As you read this one, think about the effect of California's Proposition 13, which caps the annual property tax at 1% of the assessed value (rising by no more than 2% peryear, even when land values are rising much faster), and requires the state and cities and counties to rely on sales and wage taxes.
Think, too, about what the effects of so-called "property tax relief" really are.
This comes from Tax Facts in November, 1926 --- fifty years before Prop 13, and eightly years before the crash it produced..
BUY REAL ESTATE
The real estate editor of the Los Angeles Times does his bit in boosting the city in this way:
Fact and Comment solicits your indulgence and again advises you to buy real estate. Your attention Ib called to the sale of the northeast corner of Wilshire and Hauser boulevards last week. Bought scarcely two years ago for $36,000, it turned last week for $100,000.
"No plans were made public for the improvement of the property," says the report of the deal. "We contemplate no immediate development," the buyers of the corner assert, "we consider the deal a bargain and we thought this time excellent for buying."
To add to its impressiveness, the real estate editor continues:
There is food for a little serious thinking, Mr. Wise Investor. When the professional crepehanger and the wet-blanket artist cry "Business is bad," that is a signal to — buy some real estate.
There you have it, the quick and simple way of building up the community: buy real estate. Never mind about putting it to productive use. Let someone else attend to that. Just buy it and hold it. It will enrich you. And if it enriches you, a citizen, it enriches the community.
Ah, but does it? The second man who sold the corner mentioned by the real estate editor is nearly three times as rich as he was two years ago, it is true; but how about the man who wishes to use that corner?
Two years ago the man who wishes to use that corner would have had to pay $6.00 a day just for the site upon which to set his building. Today he would have to pay $16.00 for the same privilege. The owner of the land might be enriched to the extent of sixteen dollars a day, but what of the public?
When the cobbler makes a pair of shoes, and the tailor a coat, each has bettered himself, and the community has been enriched to the extent of a coat and a pair of shoes. But when the speculator buys a corner for $36,000 and sells it in two years for $100,000, he may have trippled his own wealth, but what of his fellow citizens? The corner is still the same vacant lot.
Holding land idle may or may not enrich the holder. It does not enrich the community. Only the user of the land adds to the wealth of the community. One man invests $36,000 in a lot; another puts $36,000 in a building on the lot; a third stocks the building with a $36,000 consignment of furniture.
In two years the lot is worth $100,000; the building is worth $36,000, less depreciation; and the furniture is the same. Yet the community taxes all this property alike.The speculator with his $100,000 can now buy another $36,000 lot, erect a $36,000 building, and stock it with a $36,000 consignment of furniture. But will he? Experience has taught him that only land grows in value. A building adds to the value of land, but not to itself. A stock of furniture adds to the value of land, but not to itself or to the building.
"No," the speculator will say, "the community lays the same tax burden upon property that does not increase in value, as upon property that does. I'll buy three $36,000 lots, and in two years I'll have $300,000."
Is it any wonder that the speculators among the California Realtors in their state convention at Del Monte condemned the "tax relief plan'' that would equalize in some degree the burden on industry by shifting some of the taxes on business and homes and farms to the land speculator?
It remains to be seen what the farmers, home owners and business men will say.
Comments