LVTFan's Blog

The Earth-for-All Calendar: Undecimber 20 -- Herodotus

They said also that this king divided the country amongst all the Egyptians and from thence he drew his revenues, having required them to pay a fixed tax every year.

—Herodotus, Euterpe, II, 109.

Basic Principles of Ground Lease Agreements – Yes, a Contract!

Here are the opening paragraphs of a recent article about the complexities of Ground Lease contracts.  I commend the entire article to your attention.  It helps flesh out why and how the entire FIRE sector -- Finance, Insurance and Real Estate (as well as their attorneys) --  is receiving such a large share of the profits produced by the productive sectors of the economy.  The owner of land, and the entities which lend on land, and insure the buildings and the revenue flow, all reap significant shares of what the tenants labor to create.   Modern sharecropping.  And the recipients of the ground rent get to parade as self-made men, people of awesome foresight and wisdom -- and even philanthropists (think Brooke Astor, the Fishers, and others in your own community) when they donate a small share back to a charity!  As you read this, think both of Manhattan land and of land in your community's central business district, and along its major roads.  (Location, location, location!)

If one wonders why (true) small business struggles, one might consider the complexity and expense of their ground leases, and contrast that with the Georgist alternative: that one's taxes would be simply the current rental value of the land, while the value of the building remains one's private property, not subject to taxation or going pouf! at the end of a ground lease.

The land lord is "supplying" something he didn't create.  We ought to ease him out.  Land value taxation is the obvious tool for reducing, and -- slowly or not -- eliminating, his "take" on those who do create.  Think what it would mean if working people had that spending power, instead of the lords of the land.

All that land rent could be used to fund our community's needs, instead of lining the pockets of a few very "lucky" -- privileged -- duckies.  (The analogies to chattel slavery are not a long stretch, once one starts to think about it.  We should all own ourselves, and reap the fruits of our own labors.)

Basic Principles of Ground Lease Agreements – Yes, a Contract!.

PUBLISHED: JANUARY 7, 2013  

A lease is a lease is a lease – or so you may think. Yes, real property leases grant an estate in land to a tenant for a period of time. And yes, the tenant pays for that right of possession. But the action in a lease isn’t in the conveyance provisions; it’s in the contract provisions. Multiply out the rent and other annual monetary obligations by the length of the lease term (in years), and you’ll see that it might be (and often is) a big dollar contract. Even more important, unlike the vast majority of contracts whose obligations are satisfied in days or weeks, a lease contract goes unfulfilled for 50, 75, “99,” and even 500 years. That takes it beyond the life of the parties involved in its creation, and the future brings surprises. Neither Nostradamus nor Jules Verne got everything right. 

Why a Ground Lease? 

If a tenant has to build its own building (as is often the case), and has all of the burdens of ownership, why would it lease a property knowing that at the end of the lease term it has nothing left to show for its money and efforts? There are a number of common reasons, principal among them is that the owner won’t sell the land and the tenant has no alternative. 

Real property often carries a long term unrealized gain, waiting to be taxed upon its sale. 

Not every landowner is interested in making further active real property investments. This makes a like kind exchange unappealing. 

Ground leasing the same land keeps ownership in the family. At the owner’s death, because of the current estate tax “stepped up basis” arrangement, the built in gain may never be taxed.

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The Earth-for-All Calendar: Undecimber 12 -- Cushman

The hospitals (of England) are full of the ancient. . . . The almshouses are filled with old laborers. Many there are who get their living with bearing burdens, but more are fain to burden the land with their whole bodies. Neither come these straits upon men always through intemperance, ill-husbandry, indiscretion, etc.; but even the most wise, sober and discreet men go often to the wall when they have done their best. . . The rent-taker lives on the sweet morsels, but the rent-payer eats a dry crust often with watery eyes.

—Robert Cushman, Plymouth, 1621, in Young's "Chronicles of the Pilgrims."

The Mortgage on the Farm

We worked through spring and winter, through summer and through fall.

But the mortgage worked the hardest and steadiest of them all;
It worked on nights and Sundays, it worked each holiday;
It settled down among us and it never went away.
Whatever we kept from it seemed almost as bad as theft;
It watched us every minute and it ruled us right and left.
The rust and blight were with us sometimes, and sometimes not;
The dark-browed, scowling mortgage was forever on the spot.
The weevil and the cutworm they went as well as came;
The mortgage stayed forever, eating heartily all the same.
It nailed up every window, stood guard at every door,
And happiness and sunshine, made their home with us no more;
Till with falling crops and sickness we got stalled upon the grade.
And there came a dark day on us when the interest wasn't paid.
And there came a sharp foreclosure, and I kind o' lost my hold.
And grew weary and discouraged and the farm was cheaply sold.
The children left and scattered, when they hardly yet were grown;
My wife she pined and perished, and I found myself alone.
What she died of was a mystery, and the doctors never knew;
But I knew she died of mortgage — Just as well as I wanted to.
If to trace a hidden sorrow were within the doctors art.
They'd ha' found a mortgage lying on that woman's broken heart.
Worm or beetle, drought or tempest, on a farmer's land may fall.
But for a first-class ruination, trust a mortgage 'gainst them all.

How much of a farmer's mortgage is for the value of the land itself, and how much for the present value of the improvements which previous owners have made, such as clearing, draining, fencing, irrigating, building structures, plus, perhaps, equipment purchased with the land and buildings?

For that matter, how much of a homeowner's mortgage is for the value of the land itself --including its access to community-provided services such as city water and sewer, fire hydrants, and the like -- and how much for the purchase price of the landscaping and structures on the property, built by any of the previous owners?

To what degree is the modern buyer including in his formal calculations or his underlying assumptions the notion that the land will increase in value during his tenure?  (See Case & Schiller, 2003.)

The Earth-for-All Calendar: December 30 -- Dove

If, then, successive generations of men cannot have their fractional share of the actual soil (including mines, etc.) how can the division of the advantages of the natural earth be effected? By the division of its annual value or rent; that is, by making the rent of the soil the common property of the nation. That is (as the taxation is the common property of the State), by taking the whole of the taxes out of the rents of the soil, and thereby abolishing all other kinds of taxation whatever. And thus all industry would be absolutely emancipated from every burden.

— PATRICK EDWARD DOVE, Theory of Human Progression (1850), Chap. III., Sec. 3.

Baltimore Ground Rents -- some history and some principles

Just Taxation

Among no class of reformers do we find more clear thinking or a sounder political economy than among the "single-taxers." Following the writings of the late Henry George there is a considerable and important literature upon this subject. Land monopoly and speculation should be stopped. Labor should not be taxed. The resources of nature should be made to minister equitably to the whole people. Now the weakest pay the most tax. It should be the strongest and they whom the government most benefits. 

A Baltimore Instance

The Public

A single tax man of Baltimore, Mr John Salmon, expresses no little surprise that Senator Hanna's candidate for governor of Ohio supposes that the single tax has been a disastrous failure wherever tried. Of Mr Herrick and his notion Mr Salmon writes: This stamps him as being a twisted thinker and a loose observer. The single tax is in operation all over the United States, flowing into the pockets of private individuals, which is what single taxers object to. Here in Baltimore more than in any other section of the country, it is strongly apparent. We have the ground rent system in operation, 90 percent of the real estate being held on leaseholds. The custom is an old English one grafted on the Maryland colonies by Lord Baltimore and his English compeers, and it has grown and flourished like a green bay tree. When one buys a home here it is in nine cases out of ten subject to a ground rent. These ground rents are dealt in as a form of investment the same as a mortgage or any other form of investment; but the point to observe is that they are a single tax, pure and simple, the price paid for the use of the ground per se and for ground only.

Our last assessment separated the value of the land from the value of improvements, and it is done every day in our community. Baltimore has more houses per capita than any city in the country, due to the ground rent system; and a house costing $1,200 to build is very often sold for $800 or $900 in order to create a ground rent ranging from three dollars a front foot to $20 and $40 a front foot. To explain more fully: Bonus buildings are run up on plats of ground split up into lots of 15x90, and a ground rent say of $6 per front foot is put on the lot, making $90 a year ground rent, which the buyer agrees to pay, and in his ground rent is a clause that he will also pay all taxes. This $90 is essentially a single tax. The agreement to pay it is exactly the same kind of a contract that is in vogue in Fairhope, Ala. With this extremely important exception, that whereas we in Baltimore bind ourselves to pay all the taxes, in Fairhope the company or lessor, agrees to pay all taxes. Talk of its being a disastrous failure! Not on your life. Ground rents are as scarce as hen's teeth, and can only be bought on a three percent basis. They command as good a price as government bonds, and it is estimated that $14,000,000 at least is raised in Baltimore alone from this source —  nearly twice as much as the city and state taxes amount to. And what is this tax of $14,000,000 paid for? Why, merely for the privilege of living in the city of Baltimore. That's all the payers get for it. And the only kick we've got coming is that the private individuals get that money instead of the city and state.

-- found in "The American Cooperator" (1903); "The Public" was a weekly newspaper, out of Chicago, edited by Louis F. Post, who went on to serve in Woodrow Wilson's administration.

That acre in Manhattan

An article in the NYT a few weeks ago described some proposed changes in the zoning for midtown Manhattan.

Bloomberg Pushes a Plan to Let Midtown Soar

The accompanying map says, "Around Grand Central Terminal, towers could be up to twice the size now permitted.  Development could also take place along the Park Avenue corridor, where towers could be more than 40% larger. Elsewhere in the district, towers could be 20% larger."

But New York’s premier district, the 70-block area around Grand Central Terminal, has lagged, Bloomberg officials say, hampered by zoning rules, decades old, that have limited the height of buildings.

Mayor Michael R. Bloomberg wants to overhaul these rules so that buildings in Midtown Manhattan can soar as high as those elsewhere. New towers could eventually cast shadows over landmarks across the area, including St. Patrick’s Cathedral and the Waldorf-Astoria Hotel. They could rise above the 59-story MetLife Building and even the 77-story Chrysler Building.

Mr. Bloomberg’s proposal reflects his effort to put his stamp on the city well after his tenure ends in December 2013. Moving swiftly, he wants the City Council to adopt the new zoning, for what is being called Midtown East, by October 2013, with the first permits for new buildings granted four years later.

His administration says that without the changes, the neighborhood around Grand Central will not retain its reputation as “the best business address in the world” because 300 of its roughly 400 buildings are more than 50 years old. These structures also lack the large column-free spaces, tall ceilings and environmental features now sought by corporate tenants.

The rezoning — from 39th Street to 57th Street on the East Side — would make it easier to demolish aging buildings in order to make way for state of-the-art towers.

Without it, “the top Class A tenants who have been attracted to the area in the past would begin to look elsewhere for space,” the administration says in its proposal.

The plan has stirred criticism from some urban planners, community boards and City Council members, who have contended that the mayor has acted hastily. They said they were concerned about the impact of taller towers in an already dense district where buildings, public spaces, streets, sidewalks and subways have long remained unchanged.

Mr. Bloomberg has encouraged high-rise development in industrial neighborhoods, including the Far West Side of Manhattan, the waterfront in Williamsburg, Brooklyn, and in Long Island City, Queens. But with the proposal for Midtown, which is working its way through environmental and public reviews, he is tackling the city’s commercial heart.

“Unlocking the development potential in this area will generate historic opportunities for investment in New York City,” Deputy Mayor Robert K. Steel said.

The initiative would, in some cases, allow developers to build towers twice the size now permitted in the Grand Central area. The owner of the 19-story Roosevelt Hotel at Madison and 45th Street could replace it with a 58-story tower under the proposed rules. Current regulations permit no more than 30 floors.

See also http://lvtfan.typepad.com/lvtfans_blog/2008/03/hotel-roosevelt.html , which discusses this in terms of value of land per buildable square foot.

When zoning changes increase the value of land, who should reap the benefit?  The current landholder, or the community?    What did the landholder do to earn that windfall?  Do you think it comes out of thin air?  Do you think it is paid him by other rich people?

Or do you recognize that it is part of the structure which enriches a few and impoverishes the many?

It is easy to fix this one.  One just has to recognize the structure, and value the land correctly, and start collecting the lion's share of the land rent for the community.  If it is more than NYC can put to use -- and it will be -- then apply the excess to reducing our federal taxes on productive effort.  Use it to fund Social Security, or Medicare, or universal health insurance, or something else that will benefit the vast majority of us instead of an undeserving tiny privileged minority.  Don't throw it in the ocean, and don't leave it in private pockets, be they American or not. 

Collect   the   land   rent.    Repeat next year, and the next, and the next.  Natural Public Revenue.

One's "Fair Share"

The post below this one, "Mitt Romney's 'Fair Share' " refers to his fair share of the costs of providing public goods.

But perhaps an equally important question is the nature of one's fair share of the output of our economy and the output of the earth.  Some of the former output is the result of individual efforts, and one ought to be able to keep that portion. But at the same time we must recognize how much comes from the division of labor, from drawing down on the non-infinite supply of non-renewable natural resources on which all of us today must depend and on which future generations of human beings must rely. Those who draw down more than their legitimate share owe something to the rest of the community.  Our wealthiest tend, we suspect, to use many, many times their legitimate share, and the median American likely draws far more than their share, when one considers the planet as a whole.   

Perhaps "legitimate" is not the right word here.  It refers to what is permissible under current law.  (The word gets misused a lot -- see the discussion on "legitimate rape," which seemed to be about the circumstances under which a woman has a right to make a specific very personal, decision, and when it is considered by some to not be left to her and is the province of government, legislators or others.)

What is one's "fair share" of natural resources?  America is using a hugely disproportionate share of the world's resources.  Are we entitled to it because we're somehow "exceptional"?  Because "our" God is somehow better than other nation's Gods?   Or do we genuinely believe that all people are created equal, and intend to live our lives accordingly?

Our output of greenhouse gases exceeds our share of the world's population.  This is not without consequences for the world, and for peace on earth.

We ought to be re-examining our incentives so that they move us in the direction we ought to be going, which is, to my mind, using less.  We can build transportation infrastructure which will permit many more of us to move around with less impact on the environment.  We can fund that through collecting the increases in land value that infrastructure creates.  We can correct the incentives which cause us to use today's inferior technologies to extract natural resources from the earth in ways which damage the environment, as if ours was the final generation, or the only one worth serious consideration.

Better incentives could reduce, eliminate, even reverse urban sprawl.  I refer specifically to land value taxation as a replacement for the existing property tax, particularly in places where assessments are for one reason or another not consistent with current property values -- e.g., California and Florida, parts of Delaware and Pennsylvania which currently use assessments from the 1970s, and many other places where assessments are simply out of whack with current reality!)  We should be replacing sales taxes, wage taxes, building taxes with taxes on land value and on natural resources.  Most of that value is flowing generously into private or corporate pockets, to our detriment.  It concentrates wealth, income, and, of course, political power. 

Collecting the rent, instead of leaving the lion's share of it to be pocketed by the rent-seekers, would go a long way to making our society and our economy healthier.  Eliminating the privilege of privatizing that which in a wisely designed society would be our common treasure would make our society a better place in which to live, a place in which all could thrive and prosper without victimizing their fellow human beings. 

Stiglitz: "Mitt Romney’s Fair Share"

a few excerpts from: "Mitt Romney’s Fair Share" by Joseph E. Stiglitz | Project Syndicate.

A major theme of the underlying political debate in the United States is the role of the state and the need for collective action. The private sector, while central in a modern economy, cannot ensure its success alone. For example, the financial crisis that began in 2008 demonstrated the need for adequate regulation.

Moreover, beyond effective regulation (including ensuring a level playing field for competition), modern economies are founded on technological innovation, which in turn presupposes basic research funded by government. This is an example of a public good – things from which we all benefit, but that would be undersupplied (or not supplied at all) were we to rely on the private sector.

Conservative politicians in the US underestimate the importance of publicly provided education, technology, and infrastructure. Economies in which government provides these public goods perform far better than those in which it does not.

But public goods must be paid for, and it is imperative that everyone pays their fair share. While there may be disagreement about what that entails, those at the top of the income distribution who pay 15% of their reported income (money accruing in tax shelters in the Cayman Islands and other tax havens may not be reported to US authorities) clearly are not paying their fair share. ...

I have to disagree with the second sentence of this next paragraph.  And I think Stiglitz knows better, if he stops to think about it:

Democracies rely on a spirit of trust and cooperation in paying taxes. If every individual devoted as much energy and resources as the rich do to avoiding their fair share of taxes, the tax system either would collapse, or would have to be replaced by a far more intrusive and coercive scheme. Both alternatives are unacceptable. 

We don't need intrusive or coercive; we just need to start collecting the lion's share of the rent!  Well, I suppose some rent-seekers would find this extremely intrusive -- it intrudes on their habit of self-enrichment by privatizing of what is rightly and logically our PUBLIC treasure, the logical way of financing PUBLIC goods.   And Professor Stiglitz is quite aware of the value of natural resources; he may not be quite as conscious of the value of urban and other well-situated land.   

Our national recordkeeping doesn't even collect the valuations of land and natural resources on any consistent basis! (One could reasonably argue that this failure-to-measure is a form of corruption!)  What we don't measure we can't do anything about.  And the powers that be are quite content with how we do things; the benefits accrue to them!  And several generations of college-educated people know nothing about the issue, which was well known and widely discussed 100 years ago.  (Look into the extensive Single Tax literature and the ideas of Henry George.)

Some more excerpts:

The billionaire investor Warren Buffett argues that he should pay only the taxes that he must, but that there is something fundamentally wrong with a system that taxes his income at a lower rate than his secretary is required to pay. He is right. Romney might be forgiven were he to take a similar position. Indeed, it might be a Nixon-in-China moment: a wealthy politician at the pinnacle of power advocating higher taxes for the rich could change the course of history.

Comments

But Romney has not chosen to do so. He evidently does not recognize that a system that taxes speculation at a lower rate than hard work distorts the economy. Indeed, much of the money that accrues to those at the top is what economists call rents, which arise not from increasing the size of the economic pie, but from grabbing a larger slice of the existing pie.

Those at the top include a disproportionate number of monopolists who increase their income by restricting production and engaging in anti-competitive practices; CEOs who exploit deficiencies in corporate-governance laws to grab a larger share of corporate revenues for themselves (leaving less for workers); and bankers who have engaged in predatory lending and abusive credit-card practices (often targeting poor and middle-class households). It is perhaps no accident that rent-seeking and inequality have increased as top tax rates have fallen, regulations have been eviscerated, and enforcement of existing rules has been weakened: the opportunity and returns from rent-seeking have increased. 

Today, a deficiency of aggregate demand afflicts almost all advanced countries, leading to high unemployment, lower wages, greater inequality, and – coming full, vicious circle – constrained consumption. There is now a growing recognition of the link between inequality and economic instability and weakness.

There is another vicious circle: Economic inequality translates into political inequality, which in turn reinforces the former, including through a tax system that allows people like Romney – who insists that he has been subject to an income-tax rate of “at least 13%” for the last ten years – not to pay their fair share. The resulting economic inequality – a result of politics as much as market forces – contributes to today’s overall economic weakness. 

The Earth-for-All Calendar: August 7 -- Thorold Rogers and Ede

I can easily imagine a great proprietor of ground rents in the metropolis calling attention to the habitations of the poor, to the evils of overcrowding, and to the scandals which the inquiry reveals, while his own income is greatly increased by the causes which make house-rent dear in London, and decent lodging hardly obtainable by thousands of laborers.

— PROF. THOROLD ROGERS, Work and Wages, Chap. XX., p. 550.

Efforts should be made to prevent the increase of value which is occasioned by the growth of the population of towns enriching private individuals.

— The REV. W. MOORE EDE, Honorary Canon of Durham, The Church and Town Problems, p. 88, note.

The Earth-for-All Calendar: August 5: Patrick Edward Dove

Let it be observed that when land is taxed, no man is taxed; for the land produces, according to the law of the Creator, more than the value of the labor expended on it, and on this account men are willing to pay a rent for land.

— PATRICK EDWARD DOVE, Theory of Human Progression (1850), Chap. I., Sec. 2, p. 44

(American Edition of 1895).

The Earth-for-All Calendar: July 31 - John Stuart Mill

The ordinary progress of a society which increases in wealth is at all times to augment the incomes of landlords — to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer as it were in their sleep, without working, risking or economizing. What claims have they, on the general principles of social justice, to this accession of riches?

— JOHN STUART MILL, Principles of Political Economy, Book V., Chap. 2, Sec. 5

 

On land producing income for local communities -- with thoughts of Ipswich's Little Neck "trust"

When I came across this article, 111 years old, I thought of the Ipswich, Massachusetts, trust established in 1650 by the gift of a fine 32-acre piece of land by a forward-thinking resident.  His stated intention was that the land be kept by the town, forever, for the benefit of the public schools.  Alas, it was poorly managed for a number of years, perhaps decades, and this appears to have been transformed, remarkably, into an excuse for the eager TENANTS to buy the land (and at less than half what I calculate it to be worth -- click on the "Little Neck Feoffees of Ipswich" link at left to see all my posts on the topic). 

The tradition of school lands has served many communities very well.  Part of Chicago was rented out to tenants and the revenues used to fund the city's schools.

But some fast-talkers appear to have convinced the powers-that-be in Ipswich, Mass., (including, remarkably, some judges and perhaps the state A.G.!) that "forever" is just temporary, and other investments are superior to the revenue from land and natural resources for funding public spending.  (Not!)   And the land will be there forever; a few decades of poor management is, in the long run, a triviality; the same would not be true of any of the substitute investments the Feoffees and their highly-compensated investment advisors will come up with. 

(The first-quoted writer was the president of the Massachusetts Institute of Technology.)

http://paperspast.natlib.govt.nz/cgi-bin/paperspast?a=d&d=TS19010921.2.76&l=mi&e=-------10--1----2--

Star, Putanga 7209, 21 July 1901, Page 7

Land Nationalisation

The Land and the People

The Lands Sub-Committee submitted the following report at the last annual meeting of the Progressive Liberal Association: --

General Francis Walker, in "First Lessons in Political Economy," says: -- "It certainly is true that any increase in the rental value or selling value of land is due, not to the exertions and sacrifices of the owners of the land, but to the exertions and sacrifices of the community.  It certainly is true that economic rent tends to increase with the growth of wealth and population, and that thus a larger and larger share of the products of industry tends to pass into the hands of the owners of land, not because they have done more for society, but because society has greater need of that which they control."

On the same subject Thorold Rogers has expressed himself thus: -- Every permanent improvement, every railway and road, every bettering of the general condition of society, every facility given for production, every stimulus applied to consumption, raises rent.  The land owner sleeps, but thrives."

The observant thinking man must admit that the above opinions are borne out by facts, but the importance to the community of the nationalisation of the land is unfortunately realised by comparatively few.  If people would endeavour to understand its importance, there is little doubt that the majority would be forced to the conclusion that the private ownership of land is beyond question decidedly against the best interests of the State.

Cardinal Manning has said: -- "The land question means hunger, thirst, nakedness, notice to quit, labour spent in vain, the toil of years seized upon, the breaking up of homes, the misery, sicknesses, deaths of parents, children, wives, the despair and wildness which spring up in the hearts of the poor, when legal force, like a sharp harrow goes over the most sensitive and vital right of mankind.  All this is contained in the land question."  The opinion of the late Cardinal, expressed in such a forcible language, should at the very least induce people to study this question thoroughly.  As a proof of its importance many object lessons are to be found -- as bearing upon it from a municipal point of view two may be mentioned.  Doncaster in Yorkshire has no borough rate.  Why?  Because it is the owner of certain remunerative land; and Durban, in South Africa, for a rate of 1½d in the £ obtains the usual municipal services such as we possess in Christchurch, and in addition enjoys several others which we much desire to have.  The difference is because in Durban its founders made reserve round the town which have not been alienated and have so increased in value that the rentals therefrom very nearly provide for all municipal requirements.  The founders of Canterbury made a similar wise provision for Christchurch, but in an evil day the Provincial Council, when it took over the affairs of the Canterbury Association, sold the city's inheritance for a mess of pottage.  It will doubtless be interesting to many to lean something of the history of the

CHRISTCHURCH TOWN RESERVES.

When constitutional government was established in Canterbury the Provincial Government took over the property of the Canterbury Association, including the town reserves of Christchurch and Hagley Park, the total area of these two being 897 acres, which, five years previoiusly, had been considered of the value of £2700. The Association had got into debt to the extent of nearly £29,000, which the Provincial Government paid with money raised on debentures, and proceeded to sell the reserves situated inside the belts.  To prevent any misunderstanding as to the then estimated value of these town reserves, it is desirable to state that for the £29,000 mentioned the Association transferred to the Provincial Government all the property it possessed in Canterbury, which included other reserves than those in Christchurch, also plant, tools, survey maps and field books, which must have been value for a considerable portion of the sum named.  By the deed poll of the Association these lands were to be held in trust for the purposes for which they were reserved, but a special Act of the Assembly was obtained to permit of their alienation.  It has been truly said that the price of liberty is eternal vigilance.  It is equally true with regard to reserves of land made for the benefit of the public; the people (every individual) should be ever on guard and watchful that no tampering with public reserves be allowed.

At the present day it is particularly interesting to consider what would now be the position of Christchurch if the reserves inside the belts had not been sold.  What income would now be derivable therefrom?

Excluding twelve acres which were set apart by the Provincial Council  as endowments for various religious bodies, the frontages of the reserves on the main streets of the city, as originally laid out in the extensions of these streets to the belts, amount to about 92,400 ft, after deducting 1¼ chains at each corner to avoid reckoning double frontages at corners.  At 4s per foot frontage it would be £23,100.  Bearing in mind that more than half the frontages have a depth of 5½ chains, it is estimated that if these lands were now let on building leases they would average a return of not less than 4s per foot, possibly more, and it is probably safe to say that the income therefrom would be £20,000 a year.

HOW WOULD CHRISTCHURCH BE AFFECTED.

The statement of accounts of the City Treasurer shows that for the year ending March 31, 1901, the rates assessed amounted to £28,526 --

	£
General rate (omitting shillings and pence)	13,680
Special drainage rate	1,983
Charitable institutions	1,370
Waimakariri	686
District drainage	10,807
	£28,526

obtained by a total assessment of 2s 7½d in the pound, whereas, had the town reserves not been alienated, all the municipal services rendered would probably have been obtained for a modest rate of less than 9d. in the pound.

This is surely an object lesson which should be laid to heart by every inhabitant of the colony, as well as by the citizens of Christchurch, and should demonstrate how very desirable it is in the interests of the people as a community, that all land should be owned by the community, seeing that increased values of land are derived from the exertions and sacrifices of society.  It will serve to show what enormous sums society thus pays to individuals to state that it is estimated that the value of land in London is increasing at the rate of 7½ millions annually; under the system of private ownership of land this large sum is accruing yearly in London alone to private individuals, and the public who must use the land, necessarily pay interest on that sum.

The Progressive Liberal Association earnestly commends these facts to the consideration of the people of New Zealand in the hope that they will insist upon a stoppage being put to the sale of Crown lands; and as regards the granting of leases in perpetuity, which, in parting with the possession for 999 years at a rental based on the present value, hands over to individuals the unearned increment for that unconscionably long period, it is hoped that a mandate will go forth from the electors of the colony insisting upon a periodical revaluation of the unimproved value.  When these have been accomplished, there will be the question of the nationalisation of all the lands in the colony to be dealt with.

"That which was created for the use of all, the use of which is absolutely necessary for the existence of every individual, should be owned and controlled for the benefit of all.  The private control of land is dead against the common welfare.  Justice demands this, and what justice demands must sooner or later be conceded.

Christchurch, July 29, 1901

Bankrupt in California

Has no one in California figured out that when the calf is deprived of mother's milk, starvation is inevitable?

It has taken 34 years, but it is coming about.

Feeding calves grain, or seaweed, or sunflower seeds isn't as smart as letting it consume its natural food.

Taxing wages, sales and buildings isn't as smart as collecting the lion's share -- calf's share, if you will -- of the land rent for public purposes.

Proposition 13 was designed to make sure that the cows' milk was kept for the Irvines, the big landowners, the commercial property owners, and the longtime homeowners, while providing a diminishing fifth of it to the calf and supplementing with grain, seaweed and sunflower seeds.

The calf's digestive system has blown up because it was deprived of its proper food, and "nourished" with stolen fake food.

 

To make America more egalitarian, tax the value of land

To make America more egalitarian, tax the value of land - FT.com.

Sir, Joseph Stiglitz is concerned that America has become less egalitarian, and no longer the land of opportunity (June 26). He mentions reducing rent-seeking as a solution, but he does not mention the paradigmatic form of rent-seeking: collecting the ground rents of land. If an increasing share of gross national product is going to the top 1 per cent, it is at least in part because they are the people who own most of the valuable land, and the rents of land are absorbing a larger share of production. No one is making more land to keep the price down by competition.

I'll leave it to you to go read the rest. (Registration is free.)

The Rent of Land, and Government Expense

"The rent of land and government expenses are both caused by population. Let one pay the other."

--Henry Chase, M. D.

NYT 99 years ago ... a "Lower Rents" bill in Albany

1913-05-11 Demand Reduction of Building Taxes

Thousands Sign Petition at a Mass Meeting Held in Union Square

Pastor Flays Legislature

Dr. John Haynes Holmes Says Bosses Have No Right to Stop the Expression of the People's Will

Petitions asking for a referendum vote upon the question of reducing gradually the tax rate upon buildings in New York to one-half the tax rate upon land, through five consecutive reductions in as many years, were signed yesterday by several thousand persons at a mass-meeting held in Union Square under the auspices of the New York Congestion Committee. The meeting was announced as a public protest for lower rents.

Benjamin Clark Marsh, Executive Secretary of the Committee on Congestion of Population in New York, was Chairman.  Dr. John Haynes Holmes of the Church of the Messiah said that the Legislature "in the wisdom of the Big Sachem at Fourteenth Street has decreed that the people are not fit to register their judgment as to this bill.  I, for one, desire to protest against the boss or set of bosses who presume to forbid the people to express their will on any question."

Frederick Leubuscher, representing the New York State League of Savings and Loan Association, said:

"It was admitted by some of the land speculators at the hearing of the Lower Rents bill at Albany that they were unable to answer our arguments.  Nevertheless, a Democratic majority stifled the bill.  As a savings and loan association man, I am interested particularly in the enactment of this proposed law.  The stimulation of the erection of buildings and the making of improvements generally will be more market in the suburbs, where modest homes, costing from $2,000 to $5,000 to erect, are most in demand."

The purpose of the law was explained in a letter from Assemblyman Michael Schaap, who introduced the Salant-Schaap bill in the lower House of the State Legislature.

"If the tax rate on buildings had been half that on land this year," he wrote, "the rents of the average tenant would have been at least one month's rent less than it was; owners of small houses would have paid $15 to $25 less taxes than they do, and there would be fewer than 9,000 evictions for non-payment of rent.

"The taxes on all adequately improved property would have been reduced and the city would have recovered almost $20,000,000 more of ground rent which now goes to a few people of New York and to absentee landlords.  This ground rent at 6% is over $273,000,000.  The people of the city have created and maintain these values, but they get less than $84,000,000 of it -- the land owners get the other $189,000,000.  Rent and taxes on homes and other buildings would have been reduced by at least $20,000,000."

The Rev. Alexander Irvine said that one family out of every 150 in New York City was evicted for non-payment of rent, because of the unjust taxation of improved property as contrasted with vacant land.  Only 3% of the residents of the city own land, the speaker asserted.

John J. Hopper, Chairman of the New York State Independence League, said:

"A tax upon anything tends to lessen the supply of that commodity.  By the same principle a tax upon buildings tends to lessen their number.  A bill tending to reduce the tax upon buildings will bring about the construction of more buildings, and as a result there will be more competition and a corresponding reduction in rents.

"The Legislature refused to let us decide this question for ourselves, asserting that we did not know enough to vote on the subject of taxation.  When we realize that for the expenses of the National Government each one of us pays $7.50 a year; for the state expenses, $5.50 and for the city expenses $38.50, making a total of $51.50 per individual, or $255 for a family of five, then we understand that we must think upon this subject of taxation.

Frederick C. Howe, Director of the People's Institute, said:

"Think of the stupidity of New York citizens.  We talk about bankruptcy and lack of city credit and yet we give away each year at least $100,000,000 in the speculative increase of land values which the growth of the community creates.  That is, the increase show by the tax valuation of the city.  New York could pay a large part of its present budget out of the land speculation profits alone, if it taxed land and exempted buildings."

C. N. Sheehan of the Twenty-eighth Assembly District Board of Trade, Brooklyn, and J. P. Coughlin of the Central Labor Union of Brooklyn also spoke.

Edmund Vance Cooke: Rent, Rent, Rent!

I've taken the liberty of retitling the poem (in the spirit of "Location, Location, Location!).  Cooke is also the author of Uncivilized, Thanksgiving, and The Monkeys Disgrace

When people remind us, next April, of the so-called "Tax Freedom Day," perhaps it is worth bringing this aspect to their attention.  However, few of them will have the economic education to understand what this poem is saying, on a first reading.  (Maybe they'll take the time to explore this blog.)

It was Winston Churchill who brought the term "Mother of all Monopolies" to prominence, in a series of speeches he gave in the fall of 1909.

Rent
Edmund Vance Cooke
Written for the Cleveland Singletax Club
in The Single Tax Review, October 2, 1914

        You may tinker with the tariff and make some simple gains,
        You may put on tolls or take 'em off, inducing party pains;
        You may monkey with the money, but the lack of it remains,
        For the Mother of monopoly is laughing as she reigns.

        Rent! rent! who is it pays the rent?
        A dozen days in every month the worker's back is bent;
        Figure it in dollar bills or work it by percent,
        But with his dozen days he pays just rent, rent, rent.

        You may "minimum" the wages, you may let the women vote,
        You may regulate the railroads with a legal antidote,
        You may jail some Rockefeller, or may get a Morgan's goat,
        But the Mother of Monopoly is laughing in her throat.

        Rent! rent! who is it pays the rent?
        A hundred days in every year a business profit's spent;
        Figure it in "overhead," or state it by percent,
        But all your hundred days are gone for rent, rent, rent.

        You may institute Foundations, you may educate the dubs,
        You may librarize the Bread Line, and establish Slumy Clubs;
        You may ostracize the Demon Rum and eugenize the cubs,
        But the Mother of Monopoly is smiling at your snubs.

        Rent! rent! who is it pays the rent?
        A score of years in life you spent to get one document;
        From your cradle to your coffin you must bow to its assent,
        And that's your little, old receipt for rent, rent, rent.

        I look across the rented world and idle land I see,
        Whose owner doesn't work it, for he's working you and me,
        And on the first of every month all tenants bow the knee,
        And pay the rent of vacant land, in great or small degree

        Rent! rent! who is it pays the rent?       
        The worker's hands are busy and the business back is bent;
        The idle lands advance in price and every single cent,
        Of that advance is paid by us in rent, rent, rent.

The Earth-for-All Calendar: May 12 -- Adam Smith

As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.

— ADAM SMITH, Wealth of Nations, Book I., Chap. 6.

The Last Remnant of Sorcery

THE LAST REMNANT OF SORCERY

For ages sorcerers and magicians kept their secrets, their charms and enchantments to deceive the simple and unwary. At length most of such marvels are relegated to jugglers and sleight-of-hand performers, and we are amused to be deceived. We expect to see things come out of nothing; to see the unbroken eggs come out of the beaten scarf; the guinea pigs come out of the empty silk hat, the ducks come quacking out of the empty box; silver dollars come out of the boy’s ear or empty pocket. But there is yet one piece of magic in which many still believe. That is the magic of land values materializing from a vacant rubbish-covered lot or tract of land on which not a lick of work has been done.

Our modern sorcerers do the trick and roll up the hundreds of thousands of dollars out of nothing, and we look with gaping mouths, wondering where the big roll of bills came from. No question is asked. Something came out of nothing; that is all. Ah! if we could all learn the trick! No more work for anybody!  Why should we work when we can produce money from nothing? Nobody investigates; we have the money on us, but sleep with untroubled mind, for no man can say “That is mine.” True, no man can say “That rake-off is mine”; but all the community could rise and say, “That rake-off is ours. We, all together, created the demand for the lands of the community by our presence and industry. Before we came, the values were not. If we should all go, they would disappear. Your money does not come from nothing, as some suppose. The whole community contributes to your roll. It should be ours to pay our taxes with. For lack of it we are fined for our houses, furniture, machinery, crops, merchandise, etc.”

Oh, come off with your magic of getting something for nothing! Take your chances with the rest of us, who earn our money by work. We have been shown, and are on to your magic. We are going to vote for Amendment Number 20.” Thus will sorcery fade before reason. —Lona I. Robinson, in The Great Adventure, October 23, 1920

The Earth-for-All Calendar: April 3 -- Tolstoy

"The land is common to all. All have the same right to it; but there is good land and bad land, and everyone would like to take the good land. How is one to get it justly divided? In this way: he who will use the good land must pay those who have got no land of the value of the land he uses," Nekhludoff went on, answering his own question. . . . "Well, he had a head, this George," said the oven builder, moving his brows. "He who has good land must pay more."

— COUNT TOLSTOY, Resurrection, Book II., Chap. 9.

Tolstoy has rightly discerned the evils which follow the uprooting of the people from fostering Mother Earth, and the incubation of a day-wage-earning, urban, industrial proletariat.

— MAX NORDAU, Degeneration, p. 163.

The Earth-for-All Calendar: March 31 -- Adam Smith

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.

The Earth-for-All Calendar: March 30 -- Emperor Joseph II

Land, which nature has destined to man's sustenance, is the only source from which everything comes, and to which everything flows back, and the existence of which constantly remains in spite of all changes. From this unmistakable truth it results that land alone can furnish the wants of the state, and that in natural fairness no distinctions can be made in this.

— EMPEROR JOSEPH II., in Oestreichische Geschichte fur das Volk, Vol. XIV. (Vienna, 1867).

The Earth-for-All Calendar: March 27 -- Paine and Penn

Every proprietor, therefore, of cultivated land owes to the community a ground rent (for I know of no better term to express the idea) for the land which he holds.

— THOMAS PAINE, Agrarian Justice, Paine's Writings, Vol. III., p. 329 (1795-6).

If all men were so far tenants to the public that the superfluities of gain and expense were applied to the exigencies thereof, it would put an end to taxes, leave never a beggar and make the greatest bank for national trade in Europe.

— WILLIAM PENN, Reflections and Maxims, Sec. 222, Works V., pp. 190-1.

The Earth-for-All Calendar: March 26 - Spinoza

Let the fields and all the soil, and, if possible, even the houses, belong to the state, that is, to him which is the depositary of the right of the state, so that he may let them out for an annual rent to the inhabitants of the cities and the cultivators. This will exempt all citizens from extraordinary taxes in time of peace.

— SPINOZA, Tractatus Politicus, Chap. VI., On Monarchy, Sec. 12.

Developer Inks 99-Year Lease

The remarkable thing about this story, to my eye, is that the size of the lot isn't even mentioned!  It is worth $1 million land rent per year, and one might infer from the information provided that the lot is about 10,000 square feet, or less than 1/4 acre.

Capitalized at 5% (also known as "20 years' purchase") the lot would sell for about $20 million.

I assume that in addition to the land rent, the tenant pays the property tax on the land.  So the entire $1 million annual land rent flows out of NYC, to the property's owner, in Marshall, Virginia.

What, pray tell, has the land owner done to earn that land rent? 

Consider how many people's wage taxes and sales taxes could be lifted, and what that additional spending power could do for the local economy.  Consider what would happen if there were no taxes to be paid on the apartments or on people's condo structures.  

Or NYC can just keep letting the land rent leave the city, and even leave the country, continuing to flow into private pockets, just as if they'd rendered someone some service and earned it!

Land rent is natural public revenue, and we permit landlords to privatize it.  Aren't we generous with our patrimony?  (Leona told us the truth!)

Karl Fischer | Developer Inks 99-Year Lease | East Village.

The developer of a nine-story Karl Fischer rental apartment building planned for a corner site in the East Village signed a 99-year ground lease that requires payments each year of about $1 million.

The development company, YYY Third Avenue, signed the long-term lease for the vacant site at 74-84 Third Avenue, at 12th Street, April 27, 2011, however, a memorandum of the lease was not recorded in public records until last Wednesday, city property documents show.

A source citing city property records said the lease payment, which is not specifically recorded, could be inferred to be about $1 million per year. Prior to the document’s release, the annual lease cost was not known.

The prolific and controversial architect Fischer filed plans to build an 82,000-square-foot, nine-story residential building with 94 units, city Department of Buildings online records show. The permit has not been approved and is pending, DOB data indicate, and is to include nearly 9,511 square feet of retail, as well.

You might also be intrigued by the URL for the story ... I'm not sure what to make of it.

Bob Andelson: An Open Letter to Pope John Paul II

Open Letter to Pope John Paul II

by the late Robert Andelson

Your Holiness,

THE QUESTION OF MISERY

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:

WHY?

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.

OUR PRAYER

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.

 

The Earth-for-All Calendar: March 9 -- Spence

While I was in the wood alone by myself a gathering of nuts, the forester popped through the bushes upon me, and asking me what I did there, I answered, "Gathering nuts." 

"Gathering nuts!" said he; "and dare you say so?"  

"Yes," said I.  "Why not? Would you question a monkey or a squirrel about such a business?"

 .   .  "I tell you," said he, "this wood is not common; it belongs to the Duke of Portland."  

"Oh! My service to the Duke of Portland," said I; "Nature knows no more of him than of me. Therefore, as in Nature's storehouse the rule is, First come, first served, so the Duke of Portland must look sharp if he wants any nuts."

— THOMAS SPENCE, Pig's Meat (1793)

in Land for the Landless (Wm. Reeves, 1896), pp. 7-8.

The Land Questions: #38: Mining

38. Mining companies which mine on public lands pay far less to the Federal government than they pay on privately held lands. 

A.  That's fair, because the private landholders are better negotiators

B. That's fair, because the 1872 Mining Act set the price, and it wouldn't be fair to change the business environment after setting the rules.

C. That's fair.  Corporations need subsidies to create jobs.

D. That's unfair, and the federal government should be getting just as much from the miners as the private landholders are getting

E. That's unfair, and not only should the federal government be getting more from the mining companies, but the federal government should be collecting a significant portion of the royalties now privatized by private and corporate landholders, since we're all equally entitled to nature's bounty.  This would permit us to reduce other taxes on wages and production, and perhaps lead to a citizen's dividend, similar to the Alaska Permanent Fund

F. That's unfair, because the 1872 Mining Act was based on old prices and old mining technology.

G. Your reactions?

 

The Land Questions: #35 -- the land in the path of progress (1)

a bit out of sequence ...

35. He worked hard.  He played by the rules. He bought up land before the interstate highway was announced, and his widow and orphans now have a very valuable land portfolio, for which others will pay a high purchase price or high lease prices for generations.  Is it right to exact an estate tax of 50% or so on the true market value of that estate?

A. No! Widows and orphans must be protected!  We wouldn't want them to have to depend on the social safety net.

B. No! The dollars he spent to buy that land decades ago were already subject to an income tax -- maybe two (federal and state) -- and the heirs are entitled to keep all the increase from the purchase price, even if that is a 20% increase, or a 200% increase, or a 2000% increase, over the purchase price.

C. No! The man had foresight, and we ought to honor, reward and encourage that!

D. No!  The interstate highway could have been re-routed, and the man and his widow and children could have been left high and dry.  They took a risk, and we ought to reward them for their brilliance!

E. An estate tax is a good way to capture this socially-created windfall once per generation.  After all, he can't take it with him.  Half for the heirs, half for the community that created the value. Seems fair, and keeps them out of the social safety net.

F. An estate tax is better than nothing, but it is a poor alternative to collecting some significant portion of the rental value of the land, month in and month out, whether that rental value be low (before the interstate highway's route is determined) or high (after it is announced and built, and the community grows up around that highway).

G. Your suggestions?

The Land Questions: #37

37.  Our ancestors bought or stole the land which the ancestors of some of those now identified as "Native Americans" relied on.  How should we and our children pay back them and their children?

A. By giving them the privilege of selling cigarettes without taxes, forgoing revenue that could help meet the health costs associated with smoking, both for smokers and for those who live with them.

B. By giving them the privilege of running casinos, even if a percentage of that revenue must be contributed to the state, and even if gambling is creates tremendous problems for some individuals in society, beyond those who actually gamble.

C. By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever.  (Similar to the Alaska Permanent Fund)

D.  By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever, and providing a double share to those who are starting from a disadvantaged position for some fixed number of years

E. By collecting from everyone who owns land and natural resources the annual economic value, paying the costs of government and common spending from that source, producing equal opportunity for all.

F. Your suggestions?

 

The Land Questions: #30 -- Public Lands

30. What should we do with our public lands?

A. Sell them off at the current price, about $5 per acre, per the 1872 Mining Act, even if they contain minerals worth billions of dollars.

B. Sell them off to the highest bidder, as soon as possible

C. Sell them off to any bidder, as soon as possible

D. Lease them for fixed terms, to the highest bidder, with future lease prices to be calculated with an eye to making it profitable for the tenant

E.  Lease them for fixed terms, to the highest bidder, and then repeat the auction in 10 years. Maintain extensive online databases so that the lease descriptions are visible to all, and the lease expirations are well advertised to all who might be interested in bidding.  Make it the landlord's business to get high quality unbiased appraisals of tenant improvements, so that tenants can make sensible improvements and be secure in them.  Use the revenue to reduce other taxes which burden the economy.

F. Lease them out, at market rates, with the proceeds used to generated a citizen's dividend.  If there is a monopoly or oligopoly, break it up so that there is a genuine market.

G. Keep renting them out at whatever price they're now receiving; we don't want to upset anyone's plans or privileges.

H. Your suggestions?

Earnings and findings -- earned and unearned income

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.

From The Single Tax Year Book (1917)

Brief Statement of Single Tax Philosophy

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.

Another motto: Save the Rent for Society

Save the rent for Society.

That's short and sweet.  I came across it in The Single Tax Year Book for 1917, in a chapter about the Single Tax in Germany.

The value of land is the day-to-day product of the community

The taxation of all property at a uniform rate is made necessary by the constitutions of about three-fourths of the States of the Union. The taxes on chattels, tools, implements, money, credits, etc., find their condemnation from the Single Taxer's point of view in those ethical considerations which differentiate private from public property. Where there arises a fund known as "land values," growing with the growth of the community and the need of public improvements, it is not only impolitic, it is a violation of the rights of property to tax individual earnings for public expenses.

The value of land is the day-to-day product of the presence and communal activity of the people. It is not a creation of the title-holder and should not be placed in the category of property. If population deserts a town or portions of a town, the value of land will fall; the land may become unsalable. When treated as private property the owner of land receives from day-to-day in ground rent a gift from the community; and justice requires that he should pay taxes to the community proportionate to that gift.

"Land value" or "ground rent" as the older economists termed it, is a tribute which economic law levies upon every occupant of land, however fleeting his stay, as the market price of all the advantages, natural and social, appertaining to that land, including necessarily his just share of the cost of government.

excerpt from The Single Tax Year Book (1917)

The Land Questions: #21 -- Paying for Transportation Infrastructure

21.  The creation of a new subway line raises the land values near each of the stations.  Who should pay for the building of the subway line?

A. Riders of the new subway line

B. Riders of all subways in the system.

C. Riders of all mass transit in the metro area.

D. Drivers of cars and trucks, all over the metro area, via taxes on their fuel purchases (that is, in proportion to miles driven and the fuel efficiency of their vehicles)

E. Drivers of cars and trucks, all over the metro area, via an annual surcharge on their registration

F. Drivers of cars and trucks, all over the metro area, in proportion to the value of their cars, owned or leased

G. Drivers of cars and trucks, via tolls when they use bridges and tunnels, or HOV lanes, or certain highways

G. The taxpayers, via increased sales taxes on their purchases

H. The tourists and business travelers, via hotel occupancy taxes and taxes on rental cars.

I. Passengers in taxis, via a surcharge on their fares.

J. The homeowners, via taxes on their homes

K. Drivers, commercial and individual, via taxes on fuel purchased within the city

L. Employees all over the metro area, via a payroll tax

M. The tenants of commercial buildings in the heart of the central business district

N. All landholders, paying equally (a parcel tax)

O. All landholders, in proportion to the size of their lots

P.  Landholders, in proportion to the value of the land they hold, without regard to the buildings or their contents.  Those whose land values are raised by their proximity to the new line will see a proportional increase in their share of the tax burden; those far from the new line will not.

Q. Your suggestions?

Downton Abbey: The Landed Gentry

I had the pleasure of watching part of a marathon of the second season of Downton Abbey yesterday, knowing that I'd missed a few shows -- and want to watch them all in sequence.

The setting of the show raises some questions one might want to think about.

1. What sort of wages do all the "downstairs" employees receive?

2. What employment alternatives are available to them?

3. How does the owner of Downton Abbey afford to pay for the services of all those workers, in addition to the non-wage costs of maintaining the castle and the surrounding land, which is an overwhelming job -- and passion -- for him?

4. Is there a middle class in that town?  On what are their fortunes dependent?  How are they different from the staff at Downton Abbey?

5. What are the opportunities for the children of the house staff at Downton Abbey to have a different life from their parents?

6. Can others prosper?

7. What sorts of ideas, particularly on public policy, maintain the status quo?

8. Why is having the property pass intact to one person so important?  What would happen if it were divided among several heirs?

9. Do you think there are small holdings in the same area, where individual families can live, work and prosper, or a series of large holdings like DA?

10. Are people unemployed or underemployed? Are their opportunities limited by the system, particularly if they care about staying close to family?

This is off the top of my head.  I'm charmed by the series, and at the same time, am puzzled by how much I enjoy watching it.  (Good writing, of course.)

Mason Gaffney: An Alternative Reform

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"

I see that there continue to be people who see the stupidity of Proposition 13 -- see http://www.dailyrepublic.com/opinion/letters-editor/time-for-a-petition-against-proposition-13/ Perhaps they will find this of use.  Georgists recognize Prop 13 as the antithesis of logical and just taxation.

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."

You can read more about the Poor Widow by clicking on the "widow's skirts" link at left, in the tag cloud, and by reading Bill Batt's Property Tax Relief Measures: Answers to the "Poor Widow " Argument (or the pdf version)

• 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:

In Arden Town (1914)

I stumbled across this one by accident, and thought some might enjoy it.  Arden is a community on the north side of Wilmington, Delaware, USA, near the Pennsylvania border.  In more ways than one, it is the high point of Delaware.  (For a more contemporary look at Arden, check out the 2007 article in Delaware Today with the tongue-in-cheek title, "Hey, Where are All the Nudists?") Mike Curtis, whose essay, Taxes Kill Jobs, appears a few items below this one, lives in Arden.

The quote about "the land belongs in usufruct to the living" is from Thomas Jefferson.  You can read more about the idea here.

http://paperspast.natlib.govt.nz/cgi-bin/paperspast?a=d&d=EP19140509.2.122

1914-05-09

Evening Post, Volume LXXXVII, Issue 109, page 10

In Arden Town
Bird and Bush Life Sacred
Single Tax in Practice

Florence A. Burleigh contributed to that staidest of American journals, the Springfield Republican, a most interesting article on the Town of Arden, which is in Delaware.  In May, 1900, Frank Stephens and Will Price, artists, who had long dreamed of a village colony where love and justice should take the place of strife and injustice, found a piece of land near Wilmington, Delaware, which they immediately secured and started what is now a busy little village of 120 leaseholders, about 60 dwellings and 250 residents, 80 of whom remain all winter.

These two men had for many years believed that "the earth belongs in usufruct to the living," and with Henry George that the only way to secure this was for landholders to pay to the community annually the value of the land they held.  They also believed that art, music, and the drama were a very important -- indeed, the most important -- part of life and they agreed with William Morris in his "News from Nowhere" when he said, "We like these pieces of wild Nature and can afford them, so we have them. . . Go and have a look -- and tell me if you think we waste the land by not covering it with factories for making things that nobody wants, which was the chief business of the 19th century."  So they set apart a green in the centre of the 160 acres -- a part of which was for sports and an outdoor theatre -- and much of the woodland.

For a few years Arden remained scarcely more than a dream; but one by one little picturesque bungalows appeared and soon an inn or "guest-house" was found necessary in order that visitors might find an over-night shelter and a simple meal.  Next came a club house, planned and made by the Ardenites out of an old but substantial barn standing on the place.

Various industries -- carpet weaving, leaded glass, cabinet-making, etc. -- are carried on and many of the leaseholders have little gardens.  There are at present a craftsmen's guild, having in charge the village industries, a folk guild, having in charge matters concerning hospitality and entertainment; players' guild, having charge of the dramatics; gardeners' guild, "including tillers of the soil and those who tell others how to"; a housewives' guild, scholars' guild, educational  work, and several other guilds.

The woods are kept free from underbrush but otherwise are left untouched and no one is allowed "to hunt or fish on any of the lands of Arden, or cut timber or fence in woodland or keep the land in such disorder as shall in the opinion of the majority of the residents of the community be injurious to the rights of others."

A clearing the form of an ampitheatre with evidence of numerous fires in the centre of it is the place where, every Sunday evening throughout the warm season, the Ardenfolk and their guests go with lanterns and rugs to watch the big fire which is built by some of the young men and boys, and sing from the Arden song book or listen to readings from Uncle Remus or other books for an hour.  As the fire dies down, the ghostly folk file slowly back with their lanterns through the dark wood and soon there is no sound but the crickets or an occasional owl.

Saturday night is devoted to the open-air theatre, which is in the centre of the green and has a grassy stage about 20ft long, with a large rock at the back, and exits made by openings in the shrubbery. At each end of the state, which is footlighted by large oil lamps with reflectors, is a white column which gives dignity to the place.  The seats are built in a semi-circle -- or, more strictly speaking, the long bench, for everything is quite primitive -- and the "front row" is cut out of the earth and grass-covered.  The players file to the theatre and across the stage, already costumed, and the play begins.  "Julius Caesar," "The Merchant of Venice," and "Romeo and Juliet" are the favorites; and if this might seem ambitious, the reply would be that the object is not so much the entertainment of the audience as the education of the actors.  When the play is over -- and as it begins early it ends early -- those who care to adjourn to the clubhouse to dance.  The plays, the sports, the pageants, and the campfire -- all are as much a part of Arden as the industries, and "the spirit of Arden pervades everything."

One of the dreams which has not yet been realized but which is surely going to be is a church on a sunny slope which shall be open at all times for anyone, no matter what his creed, who cares to enter in.  The design is already chosen, square-towered and of stone, early English.

ONLY LAND IS COMMON.

But there must be a business side to every such undertaking and Arden is no exception.  It is not a community in the sense in which the word is often used, for nothing is held in common except the land, and one of the strongest beliefs is that of individual freedom so far as it is consistent with the equal freedom of everyone else.  Even one's time is his own, for it is an unwritten law that no one shall interrupt another in his own domain when the warning white flag is at the door.

One enters Arden from the country road, by means of steps over a stone wall under a rustic arch upon which is cut in graceful letters, "You are welcome hither."  The path winds under large oak and chestnut trees past blackberry bushes and, in the fall, goldenrod and asters.  The visitor usually arrives in Arden later than the resident, because he has been obliged to stop on the way to pick flowers or admire the beautiful surrounding country.

The visitor passes one or two little cottages right up to the shop, which often is called "the red house," and he has his first view of Arden.  He sees the green with the wood at the rear, but otherwise surrounded by "the Admiral Benbow," "the lodge," "the monastery," the picturesque rough-plastered inn, "the Homestead," and other cottages of varying size and architecture.

THE LAND LAWS

Land cannot be bought in Arden, but all lots are assessed to "equal as nearly as possible the full rental value of the land, excluding improvements, and the rentals so collected shall be expended in the payment of all taxes, so far as said rentals will suffice, so that the leaseholders shall be exempt and free of all direct taxation to that extent, and thereafter for such communal purposes as are properly public in that they cannot be left to individuals without giving them an advantage over others."

Although Arden is a single tax colony in the sense that no one pays any direct tax except that on land values, among the residents are Socialists as well as Single Taxers, and people of no definite economic belief who go there to enjoy the freedom from conventionality. All the sites are taken for 1914, the rents amounting to £400.  Besides the little homes, the inn and the guild-house, are a laundry, a summer school, and the craftsmen's show, which has a dozen rooms for bakery, store, studios, and for rug and furniture making.

EDUCATION SYSTEM

The "organic school" is unique in that no desks were used, only tables and chairs, and that the children have to be sent home instead of being sent to school.  Occupations take the place of lessons, on the principle that the conscious reasoning into which the children are plunged upon entering school retards the development of the reasoning power for some years.  If occupations were substituted for 'lessons' the reasoning power would develop unconsciously and naturally, thus insuring a stronger fine mentality.  Children should not consciously strive to know any more than they consciously strive to grow.  Singing, dramatisation, stories of literature and history, field geography, and Nature study in the form of walks -- observation and investigation, gardening, creative handwork, art work, and fundamental conceptions of numbers, may occupy the children from six to nine years of age, without the use of books, excepting where the child really desires to learn to read.  At nine or ten the child may come into the use of books, not by having 'lessons' assigned, but for the pleasure of finding out what the books can tell with the assistance of the teacher.

The affairs of the town are managed by three men, one of whom is chairman.

The Evening Post was founded by Henry Blundell and began publication as a daily in Wellington on 8 February 1865. Blundell was born in Dublin in 1813 and worked for nearly 30 years at the Dublin Evening Mail. In 1860 he migrated with his family to Melbourne. Blundell moved to New Zealand in 1863 and worked on the Otago Daily Times.

Who are the Criminals? --Henry George, Jr., 1901

I am including this because I find it timely and timeless; because it provides a good simple mathematical look at the perversity of our current tax system, and because it illustrates my notion that when Leona Helmsley said "WE don't pay taxes; the little people pay taxes," she was not describing tax evasion but actual tax structures.

Henry George, Jr., was a U. S. Congressman.  His most famous writing is "The Menace of Privilege." 

WHO ARE THE CRIMINALS?

BY HENRY GEORGE , JR.
Copyright, 1901, by The Abbey Press, 114 Fifth Avenue, New York

I.    Who are the Criminals? 5
II.   French Aristocracy of Privilege 6
III.  New York Aristocracy of Privilege 10
IV.  Robbery of Masses by Classes 12
V.   Nature and Extent of Robberies 13
VI.  How to Stop the Robberies 18
VII. The Criminals 23

I.    WHO ARE THE CRIMINALS?

In considering the problem of how to check or control vice and crime in New York the question at once raised is: Who are the criminals? Who are they who cause these dreadful evils in the community? For unless we know exactly where the disease lies how can we attempt a remedy?

II. FRENCH ARISTOCRACY OF PRIVILEGE.

When the French Revolution broke loose the people followed the lead of men who seemed no better than a pack of devils, for they maimed, they brutally tortured and they slew. Women, whose only offense was that they were members of an arrogant and grinding aristocracy, were stripped naked, treated with every indignity and killed with every mark of ferocity. Old men and young children belonging to the upper classes were butchered, and persons of blameless life and humane intention were trampled under foot when they attempted to stay the carnival of blood.

Who will dare say that these revolutionary leaders, these butchers, were not criminals — criminals whose bloody hands must shine down through history? They were men turned to monsters; brutes with human intelligence, striving for new ways to torture and kill.

But whence came they? Not from without. They sprang up within. They represented the spirit of retaliation — of fiendish retaliation for the centuries of wrong done them and theirs. They were the progeny of poverty made by robbery.  Their deeds were the deeds of monstrous criminals, but they themselves were the spawn of hideous injustice — an injustice that gave to the few riotous feasting and gorgeous raiment and to the many rags and black bread filled with maggots.

The aristocrats during centuries of power had appropriated the soil of France, and all other Frenchmen had to purchase the privilege of living in their native country.  Not content with this, the upper classes had thrown upon the masses all those heavy taxes which it was the plain intent only the landowners should bear. They shifted upon the common people all the expenses of an extravagant, aristocratic government, and through ground rents sucked away all the people's remaining substance, save just enough to keep them alive and at work. Who were making the masses so poor and wretched was as plain as day. The masses themselves could see, and when they raised the sword against the aristocracy all hell seemed to break loose.

Who were the criminals? Why, of course they were criminals — horrible, revolting criminals — who did this guillotining, who committed these butcheries.

But who made these criminals? Clearly those who bore so heavily upon the people — the aristocrats, who kept the people in fearful poverty and ignorance which bred the spirit of bloodthirsty tigers.

The aristocracy, therefore, were the primary, the real criminals.


III. NEW YORK ARISTOCRACY OF PRIVILEGE.

I wish to proceed with greatest caution, with utmost conservatism. Yet candor compels me to ask: Have we not in our community an aristocracy of privilege — an aristocracy far more rich, far more powerful than was the aristocracy of old France? And have we not a corresponding poor class? Is it not true that half the population of Manhattan Island is living in what Ex-Mayor Hewitt rightly calls "those terrible tenements?"

That Prince of the Church, Bishop Potter, has proposed in the emergency that we have noonday prayer meetings. By all means, we all say. Let us bow ourselves before Almighty God and ask for relief from this social scourge. Yet what if, while we pray, we abate not the power of our aristocracy of privilege; what if we do nothing to mitigate the poverty of the million tenement dwellers?

The distinguished divine has also proposed a military police. If that were good, would not a local standing army be better? It would keep order, at least for a time. But would it cure the general poverty among the masses? Would it not rather act like a lid fastened down on a volcano — work well, until fire and molten stone and destruction belched forth? What then?


IV. ROBBERY OF MASSES BY CLASSES.

Assuming that we are sincerely trying to make civic conditions better, that we are seeking a cure (if there be a cure) for the general vice and crime in the community, should we not ask ourselves some plain questions? Is it not the truth that we have an aristocracy? Is it not the truth that we have a poor class? Is it not certain that the rich are growing richer and the poor poorer and more numerous?

I believe that there can be but one answer — yes.

Yet I can see no reason for this state of things unless it be that the classes are robbing the masses.


V. NATURE AND EXTENT OF ROBBERIES.

LET us consider how the classes may be robbing the masses into poverty.

It is said that when the first Dutchmen came sailing into New York Bay they bought Manhattan Island for $24. That was for the land alone, no houses or other improvements being here. Today the selling value of the bare land of this same Manhattan Island is at least $3,000,000,000. Those who possess the land of this island, now get what is equivalent to a ground rental of $150,000,000 a year, with this sum steadily swelling. The ground rental of Greater New York cannot be less than $225,000,000 yearly.

This vast sum is paid over to the landlord aristocracy — for what? For doing nothing. The people multiplied from a ship's crew to several millions in and about the island and behold! the vast value of land which in the beginning sold for but $24. The increment of value obviously has not been produced by individuals; it is entirely aside from and in addition to the value of improvements, which spring from human labor, which are produced by individuals. This increase in land value is a publicly-made value. It of right belongs to all the people. Do all the people get it? No, the few whom we recognize as the owners of this land claim that value and get it. The people at large in the community get nothing. Do not these landed aristocrats — of which the old French nobility were in many respects prototypes — rob the community? Do they not go far toward robbing a large part of the people into poverty?

Take another instance of robbery of the many by the few. Observe what we are doing about public franchises. A public franchise is a public right of way, a public highway. Modern civilization, with its intense centralization, its condensed population, and its interdependence of individuals, makes these highways of vital importance to the community. They are the arteries of the body-social, the channels of intercommunication and transportation, of heat, and water, and light, and power, and sewage. Were they suddenly destroyed, a large part of the population would die as quickly as a member of the human organism withers up and dies when the flow of blood is cut off from it.

Then if these public franchises, these public rights of way, these public highways, are so vital to the body-social, so necessary to the well-being of the people, what should be our policy toward them?  What is our policy toward them? Why, in the case of water and sewage we treat them as public property, operating them publicly through public officials. But what do we do in respect to the other franchises? What do we do regarding street railroads, telephones and telegraphs, electric lighting and heating and gas, and steam supply? All these public franchises are treated as if they were private franchises. Upon all these public highways we allow private individuals to set the claim of ownership; to make charge upon the people; make charge upon the body-social for its blood, as it were. And a conservative estimate of the annual value of these public franchises in Greater New York at this time is $30,000,000.

Here, then, we have two forms of grand, constant, continuous robbery of the people — an aristocracy of privilege appropriating public ground rents and public franchise values, so that a few of the population are enabled to live in palaces while a million crowd into tenements.


VI.   HOW TO STOP THE ROBBERIES.

Now the masses of the people of Greater New York lose annually by the appropriations of the landed and franchise aristocracy —

In ground rents	$225,000,000
In franchise values	30,000,000
While they are compelled to pay in various taxes for the support of local government	98,000,000
Which makes in all	$353,000,000

What shorter way is there to relieve poverty and to do social justice than to abolish the $98,000,000 of general taxes, which fall mainly upon industry or the fruits of industry and terribly hamper the masses of the people; and then what more simple than to appropriate for local governmental expenses that sum out of the $225,000,000 of publicly-made land values?  Why not further lighten the load of the masses by taking over into public ownership and management all public municipal franchises, just as are water and sewage now; and then why not cut down their cost of service to the public that $30,000,000 which now represents purely franchise value in the charges of the private corporations that possess and manage them?

For a third step, why not make these municipal utilities free to the public, meeting the expense of their operation by another appropriation of the publicly-made land values?

And for a fourth step, why not appropriate for an old-age pension to every citizen, rich and poor alike, for public parks, for public lectures and concerts, or for any other or for all such purposes — all that still remains of the publicly-made land values?

What would be the result of such a policy? It would be that all the people in Greater New York would be relieved of the burden of $98,000,000 of various taxes; that the great charge of the many branches of the public franchise service on the people would be entirely wiped out and abolished; and that the whole of land values, that is, of ground rents, would be enjoyed by all the people equally, being appropriated for public uses.

Would this make any difference in the community? The welkin is made to ring by the most influential of the tax-payers when, under present conditions, the taxation authorities raise or lower the tax rate even 1%. What, then, would happen if all taxation were lifted from the fruits of toil, if public utilities were made free, and if land values were to benefit, not a class, but the whole people?

Such a tax would be just, because it would fall on this publicly-made value; it would be certain, because land cannot be hidden or lessened in amount; it would force all unused or inadequately used valuable land into its highest use, for no one could afford to hold such land vacant for a speculation, as very many do now.

Land in Greater New York would therefore be cheaper — how much cheaper may be judged by the fact that two-thirds of the land within the city limits, though extremely valuable, is not now used.  This unused land would compete with the used land for users, so that land values in the community generally would fall. At the same time all building materials, being relieved of present taxation, would be far cheaper, making two of the chief elements for house building would be greatly less in cost, and consequently, larger, lighter, better dwelling accommodations in every way could and would be supplied to the masses of the people, and especially to the million now living in tenements.

What would help the poorest would be of direct and indirect benefit to all others in the community; and this would be but one of a large harvest of good results that the people would reap from such a policy.

The privileged classes, the aristocrats, would lose their privileges, but they would have no less rights than any and all other citizens of Greater New York.


VII.   THE CRIMINALS.

That able and public-spirited citizen, Mr. President Baldwin, of the Long Island Railroad, and Chairman of the Chamber of Commerce Anti-Vice Committee of Fifteen, has said that this is not the time for "idealist scheme of reform." But we are trying to put down vice and crime in the community; and the question is: Who are the criminals?

Let us be frank with ourselves: Who are the criminals? Are they the housebreakers, the unfortunate women who walk the streets and the police officials who take blood-money? Or are they those who rob the masses of the people into poverty — deep, biting, degrading poverty?

Are not the aristocrats of privilege, knowingly or unknowingly, the criminals we should first consider in an examination of civic disease in New York?

The Owners of the United States

I recently came across an 1889 article by Thomas G. Shearman, co-founder of the NYC law firm Shearman & Sterling, entitled "The Owners of the United States."  It seems rather timely, and might be of particular interest to the Occupy Wall Street movement.  It appeared in The Forum, in November, 1889.  It refers to an earlier article in the September 1889 issue of the same journal, which appeared under the title, "Henry George's Mistakes." (Based on its content, it seems to me that it would have more accurately been titled "Henry George's 'Mistakes'.")

The Owners of the United States

by Thomas Gaskell Shearman

It has been and still is the boast of the American people, that wealth is more equally distributed here than in any other part of the world.  While every one admits that the old days of New England, in which none was very rich and none was very poor, have passed away, yet it is still believed that the land, buildings, and personal property of this country are owned mainly by the majority of its people, and that there is no danger of any such concentration of wealth in a few hands among us as exists in older and more aristocratic nations.  Statistics as to the wide distribution of wealth, shown by the deposits in American savings banks, by the large number of American farms, and by the supposed high standard of American wages, have been consistently set forth as conclusive evidence that American wealth is substantially owned by the mass of the American people.  The object of the present inquiry is not to determine whether such a condition would be desirable or not, but simply to ascertain whether it actually exists.

Interesting as such an inquiry must be, especially to that laboring class on whose behalf it was supposed that labor commissions were established, little effort has been made by any of them to solve this problem.  The very able gentleman at the head of the National Labor Bureau, after taking statistics of industrial depressions, convict labor, and strikes, seems to have felt that he had exhausted all subjects of special interest to the laboring classes; and he therefore directed the energies of all his assistants to an investigation of the subject of divorce -- the one subject, among all grave social questions, with which the masses of laboring men have the least practical concern.  One who desires to investigate the great problem of the distribution of wealth in this country must, therefore, feel this way, without much assistance from the official representatives of the very class which has the deepest interest in the question.

In the "effete monarchy" of Great Britain, where the laborer, deprived of all the blessings of a protective tariff, has no representative in the national government, no bureau, no commissioner, and only five members of Parliament among 1200, there is nevertheless no serious difficulty in the way of forming a pretty close estimate of the distribution of wealth.  The income-tax returns, combined with those of the probate and succession duties, furnish the means of estimating, at frequent intervals, the proportions in which wealth is distributed among different classes of the nation; while a return of rent rolls, made in 1872, enables us to determine with considerable accuracy the proportions in which the land of the whole country is owned.  Mulhall's estimate is as follows:

	DISTRIBUTION OF BRITISH WEALTH, 1877
	Class	Families	Wealth in Millions	Wealth per Family
	Rich	222,500	$27,781	$125,145
	Middle	1,824,400	$9,142	$4,874
	Working	4,629,100	$1,930	$418
		6,676,000	$38,853	$5,823

From this table it will be seen that one thirtieth part of the English people own two thirds of the national wealth.  With what scorn we have long pointed to these figures; and with what pride have we bade foreign nations to look upon our own beloved land, where such things no only did not exist, but were made impossible by our republican form of government!

Can any light be thrown upon the distribution of American wealth by a study of English statistics?  Let us see.  By adding to the published returns of the personal estates of British decedents a capitalization of the rental value of their estates, at 4% interest, we may form a tolerably accurate estimate of the aggregate wealth, real and personal, of the richest noblemen and bankers of England who have died within the last quarter of a century.  We may then compare these figures with the known wealth of a few American citizens, and thus obtain a starting point for further comparisons.

In this way, we find that the richest of the Rothschilds, and the world-renowned banker Baron Overstone, each left about $17,000,000.  Earl Dudley, the owners of the richest iron mines, left $20,000,000.  The Duke of Buccleuch (and the Duke of Buccleuch carries half of Scotland in his pocket) left about $30,000,000.  The Marquis of Bute was worth, in 1872, about $28,000,000 in land; and he may now be worth $40,000,000 in all.  The Duke of Norfolk may be worth $40,000,000, and the Duke of Westminster perhaps $50,000,000.

There is no official classification of British wealth or rents.  But incomes derived from the profits of  business, exclusive of railways, mines, etc., are classified as follows:

	British Incomes from Business Profits, 1884
	Persons	Incomes	Average Income
	104	50,000 and over	$91,733
	1,192	10,000 to 50,000	17,644
	1,871	5,000 to 10,000	6,553
	1,117	4,000 to 5,000	4,270
	1,947	3,000 to 4,000	3,266
	4,202	2,000 to 3,000	2,282
	13,268	1,000 to 2,000	1,277
	52,765	400 to 1,000	541
	159,198	200 to 400	282
	235,664

The great law of averages may be relied upon as confidently in America as in Europe.  We need only find a starting point; then we may safely proceed to calculations based upon general experience as to the average increase in the number of persons owning wealth, in proportion to the decrease of the amount owned by each individual.  To find this starting point, it will be necessary to give a list of Americans whose wealth is approximately known.  The writer abstains from mentioning in this list a single name concerning which he has any information which might possibly be confidential; and, to make quite sure of this, he omits the names of all gentlemen with whom he has any confidential relations.  The names of person who have died (six of them within one year) will be included, more accurate information being obtainable concerning their affairs than in any other cases. Their estates are nearly all either undivided or in the hands of so small a number of persons as to make no practical difference, while the number of names which have been omitted will far outweigh all possible errors in the list.  No name is given which is not believed, for good reasons, to represent an individual wealth of at least $20,000,000.  The figures indicate the wealth believed to be possessed on the average by each of the persons whose names follow:

	$150,000,000	J. J. Astor, Trinity Church
	$100,000,000	C. Vanderbilt, W. K. Vanderbilt, Jay Gould, Leland Stanford, J. D. Rockefeller
	$70,000,000	Estate of A. Packer
	$60,000,000	John I. Blair, Estate of Charles Crocker
	$50,000,000	Wm. Astor, W. W. Astor, Russell Sage, E. A. Stevens, Estates of Moses Taylor, Brown & Ives
	$40,000,000	P. D. Armour, F. L. Ames, Wm. Rockefeller, H. M. Flagler, Powers & Weightman, Estate of P. Goelet
	$35,000,000	C. P. Huntington, D. O. Mills, Estates of T. A. Scott, J. W. Garrett
	$30,000,000	G. B. Roberts, Charles Pratt, Ross Winans, E. B. Coxe, Claus Spreckels, A. Belmont, R. J. Livingston, Fred. Weyerhauser, Mrs. Mark Hopkins, Mrs. Hetty Green, Estates of S. V. Harkness, R. W. Coleman, I. M. Singer
	$25,000,000	A. J. Drexel, J. S. Morgan, J. P. Morgan, Marshall Field, David Dows, J. G. Fair, E. T. Gerry, Estates of Gov. Fairbanks, A. T. Stewart, A. Schermerhorn
	$22,500,000	O. H. Payne, Estates of F. A. Drexel, I. V. Williamon, W. F. Weld
	$20,000,000	F. W. Vanderbilt, Theo. Havermeyer, H. O. Havermeyer, W. G. Warden, W. P. Thompson, Mrs. Schenley, J. B. Haggin, H. A. Hutchins, Estates of W. Sloane, E. S. Higgins, C. Tower, Wm. Thaw, Dr. Hostetter, Wm. Sharon, Peter Donohue

Trinity Church is included in this list because it is practically an individual owner.  For the purpose of estimating the distribution of wealth, it is obvious that this corporation, which has no stockholders, must be treated as a unit.

It will be said that these estates could not be readily sold for their estimated value.  In a few cases this is true; but it is immaterial, because it is equally true of the property of farmers and other small owners, and so does not change the relative proportion of wealth, which is the only important question.  Our estimate of the whole national wealth is based upon the census of 1880, in which the capital and debts of railway, telegraphy, and steamboat companies were included at par.  But in the foregoing estimates of individual wealth the current market value is adopted, which is much less than par.  For purposes of comparison between different classes the census valuations ought to be adopted all around.  But if they were, the wealth of Mr. Gould would be fixed at over $125,000,000, and that of Messrs. Crocker and Huntington at nearly as much; and the proportionate share of the very rich would be greatly increased.

Making the largest allowance for exaggerated reports, there can be no doubt that these 70 names represent an aggregate wealth of $2,700,000,000, or an average of over $37,500,000 each.  The writer has not especially sought for information concerning any one worth less than $20,000,000, but has incidentally learned of 50 other persons worth over $10,000,000, of whom 30 are valued in all at $450,000,00, making together 100 persons worth over $3,000,000,000; yet this list includes very few names from New England and none from the South.  Evidently it would be easy for any specially well-informed person to make up a list of 100 persons averaging $25,000,000 each, in addition to ten averaging $100,000,000 each.  No such list of concentrated wealth could be given in any other country in the world.  The richest dukes of England fall below the average wealth of a dozen American citizens; while the greatest bankers, merchants, and railway magnates of England cannot compare in wealth with many Americans.

Lists were lately published of 67 millionaires residing in Pittsburgh, of 63 residents of Cleveland possessing in the aggregate $300,000,000, and of 60 persons residing in three villages near New York whose wealth was said to aggregate $500,000,000.  One of the gentlemen included in the last estimate said that if it included one of his neighbors, with whose affairs he is intimately acquainted, it was entirely too low: $750,000,000 would be none too much.  The Goelet estate, in New York City, pays taxes on $25,000,000 real estate.  The mayor of Chicago says that four gentlemen of that city are worth over $20,000,000 each; but only two are included in the above list.  The Boston "Advertiser" lately asserted that there were not 50 millionaires in Boston; but the official tax-list shows that more than 50 families pay taxes on over $1,000,000 each, and 200 persons pay taxes on amounts which clearly show that they are really millionaires.

The facts already stated conclusively demonstrate that the wealthiest class in the United States is vastly richer than the wealthiest class in Great Britain.  The average annual income of the richest 100 Englishmen is about $450,000; but the average annual income of the richest 100 Americans cannot be less than $1,200,000, and probably exceeds $1,500,000.  It follows, inevitably, that wealth must be far more concentrated in the United States than in Great Britain; because, where enormous amounts of wealth are placed in a few hands, this necessarily implies that the great mass of the people have very small possessions.  On the other hand, we know with tolerable certainty what are the average earnings and possible savings of the masses.  The earnings of fully fourth-fifths of American families do not average as much as $500 per annum.  As the average age of busy men is less than 40 years, their savings cannot spread over more than an average period of 20 years.  Farmers being always more economical than mechanics or other laborers of the same income, the savings of farmers, represented by their farms, will afford a maximum standard for the classes to which they correspond.  According to the census of 1880, the average value of 25% of farms was $635, of another 25%, $1,750, and of about 35%, $3,500; the remaining 15% being held by wealthy owners.  To allow, in marketable property, $750 each to the mass of the community, $2,000 each to the next class and $3,500 each to the small tradesmen, highly-skilled mechanics, and others whose condition corresponds with that of the best class of ordinary farmers, will be quite as much as facts will justify; especially when we take out of this highest class, as we must, a considerable number (say one sixth) who, by saving one third to one half of their income, have accumulated four or five times as much as their fellows.

In 1877 the number of British capitalists possessed of over $25,000 each was about 222,000, while the number of persons deriving profits of over $1,000 per annum each from business was nearly 200,000.  The two classes of persons were not at all the same; on the contrary, probably not one third of either class, possibly not even one fifth, was included in the other.  Yet, in the absence of any detailed information as to the distribution of wealth, the classification of incomes must be taken, with much reserve, as the only attainable guide.  But incomes, in their very nature, are much more equally distributed than wealth.  Millions have inomces who have practically no wealth.  Therefore, a computation on this basis will greatly underestimate the concentration of wealth in the higher figures, while it will lead to such an overestimate of wealth in the lower figures as to make it gradually quite misleading.  Such a computation is indeed of no use whatever outside of the first 250,000 families, and must be greatly modified long before reaching that number.

Bearing these considerations in mind, we proceed to estimate the distribution of American wealth.  Judging from the rate of increase in wealth indicated by the last census, it is probably that (estimated by the same method) it now amounts to nearly $1,000 per head, or $65,000,000,000 in all.  In 1880, $2,000,000,000 was invested in public buildings, churches, colleges, charitable institutions, etc.; and this item must be about $2,500,000,000 now.

Taking the number of British incomes exceeding 200 pounds as a basis for comparative classification, starting on the basis of known facts about American wealth, and modifying the figures gradually, for the reasons already stated, we arrive at the following conclusions:

	DISTRIBUTION OF AMERICAN WEALTH, ON THE BASIS OF BRITISH INCOME RETURNS.
	Families	Average Wealth in Thousands	Total in Millions
	10	$100,000	$1,000
	100	25,000	2,500
	1,200	6,000	7,200
	2,000	2,200	4,400
	1,000	1,400	1,400
	2,000	1,000	2,000
	4,000	700	2,800
	13,000	400	5,200
	52,000	150	7,800
	160,000	60	9,600
	200,000	20	4,000
	1,000,000	3.5	3,500
	2,000,000	2	4,000
	9,565,000	.75	7,175
	13,000,310		62,575
	Public property, churches, etc.		2,500
			65,075

Condensing this table, so as to arrange it in three great classes, we arrive at this result:

	DISTRIBUTION OF AMERICAN WEALTH
	Class	Families	Wealth in Millions	Average per Family
	Rich	235,310	$43,900	$186,567
	Middle	1,200,000	7,500	6,250
	Working	11,565,000	11,175	968
		13,000,310	$62,575	$4,813

On this basis, 50,000 families would appear to own one half of the national wealth.

In this table small farmers, skilled mechanics, foremen, conductors, engineers, etc., are included in the "working class," and $968 has been allowed as the average savings of each family in this class -- more than double the highest claim made on behalf of the same class in England, and nearly treble the average deposit in American savings banks.  This amount is certainly too large.  The number of  the very largest millionaires has been kept down to very nearly the limit of the writer's personal information; while in his judgment there must have been at least as many more, of whom he has never heard.  If this surmise is correct, it would add at once $2,500,000,000 to the share of wealth belonging to the millionaire class, and would confirm the writer's rough estimate in the FORUM for September, that 25,000 persons own just about one half of all the wealth of the United States.

Objection will doubtless be made to any estimates based upon British statistics.  Fortunately, Massachusetts furnishes a purely American basis for estimates of the distribution of American wealth.  A list of the largest individual taxpayers in Boston, published this year, including all (exclusive of corporations and executors) who paid more than $1,000 in taxes, and who were therefore assessed at more than $75,000 (the tax being 1.33%) showed the following results:

	BOSTON TAX LIST FOR 1888
	Individual Taxpayers	Amount of Tax	Average Assessed Wealth
	2	$50,000 to 75,000	$4,600,000
	4	40,000 to 50,000	3,205,450
	3	30,000 to 40,000	2,732,570
	8	20,000 to 30,000	1,840,000
	39	10,000 to 20,000	930,000
	133	5,000 to 10,000	500,000
	1,065	1,000 to 5,000	160,000
	1,254

It may be safely assumed that every one who is assessed at $400,000 is really worth $1,000,000; because large estates are never assessed at their full value, and because these assessments include no shares in corporate stock, nor government, municipal, or mortgage bonds, in which a vast proportion of the wealth of the very rich is invested.  For the same reasons, an assessment of $75,000 represents in actual wealth not less than $150,000.  The wealth of the very rich is always more under-estimated by assessors than that of men in moderate circumstances.  Assessments of $400,000 and over are therefore multiplied, in the next table, by two and one half, while those below that line are only doubled.  In both cases the increase is too small.  Boston has less than a forty-fifth part of the nation's wealth, and less than a hundred and thirtieth part of its population.   Multiplying the Boston figures by only 45, it would follow that there are in the United States more than 56,000 persons worth over $150,000 each, of whom at least 8,500 are worth over $1,000,00.  Classifying men of wealth in conformity to the proportion in which assessment returns show that their wealth is divided in Boston, but adding the 70 persons who have been specifically named as averaging $37,500,000, we arrive at the following estimate, which errs only on the side of moderation:

	DISTRIBUTION OF AMERICAN WEALTH, ON THE BASIS OF BOSTON TAX RETURNS
	Families	Wealth in Thousands		Average Wealth in Thousands	Total Wealth in Millions
		over	under
	70	$20,000	$150,000	$37,500	$2,625
	90	10,000	20,000	11,500	1,025
	180	7,500	10,000	8,000	1,440
	185	5,625	7,500	6,800	968
	360	3,850	5,625	4,600	1,656
	1,755	1,875	3,750	2,300	4,036
	6,000	937	1,875	1,250	7,500
	7,000	500	937	650	4,550
	11,000	300	500	375	4,125
	14,000	200	300	230	3,220
	16,500	150	200	165	2,722
	50,000	75	150	100	5,000
	75,000	50	75	60	4,500
	200,000	15	50	20	4,000
	1,000,000	3	15	3.5	3,500
	2,000,000	1.5	3	2	4,000
	9,620,000			.75	7,215
	13,002,090				62,082

 

	Distribution in Classes
	Class	Families	Wealth in Millions	Average per Family
	Rich	182,090	$43,367	$233,135
	Middle	1,200,000	7,500	6,250
	Working	11,620,000	11,215	968
		13,002,090	$62,082	$4,775

On this basis, 40,000 persons own over one half of the wealth of the United States, while one seventieth part of the people own over two thirds of the wealth.

It will be seen that in these tables, which are prepared upon the basis of purely American statistics, the concentration of wealth appears to be much greater than in tables prepared upon the basis of British statistics.  By either table, 70% of the national wealth appears to be concentrated in the hands of a very small minority of the people; but dividing this wealth in proportion to the English ratio, it is distributed among 235,000 families, while dividing it according to the Boston ratio, it is possessed by only 182,000 families.  The truth probably lies between the two; and it may safely be assumed that 200,000 persons control 70% of the national wealth, while 250,000 persons control from 75 to 80% of the whole.

These conclusions are of course very unpalatable to comfortable optimists.  But what other results could possibly be expected, in view of well-known facts?  No one can entertain a reasonable doubt that there has been an accumulation of wealth in a few individual hands in the United States, during the last 25 years, vastly in excess of any which has taken place in other parts of the world.  In no other country have railroad-managers, manufacturers, oil-refiners, mine-owners, bankers, and land speculators accumulated fortunes so rapidly as they have in this.  In no other country, and least of all in England, during the last 30 years, has the burden of taxation been cast so exclusively upon the working class, or the machinery of public taxation been used so unscrupulously for private profit.

In Great Britain, although indirect taxation still constitutes the greatest part of the public revenue, a large share of direct taxation has been maintained, and, as far as possible, all tribute levied by the rich upon the poor, under the pretense of taxation, has been abolished.  The natural consequence is that the disproportion between the rich and the poor in Great Britain is less today than it was 40 years ago, that wealth is more widely distributed, that the middle class is much more numerous, and that the masses are rapidly gaining in power and influence.

In America the drift has been in precisely the opposite direction.  Federal taxation has increased 6-fold since 1860, and the whole of this increase has been taken out of the relatively poorer classes.  At the same time, the profit which is secured to the wealthier classes by the adjustment of indirect taxation in their interest has been increased not less than 10-fold.  The wealthy classes, collectively, have made a clear profit out of the indirect effects of taxation to an amount far exceeding all that they have paid in taxes, although this profit has been absorbed by a minority of even the rich.  But, apart from this, the whole system of taxation is and has been such as to take from the rich only from 3% to 10% of their annual savings, while taking from the poor 75 to 90%.  It is true that the same system existed, in form, before the war; but, taxation being light, the amount taken from each individual was far less, and the disproportion between the rich and the poor not so great, while the profit levied from the poor by the rich was much smaller.  The amount of the burden has increased, and it has been more and more shifted over upon the poor.

It is childish to imagine that, under such circumstances, the concentration of wealth can go on less rapidly here than in Europe.  On the contrary, it has gone on far more rapidly here; and it will continue to do so, at a tremendous pace.

It is intended to confine this paper to a simple investigation of facts, without suggesting remedies; but, to avoid misapprehension, the writer wishes it to be distinctly understood that he is opposed, on principle, to all schemes for arbitrary limitations of individual wealth, whether by a graduated income tax, a heavy succession tax, or otherwise; that he is utterly opposed to communism, socialism, and anarchism; and that he is of opinion that the enormous wealth of the few in this country has been forced upon them by the votes of the very masses who have been impoverished for their benefit.  Populous vult decipi.  The farmers insist upon throwing away their inheritance; and since they are determined to heap their earnings upon somebody, it is well that the list of their chief beneficiaries should be, upon the whole, so respectable.  And, indeed, has it not been clearly explained to us that it makes no sort of difference who owns the wealth of the nation, so long as it is kept at home?

But the facts should be known, without regard to the inferences which may be drawn from them; and we are now prepared to answer the question: "Who own the United States?"

The United States of America are practically owned by less than 250,000 persons, constituting less than 1 in 60 of its adult male population.

Within 30 years, the present methods of taxation being continued, the United States of America will be substantially owned by less than 50,000 persons, constituting less than one in 500 of the adult male population.

THOMAS G. SHEARMAN

 

 

Thomas G. Shearman: Henry George's 'Mistakes'

In September, 1889, Thomas Shearman, co-founder of the NYC law firm Shearman & Sterling, published an article in The Forum, entitled "Henry George's Mistakes."  This was ten years after the publication of Henry George's "Progress and Poverty," which was, by that time well known to most Americans and many in other parts of the world; by 1900, P&P had sold something like 6 million copies and been serialized in many periodicals.  As the first paragraph shows, George's ideas were controversial, particularly with the vested interests who were more than happy with the current structure, and were in a position to spend to influence public opinion.

Shearman is responding to those who thought that George's Remedy (the subtitle to P&P is "An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy") was unrealistic, and in particular, to an 1887 article in The Forum.

Shearman shows why indirect taxes raise prices and the cost of living, particularly for the poor.  Recall Leona Helmsley's statement about taxes: "We don't pay taxes.  The little people pay taxes."  I don't think she was talking about tax evasion; she was talking about tax structures.

I've taken the formatting liberty of presenting some lists contined in paragraphs as bullet points.

 

HENRY GEORGE'S MISTAKES.

Since the mistakes of Moses were so triumphantly demolished by Col. Ingersoll, his example has been followed by numerous writers, who, possibly because they concluded that the Mosaic field has been sufficiently occupied, have devoted themselves to an equally triumphant demonstration of the mistakes of Henry George. Space could not be afforded for even an abstract of these brilliant productions. Crushed by the Duke of Argyll, refuted by Mr. Mallock, extinguished by Mayor Hewitt, undermined by Mr. Edward Atkinson, exploded by Prof. Harris, excommunicated by archbishops, consigned to eternal damnation by countless doctors of divinity, put outside the pale of the Constitution by numberless legal pundits, waved out of existence by a million Podsnaps, and finally annihilated by Mr. George Gunton, still Henry George's theories seem to have a miraculous faculty of rising from the dead. For it is certain that his general doctrines are more widely believed in today than ever before; while the one practical measure which he advocates for present and immediate enactment is accepted by a vast number of intelligent men on both sides of the Atlantic. It is, therefore, still worth while to look into this terrible delusion, and to inquire seriously what are these fatal mistakes which, being so often slain, nevertheless live.

Mr. George has devoted a large portion of his famous book, "Progress and Poverty," to the assertion and illustration of his belief that, all over the civilized world, the rich are growing richer and the poor relatively poorer. He undertakes to trace the cause of this assumed evil to the private ownership of land and the steady increase of economic rent. He insists, with admitted eloquence and earnestness, that private ownership of land must be abolished; but he proposes one remedy and only one, the concentration of all taxes upon ground rent alone. He urges that these taxes should be increased to such an amount as will absorb ground rent. This, in view of statements made by all Mr. George's opponents, would seem to be really only a matter of detail, concerning which any one might be at liberty to entertain, as Mr. Disraeli used to say, a "pious opinion." For they all, with one voice, maintain that ground rent would never be sufficient to meet the existing taxes; and so this question, if any of Mr. George's critics are correct, could never arise.

To a practical mind there are only two important questions involved in this controversy.

• First, is there any undesirable tendency toward the concentration of wealth in the hands of a few?
• Secondly, is the concentration of all taxes upon ground rent alone a real, just, and effective remedy?

 

Let us inquire whether there is any excessive concentration of wealth going on in the United States of America. Leaving mere clamor and unsupported assertions out of consideration, on either side, let us look into facts. As lately as 1847, there was but one man in this country who was reputed to be worth more than $5,000,000; and though some estimated his wealth at $20,000,000, there is no good reason for believing it to have been so great. The wealth of his lineal descendants is estimated at $250,000,000, or over $50,000,000 each. In 1867, in the New York constitutional convention, one of the most prominent delegates stated that he could name 30 men, residing in that State, whose wealth averaged $15,000,000 each. The St. Louis "Globe" recently published a list of 72 persons who were worth, collectively, the whole amount of our national debt, averaging $18,000,000 each. The wealthiest railroad manager in America, in 1865, was worth $40,000,000, but not more. His heir died recently, leaving an estate of nearly $200,000,000; and there are several gentlemen now living who are worth over $100,000,000 each. Within a short period, a number of quiet, unobtrusive men, of no national fame, have died in Pennsylvania, leaving estates of over $20,000,000 each. Twenty living persons, in the oil business, are reputed to be as rich. Forty persons could be easily named, none of them worth less than $20,000,000, and averaging $40,000,000 each. At the lowest reasonable estimate, there must now be more than 250 persons in this country whose wealth averages over $20,000,000 for each. But let us call the number only 200. Income-tax returns in Great Britain and in the United States show that, in general, the number of incomes, when arranged in large classes, multiplies by from three to five-fold for every reduction in the amount of one-half.* For extreme caution, however, we estimate the increase in the number of incomes at a very much lower rate than this. At this reduced rate, the amount of wealth in the hands of persons worth over $500,000 each in the United States would be about as follows:

	200 persons at	$20,000,000	$4,000,000,000
	400	10,000,000	4,000,000,000
	1,000	5,000,000	6,000,000,000
	2,000	2,500,000	5,000,000,000
	6,000	1,000,000	6,000,000,000
	15,000	500,000	7,500,000,000
			$31,500,000,000

* In Brooklyn, N. Y., in 1865, the tax returns showed one income of $600,000, 2 incomes of $200,000, 11 incomes of $100,000, 61 incomes of $50,000, 1,700 incomes averaging $7,000. See also the "Cyclopedia of Political Science," art. "Income Tax."

In Great Britain, in 1872, 3 landlords averaged each $1,100,000 rent, 14 averaged $675,000, and 83 averaged over $250,000. In 1884, the returns of business profits, only, showed 104 incomes averaging $450,000,1,192 of $85,000, 1,871 of $32,000, and 20,534 of $9,000.

This estimate is very far below the actual truth. Yet, even upon this basis, we are confronted with the startling result that 25,000 persons now possess more than half of the whole national wealth, real and personal, according to the highest estimate ($60,000,000,000) which any one has yet ventured to make of the aggregate amount. Nor is this conclusion at all improbable.

Let us test the question in another way. Eastern savings banks show an average deposit of $365. This sum represents the extreme savings of the average thrifty workingman of the East. But even estimating that 20,000,000 workers of 1889, earning an average of less than $400 each, of whom 5,000,000 are women and children, have saved, on the average, $600, still, their aggregate savings would not amount to $12,000,000,000, or $1,100 for each average family. Let us suppose that the 1,000,000 workers of superior class, earning an average of $1,000 each, have saved $3,000 — a monstrous exaggeration. This would make their total possessions $3,000,000,000. The result would be to show that 21,000,000 persons had saved up in the whole course of their lives $15,000,000,000, leaving $45,000,000,000 in the possession of not more than 400,000 persons.

Look again. Excluding churches, public buildings, etc., from the items of wealth enumerated in the census estimate for 1880, it is reduced to $41,000,000,000. Railroads, telegraphs, shipping, mines, quarries, canals, merchandise, and specie count for $13,500,000,000. These certainly do not belong to $400 workingmen. $5,000,000,000 is charged to household furniture, paintings, and jewelry. Two-thirds of this would be an extreme allowance for the 9,700,000 families of the poorer class; but let us allow them more, and estimate the furniture of the 300,000 richer families at only $5,000 each. Farms stand for $10,000,000,000, of which more than one-fourth were owned by landlords and leased to tenants, while one-fifth were so large as to imply wealthy owners; and mortgages were certainly outstanding for more than one-fifth of the rest. Business and residential real estate, water-power, etc., were estimated at about the same value. Of this, at least three-fourths was owned by the wealthy class, either absolutely or by mortgages. On this basis we arrive at the following estimate of the possessions, in 1880, of not more than 300,000 persons:

	Railroads, shipping, mines, merchandise, specie, etc.	$13,500,000,000
	Farms, 45 per cent	4,500,000,000
	Mortgages on farms, 20 per cent	1,000,000,000
	Other real estate	7,500,000,000
	Furniture, etc.	1,500,000,000
		$28,000,000,000

The total national wealth held as private property being $41,000,000,000, this estimate confirms the previous one, that a small minority of the people own two-thirds of the national wealth. Is Mr. George so very much mistaken, in view of these figures, when he asserts that the rich are growing richer and the poor relatively poorer?

A sufficient cause for the immense and growing chasm between the rich and the poor of this country is to be found in indirect taxation. The population of the United States has increased in 25 years from 35,000,000 to 60,000,000. Let us call the average 45,000,000. The average annual taxes for the same period have been about $175,000,000 on imports, $136,000,000 on domestic productions, $14,000,000 on incomes, $25,000,000 miscellaneous, and $300,000,000 State and local taxes, mostly on houses and improvements and personal property. Duties on imports have entailed an average increase of prices on domestic goods to the amount of fully thrice the duties, say $525,000,000. Excise duties, by promoting monopolies, have largely increased prices, as in the well-known case of matches, where a duty of one cent caused an increase in price of' two cents. Let us, however, call this increase only one-fifth of the excise, or $27,000,000. But upon these taxes there are three profits, made by the importers or manufacturers, the jobbers, and the retailers, amounting to not less than 20% in all, or $172,600,000. Two-thirds of the State and local taxes are paid by middlemen, who of course add a profit; but this may be put as low as 5%, or about $10,000,000. The grand total now comes to $1,384,000,000 per annum, as the average annual burden borne by the people for 25 years past. Of this all was indirect taxation, except something over $100,000,000; leaving the average annual burden imposed by indirect taxation at $1,280,000,000.

This burden was distributed as equally as possible by natural laws, in proportion to the expenditure of each income-receiver in the support of his family. As each worker supported, on the average, three persons, including himself, the people may be divided into 15,000,000 families, or rather groups of three.* On the basis of the careful estimate of Mr. Atkinson, 14,000,000 of these must have been supported upon incomes of less than $400 (in my judgment less than $350), 700,000 on less than $1,000, and the other 300,000 on larger incomes. The average annual earnings of the nation during 25 years cannot have exceeded $7,500,000,000. Allowing 15% as savings, destruction, and cost of replacement, and adding to this the tax burdens, which must be paid out of savings, there would remain, as the sum expended in the support of the people, an average of less than $5,100,000,000 per annum. On this the burden of indirect taxation has averaged 25%. We are now prepared to calculate the effect.

* The actual number of real families was much less. It was under 10,000,000 in 18S0, averaging 5 persons each.

Supposing them exempt from taxes, still it would be unreasonable to expect the mass of the laborers to support their groups of three on less than $300 a year. Their burden of taxation, then, has averaged 25% on this, or $75 a year. Contrast with this the case of men who enjoyed an income of $1,000,000, which a fortune of $15,000,000 would on an average easily have produced in simple interest during this period. Allow them $100,000 each, for a modest living; on which their tax would be $25,000 each. From what fund would these taxes be paid? Obviously, from what would have been saved, but for taxation, not from what was spent. This fund, in the case of the masses, would amount to $100 each; tax, $75. In the case of the great millionaires, $900,000; tax, $25,000. Tax on the property of the very rich, less than 3%. Tax on the property of the masses, more than 75%.

What would be the result, at the end of a year, on these two classes? Assume only 200 such very wealthy men; yet their savings would be, under such taxation, $175,000,000. Assume only 600 more, with incomes of $500,000 each, spending $50,000, and taxed therefore $12,500; their net savings would be $437,500 each, or $262,500,000 in all. Thus 800 rich men would save $437,500,000. The savings of the 14,000,000 laborers could not exceed $25 each, or $350,000,000. But, if taxes could be dispensed with, the savings of the millions of poor men would have reached $1,400,000,000, while those of the 800 rich would not have exceeded $450,000,000.

Here is a mathematical demonstration that the mere fact of indirect taxation is sufficient to strip the poor of three-fourths of their natural savings, and to concentrate a majority of the wealth of the community in the hands of an infinitesimally small part of its number.

What, then, is the remedy proposed by the wild fanatic whose blunders we are considering? It is threefold.

• First, the total abolition of indirect taxation.
• Secondly, the substitution of a single tax on ground rent, the only sufficient form of strictly direct taxation which has ever been invented.
• Thirdly, the gradual increase of this direct tax, if necessary to that end, to an amount sufficient to absorb ground rents. This is all.

The third branch of this proposition is the only one which has brought the penalties of everlasting damnation upon Mr. George's head, from the hand of Dr. Van Dyke. But Prof. Harris and Mr. Atkinson are sure that they have saved his soul, at the expense of his arithmetic, by demonstrating that rent is a very insignificant item, which would not suffice to meet the present necessary taxes. Assuming, for the moment, that Mr. George's arithmetical critics have delivered his soul from Sheol, let us try to rescue his body from the lunatic asylum.

Every form of tax upon personal property or improvements upon land, whether in the form of a tariff, an excise, a license, or a so-called "direct tax" upon their value, is, in the inherent nature of things, an indirect tax. It is and always must be shifted from the original tax-payer to the final consumer. In many individual cases the original tax-payer is unable thus to shift the tax; but in that event he is crippled in business, and, if the difficulty is permanent, he is ruined and driven out of business, to give place to a shrewder man, who makes the customer pay the tax in the end, with a bigger profit than would have contented the weaker man.

There are no direct taxes worth discussing, except the income tax, the succession tax, and the tax on land, valued without reference to its improvements. The income tax opens the door to innumerable frauds, and puts a premium upon perjury and corruption. If adopted in this country as the sole method of taxation, it will open the way to such plunder of the honest rich as will make them sigh for Henry George and his tax on rent. Poor folk and rascals will escape from all taxation whatever. The succession tax will fall exclusively upon the rich. If made high enough to support the cost of all government, it will fail, because it will be evaded. There remains only the tax on land values, or the natural rent of land, irrespective of improvements.

This tax is absolutely direct. It cannot be evaded. It cannot be shifted by the original tax-payer. That is an axiom of economic science. If it were not so, there would not be a particle of the clamor which is raised against it. The thunders of the pulpit would have slept forever, if the land-owner could make poor folk pay his land tax, with a little profit. The adoption of this tax would therefore put an end to all the unnatural impoverishment of the poor and enrichment of the rich, which take place under the present system. It would amount to a total abolition of taxation, as to that vast majority of the poor who own no land. Whereas now they pay both rent and taxes, then they would pay rent alone. This simple fact is a complete answer to the inquiry: "How are the masses to get the benefit of taxing rent?" As to such of the poor as own land, they would be relieved from the taxes which they now pay on personal property and improvements, that is, from more tax than would be added to their land tax. For we need reckon none among the poor who own more than $3,000 worth of land clear, that being more than the average value of improved farms; and those who own less than $6,000 worth of improved real estate are now paying more taxes indirectly than they could ever be required to pay under the single-tax system.

Let us briefly consider "Henry George's Mistake about Land," as set forth by Prof. W. T. Harris, in the Forum for July, 1887. That "mistake" lies in his assumption that ground rent would be sufficient to defray all the expenses of government, national, State, and local. Prof. Harris, finding that the official assessment of real estate in this country, in 1880, was about $13,000,000,000, and estimating that this was two-thirds of the market value, and the value of the land alone about one-half of the whole, or somewhat less than $10,000,000,000, calculates the ground rent at 4% on this sum, or $400,000,000 per annum; which of course is wholly insufficient to meet the taxes of $700,000,000 levied in 1880. He then refers to Great Britain and Ireland, where, he says, land forms only one-fifth of the total wealth, with an annual rental of £65,442,000. As British taxes altogether amount to about £118,500,000, it is clear that, if this estimate is correct, the single tax would not suffice to meet British taxes.

Taking first the case of the United States, the census report of 1880 shows conclusively that assessments are worthless, as a means of estimating real values. They vary from 10% to 70% of the true value of real estate; and no average can be estimated from them. The census of 1880, upon which Prof. Harris relies to show the proportion of land to the aggregate wealth, and which he must not therefore desert for local assessment tables, contains items of real estate, including all privileges over land, aggregating over $28,000,000,000. Adopting the rule of division between land and improvements propounded by him, the lowest estimate of pure land values for 1880 would be between $15,000,000,000 and $16,000,000,000. There is no estimate whatever of wild lands belonging to private individuals, unconnected with farms, the value of which could hardly have been less than $2,000,000,000; but of this we will take no notice. The rental of 4% for 1880, upon which Prof. Harris bases his calculation, is utterly absurd. Strictly first-class mortgages could not be placed at less than 5% in the city of New York in 1880; and such mortgages averaged, the country over, nearer 7% than 6%. It is impossible that the ownership of land, which is no better than a second mortgage, should not, on the average, produce a rate of interest higher than a first mortgage. The lowest rate of interest to be allowed on the value of land would therefore be 6.5%. But to this must be added the amount of taxation which actually fell upon land values in 1880. This could not have been less than 0.5%. Such taxes, being paid by landlords and not by tenants, necessarily depreciate the market value of the land; and this amount should be either added to the rent, or deducted from the amount expected to fall upon lands in consequence of the adoption of the single tax, since this falls upon it already.

It follows that the ground rent of the United States, in 1880, was considerably over $1,000,000,000. The taxes for that year were about $700,000,000. But of this, $100,000,000 was levied only for the purpose of piling up a surplus. The necessary taxation was only $600,000,000; and the land-owners of the United States would have been able to pay all taxes and yet retain a very large surplus. The value of land in the United States is now not less than $20,000,000,000; but the rate of interest is lower, and ground rent has not increased in equal proportion to nominal values.

Turning to Great Britain, the mistakes of Prof. Harris can be readily shown to be vastly greater than any mistakes of Henry George. His fundamental errors are three.

• He mistakes the rent of agricultural lands alone for the whole rent of the United Kingdom;
• he mistakes the valuation of "houses" for that of structures alone, without the lots beneath them; and
• he assumes that railways are not built upon land.

The following are the official figures for 1884, taken from the 28th British Inland Revenue Report; to which we append a very low estimate of the proportion of mixed land values which should be charged to ground rents alone:

	British Pure Annual Land Values, 1884.
	Lands, returned as such		£65,442,000
	Manors, tithes, fines, etc.		853,000
	Fishing and shooting rights		572,000
	Markets and tolls		607,000
			£67,474,000
	British Mixed Annual Land Values, 1884.
	Houses and lots	£127,050,000
	Canals, water-works, mines, gas, iron, etc	22,381,000
	Railways	33,050,000
		£182,481,000
	One-half of these values as land		£91,241,000
	Total land values		£158,715,000

Now the whole net amount of British taxes is £118,500,000. But of this, over £27,500,000 is already assessed upon pure land values. The adoption of the single tax would therefore increase the burden upon land only by £91,000,000. The net rental value of land being over £158,000,000, it follows that the land-owners of Great Britain and Ireland could pay all national and local taxes, and still retain for their own benefit the comfortable margin of £67,000,000. Prof. Harris will do well to study his statistics carefully before he again undertakes to exhibit "the mistakes of Henry George." *

*Prof. Harris quotes Mulhall, as proof that "land" in the United Kingdom is worth only £1,737,000,000, in a total of £8,720,000,000, or one-fifth of the whole. But Mulhall distinctly shows that this amount includes only agricultural land ("Dictionary of Statistics," 5); and he very properly recognizes houses and railways as real estate, stating (p. 280) that 62%, of British wealth consists of real estate. It is notorious that the mere land occupied by British railways was enormously costly, and is now worth far more than it cost. Land alone, on Mulhall's showing, forms one-third of British values, just as it does in America.

Mr. Gunton, in the Forum for March, 1887, had preceded Prof. Harris in the same field and with about equal accuracy. He calls the entire rental value of real estate in the United Kingdom, including, of course, improvements, £131,468,000. The correct official figure (including £43,000,000 taxes, paid by occupiers) was, in 1884, almost exactly £293,000,000; and the real value is far greater. Instead of being only 11% of the gross produce, as claimed by Mr. Gunton, it is fully 25%. It is not worth while to follow either Mr. Gunton's figures or arguments any further.

I regret that the space allotted for this article will not allow an examination of Mr. Edward Atkinson's calculations on the same general point. His statistics are far more accurate than those of Messrs. Harris and Gunton. Accepting all his statistics as absolutely accurate, I have shown in another place, by his own figures, that two-thirds of the ground rents of Boston would provide for all local, State, and national taxes on Boston.

The single tax, therefore, would be a real, effective, and adequate remedy for the present unjust intervention of the state in favor of the rich and against the poor.

There still remains the question: "Is the remedy just?" Many of Mr. George's critics (notably Mr. Gunton) are debarred from raising this question, since they assert the absolute right of the state to deal with all property as may be deemed expedient. But the majority of them are better represented by Dr. Van Dyke, who thinks the proposition of Mr. George "thoroughly unrighteous." So far as we can make out, this is because the state has in the past allowed private individuals to appropriate land and its rent to their own use, and is therefore estopped from taking away that rent by taxation. But land has always been taxed. In most of our large cities it is now theoretically taxed at least 2% on its value; often 3%. Why should a tax of 2% or 3% be just and righteous, but a tax of 4%, 5%, or 6% incur penalties of everlasting damnation? Is it because land is especially singled out for taxation? Then is there not at least equal wickedness on the part of Congress, which for half a century singled out the business of importation as the only subject of taxation, and still taxes it ten times as heavily as anything else? Does the wickedness consist in taxing land up to its full value? Then is it not equally wicked to tax the poor man's window glass 100% upon its value? Does the wickedness consist in imposing a tax for the purpose of accomplishing some ulterior result? How about our whole tariff legislation, which is avowedly maintained for an ulterior purpose? Is it wicked to tax private property out of existence? How about the tax on bank notes, which was levied for the express purpose of destroying State banks? How about the tax on oleomargarine? Is it wicked to tax property out of existence, without giving compensation? Why do not those who urge this plea petition Congress for compensation for those whose wealth has been destroyed and whose occupation has been taken away by taxes avowedly levied for that purpose? Not one of these critics has ever suggested such a petition; not one of them would sign such a petition; and not one of the many thousands who have suffered from such tax laws ever thought of presenting such a petition.

Judged by any standard which has ever been applied to public affairs, even by clergymen, the proposition of a single tax on land values is perfectly reasonable, moral, and honorable. As to the amount of such a tax, that is a question to be decided by a wise expediency. There is not the slightest moral obligation on the part of the state to make the tax small, or to leave any margin to land-owners, so long as no more is taken than is needed for the honest use of the state.

It is not necessary to follow any further the proposition of Mr. George to increase taxation up to a point which would practically absorb all ground rent. Every one of the critics who has discussed the point at all, has committed himself to the theory that no such artificial increase of taxation would be necessary to absorb rent. Moreover, it is not a practical question at present, and will not be for a very long time to come, if ever. Taxation rises quite fast enough, without artificial efforts to increase it. In 40 years, in Ohio, population increased 100%, assessed wealth 1,000%, and taxation 1,360%. It is sufficient for the present to show that the actual remedy proposed by Henry George for the evils of our present social condition, the only practical measure which he asks to have adopted today, is a real remedy, an adequate remedy, and a just remedy. The criticisms of his adversaries have been directed to mere side issues, to his minor arguments, to his intellectual processes, to his illustrations, to anything except the real pith of the matter in hand. Not one of them has really wrestled with the problem; not one of them (except Mr. Atkinson) has been even approximately correct in his statistics; not one of them has failed to commit mistakes in his reasoning and his calculations far more serious than any which can be fastened upon Henry George.

Thomas G. Shearman.

Are Public Sector Jobs, by Definition, a Drain on the Economy?

Are public sector jobs by definition a drain on the economy?

Some would say that they are.  But I think there might be a false assumption in there -- one which comes from an unexamined assumption.

When a public sector job is funded via a tax on wages, or a tax on sales, or a tax on buildings -- things which are produced by human effort -- there is a burden to the economy. 

• Employers must pay far more than their employees receive in wages and benefits;
• purchasers must pay more for goods than the producers (including those in the distribution chain -- distribution is part of production) receive;
• owners of buildings and other improvements must pay an annual penalty in proportion to the value of those improvements.

All these taxes reduce the demand for what is taxed: work, goods (and, in some places, services), buildings.  Fewer jobs are created, fewer goods produced, fewer buildings built and maintained well, less expensive technologies are favored over more expensive ones.

And these are the taxes most of us think about when we think about how to finance public goods.

But suppose we got ourselves outside the smallish box of taxes we're used to thinking about -- those advocated by the neo-classical economists -- and looked more closely at the wisdom of the classical economists -- Adam Smith, David Ricardo, John Stuart Mill, Henry George.

Suppose we thought about the effect of our public spending: effective public spending on goods and services that people value increases land value.

Good schools.  Paved streets.  Well-maintained streets.  Lit streets.  Plowed and cleaned streets.  City water.  Sanitary sewers.  Stormwater runoff.  Police, with well-equipped cars.  Fire departments, with trained professionals and the best of equipment.  Ambulances (ditto).  Hospitals with life-saving equipment and professionals.  Other public-health services.  Courts and jails.  Libraries.  Public health services. Social services.  Parks.  Playgrounds.  Highways (ideally with maintenance taking place at night or at least not during rush hour).  Bridges, well-maintained.  Buses, subways, railroads (passenger and freight).  Airports.  Beaches.  Utilities (more commonly owned by shareholders, but quite realistically municipally provided). Preschools.  Community colleges.  Colleges and universities.  Perhaps after-school activities for children.  A social safety net.  This list is incomplete, but each item on it is a fair example of what makes communities good places to live and worth paying to live in and conduct business in. 

The presence of each of these things increases land values within the area served.  It increases what landlords can charge tenants; it increases what houses and commercial buildings will sell for, without the building owner improving the building or providing additional services.

So does it make any sense to finance these things via taxes on wages?  On sales? On buildings? On imports? On personal possessions?  On cars?  On trucks and business equipment?  On business inventory?    None of these things are increased in value by the provision of public services and goods.  

What increases in value is land -- as everyone can chant, the three most important things in real estate are location, location and location!  Much of that is the availability of publicly-funded services.  (The rest can be attributed to the presence of the community -- drawn in large part by those services, but also by the beauties of nature, the harbors and rivers, the climate, other favorable conditions; to opportunities seen by entrepreneurs and nonprofits to provide commercial ventures and cultural amenities; to advances in technology and science such as air conditioning, mosquito control, fiberglass pleasure boats, etc.)

 

A few weeks ago (8/30/11), David Cay Johnston's blogpost at Reuters, entitled "Budget Costs That Raise Costs," ended with this example:

How can raising taxes put more money in your pocket? By increasing efficiency.

This year we paid $210 in higher property taxes to finance trash collection and sidewalk snowplowing. Purchased retail, those services would cost about $600. So we spent $210 to save $390. That translates into a savings of $1.86 for every dollar of increased tax. As an added bonus we have just one garbage truck a week down our street, not a different company’s truck everyday, and garbage cans on the street only on Thursday mornings.

What matters in public finance is not how much government spends, so much as what it buys with our tax dollars. But don’t count on the new “Super Congress 12″ committee to undertake serious cost-benefit analysis because cutting spending has become dogma and reality-based policies would be economic heresy.

I don't think DCJ has yet seen the cat, but he's certainly recognizing whiskers.

Would you be willing to pay $210 more in property taxes each year to have these services delivered to you by your community?  I'd guess that you might be very willing to pay $210 more in property taxes AND be willing to pay the seller -- and for 30 or 15 years, a mortgage lender -- more for the privilege of living in a place where these things are provided by the community, rather than just outside of town.    (If we paid for this via a tax on land value, the selling price wouldn't rise; and the cost of living would be held down.  If we pay for it by taxing wages, or sales, or buildings, we do burden the economy, just as the "small government" people tell us.  But they don't seem to consider the possibility of taxes which don't burden the economy.)   

There are some who would complain that private trash collectors and the people who specialize in shoveling the sidewalks ought not to have competition from the public sector.   They should all live in communities which feel this way.   And they might concede that others might choose to live in communities which provide these amenities efficiently, with people paid from the public treasury.  

Taxing work does not create ...

Inspired by the energy, rhythm and tune of Kristin Andreassen’s Crayola Doesn’t Make the Color of your Eyes or another version from Prairie Home Companion, my friend Joe Johnston wrote this song.  Watch one of the videos first!  The tune is infectious, and Joe's words communicate the message clearly.

Taxing work does not create....

I went to see the wise one
our town was such a mess
the longest lines to get in
were at the DSS

He said, I cannot cure your town
But here’s something you can do
write a list and flesh it out
Of why your town is in a stew

Well, we build roads; we run the bus,
We try to control crooks.
We build the parks and sidewalks
We give our streets good looks

To do these things, we need some wealth
And so we tax the things we see
We tax the buildings and what you earn
We tax merchants and sellers with a fee.

(refrain)
I guess I realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

We tax the land, that helps ensure
that land is not a wager
It lowers the cost to those who use it
to create more jobs per acre

Collecting land rents means
That the things we as community do
are benefiting everyone and
go to all, not to the few.

And if a person wants to work
she reaps the results of her labor
The benefits of what she does,
Not the out-of-town land speculator

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

So maybe we’ll shift the taxes off
The labor you and I do, you see
And put it on the land so none
can squeeze the blood from you and me.

That way they’ll be  more jobs for those
who put their backs and brains to work
We wouldn’t have to work so long,
To put a roof and walls on God’s good dirt.

We wouldn’t need two jobs to feed
The mouths that we beget,
To house and clothe them and ourselves
And where we need to go, we’d get.

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

A compact town means we could walk around
to get, to shops, to meet, to work for gain
And even walk to parks nearby
where quiet, joy, and beauty reign.

We wouldn’t need a big back yard,
or front ones with their lawns to mow.
We’d have a share in common land,
Where our souls, spirits, and bodies grow.

I think we’ve solved the problem of unemployment lines
of barely earning what we need.
We may not have the harvest yet,
But we have sown the seed.

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

Who benefits when America sells off our airwaves?

I couldn't figure out how to comment at HuffPost, but I question the wisdom of selling off our airwaves, rather than leasing them for, say, 5 or 10 or 20 years.  They're OUR asset, and shouldn't become a privatized corporate asset under any circumstance.  We aren't the final generation.  Yes, we have revenue needs, and the value of the airwaves can certainly make a solid contribution to those needs.  But we ought not to do it at the expense of the next generation, and the one after that.   LEASE those airwaves, and then repeat it in 5 or 10 or so years.

Who benefits?  Smartphone Users???   Hah!

Spectrum auctions are a win-win-win?   Only if you omit future generations -- even our own future selves, if we expect to be alive in, say, 15 years -- from the calculation.

"Congressional budget officials estimate those auctions would raise a total of $24.5 billion over 10 years. Reid's plan envisions $13.1 billion going to the Treasury Department to help narrow the federal deficit. The remainder would largely go to compensate television broadcasters that give up airwaves, cover the expenses of broadcasters and government agencies that move to different parts of the spectrum and fund the construction of the public safety wireless network."

Compensate television broadcasters for giving up their privilege of owning a portion of OUR airwaves?   Should we have compensated Captain Kidd when piracy was stopped?

I don't know whether Chicago has yet figured out that selling its parking meters wasn't a particulary smart thing to do.  But we need to study this, and recognize that we ought not to be selling off our public assets.  LEASE THEM, and REPEAT in a decade or two.   NATURAL PUBLIC REVENUE, not just once, but forever!

http://www.huffingtonpost.com/2011/07/29/debt-ceiling-smartphone-harry-weird_n_913121.html

Debt Ceiling Battle: Harry Reid's Plan May Benefit Smartphone Users

By JOELLE TESSLER   07/28/11 06:01 PM ET   

WASHINGTON -- The debt ceiling battle could produce an unlikely winner: smartphone users.

Senate Majority Leader Harry Reid's current plan would direct the Federal Communications Commission to auction off highly valuable radio spectrum to wireless carriers desperate for more airwaves. Companies such as AT&T and T-Mobile USA say they need more capacity to keep up as their customers increasingly use iPhones, tablets and other portable devices to handle mobile applications, online video and other bandwidth-hungry services.

The plan could generate critical revenue for a government spending beyond its means. Congressional budget officials estimate the auctions would raise $13.1 billion for deficit reduction.

Reid's proposal would also deliver a big victory to public safety officials: It would set aside airwaves and money for the construction of a nationwide wireless broadband network that would let police officers, firefighters and emergency medical workers communicate with each other across agencies and jurisdictions.

"Spectrum auctions are a win-win-win," said Tim Doyle, a spokesman for the Consumers Electronics Association.

But the proposal still faces significant hurdles. For one thing, a competing debt ceiling plan from House Speaker John Boehner, which will be voted on Thursday, contains nothing on wireless spectrum auctions. Boehner's focus is on spending cuts, not finding new sources of revenue. What's more, Reid's proposal has run into major opposition from television broadcasters, which are under pressure to give up spectrum that would be sold to wireless carriers.

The haggling over wireless spectrum auctions comes as Congress rushes to try to agree on a plan to stave off an unprecedented U.S. default on its debt, which could have catastrophic consequences for the global economy. The Treasury Department has warned that the government will run out of money to pay its bills after Aug. 2 if Congress does not raise the debt ceiling. Reid and Boehner are pushing competing proposals to lift the debt limit and slash spending.

No matter how the current fight plays out, many in Washington see spectrum auctions as an attractive way to chip away at the federal deficit.

Stifel Nicolaus analyst David Kaut, for one, says spectrum auction legislation has a good shot of passage in Congress – whether it is part of the current debt ceiling package, a deficit reduction measure down the road or even a stand-alone bill.

"You have wireless pressures, budget pressures and public safety pressures," Kaut said. "The forces are aligned."

Reid's proposal would give the FCC authority to auction off airwaves voluntarily relinquished by government agencies such as the Pentagon and television broadcasters with extra spectrum. It would allow broadcasters to share in the auction proceeds.

Congressional budget officials estimate those auctions would raise a total of $24.5 billion over 10 years. Reid's plan envisions $13.1 billion going to the Treasury Department to help narrow the federal deficit. The remainder would largely go to compensate television broadcasters that give up airwaves, cover the expenses of broadcasters and government agencies that move to different parts of the spectrum and fund the construction of the public safety wireless network.

Reid's plan, based largely on a Senate Commerce Committee bill, would also dedicate a highly contested piece of airwaves to that network. Such an "interoperable" network was a key recommendation of the 9/11 Commission, and is becoming an urgent priority for lawmakers as the 10-year anniversary of the 2001 terrorist attacks approaches. The shortcomings of existing networks became apparent after the 9/11 attacks and Hurricane Katrina, when emergency workers could not talk to one another because they were using incompatible – and sometimes antiquated – systems.

At this point, perhaps the biggest hurdle facing any spectrum auction proposal is opposition from television broadcasters reluctant to give up their existing airwaves. Dennis Wharton, an official with the National Association of Broadcasters, noted that many broadcasters fear being moved to different channels that would reach fewer viewers.

He added that many broadcasters want to use their existing airwaves to deliver television signals to mobile devices and to "multicast" more than one television signal at a time. Broadcasters worry that they could be moved to a part of the electromagnetic spectrum that is less conducive to such broadcasts.

Wharton said that while the proposals in Congress are intended to be voluntary for broadcasters, those that want to hang onto their airwaves are concerned that they could face user fees and other government sanctions intended to force them to give up their spectrum anyway.

Ultimately, Wharton said, it will be viewers who suffer in the face of "incredibly shrinking free and local television."

A Better Way to Do Housing

Although a few neighborhoods shine, Washington area condo market still struggles - The Washington Post.

This article describes how difficult it is for condo owners to sell, since most buyers need mortgages with high loan-to-value (LTV) ratios, and FHA, Fannie and Freddie aren't lending because of rule-making on building approvals.  And many buildings prohibit renting one's condo, a particular problem in a city where people rotate from one assignment to another, often in other countries.

It suggests that people with cash offers can get good deals.

Let's consider a different approach to housing.  Suppose that, instead of paying taxes on one's wages, sales and building, taxes were shifted over to the value of the land one occupies.  Were we to collect the full rental value of the land, in the form of a tax, reducing the selling price of the site to $0 or a token amount, a home, be it a high-rise condo unit or a single-family house, would sell for the depreciated value of the structure.   A 2-bedroom, 2 bath condo of 1200 square feet would sell for pretty much the same amount wherever it is, with the buyer taking over the land value tax just as buyers now pick up the responsibility for the conventional property tax.

Buyers would need to borrow a great deal less.  A 1200 square foot condo, at a generous $100 per square foot, would sell for $120,000.  A 10% down payment on that would be a manageable $12,000.  And the $108,000 mortgage could probably be paid off in far less than 30 years, incurring much less interest.

Relieved of taxation on wages and other income, one could afford to pay for the location one chooses, in the form of a monthly or quarterly payment to one's community.  One wouldn't expect appreciation of one's housing -- after all, it is a depreciating asset.  But assuming one's local government is providing services which others consider worth the price of the rental value of the land, one could expect to sell an attractive house or condo unit fairly quickly, and be able to relocated locally or cross-country in fairly short order.

Housing would no longer be regarded as an investment expected to appreciate.  Buyers would enter clear-eyed and realistic, and seek to find the housing that best fits their needs without trying to make an investment.

Perhaps best of all, it would free up capital.  We'd no longer be borrowing  anything to buy land, so those funds would be available for investment in buildings, equipment and other things that create jobs.   And many more of us, I think, would become investors, and would be accumulating resources to see ourselves through our retirement years.

Post Script: It occurs to me that among the first people to benefit from this measure, were it to be enacted in Washington, DC, would be our incoming congressmen, senators and their aides, who could afford housing, whether they were coming from a rich district or a poor one, whether they had tremendous fortune, or barely enough for a down payment.  They could afford their own home, without living with roommates on C Street, or sleeping on their congressional couch and showering down the hall, as some impecunious or loudly frugal members of Congress choose to.   And they would become conscious of how much of the cost of living in a city is payment for the location itself -- which should benefit all of their constituents, be they in blue counties or red ones.   (And it might be interesting to look at how many blue cities there are.) 

Right-sized government and the REVENUE side of the budget

This tidbit from a 1926 Single Tax monthly contains an important truth for our era.   Today, it would be necessary to add "wages" to the list of things he ought not to be taxed on, since so many states and cities impose wage taxes on their residents.  And in California and NYC, a large share of residents are renters.    And equally important, it applies to how we tax businesses, many of which are tenants.

LEST WE FORGET

Nothing should be left undone to prevent waste and promote efficiency in government. Public officials should be closely watched to see that they render full service.

But when all is said and done in the way of securing the wisest outlay of tax money, it should not he forgotten that more harm and injustice can be done to the individual citizens in taking money from the wrong persons than in wasting it.

When a new pavement, water, light, or school is put in, it makes the neighborhood a more desirable place in which to live, and rents go up. It is well to have these public utilities constructed as cheaply as possible. But it is far more important that the tenant who pays for the use of the public service in higher rent shall not also be taxed a second time on his personal property, goods, or household furniture to pay for the same service.

 

An early ad for The Landlord's Game

The Public, May 12, 1906, page 143.

THE LANDLORD'S GAME

invented by Miss Lizzie Magie of Washington, D. C, will be manufactured and ready for the market about June 1st.

DESCRIPTION

The Landlord's Game is played on a board about 18 inches square, divided into 46 spaces representing all the various institutions of modern commercial life. The names of some of these spaces are "Soakum Lighting System," "Slambang Trolley," "Gee Whiz Railroad," "Lord Blueblood's Estate," "Wayback," "Boomtown." "Easy Street." "Broadway," "Timberlands.''  "Oil Fields," "Jail," "Poor House," etc.

The play on the board is started by the throw of dice which indicates the moves of the players and from that time on the transactions between individuals, corporations and the government are entered into with vim and interest. At the start the players are equally equipped but as the moves continue the majority of the players are apt to be forced into poverty, some even arriving at the Poor House, while one player generally becomes the millionaire.

THE SINGLE TAX

This condition prevails until the adoption of the single tax on land values, when the land rents, instead of being appropriated by individual players, are turned into the public treasury and used for public improvements. The game as then continued equalizes opportunities and raises wages, while it is impossible for one player to get any great advantage over the others.

The game brings out with great clearness the exact position in the commercial world of money, transportation and land monopoly. Unlike most games that have sought to teach a problem, this game preserves all the principal features of the popular chance and skill games, at the same time demonstrating the problem with clearness and simplicity. It is easily learned and is played with great enthusiasm by children as well as adults.

TESTIMONIALS:

Mr. John Z. White says:

The Landlord's Game Is something with which all single taxers should be familiar, as It will not only afford them much amusement, but will enable them to make practical illustrations of disputed points. It gives opportunity in this direction that can be secured in no other way. The "cat" is so clearly revealed that even he who runs may perceive.

Mr. Henry George. Jr., says:

The Landlord's Game illustrates the salient points of the single tax philosophy and is also interesting as a game.

Mrs. Jennie L, Munroe. Vice-Pres. of the National Woman's Single Tax League, says:

A thorough understanding of the principles of the Landlord's Game is equal to a whole course in political economy.

Rev. Alex. Kent, Pastor People's Church, Washington. D. C, says:

The game is instructive and at the same time absorbingly interesting.

The game will be furnished in a neat box with lithographed board in colors, will include a pack of cards representing title deeds, railroad charters, etc., besides checkers, dice, money and all other implements necessary to the playing of the game, and will be sent to any address in the United States on receipt of one dollar. Postage 20 cents extra.

Address MISS LIZZIE J. MAGIE, Secretary, ECONOMIC GAME COMPANY. 58 WEST 68th ST., NEW YORK, N. Y.

 

LVTfan here: the ad has no graphics.   But this game is the inspiration for the board game we know as Monopoly.

Lizzie Magie's 1902 commentary on The Landlords' Game, on which Monopoly is based

Digging through primary sources can provide some great thrills.  I stumbled onto this article about The Landlords' Game in the Autumn, 1902, number of The Single Tax Review (then a 64-page quarterly, later more frequent) .   It was the Landlord's' Game which was later revised to create the board game Monopoly.   As I've written earlier here, the Landlords' Game (probably in later editions than what is referred to here) came with 2 sets of rules, one which would create widespread prosperity, and the other which would create a winner-take-all situation.

Magie's comments are quite relevant to understanding the game of Monopoly, too:

from The Single Tax Review, Autumn, 1902

THE LANDLORDS' GAME.

AN INTERESTING INVENTION OF A YOUNG LADY IN WASHINGTON BY WHICH CHILDREN AT THEIR PLAY MAY BE TAUGHT THE TRUE LAWS OF ECONOMICS.
Miss Lizzie J. Magie, a single taxer of Washington, D. C has invented an ingenious game, played with checkers and dice as is parcheesi, and thus describes it for the Review:

"It is a practical demonstration of the present system of land-grabbing with all its usual outcomes and consequences," says Miss Magie. " It might well have been called the 'Game of Life,' as it contains all the elements of success and failure in the real world, and the object is the same as the human race in general seem to have, i. e., the accumulation of wealth.  Representative money, deeds, mortgages, notes and charters are used in the game; lots are bought and sold; rents are collected; money is borrowed (either from the bank or from individuals), and interest and taxes are paid. The railroad is also represented, and those who make use of it are obliged to pay their fare, unless they are fortunate enough to possess a pass, which, in the game, means throwing a double. There are two franchises: the water and the lighting; and the first player whose throw brings him upon one of these receives a charter giving him the privilege of taxing all others who must use his light and water.

"There are two tracts of land on the board that are held out of use—are neither for rent nor for sale—and on each of these appear the forbidding sign: 'No Trespassing. Go to Jail.' One of these tracts of land (the largest on the board) is owned by Lord Blueblood, of London, England, and represents foreign ownership of American soil. A jail is provided for any one  who trespasses upon this land, and there the unfortunate individual must linger until he serves out his time or pays the required fine. 'Serving out his time' means waiting until he throws a double.

"Before the game begins, each player is provided with a certain amount of cash, sufficient to pay all necessary expenses until he is well enough along in life to earn his living. Should any one be so unlucky, or so reckless and extravagant, as to become 'broke,' there is a nice little poor house off in one corner where he may tarry until he makes a lucky throw or until some  friend takes pity on him and lends him enough to set him on his feet again. And here is where he generally gets 'soaked,' for the other players, taking advantage of the unfortunate one's necessities, demand an enormous rate of interest which the impecunious individual must pay before he can complete his round and get his wages.
 
"The rallying and chaffing of the others when one player finds himself an inmate of the jail, and the expressions of mock sympathy and condolence when one is obliged to betake himself to the poor house, make a large part of the fun and merriment of the game.

"Each time around the board represents so much labor performed, for which so much wages are paid. When a player has been the rounds ten times he retires from his labors, although he still remains in the game, which is not finished until the last player has made his tenth round. It takes forty moves to make a round and there is in each round one little black-bordered spot marked 'Legacy,' and whenever a player stops on this he receives a cash legacy. In each round there are three spots marked 'Luxury,' and these the player may indulge in or not, according to his inclinations or finances, but each luxury purchased counts the player so much more at the end of the game.

"General directions for playing the game accompany this description, but it is difficult to make a set of rules that will cover all contingencies since no two games are alike. The combination of circumstances are so many that almost every time the game is played new situations are brought out. Thus it is a game that is always interesting—never monotonous. It was the original intention of the author simply to work out a demonstration of how the landlord gets his money and keeps it, but while doing this there gradually developed a game which has proven one of amusement as well as of instruction and one which has attractions for both old and young.

"Children of nine or ten years and who possess average intelligence can easily understand the game and they get a good deal of hearty enjoyment out of it. They like to handle the make-believe money, deeds, etc., and the little landlords take a general delight in demanding the payment of their rent. They learn that the quickest way to accumulate wealth and gain power is to get all the land they can in the best localities and hold on to it. There are those who argue that it may be a dangerous thing to teach children how they may thus get the advantage of their fellows, but let me tell you there are no fairer-minded beings in the world than our own little American children. Watch them in their play and see how quick they are, should any one of their number attempt to cheat or take undue advantage of another, to cry, 'No fair!' And who has not heard almost every little girl say, 'I won't play if you don't play fair.'  Let the children once see clearly the gross injustice of our present land system and when they grow up, if they are allowed to develop naturally, the evil will soon be remedied."

 To read more about The Landlord's Game, explore the two "Monopoly and the Landlord's Game" tags in the cloud (I can't seem to meld them into a single one!)  It is quite an interesting story.