, would include greater pressure on landowners to put land to better use. Withholding land -- which reduces the current effective supply -- would become more costly if land value taxes were higher. Thus some land formerly held for speculation would be sold, and new building would be encouraged on the increased supply of land.
A careful study of probable results in Washington, D. C., showed, among other things, that taxes on present homeowners would generally fall. But this result is not the one which most justifies support for reform. More significant and constructive would be a combination of forces producing incentives for better land use. Upgrading of housing in older urban centers would be expected. Positive incentives at many points would contribute to improving America's housing.
The historical fact that land values have been privately appropriated and that this practice has been sanctioned for many generations does not alter its inherent inequity: an ethical wrong is not converted into a right by the benediction of time or of social sufferance.
If the present generation becomes conscious of an old injustice, is it powerless to seek redress? "New time" it has been said, "oft makes ancient good uncouth."
This was in a booklet published in the early 1960s.
The Ethics of Land-Value Taxation
Louis Wasserman, Ph. D., Professor of Philosophy and Government, San Francisco State College
The question, briefly stated, is this: Should the owners of land whose rent and increments would be partially or wholly confiscated by a program of land-value taxation be compensated for their losses?
We are not bound here by what Henry George thought about the matter; nevertheless, there is probably no better position from which to launch our consideration. The answer given by the father of the Single Tax was clear and explicit: No, the landowners should not receive compensation.
Why not? Since George made so much of social justice -- asserting it as the basis of his whole scheme -- upon what grounds could he justify the confiscation of landed wealth? The answer is implicit in the very essence of his social analysis. Let us turn to his argument.
What, George asks, is the moral basis of property -- any kind of property? And he replies that this basis is to be found in the use of a man's powers to produce something of value; once he has done so, the product is henceforth his to use, to dispose of, to exchange into any tangible or intangible form. The right to property, then, is the right to the fruit of one's labor.
But this, he continues, is precisely not the situation with regard to landed property. The raw land is not produced by any man's labor: it was there before the advent of man, it is the bounty of nature to all men in common, and it is literally the foundation upon which they exert their labors. And just as the raw land is created by nature, so the value it acquires as real property is due to society as a whole -- to the growth of the community with its services, its needs, and its uses. As community-created value, then, the rental and increment derived from the natural land ought to be appropriated by the community at large and used for public purposes.
Just as a man, then, has the full right to the products of his own labor -- say a house he has built or has purchased with his earnings -- so no individual has the right to the land itself, which he has had no hand in creating and whose value is due to the aggregate of community efforts rather than to that of any single person within it. The historical fact that land values have been privately appropriated and that this practice has been sanctioned for many generations does not alter its inherent inequity: an ethical wrong is not converted into a right by the benediction of time or of social sufferance.
This, in brief, is the rationale of Henry George's appeal for the socialization of land values. It is couched in terms of natural rights, and its fundamental premise is the labor theory of property, viz., that the only true source of private property, its ethical justification, rests in the labor by which it was produced, whatever direct or indirect form it takes.
That there are practical weaknesses in this view is, of course, apparent. The labor theory of property has been shelved, since the nineteenth century, in favor of more complex and sophisticated analyses of wealth production, and it can no longer be accepted as a self-evident proposition. Moreover, the theory of natural rights upon which it rests -- although stubbornly recurrent in Western thought -- enjoys at present only a limited vogue among moderns; there is too much disagreement on specifics and, no matter what its form, such a concept is regarded as too rigid for social purposes.
Nevertheless, if we are to seek for an ethical justification for private property it is unlikely that we can find anything better than the labor theory. It is no argument against the ethical rightness of that theory that it has been historically superseded by another, or that it is insufficient to account for the complexity of the productive process, or that the division of labor has made unintelligible the product of any individual worker. No matter how greatly production has become socialized or in what manner its rewards have come to be partitioned, the irreducible element remains that of individual labor, the contribution of the hand or brain of each producer to the material and equipment at hand. It is not enough for a theory of property simply to describe its character and distribution; there must be an explanation to account for the phenomenon and some social ethical criterion to justify it. I am aware of no ethical theory, ancient or modern, religious or secular, which would deny explicit or implicit approval to the labor theory of property.
But perhaps it will be argued against any such ethical contention that private property is simply what a society has caused it to be, and that since a society is the sole source of its own ethics, the matter ends there. What then, it may be asked, is used to justify the institution: force, fraud, custom, tradition? Each of these may have its weighty explanation, but what can be said of its ethical sanction? At worst, that it has been imposed, willy-nilly; and, at best, that it represents a social arrangement sanctified by age, legality, and expectation. But the history of property, as idea, usage, and institution, is so heterogeneous among so many cultures of the past and present that the term itself can be taken to mean only that which current convention decrees it to mean. Perhaps, then, property may be best conceived, to use the phrase of Walton Hamilton, as "a conditional equity in the valuables of the community."
If -- setting aside the natural rights theory -- the ethical test of land-ownership and increment is taken to be a matter of social convention or utility, the whole issue is, of course, thrown open for social evaluation by each generation.
The present condition is that most of the usable raw land in the United States is held privately; it has been obtained by purchase, gift, or inheritance; it enriches its owners by way of direct use, rental income, or profitable sale; the community siphons off part of this income in the form of an annual property tax or, when the land is sold at a profit, by a capital gains tax.
Now, the most extreme land-value tax proposal provides that this levy upon the rental value of the raw land be increased gradually until it approximates the full rental income; at the same time, tax levies on personal property, improvements, and as many other taxes as possible would be abolished.
What ethical considerations are involved in this proposal? If we are to reject any "higher law" criteria, such as that of Henry George, we must revert to the test of "social utility" or some restatement thereof. How are the ethics of social utility to be tested in our society? The answer is quite simple: Social approval of any established practice is expressed by sheer inertia or by the rejection of proposed change; the reform of any established practice is engineered by the majority through democratic procedures. To put it starkly, the ethical judgment with respect to any social change is transformed into a political decision.
We are all, of course, familiar with the democratic political process, but it is worth recapitulation to see how a social consensus may be reached on such an issue as land-value taxation. We start with the theoretical foundations of popular sovereignty and government by consent of the governed. The working machinery includes representative bodies, public-interest groups, freedom of expression, and the media of communication employed to shape public opinion. Since every tax proposal is a matter of public policy, it must necessarily be discussed and legislated by the appropriate public body -- i.e., the state legislature, county board of supervisors, city council, or the like. Sober attention must be paid in all such cases to the variety of interests, needs, motives, preferences, and other relevant factors in the affected community in order to shape a policy which attains its purpose and yet does not alienate too seriously any important segment of the population. The final result, as registered in the legislative chamber or at the polls, is what we come to accept as public policy.
It would be too harsh a judgment to infer from the foregoing description of the democratic process that the sheer weight of numbers over-rides all consideration of private preferences. What happens instead is that personal convictions, individual ethics, and material interests are mingled and measured and tested against each other in the give-and-take of public controversy; the result is a kind of rough-hewn, but acceptable, consensus which alone can make a community viable. It is this broad consensus -- the specified or implicit assumption that the policy to be enacted is a contribution to the common welfare -- which defines the realm of social ethics in public policy making.
Nor is this political approach to be regarded cynically or derided as unworthy of decent folk. The social ethic of American society is tightly bound to the prescriptions of our prevailing Judeo-Christian and democratic-humanistic traditions, and we may draw from that source as much in the form of ideal moral principles as we are humanly able to practice. If we cannot agree upon common aims, we are at least the inheritors of a tradition of fair play as to means; and if the nature of justice is a matter of great dispute among us, we are still guided by what Edmond Cahn describes as the "sense of injustice" -- that is, a consciousness of wrongdoing and the commitment to abstain therefrom.
The social ethic of a democratic society is continually being created and revised through public dialogue, political action, and law. It is necessary only to mention such illustrations as our attitudes regarding crime and punishment, treatment of our Negro population, the status of labor unions, sex information and birth control, the training of children, the prerogatives of women, and indeed the ameliorative role of taxation, to have us realize its progressively changing character. Through the use of the democratic process the social ethic emerges as a sort of mean between the extremes of private ideals and private irresponsibility. And it is worthy of mention that not infrequently the law itself nudges us into forms of behavior more ethical than we would exercise if left to our own dispositions.
Now, taxation policy inherently affects the general welfare of a community; and the social ethics of our society have for a long time recognized a distinction (despite certain weaknesses in definition) between earned and unearned incomes. Taxing policies in the form of differential rates and other incentives have been used here and in many other countries deliberately to foster, or to discourage, certain social-economic developments. A strong case can be made, in general, for taxation as a social instrument.
There was a time when the income tax did not exist at all in this country; then it was voted in, first as law, later as a constitutional amendment. At its present steeply progressive rates, the income tax may "confiscate" up to 91 percent of excessively high earnings. But, whatever the rate applicable, it is levied predominantly upon wages, salaries, and other forms of productive enterprise. Would an increased tax upon the socially created value of the natural land be less equitable or less lacking in ethical propriety?
I am, accordingly, unable to find any ethical barrier -- either of higher law principles or of social utility -- raised against the proposal to recapture more fully the rental income and increased increment of the land. There is, indeed, a strong rationale in its favor, especially since it would lead to the reduction of more burdensome taxes. The problem is one of social engineering; it is a decision to be reached solely upon its merits in the political realm.
That there is now, and will be, strenuous opposition to such a program is of course only too clearly evident. Without assuming the mantle of righteousness in prejudging the conduct of others, I would nevertheless venture to say that the main difficulties in enacting land-value taxation will stem principally from the following groups. First, and most importantly, opposition will come from those who derive their incomes wholly or primarily from landholdings and from speculative profits thereon. No argument concerning indirect, long-range benefits to them and others would suffice to soften their antagonism unless they stood to gain equally from a lightening of other taxes. Then there is the large group whose simple inertia would inhibit any such contentious reform in taxation policy. It is difficult to enlighten and energize this inert portion of any community unless the immediate benefits are made clearly, directly, and concretely self-evident to them. For this group there is no sharp sensitivity to the ethics of land-value taxation, pro or con. Finally, there are those in every community who have no vested interest in the change one way or the other but whose notions of propriety, of ethics, of the right to profit-making, or of general antipathy to government and reform would lead them to reject such a proposal on what are essentially ideological grounds.
If the result at the ballot box is to approve a measure to increase the tax rate on land values, it could not be denied that the social ethics had thus been expressed in a democratic manner. Similarly, if the tax increase is defeated (as has been true most often in the past), it would properly imply that the social ethics of the community did not then sanction such a proposal.
But we have so far left untouched the critical issue with which we began this discussion: that is, whether compensation should be paid to landowners whose rental incomes or increments are seriously impaired or expropriated as a consequence of the increased tax. Even if it be granted that land values ought, ab initio, to have been recaptured in full by the community for public revenue, the fact remains that they were not. And upon this practice of private ownership and appropriation there has been reared an institutional complex long approved and sanctioned by law. The present owners of land, it may be assumed, received or purchased their land in good faith and contractual expectations, often with capital acquired through alternative income channels. Are they, then, to be penalized for an ancient wrong -- if wrong it was -- which has been sanctified by the common usage of earlier generations?
But the counterquestion to this is even more cogent: If the present generation becomes conscious of an old injustice, is it powerless to seek redress? "New time" it has been said, "oft makes ancient good uncouth."
The answer, in practical terms, is to be found in the equity which can be extended to those who suffer most from social-political innovations. This is a matter to be determined by a commission of inquiry into the effects of the legislation; it should be in the minds of the legislators who draft the reform proposal; the nature of the equity to be granted will depend upon the provisions of the tax measure; and it will be affected by the give-and-take of the political process in which opposing groups make themselves heard.
Every public policy confers differential advantages and disadvantages upon those who are touched by its provisions. A decent respect for equity in the present matter, then, requires that the proponents of land-value taxation exercise their utmost ingenuity and technical skill -- not to provide direct compensation as such, but rather to devise fiscal and administrative measures to cushion the shock and to ameliorate the condition of those who stand to lose most severely by the action contemplated.
I do not make this suggestion in a spirit of vague and wishful penance for what is not certain, in practice, to be realized. Rather, I would recall to us all the wide range of creative and imaginative variations already proposed or practiced in fiscal policies and their administration, through which provision might be made without penalty to the community, for economic equivalents, direct or indirect, to landowners adversely affected by proposed land-value taxation.
The adoption of such provisions, I believe, would not only satisfy our social conscience but would do much to make land-value taxation politically possible.
The reader of a book review will rightly want to know the ideology of the reviewer. Very well: being of Georgist persuasion, I divide the "means of production" into two categories: those that can be produced or reproduced by competitors, and those that can't. On the former category, I'm as far Right as you can get, believing that such assets should be privately owned and exempt from tax, to encourage capital formation.
That brings us to the other category of "means of production" -- assets that can't be produced or reproduced by competitors. Georgists contend that the market values of such assets, being publicly created, are the proper source of public revenue. The most important example is land, whose value can be tapped by means of rates, "land tax" and "capital gains" tax.
Hazlitt doesn't have "land" in the index.
In three places in the text (ss. 11.4, 15.2 and 16.2), he lists the factors of production as land, labour and capital, but doesn't distinguish between them for purposes of argument. In s.16.2 he also mentions the "poorest land", "least competent farmers" (labour) and "poorest equipment" (capital), but again doesn't distinguish further.
Similarly in the chapter on credit, he doesn't care whether borrowed funds are spent on farms (land) or tractors (capital).
In s.15.2 he adds that for an economy in "equilibrium", these factors are limited "at any moment", thus glossing over the fact that the supply of capital can build up or decay. Although Hazlitt is usually said to be of the Austrian school, this snapshot view of "equilibrium" is neoclassical, not Austrian; it was pioneered by J.B. Clark for the purpose of making capital look like land, so that land could be called a form of capital. Hazlitt includes Clark in his recommended reading list.
Earlier (s.6.2), Hazlitt cites the "limited" supply of capital as an argument against government-guaranteed home mortgages, claiming that they cause "oversupply of houses as compared with other things" -- not that they pump up land prices.
But he mentions the need for capital accumulation elsewhere, especially in the chapter on saving, where his examples of "capital" include schools, colleges, churches, libraries, hospitals, private homes, and "the most wonderfully equipped factory", all of which include land components. This conflation of capital and land is neoclassical.
In contrast, Austrian economists emphasize that capital, unlike land, must be constantly renewed, that its life cycle may be long or short, and that loose monetary policy causes overinvestment in long-life capital, whose value then collapses, contributing to recessions.
Meanwhile Georgists notice that recessions follow bursting "property bubbles", which are really land bubbles because land prices, unlike prices of buildings (prime examples of "long-life capital"), are not constrained by construction costs.
Hazlitt's failure to make these distinctions may explain why his explanation for depressions (s.23.5) is so vague: "the real causes, most of the time, are maladjustments within the wage-cost-price structure... At some point these maladjustments have removed the incentive to produce, or have made it actually impossible for production to continue... Not until these maladjustments are corrected can full production and employment be resumed." All clear now?
Those who call themselves free-traders too often fail to apply their own standards to trade within their own countries. Witness those misnamed "free trade agreements" in which each country promises to impose the other's monopolies on its own citizens.
Hazlitt falls into this error in chapter 4, where he considers an extra bridge between Easton and Weston and declares that "For every dollar that is spent on the bridge a dollar will be taken away from taxpayers." Not necessarily, because any such bridge will lower barriers to trade between Easton and Weston, especially the indispensable trade between employers and employees.
The benefit of the additional trade, net of any bridge tolls, will be shown in prices of access to locations served by the bridge -- in other words, land values. If the benefit exceeds the cost, it will be possible to cover the cost by clawing back a sufficient fraction of the uplift in land values, in which case the cost, although clawed back through the tax system, will not be "taken away from the taxpayers" but will be part of the new value created by the bridge.
The rest of that new value will be a net windfall to the property owners.
Hazlitt then turns to the Norris Dam (a New Deal project) and rubbishes the claim that "private capital could not have built it", because it was indeed built by private capital "expropriated in taxes... taken from people all over the country", causing the loss of "the private power plants, the private homes, the typewriters and television sets" that the expropriated funds might otherwise have bought. Thus the people of one district got richer at the expense of the rest of the country.
But it didn't have to be done that way. The earlier Don Pedro dam (completed 1923) was built by two Californian irrigation districts and financed entirely by local land-value taxes. The affected land owners were fiercely in favour of it because they knew the increase in their land values would outweigh the taxes. Even if the land-value taxes had been imposed by a higher level of government, the financing of the dam would still have been local, because only the local land values would have been affected by it. Private capital did not build it, because the uplift in land values that paid for it would not have occurred without it. Private agencies could not have organized it, because they would have had no way of tapping the uplifts in land values.
With an eye to current debates, I should conclude by praising Hazlitt for an insight that his latter-day admirers have ignored.
In explaining why "Taxes Discourage Production" (chapter 5), he says:
"When a corporation loses a hundred cents of every dollar it loses, and is permitted to keep only 52 cents of every dollar it gains, and when it cannot adequately offset its years of losses against its years of gains, its policies are affected." If individual investors "lose the whole dollar when they lose, but can keep only a fraction of it when they win," they are less likely to take risks.
In the files I've been digging through, from the late 50s to the early 80s, I found an early draft of a fine paper by Mason Gaffney about California's Proposition 13, for presentation at an August, 1978 conference. I dug around and found a published copy of that paper, and think it worth sharing here. Original title, "Tax Limitation: Proposition 13 and Its Alternatives"
First, a few of my favorite paragraphs, which I hope will whet your appetite for the whole paper. I won't attempt to provide the context (you can pick that up when you continue to the paper, below).
"There is a deferment option for the elderly, bearing only 7% interest (which is about the annual rate of inflation). In California, as also in Oregon and British Columbia, hardly anyone takes advantage of this deferment option. This fact, it seems to me, rather calls the bluff of those who so freely allege that the woods are full of widows with insoluble cash-flow problems, widows who are losing their houses to the sheriff and whose heirs presumptive, will not help keep the property, which they will eventually inherit."
We hear a lot these days about cutting the fat out of the public sector; but there is fat in the private sector too. I interpret "fat" to mean paying someone for doing nothing, or for doing nothing useful. Most economists agree that payments to people. for holding title to land is nonfunctional income, since the land was created by nature, secured by the nation's armed forces, improved by public spending, and enhanced by the progress of society. "Economic rent" is the economist's term, but in Jarvis-talk we may call it the fat of the land or "land-fat." It has also been called unearned increment, unjust enrichment, and other unflattering names. Howard Jarvis has said that the policeman or fireman who risks his life protecting the property of others has his "nose in the public trough." But it has seemed to generations of economists that the owner whose land rises in value because public spending builds an 8-lane freeway from, let us say, Anaheim to Riverside, and carries water from the Feather River to San Diego, is the first to have his nose in the trough. Nineteenth-century English economists who worked this out were more decorous. They said things like "landlords grow rich in their sleep" (John Stuart Mill), or the value of land is a "public value" (Alfred Marshall) because the public, not the owner, gives it value.
Some 43% of the value of taxable real estate in California is land value. When we lower the property tax we are untaxing not only buildings, but also land-fat.
The ownership of property is highly concentrated, much more so than the receipt of income. Economists in recent years are increasingly saying that the property tax is, after all, progressive because the base is so concentrated, and because so little of it can be shifted. But this message has not yet reached many traditional political action groups who continue to repeat the old refrains. Two remedies are in order.
One is to collect and publish data on the concentration of ownership of real estate. The facts are simply overwhelming and need only to be disseminated.
The second remedy is to note how strikingly little of the Proposition 13 dividend is being passed on to renters. This corroborates the belief of economists that the property tax rests mainly on the property owner where it originally falls, and not on the renter.
A high percentage of real property is owned from out of state and even out of the country. The percentage is much higher than we may think. It is not just Japanese banks and the Arabs in Beverly Hills. It is corporate-held property which comprises almost half the real estate tax base. If we assume that California's share of the stockholders equals California's share of the national population, then 90% of this property is absentee-owned; the percentage may be higher because many of these, after all, are multinational corporations with multinational ownership.
No one seems to have seized on the fact that half the taxable property in California is owned by people not voting in the state. Senator Russell Long has suggested the following principle of taxation: "Don't tax you, don't tax me, tax that man behind the tree." Property tax advocates have done well in the past and should do well again in the future when they make their slogan: "Don't tax you, don't tax me, tax that unregistered absentee. Don't tax your voters, they'll retaliate; tax those stiffs from out of state." Chauvinism and localism can be ugly and counterproductive, as we know; but here is one instance where they may be harnessed to help create a more healthy society. The purpose of democracy is to represent the electorate, not the absentee who stands between the resident and the resources of his homeland.
California's legislative analyst, William Hamm, estimates that over 50% of the value of taxable property in California is absentee-owned. This is such a bold, bare, and enormous fact it is hard to believe that Californians will long resist the urge to levy taxes on all this foreign wealth. They may be put off by the argument that they need to attract outside capital, but that carries no weight when considering the large percentage of this property which is land value.
Property income is generally more beneficial to the receiver than is the same income from wages or salaries, because the property owner does not have to work for it.
Property, particularly land, has been bought and sold for years on the understanding that it was encumbered with peculiar social obligations. These are, in effect, part of our social contract. They compensate those who have been left out. Black activists have laid great stress in recent years on the importance of getting a few people into medical and other professional schools. Does it not make more sense that the landless black people should have, through the property tax, the benefit of some equity in the nation's land from which their ancestors were excluded while others were cornering the supply?
A popular theme these last few years is that property owners should pay only for services to property, narrowly construed. Who, then, is to pay for welfare — the cripples? Who is to pay for schooling — the children? Who should sacrifice for the blacks — Allan Bakke? Who should finance our national defense — unpaid conscripts? The concept that one privileged group of takers can exempt itself from the giving obligations of life denies that we are a society at all.
Here is, perhaps, my favorite:
We can ask that a single standard be applied to owners troubled by higher taxes and to tenants troubled by higher rents. When widow A is in tax trouble, it is time to turn to hearts and flowers, forebode darkly, curse oppressive government, and demand tax relief. When widow B has trouble with escalating rents, that touches a different button. You have to be realistic about welfare bums who play on your sympathy so they can tie up valuable property. You have to pay the bank, after all. A man will grit his teeth and do what he must: garnishee her welfare check. If that is too little, give notice. Finally, you can call the sheriff and go to the beach until it's over. That's what we pay taxes for. Welfare is their problem.
Anyway, widow B is not being forced out of her own house, like widow A and so many like her. Jarvis said that taxes are forcing three million Californians from their homes this year. But in truth, while evictions of tenants are frequent, sheriff's sales of homes are rare. Those who do sell ("because of taxes," they say, as well as all their other circumstances) usually cash out handsomely, which is, after all, why their taxes had gone up.
Then there is the fruit tree anomaly. Under Proposition 13, a tree can only be assessed at its value when planted, with a 2% annual increment. The value of a seed thrown in the ground or even a sapling planted from nursery stock is so small compared with the mature tree that this is virtual exemption. This anomaly rather graphically illustrates how Proposition 13 automatically favors any appreciating property over depreciating property. The greatest gain here goes, of course, to appreciating land.
Finally, build no surpluses. Surpluses attract raiders and raiders are often organized landowners. "Property never sleeps," said the jurist Sir William Blackstone. "One eye is always open." Even though the surplus was built up by taxing income, Howard Jarvis made it seem the most righteous thing in the world that it should be distributed to property owners. He was geared up for this because his landlord patrons kept him constantly in the field.
Economists of many generations even before Adam Smith and continuing to the present — have preached on the advantages of land as a tax base. Let me enumerate a few of those.
A tax on land value is the only tax known to man which is both progressive and favorable to incentives. One can wax lyrical only about a tax that combines these two properties, because the conflict between progressivity and incentives has baffled tax practitioners for centuries, and still baffles them today.
A land tax is progressive because the ownership of the base is highly concentrated, much more so than income and even more so than the ownership of machines and improvements.
Also, the tax on land values cannot be shifted to the consumer. The tax stimulates effort and investment because it is a fixed charge based merely on the passage of time.
It does not rise when people work harder or invest money in improvements. Think about this. It is remarkable. With the land tax, there is no conflict but only harmony between progressivity in taxation and incentives to work and invest. In one stroke it solves one of the central divisive conflicts of all time.
The land tax does that because it cuts only the fat, not the muscle. It takes from the taxpayer only "economic rent," only the income he gets for doing nothing. If people could grasp this one overriding idea, then the whole sterile, counterproductive, endless impasse between conservatives who favor incentives and liberals who favor welfare would be resolved in a trice, and we could get on to higher things.
The final paragraphs speak directly to us in 2012. 34 years have passed since this was written.
Summing up, Walter Rybeck, an administrative assistant for Congressman Henry Reuss of Wisconsin, and head of the League for Urban Land Conservation, has sagely suggested that we distinguish two functions of business: wealth-creating and resource-holding. A good tax system will not make people pay for creating wealth but simply for holding resources. Most taxes wait on a "taxable event" — they shoot anything that moves, while sparing those who just sit still on their resources.
If we really want to revive the work ethic and put the United States back on its feet, we had better take steps to change the effect of taxes on incentives. Legislatures have got in the habit of acting as though persons with energy and talent, and with character for self-denial, should be punished, as if guilty of some crime against humanity. We cannot study the tax laws without inferring that Congress regards giving and receiving employment to be some kind of social evil, like liquor and tobacco, to be taxed and discouraged by all means not inconsistent with the rights of property. Little wonder the natives are getting restless. If we tax people for holding resources rather than creating wealth and serving each others' needs, we will be taking a giant step toward a good and healthy society.
If your appetite is whetted by these excerpts, you can read the entire article below:
When the structures that our laws and traditions create provide opportunities for someone to capture a windfall, should we blame the fellow who "takes advantage" of those structures, or should we respond by studying and correcting those structures and laws?
Winston Churchill, in his speeches under the baanner "The People's Rights," in 1909, said this:
I hope you will understand that when I speak of the land monopolist I am dealing more with the process than with the individual landowner. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally a worse man than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack, it is the system. It is not the man who is bad, it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy were it not to endeavour to reform the law and correct the practice. We do not want to punish the landlord. We want to alter the law.
The 99% need to start identifying the laws and structures that must be adjusted. This is not easy work.
What individuals produce, and corporations produce, should not be "there for the taking" -- be it by corporate management in the form of hugely generous compensation packages and golden parachutes, or by simply saying "these resources are OURS, not everyone's" or by establishing monopolies or duopolies or other such structures. We-the-people need to educate ourselves about how things are done now, who benefits from that, and what alternatives exist. It won't be easy. We'll be challenging special interests who somehow think they're entitled to their advantaged positions, and the rest of us exist to keep them comfortable.
Labor should get its share, and capital should get its share, and we-the-people should get land's share. That last could fund a large portion of our common spending, on infrastructure and services, and permit us to reduce or eliminate the dumb taxes which take which individuals and corporations legitimately create. That "keeping what we create" extends, also, to "externalities," to being responsible for the pollution we create, and setting up incentives so that it is minimized, for the good of all of us now here and the good of future generations.
I think it is quite possible, even likely, that a few years after we've made this shift in who gets what, we'll find that we don't need nearly so robust a social safety net, and that we-the-people may get some of "land's share" back in the form of a Citizen's Dividend, just as all permanent residents of Alaska receive an annual dividend from the Alaska Permanent Fund.
In any case, letting some corporations and some individuals grab that which we all create together is just plain wrong. Letting it be "there for the taking" is insanity and injustice. And don't we pledge "liberty and justice for all?"
Our ancestors may have granted some privileges to some lucky folks for one reason or another. That doesn't mean that we can't, politely and firmly, revoke those privileges. A couple of centuries is plenty. Experience has shown us that those privileges don't serve the greater good, and it is time to revoke them. Will the privileged give up those privileges graciously? Quite possibly not. But the first step is to identify them, and then to seek to change the system so that those rightly-common assets aren't "there for the taking."
I came across this in the San Jose Letter, from late 1895. Over the course of the year of issues online (about 430 pages), there were just a few articles specifically about the Single Tax. But I continue to be amazed at how much of the popular literature of the 1890-1920 period has as its context the assumption that the reader knew of and was generally comfortable with the ideas of Henry George. They were in the air people breathed, well-known to all! What I find interesting, as a long-ago American Studies major, is that a 21st century reader who isn't familiar with George's ideas, reading that literature, would miss out on most of the conversation -- and perhaps never notice the gap!
The graphic [woodcut, or "cut"] is definitely a keeper. It explains a lot of things. Location, location, location. This political cartoon covers it pretty well. (See also a recent video here.) While it isn't signed, it makes me think of J. W. Bengough's cartoons, which appeared in The Single Tax Review for a number of years in the first decade of the 20th century. Bengough was also the author of the wonderful Up-to-Date Primer: A First Book of Lessons for Little Political Economists.
I'm assuming that Franklin Hichborn, editor of The San Jose Letter, wrote this piece, inspired in part by the woodcut in the SF Star. The comparison of the 4 lots might be compared to Louis F. Post's lecture notes, at http://wealthandwant.com/docs/Post_Lectures.htm, starting at Chart 28.
Through the courtesy of James H. Barry, publisher of the San Francisco Star, we are enabled to publish the cut accompanying this article, which gives, as the Star expresses it, the "Single Tax in a nut shell." In the near future a series of articles on Single Tax will be published in the Letter, which, besides stating clearly what the Single Tax is, will give, which will be more important, what the Single Tax is not. The confusion among the people on this very simple subject, is due in the main, I fancy, to their misunderstanding of the term rent. It is proposed to show what rent is, and, by it, what is meant by the Single Tax.
Any old farmer knows, and common sense will tell the inexperienced, that in a 10 acre field, more grain can be raised by planting a bushel of seed than a quart, more by plowing the land and harrowing, than by omitting the plowing, more by having the field fenced than by allowing cattle to run over it. In a word it pays to expend a certain amount of labor and capital upon our 10 acres. But it will be just as readily recognized that the thing can be over done, that the field can be plowed so much that the last plowing does not pay, that more seed can be sown that will be justified by the returns. There is, than a point in the culivation of our field where a given amount of seed and a given amount of plowing will yield the best returns, a point beyond which it will not pay the farmer to go, where the return will begin to be deminished in proportion to the outlay. In a word, a point of deminishing returns.
Now, suppose a community to be living on an island which has no communications with the outer world. Suppose the food of the community to be, in the final count, wheat, and suppose our island to have four grades of land, one producing at the point of diminishing returns 30 bushels to the acre, one 28, one 26 and one 24. Here is our land:
30 bushels to the acre
28 bushels to the acre
26 bushels to the acre
24 bushels to the acre
So long as the 30-bushel land will supply the wants of the people there will be no rent on our island. If the 30 bushel tract is owned by ten people they will compete with each other for tenants until practically nothing is paid for the use of the land.
But when the population of our island increases to such an extent, (and by the way, it is bound to increase so long as there is free land) that the 30 bushel land will not supply the wants of the inhabitants, the 28 bushel land must be cultivated. The 30 bushel land is then in demand, for those cultivating it will, with the same outlay of labor and capital, get 2 bushels to the acre more than the 28 bushel land, and the ten owners may and will charge all they can get for its use. This will be two bushels of wheat a year or the difference between the yield of the two tracts. These two bushels will be rent.
When the combined 30 and 28-bushel tracts fail, owing to the steadily increasing population, to supply the island with wheat, the 26-bushel land must be cultivated. The owners of the 30-bushel tract will be able to get 4 bushels a year rent, the owners of the 28-bushel tract 2 bushels. When increasing population brings the 24-bushel tract into cultivation, 6, 4, 2 bushels will be charged, plus the amount which the necessities of the people, enable the owners of the 24-bushel land to charge them.
This, then, is the way rent originates. Dr. Walker defines it: The remuneration received by the land-owning class for the use of the native and indestructible powers of the soil, or, as it might be expressed, for the use of natural agents.
Our wheat producing island presents the doctrine of rent in its simplest possible form. "Land and natural agents" includes the arable, pasture and timber lands, mineral deposits, water privileges and building sites. When one piece of land becomes valuably [sic] for any reason, to a community, the person enjoying its advantages can give, and still be able to compete with his neighbor occupying land less favorable situated, the difference between the productiveness of the two tracts — rent. Who should receive this difference? Our present system says individual land-lords. Henry George says the people. He would collect this rent from land holders. This would be sufficient to meet all the requirements of national, state and municipal governments. It would be a single tax.
We have scarcely room to state them here, but briefly a few of the things the single tax is not: It is NOT a tax on acreage. It is a tax on land values. If farmer "A" has a 100-acre farm valued at $10,000, it means that the difference between the productiveness of that farm and an equal amount of no-rent land is, at our present rates of interest about $800. If city land—lord "B" has a 25-foot lot valued at $100,000 it means that lot is worth to the community, from its situation or for other causes, $8,000 a year more than the non-utilized land. The ''single tax" on the 100 acres would be then $800 and on the 25-foot lot $8,000 a year. Farmers do not seem to be able to grasp this. In New Zealand the people are blessed with a land system resembling very much the single tax: and yet, the very term, single tax, frightens the farmer of that progressive island as badly as it does the prune-growers of our own Santa Clara valley.
Rent is NOT interest, insurance, taxes as they are, or water-rates, although they are all paid by the honest plodders of the community under the name, rent. Did it ever occur to you, my honest friend, that the landlord, before whom you doff your greasy cap so humbly, and who boasts that his taxes are so much while yours are nothing, never paid a tax-bill on rented property in his life. You pay it for him. He is your agent. He figures out your rent thus:
"The land is worth so much, interest on that (this is rent) the building so much interest on that (this is interest) insurance, so much, water-rate so much, taxes so much. I can allow tenant to have the place for the sum of these."
Thus you pay the rent, interest, insurance, water rates, taxes, under the generality "rent." The landlord pays nothing in the shape of water rates, insurance or taxes. He collects interest on the money invested in the buildings, which we will not pass upon. He collects the economic rent of the land and appropriates it to his own use, which is robbery.
One word on the difference between real and personal property, and we will leave you, my honest friend, to accumulate your landlord's taxes for next year. I paid five cents for the pen-holder with which I am writing this. The man I got it from gave me title to it, which he had purchased from some one else. This some one else, in his turn had acquired title by purchase, and if we follow the title back far enough, we will find the man who first owned the pen-holder, who did not purchase it,— made it. The original title, then, to this pen-holder, rests in human labor. It is so with every piece of personal property: this paper, ink, desk, house — the title to them all is the same — human labor. And, many reforming unmentionables to the contrary, every man is entitled to the results of his own exertions.
But how about the land upon which this building is situated? A. owns it. Where did "A" get his title? From "B." Tracing this title back, shall we find it resting on human labor? Not at all. No one made this land. Some one took it; gave title to some one else, and that title stands. It rests in force, fraud or nothing.
To sum it up: Notice that the blessing of rent did not come to our wheat-producing island until the increasing population, the people, made the land valuable. The million-dollar blocks in San Francisco would not be worth $1,000,000 if the people who have built up the city had not made them so. Now, since there can be no private title acquired to land that will stand the test of reason, since the very rent is due to the people themselves, and arises from and increases with population, we say that the people are entitled to this rent. Can you give one reason why individual proprietors should take it? Can you give one valid reason why people should pay it to them? If you cannot, you must admit that the economic rent of a nation, the unearned increment of land, belongs to the people. As this rent would more than pay the taxes of the nation, no other tax would be necessary. Thus you believe in the wisdom of the single tax. What are you going to do to secure it?
Cut the accompanying picture out; hang it up where you can conveniently see it, and consult it every time that, after stretching and pinching, and starving yourself and family, you have failed to make both ends meet.
Found in an 1896 California weekly (via Google Books). Bolton Hall is a favorite of mine, but I'd not seen this one. There's something familiar about the situation: plenty of capital, not being put to use. And while we don't have babies looking for work, we do have a lot of new college and high school graduates -- and others -- who can't find jobs.
"Justice" was apparently a Wilmington-based Single Tax publication; I've not yet seen it, but I've found plenty of references to it.
A SOCIAL ARRANGEMENT.
"I want some room in this world,"said the Baby.
"You haven't any capital to buy it with," said the Emeritus Professor of Social Economics and Political Economy, "so you can't have it."
"Capital," said the Baby, "What's that?"
"Things used to produce more things," replied the E. P. S. E. & P. E.
"That seems clear," said the Baby. "Are there no such things which you call 'capital' in the world?"
"Oh.yes; there is an overabundance of capital. It goes to waste because we can't find employment for it."
"Give me some of it," said the Baby. "I'll use it."
"You can't, for you have no land to use it on," replied the E. P. S. E. & P. E.
"Is everybody working who could use it for me?" persisted the troublesome child.
"No," replied the Professoi. "Not exactly. You don't seem to understand the law of Supply and Demand."
"Where did the capital come from?" asked the Baby again.
"Why men made it out of natural material by work.
"If I made some, would I own it?"
"Yes—that is—er—certainly you ought to."
"All right," said the Baby. "My father will work and make some capital and give it to you; so now give me a site for my cradle."
"I told you before," replied the Professor, "there is too much capital already."
"Well, let me have a place to stand and I will do some work."
Said the Professor: "Nobody wants your work."
Said the Baby: "I want it myself. If I don't work, how can I live."
"You can't have it," answered the Social and Political Economist, "there is an overproduction of goods, a large number of persons who want goods, and a large number of workers who have nothing to do."
"I don't understand that," said the Baby.
"Neither do I," said the Professor.
"When I grow up I'll buy some land with the capital I make."
"There won't be any land for sale by the time you grow up. It will be just like England."
"Is all the land there used?"
"Oh dear, no, but it is all valuable, and there is a short supply."
"What makes land valuable ?" asked the Baby.
"The increase of persons there," said the Emeritus Professor, promptly—"even a baby ought to know that."
"Have I given a value to this land by being born?"
"Certainly," replied the E. P. S. E. & P. E.
"Then I want a share of that value which I made," said the Baby.
"But that belongs to the land owners," said the Professor.
As the Baby had no where to live it died. And afterwards the Professor died, and then God asked him some questions about Social and Political Economy.
I thought this presentation -- made nearly 100 years ago, in December, 1911, to County Assessors in California -- worth sharing. (Merriam-Webster defines plunderbund as "a league of commercial, political, or financial interests that exploits the public.") That such a paper would be delivered to such a body gives one a hint of how widely understood and appreciated Georgist ideas were 100 years ago. The notes say:
"Mr. Edmund Norton presented a paper entitled "What is Single Tax?" Upon conclusion of the reading, which was interspersed with many extemporaneous remarks by the speaker, a very free discussion of the subject was held, and many interrogatories propounded to the author of the paper."
I'll give you the final paragraphs first, and then the whole talk.
Never, while the world lasts, will mankind become "Masters, lords and rulers" of themselves till these public values are publicly absorbed in taxation. The Single Tax is the most feasible, practical, expedient, simple, natural and just way of making the necessary, rational change without the violence of revolution. It stands "four square to all the winds that blow" — in economics, and politics; in ethics, morals and religion; in principle, science and philosophy; it is the practical application of Christianity to social affairs. "Equal Rights to All and Special Privileges to None," is the translation of the Golden Rule of the Nazarene to an economic and political formula. Therefore, fulfilled democracy is applied Christianity to governmental affairs.
"Do unto others as ye would that they should do to you," "Equal Rights to all and special privileges to none"; the Single Tax: these are synonymous.
Here we have the great Eleventh Commandment of the Master of Nazareth — the sum total of all "the Law and all the prophets" — we have its Jeffersonian formulation into a politico-social maxim of "Equal rights to all," and its scientific practical application in the Single Tax of Henry George. This is applied Christianity; this is democracy; this is Georgean philosophy; this is the Single Tax; different expressions of the one Unity.
and here's the whole thing:
WHAT IS THE SINGLE TAX?
The Georgean Philosophy and the Jeffersonian Formula. By Edmund Norton.
Never in the history of the world have there been so many inquiring minds asking: "What is the Single Tax and the Georgean Philosophy?" In England, Germany, Australia and Canada, as elsewhere, the constructive work of the leading statesmen is all being developed along the lines laid down by Henry George. To my mind, "The Prophet of San Francisco," as he was derisively dubbed by the Duke of Argyle, is, measured by his influence on the world of statesmanship, present and future, and as a sociological thinker, the greatest personality in the Western world between the North Pole and Patagonia since Columbus found the land. Henry George has found more continents than did Columbus by uncovering monopoly-submerged lands in the presence of which we hungered and died.
This paper is meant to merely outline the principles and philosophy of the great school of thought that has grown up in the last thirty years around its teachings that now has a literature of its own that will fill a library.
The Single Tax is the popular name of the great fiscal reform and social philosophy most powerfully promulgated by our great American, Henry George, sometimes called "the Prophet of San Francisco."
WHAT IT PROPOSES TO DO.
Its purpose is to increase wages to the full returns or earnings of labor; to shorten the hours necessary to earn a living; to leave to capital, which is secondary labor, its full returns, which are secondary wages; to abolish monopoly, which is the thief that is robbing both labor and capital, and thereby prove the unity and remove the apparent antagonisms which have no place in a natural order where monopoly does not exist. It will free production, including all trade, barter and exchange, which are but processes of production, and will equalize the distribution of wealth into the possession only of those who can earn it. It will destroy privilege by substituting equal natural rights, remove the dead hand from the control of living men; throw open the limitless natural resources of the planet to willing labor, and, by taking all social creations of value into the social treasury, will conserve all natural resources forever to the people and make private appropriation of public values impossible. This condition will start a boom that will never stop till every human want is satisfied.
It will make internecine and international wars impossible by destroying all trade and monopoly privileges which are the chief causes tempting the crafty, cunning and unscrupulous to create or encourage these sum totals of all vices, crimes and horrors against humanity for personal power and profit.
THE METHOD OF ATTAINMENT.
The Single Tax does not intend to add to or multiply the already almost infinite statutory enactments now confusing and befuddling the social state, but rather means to abolish, one after the other, every law on the statute books granting a special privilege to any one man or body of men that is at the expense of the unprivileged mass of society. This will destroy the petty and grand larceny now preying upon the social body.
Aside from the million of petty privileges granted by municipalities, states and the nation to individuals, the great and glorious pillage shows itself in privileges and monopoly in labor-saving inventions, trade restrictions and the private ownership of natural resources, the major part of which is a matter of taxation; therefore, the Single Tax would abolish all taxes on barter, trade, exchange, personal property and improvements, commensurately raising all taxes from the value of land alone, till there was in existence but one single tax upon the value of bare land exclusive of improvements. This would be a single tax on land value — not on land, for some land would pay no tax while other land would pay much tax.
For instance, one acre of land worth a million dollars would pay as much tax as a million acres worth only one dollar per acre.
SQUARES WITH THE MORAL LAW.
The Single Tax is ethically sound in application for the simple reason that all labor-created wealth is the result of individual effort and leaving that wealth untaxed would be leaving to the individual only that which belonged to him by his right to himself and to that which he himself creates; while taking into the public treasury only those values which society creates in its collective capacity would be leaving to society only that which belongs to it, for no individual on earth, by himself, can create land values.
At present we compound injustice by permitting private individuals to appropriate what society creates and then society turns about and deprives the individual of his private creation to support the governments whose existence makes possible the public values privately appropriated.
This basic injustice results in a fundamental disturbance of the equilibrium of society, showing itself in numberless evils — economic, social, political, physical, mental and moral.
Mistaken symptoms for disease, effects for causes, we have numerous social quacks pressing forward with innumerable nostrums — palliative, alleviative, suppressive or curative of the particular symptoms they have noted — each claiming he has found a remedy and each ready to cure the world with a salve, bandage, pill or liniment.
The diseased social body can be cured only by removing the cause and restoring it to a normal condition. Monopoly and Special Privilege is all that the social body suffers from today, and destruction of Monopoly and Special Privilege will cure it. Equal rights to All and Special Privilege to None is the only magic remedy. Apply this, make man free and equal before the law and the Divine Mind operating through nature will do the rest.
Thomas Jefferson's was probably the greatest democratic mind of his age and the equal of any age. If we examine the Jeffersonian formula we will find it the square, level and compass, without which no nation can ever be permanently founded., The natural rights of man, "life, liberty and the pursuit of happiness," we must take for granted, and the right of revolution — also put forth in the immortal document — "the Right of the People to alter or to abolish and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness" we must also take for granted.
The constitution — itself a reactionary document, taking away from the people perhaps 75% of the liberties gained in the war of 1776 — still leaves us the power to apply the golden rule of democratic thought to our government without violence — for which we may be thankful.
EQUAL RIGHTS; NO SPECIAL PRIVILEGE.
If we view the recent, present and past history of Los Angeles, San Francisco, Colorado, Springfield, New York, Albany, Pittsburg, and the nation at large, we will have to confess that now and for fifty years past, at least, municipality, state and nation have been passing through a Saturnalia of public pillage by Special Privileges working through varying forms of oligarchic, partisan and political control. The government has been wrested from the hand of Democracy by Plutocratic privileges.
Applying the rule of Equal Rights to All, we clearly see that while these rights exist, the power to exercise them has been nullified; therefore, all of these reforms such as the Initiative, Referendum, Recall, Commission Government for cities, Direct Primaries and Popular Senatorial elections, are democratic efforts for the restoration of the Mechanics of Government into the hands of Equal Citizens.
I say the Mechanics of Government, for in no sense will the people be at all benefited permanently, even by the perfection of these reforms, which are but tools of government to develop efficiency of popular expression, unless they grasp these economic truths and change or readjust economic conditions. Indeed they might be worse off, for having captured these means completely, they might mistake them for ends, and believing their victory full, might slumber while being worse pillaged, which has been the case in the past.
I wish to inject here one pertinent suggestion — cities, within themselves, should have absolute right to exert self-government in all things within their borders that do not infringe upon the equal freedom of other cities, the state or nation, especially in matters of taxation.
SOME FISCAL FACTS OF LOS ANGELES (1910).
Having eliminated, then, the mechanics of government, suppose we apply our rule to the fiscal and economic conditions existing in our city of Los Angeles, and nearly every other city.
During the last fiscal year we raised about $5,000,000 in taxes imposed on land values, improvements, personal property and license — fines, which amounted to some $650,000. Now, there is no civic, fiscal or economic excuse for license, business and occupation fines other than police regulation or revenue raising.
Police regulations have no reason for existence except to protect the citizens from infringement on his equal rights, and to grant a special privilege under any name whatever for some persons to possess to the exclusion of other persons, is a wrong that breaks our golden rule of Democracy and should be abolished on that ground alone.
For Government to grant these powers of wrong doing on receipt of a stipulated share of the profits of the wrong, is to participate in, sanction and legalize the wrong and thereby corrupt society at its fountain head by official and statutory enactments.
Again, varying the cost of these granted privileges from $1.00 to $200.00 or more per month is absurdly unjust, unequal and discriminative, for or against certain businesses, making another breach of the rule calling for their abolition.
The effect of these fines is to act as trade restrictions, as interference with production, and to centralize business in the hands of a dominant privileged class. They are national protective tariff superstitions localized for the benefit of civic plunder.
Here I wish to call your attention to a vital, absolute, commercial and economic law: ''All taxes on things produced by human exertion enter into the cost of production and are paid for by the ultimate consumer."
If we grasp this fact in its fullness we will see that these fines and taxes effect not so much the middlemen who are compelled by this inexorable law to add them to the price, as it does the ultimate consumer, who is the whole body of society. Thus we do not hit the one we imagine, but simply strike ourselves.
To abolish them would be to free trade, diffuse business, accelerate its activity and lower prices to the ultimate consumer, permitting him to retain a greater amount of his earned wealth.
If we could so emphasize this one law as to make all see it, the ideals of democracy would be here.
I have laid particular stress on this all-important law because it applies not only to license fines but to all personal property and improvement taxes — on everything made by man. Therefore, in all forms of wealth in course of production there are no real taxpayers but the ultimate consumers — the intermediary is only a tax shifter. This is vital.
The Single Tax would abolish all these taxes; so would the Jeffersonian formula. In the two we have a principle and a method for its practical application.
To extend this practical application of the Democratic Principle to all things — including the international tariff — would immediately destroy the nightmare of high prices and flood the world with limitless possibilities of trade. This trade is now stifled and vast amounts of wealth are wrongly diverted to the possession of those who do not create or earn it.
The question arises: Where would you get the money to run the government if the Single Tax theory were put into operation? Of course! Why, there would be no place to get it except from land values. Here is something fastened to the world — possibly by the "Big Nail" of the North Pole — anyway it is where it can be seen; it can't run away, hide in a hole nor be loaned to a convenient friend in an adjoining county when the assessor comes around.
The millions of varieties and values of other forms of property being eliminated, scientific simplicity would be possible in taxation. Taking into the public treasury publicly created values in the form of a tax and leaving in the possession of private individuals their private creations, by tax exemptions, would square with the moral law. Incidentally, "Conservation of natural resources" would become an accomplished fact in city, state and nation; for the taxing power involved in the private possession of the "Unearned Increment," "Land Values," "Economic Kent," or "Ground Rent," is a governmental power now privately possessed, obtained by grant, theft or tax evasion. It is a special privilege held only by land owners — the abolition of which is necessary to the restoration of equal rights to all.
The private possession of a governmental privilege is, moreover, the prime motive — the chief incentive — to all the speculative holdings of idle city lots, agricultural, mining, timber, coal and oil lands, and all other natural resources. It is responsible for 90% of the speculative gambling that is prostituting city councils, state legislatures, the national government and even threatening the judiciary itself.
In fact, this basic injustice is at the bottom of 90% of all the vice, crime and graft — public and private — from which society is now suffering. The removal of the cause by the socialization of land values through the application of the Single Tax, would destroy the incentive, divert the evil tendencies to the best instead of the worst in society, displace an abnormal condition by a normal one, and cut out, eventually, the 90% of evil which we now deplore. The victories opening to us under these possible conditions are only picturable by the poet or the seer.
The Single Tax will remove unjust conditions by a rational, expedient process of readjustment. It will restore to the individual his freedom and to the state its own values.
The right to "Life, Liberty and the Pursuit of Happiness," "Equality of Opportunity," "Equality of Rights," and destruction of Special Privilege, all demand its enactment as the only natural and perfectly sane method of squaring these demands.
The equal right to life can never be guaranteed until equal right to the natural opportunities upon which that life depends is also guaranteed. A denial of one is the denial of the other.
The opening up of the limitless storehouse of nature on this continent alone, by the destruction of its monopoly, would be equivalent to discovering several new continents.
Labor and capital, unrestricted, would flow to these opportunities as the sparks fly upward. Relieved of the pressure at the bottom and congestion of trade restriction removed from the top, who can tell the wonderful possibilities of America?
Here, toward the last, we come in contact with another vital related problem: that of the functions and ownership of highways — national, state, county and municipal.
These highways are, in organ and function, to the social body, what veins, arteries and nerves are to the human body. They are the channels of communication and transportation for persons, property and intelligence. Interference, restriction, congestion — all tend to varying disorders in the social body. Perfect freedom to normal action is the solvent. Private control of a public function is privileged ownership of a governmental power which should never be tolerated in a state of equal freedom. In fact, equal freedom is impossible where special privileges of government are farmed out to private individuals.
It will be noted that practically all private possessions of land on the continent, except those facing free waterways, are criss-crossed, intersected and separated by these highways. Theoretically we can easily see that, should we grant absolute ownership of highways to one individual — even were every other adjustment on earth perfected — that one individual would be master of the continent, for no possible intercommunication of persons, property, or intelligence could take place on, by, through or across these arteries and nerves without his consent, which condition, if submitted to, would make him sole arbiter of the world.
What is true of the whole is fractionally true of any part. We can never establish Equality of Right till absolute freedom of highway is guaranteed. Private possession of highways is no more necessary to private possession of property than is private possession of the ocean necessary to private ownership of ships.
In fact, the rights of private property are abrogated when governmental power to exact tribute from private property is granted to a privileged few; therefore, "Equal Rights to All and Special Privilege to None,'' demand the application of the Georgean philosophy to highway functions as a democratic and not a socialistic measure.
When we remember that these privileges now controlled (facts of 1900 since accentuated) by the national steam railways alone are capitalized at $8,000,000,000 in excess of the $5,000,000,000 of actual cost, we can see the enormity of one form of special privilege and the corresponding abrogation of natural property rights.
In passing, I will say that there are three practical methods by which these rights may be restored.
(1) Government control, ownership and operation of entire systems;
(2) Government control, ownership and operation of roadbeds only through official control of despatching service — leaving free operation of untaxed capital in all else, or:
(3) Public taxation of all incomes and values in excess of current rate of interest on actual capital — said capital otherwise untaxed.
The practical applications of these principles are mere matters of detail, expediency and policy. The brains that organize and manipulate these gigantic social plunders in all their minutia, can just as well work out the details of public restitution when deprived of activity in private depredations — and would be glad of the job.
Applied, this would mean the destruction of special privilege in national railways, telegraph, telephone, street railways, water, light, heat, power and all other monopolies of highway function.
This, with absolute free trade and the taxation of land-values through all other things being exempt, would mean the complete abolition of "Special Privilege" in all things; the institution of "Equal Rights" the "Conservation of Natural Resources,'' and the restoration of "Equal Opportunity to All." When all this is done — and never until it is done — there will be left nothing but the individual problem for man to solve.
Again let me interject a vital suggestion: Had we absolute free trade — international, state and local — including absolute freedom of highways, which is but an extension of freedom of trade — in truth, had we reached perfection in production — for this all means freedom in production — had we all these things while still leaving the "Unearned Increment, or Economic Rent,'' in the hands of the land-owner — there would be no permanent benefit to society except that incident to the transitional period of readjustment. Eventually all these wonderful benefits would clearly raise nothing but land-values and make the plunderbund richer and mightier than ever. The rise and fall of land values measure all the advances of civilization and their private appropriators are the "Masters, lords and rulers in all lands'' of whom the poet spoke.
Never, while the world lasts, will mankind become "Masters, lords and rulers" of themselves till these public values are publicly absorbed in taxation. The Single Tax is the most feasible, practical, expedient, simple, natural and just way of making the necessary, rational change without the violence of revolution. It stands "four square to all the winds that blow" — in economics, and politics; in ethics, morals and religion; in principle, science and philosophy; it is the practical application of Christianity to social affairs. "Equal Rights to All and Special Privileges to None," is the translation of the Golden Rule of the Nazarene to an economic and political formula. Therefore, fulfilled democracy is applied Christianity to governmental affairs.
"Do unto others as ye would that they should do to you," "Equal Rights to all and special privileges to none"; the Single Tax: these are synonymous.
Here we have the great Eleventh Commandment of the Master of Nazareth — the sum total of all "the Law and all the prophets" — we have its Jeffersonian formulation into a politico-social maxim of "Equal rights to all," and its scientific practical application in the Single Tax of Henry George. This is applied Christianity; this is democracy; this is Georgean philosophy; this is the Single Tax; different expressions of the one Unity.
I'm re-reading Robert Reich's recent NYT piece, which sits open on my computer:
By 2007, financial companies accounted for over 40% of American corporate profits and almost as great a percentage of pay, up from 10% during the Great Prosperity.
The economy cannot possibly get out of its current doldrums without a strategy to revive the purchasing power of America’s vast middle class. The spending of the richest 5% alone will not lead to a virtuous cycle of more jobs and higher living standards.
If you've seen the film "Inside Job" -- and even if you haven't -- you are probably at least somewhat aware of the extent to which the FIRE sector is, in the immortal words of someone I worked for years ago, "eating our lunch."
A recent column by David Cay Johnston provided an interesting graphic showing officer compensation as a percentage of corporate profits. In recent years, that percentage has ranged from a low of about 23% in 2005 to a high of about 67% in 2002, with the most recent year, 2008, being about 48%. So for 2008, it is "1 for 'us,' 2 for the shareholders." Now his study extends far beyond the top corporate executives; he's looking at an IRS database that includes nearly 1 million corporate officers, and it may well be that the top, say, 2% of that rarified universe takes a hugely disproportionate share of the total compensation. However, DCJ raises a very important question, which I take to be a challenge that someone in Congress should ask the Congressional Budget Office to look into, to determine whether companies -- particularly nonpublic ones -- are understating officer pay by not filing Schedule E. And he says,
Existing IRS corporate tax reports have for years shown us that fewer than 2,600 megafirms own 81% of all U.S. corporate assets. Another 21,000 firms control most of the rest, leaving just 5.6% of corporate assets that are divvied up among the more than 5.8 million remaining corporations.
The 2008 data show that while almost three million corporate officers show up on company tax returns, only 990,077 Social Security numbers do and of those only 838,551 show up as being paid. That may suggest some owners took no pay in the Great Recession year of 2008, but it also hints at how many officers serve multiple corporations.
The officer pay data show huge variations. Just 70 officers of 1,660 Real Estate Investment Trusts averaged $5.2 million in 2008, while 832 officers of 7,670 property and casualty insurers averaged $3.8 million. At the other end, more than 2.1 million officers of S Corporations averaged just $107,403, though many of them must be officers of multiple corporations.
The FIRE sector. Finance, Insurance and Real Estate. Most Americans, even those who were economics majors in college, don't know the mechanisms by which these parts of the economy get to be such amazing sponges. For the most part, the economics majors learned their economics from instructors whose own education was primarily in neoclassical economics, which only sees two main inputs to production -- Labor and Capital -- and somehow tuck Land in as a minor subset of Capital, rather than recognizing, as the classical economists did, that Land -- locations, natural resources and like things -- is unique and vital. The common wisdom knows "Buy land: they aren't making more of it" but doesn't realize the monstrous and far-reaching corollaries. Who does know? Those whose adult reading experience includes the ideas of Henry George, particularly "Progress and Poverty" and "Social Problems." And "The Science of Political Economy" has a lot to say about vested interests and their effects on economics. (You're likely to find some very quotable material!) All three are online.
Joe Stiglitz, last summer at a talk in Queensland, Australia, made remarks that were reported as follows:
The financial sector (the banks and regulators) are the culprits behind the global financial crisis which has crippled the global economy. Apparently, moneylenders have been skimming 40% of the profits from companies that actually make and produce things. His big point was that this is not really the role of the financial sector. The financial sector's job is to support economic growth, not cripple it.
"Finance is a means to an end," he said. "The lack of balance between the financial sector and the economic sector was actually the real problem in this economic crisis (NOT the real estate bubble)."
THE 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, according to the latest research from Moody’s Analytics. That should come as no surprise. Our society has become more and more unequal. When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt — which, as we’ve seen, ends badly. An economy so dependent on the spending of a few is also prone to great booms and busts. The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations. Sound familiar?
That's the first paragraph of a recent op-ed by economist Robert Reich of UC-Berkeley.
I think this article is important, but that it misses a larger, longer-acting dynamic: the extent to which our most wealthy, with an awesome amount of "patient money" need to find places to "park" that money, and end up buying land and natural resources.
When we need land, particularly well-located land, we end up paying them for access. When we need natural resources, we pay them for that, too.
It isn't that such access shouldn't be paid for -- it should -- rather, why on earth should private individuals or entities be the recipients of that income, rather than it flowing to the commons to finance the goods and services that make our society a good place to live, without taxing work or purchases.
Man cannot profit from owning capital without using it, which means to employ labor. Man can profit from owning land without using it, which means unemployed labor. A low tax on land will not add one foot to the State; a high tax will not drive one acre away. A low tax or no tax on capital will bring to the State the means of developing its resources and employing its labor; a high tax will drive capital away and leave unemployment.
Which is your town/city/county/state/nation going to do? Will she listen to the land speculators, and lower the taxes on vacant land? Or will she give heed to the business men and farmers, and lighten the taxes on industry? Much depends upon her decision.
adapted from Tax Facts, January, 1928.
Think about the unused and underused land within the borders of your town or city. It is not neutral. It is a drag on your economy and contributes nothing, whil the owner sits and waits for someone to meet his price. It is held out of use to create an unearned windfall for its owner.
We ought to examine our tax policies for the incentives which make it possible for some owners to put the land in their portfolio to little or no use. I'm not concerned with land of genuinely little value, but with land served by infrastructure that we-the-people have taxed ourselves to provide and maintain. We accord landholders a privilege in taxing them but lightly, month in and month out, on the value of their holdings. (At the same time, we make a big mistake by taxing the improvements and "personal" property, including vehicles and business equipment, of those who have improved their land to make it useful and productive. I am reminded of Enoch Ensley's important statement:
NEVER TAX ANY THING THAT WOULD BE OF VALUE TO YOUR STATE, THAT COULD AND WOULD RUN AWAY, OR THAT COULD AND WOULD COME TO YOU.
Our elected representatives ought to be reminded of that, and then asked to ponder how to implement it. I commend to their attention Fred Foldvary's article "The Ultimate Tax Reform."
In a recent column in the NYT entitled "Description is Prescription", David Brooks made references to Tolstoy, and it sent me looking to see whether a book I remembered was available via Google Books. The book was written in 1905 by Bolton Hall, and it is entitled "What Tolstoy Taught." Its final chapter, "Human Rights," follows:
(Tolstoy proclaimed the law of love as enunciated by Christ; the political rights as enunciated by Thomas Jefferson; the economic rights as announced by Henry George: the two latter as amplifications of the first; all being essential to man's earthly welfare. Tolstoy's philosophy was progressive. At first he saw that the law of love was necessary; then he recognized the necessity of equal political rights; next he recognized that without economic justice these remedies were futile, and he accordingly embraced the philosophy of Henry George, as evidenced by the following article addressed to the Russian people.— Ed.)
A number of suggestions have been made as to how to divide, in the most just manner, all land among the workers, but of all these only the one made by the late Henry George appears to me to be practicable.
The property right, Henry George wrote in his book about the single tax, is founded not on human laws, but on the laws of God. It is undeniable and absolute, and everyone who violates It, be it an individual or a nation, commits a theft.
A man who catches a fish, who plants a tree, builds a house, constructs a machine, sews a dress or paints a picture, thereby becomes the owner of the results of his own efforts — he has the right to give them away, to sell them or to leave them to his heirs. As the land has not been created by us, and only serves as the temporary residence of changing generations of human beings, it is clear that nobody can own the exclusive right to possess land, and that the rights of all men to it are equal and inalienable.
The right to own land is limited by the equal rights of all others, and this imposes upon the temporary possessor of land the duty to remunerate society for the valuable privilege given him to use the land in his possession.
When we impose a tax upon houses, crops, or money in any form, we take from members of society something which by right belongs to them, we violate the property right and commit a theft in the name of the law; while when we impose a tax upon land we take from members of society something which does not belong to them, but to society, and which cannot be given to them except at a detriment to others. We thus violate the laws of justice when we place a tax on labor or the results of labor, and we also violate them if we do not levy a tax on land.
Let us, therefore, decide to stop levying all taxes except the tax on the value of land, regardless of the buildings erected or the improvements made on it, but only on the value which natural or social conditions give to it.
If we place this single tax on land the results will be these:
1. The tax will relieve us of the whole army of officials necessary to collect the present taxes, which will diminish the cost of government, at the same time making it more honest. It will rid us of all the taxes which lead to lying, to perjury, to frauds of all kinds. All land is visible, and cannot be hidden, and its value is fixed easier than that of any other property, and the single tax can be determined at less expense and less danger to public morals.
2. It will to a great extent increase the production of wealth, doing away with the discouraging tax upon labor and thrift, and it will make the land more accessible to those who want to work or improve, as the proprietors, who do not work themselves, but speculate in its increasing value, will find it difficult to keep up such expensive property. The tax on labor, on the other hand, leads to the accumulation of immense fortunes in a few hands, and the increasing poverty of the masses. This unjust division of wealth on one side leads to the creation of one class of people who are idle and corrupt, because they are too rich, and the creation of another class of people who are too poor, and thus doubly delays the production of wealth. This unjust division of wealth creates on one side terrible millionaires, and on the other side vagrants, beggars, thieves, gamblers and social parasites of various kinds, and necessitates an enormous expense for officials to watch these — policemen, judges, prisons and other means which society uses in self-defense.
The single tax is a remedy for all these evils.
I do not mean to say that this tax will transform human nature, for that is not within the power of man, but it will create conditions under which human nature will grow better instead of worse, as under the present conditions. It will make possible an increase of wealth, of which it is hardly possible to form an idea. It will make undeserved poverty impossible. It will do away with the demoralizing struggle for a living. It will make it possible for men to be honest, just, reasonable and noble, if they desire to be so. It will prepare the soil for the coming of the epoch of justice, abundance, peace and happiness, which Christ told His disciples of.
Let us suppose that in a certain place all land belongs to two owners — one very rich, who lives far away, and another, not rich, living and working at home — and to a hundred of small peasants owning a few acres each. Besides these, there live on that place some scores of people who own no land — mechanics, merchants, and officials.
Now let us suppose that the people of that community, having arrived at the conclusion that the land is common property, decide to dispose of the land according to their new conviction.
What would they do? Take all the land away from those who own it, and give everybody the right to take the land he desires? That could not be done, because there would be several people who would want the same ground, and this would lead to endless quarrels. To form one society and work all things in common would be difficult, because some have carts, wagons, horses and cattle, while others have none, and, besides, some people do not know how to till the soil, or are not strong enough.
To divide all the land in equal parts, according to its value, and allow one part to each is very difficult, and this would, besides, be impracticable, because the lazy and poor would lease their property to the rich for money, and these would soon again be in possession of it all.
The inhabitants of the community, therefore, decide to leave the land in the possession of those who own it, and to order each owner to pay into the common treasury money representing the revenue which had been decided on after appraising the value of the land, not according to the work or the improvements made on it, but to its quality and situation, and this money was to be divided equally among all.
But as it was difficult first to take this money from all those who held the land, and then divide it equally among all the members of the community, and as these members, besides, paid money toward the public needs — schools, fire departments, roads, etc.— and as this money was always needed, they decided to use all the money derived from those who had the use of the land, for public needs.
Having made this arrangement, the members of the community levied the tax for the use of land on the two large owners, and also on the small peasants, but no tax at all was imposed on those who held no land.
This caused the one landowner who lived far away, and who derived little income from his property, to realize that it did not pay to hold on to land thus taxed, and he gave it up. The other large owner gave up part of his land, and kept only that part which produced more than the amount of his tax. Those of the peasants who held small properties, and who had plenty of men, and not enough land, as well as some of those who held no land at all, but who desired to make a living by working the land, took up the land surrendered by its former owners.
After that all the members of the community could live on the land and make a living from it, and all land passed into the hands of or remained with those who loved to work it, and who made it produce the most. The public institutions flourished and the wealth of the community increased, for there was more money than before for public needs; and the most important fact was that this change in the ownership of land took place without any discussions, quarrels, or discord, by the voluntary surrender of the land by those who did not derive any profit from it.
This is the project of Henry George, which, if tried here, would make Russia wealthy and happy, and which is practicable all over the world.