LVTFan's Blog

Dr. McGlynn's Lesson from the 1886 New York City Election

What follows is one of three analyses of the 1886 Mayoral election in Manhattan, which appeared in the December, 1886, issue of North American Review (see https://www.jstor.org/stable/pdf/25101145.pdf) under the title "Lessons of the New York City Election."  The authors are listed as "A Republican, Edward McGlynn and S. S. Cox."

One might consider this a supplement to Post & Leubuscher's December 1886 book, Henry George's 1886 Campaign, online at 

II.
THE LABOR PARTY VIEW.

The late contest for the chief municipal office of New York marks an historical epoch. The movement to elect Henry George to that office has been something exceptional, in fact, unique, in its inception, in its growth, and in its results, in the character of its originators, in the sympathies it won, and in the opposition it evoked. It has had an unprecedented effect in confusing and disabling political plans and factions; and it has rendered inevitable, has, in fact, already begun, the disintegration and reconstruction of political parties. It is the beginning of a pacific revolution which is destined to have upon the whole world a more beneficent effect than our first Revolution and the great Declaration which gave it its justification and battle-cry.

All this was substantially said by me at the meeting in Chickering Hall a month before the election, and was then no doubt regarded by not a few as but a campaign extravagance — a mere rhapsody inspired by foolish hopefulness of the perfectibility of human society, and by a simple but absurdly enthusiastic hero-worship. Events, however, have largely justified tho declaration made at that meeting.

After our mighty civil struggle had ended, with a Union restored and a race emancipated; after the question of reconstruction had been settled, and a large part of the burdens of the war discharged; after its deepest wounds had been healed, and even their scars obliterated, everything might have seemed to promise a long period of unexampled national prosperity and contentment. Instead of this, a new sense of disappointment and discontent began to steal over the workers of the country. With increasing wealth, they felt the pressure of increasing want. Labor in mill and mine, on railroad and farm, became more and more conscious of a wrong, in the want of opportunity to employ itself, and in the inadequate share of the product of his toil which came back to the toiler. Maddened and blinded, the giant Labor too often struck out wildly to his own hurt, and eagerly snatched at such panaceas as “protection,” urged on him by the quacks, who found profit in his ignorance. Strikes, wasteful and sometimes violent; lock-outs, long and heartless, increased and multiplied. Waves of industrial depression followed each other with a regular periodicity which suggested a law of nature. The cry was heard everywhere, “the rich were becoming richer and the poor poorer.” “Hail, Columbia, happy land!” was no longer sung with the same heartiness as in the childhood of the nation, and even the Fourth of July seemed to have lost the freshness of its charm. In the reading of the magnificent assertion of the natural equality of man, and his inalienable rights to life, liberty, and the pursuit of happiness, there seemed to many an undertone of mockery. But deeply as the growing wrong was felt, there was a failure to clearly see its cause. Voices many were raised in complaint, but they were now the roar of a strong lion helpless in the toils, and now the wail of a child crying in the night. There was lacking the clear articulate speech of a man who, seeing a great truth, sounds a trumpet-call to all who would taste the fierce delight of battle against wrong.

But the hour came at last, and with it the man. The Duke of Argyll spoke better than he knew, when he sneeringly called Henry George the “Prophet of San Francisco.” No heart has sympathized more keenly with the sufferings of the toiler, no other pen has defined the wrong so clearly, and portrayed with such force and pathos the poverty that haunts progress like a spectre. No other voice has rung so loud and clear in calling men to take up the cross of a new crusade for justice, to proclaim the glad tidings of a new evangel to the poor, that shall relieve them from the degradation of want, and the deeper degradation of the fear of want. His cry rang forth, calling on the conscience of men to restore to the disinherited their equal share in the bounties of nature, and thus to fit their hearts and minds the better to receive and act out the old evangel of Him, who taught the universal Fatherhood of God and the equal Brotherhood of men. The common people of old heard the Christ gladly as He preached to them the blessedness of those that hunger and thirst after justice; and in the common people of today the same sure instinct responds to the call for social right-doing.

What gives to the late election its deep importance is that it marks the coming of a great principle into our politics; that it is a flashing into action of sentiments that have spread and are yet spreading wide and deep throughout the land and over the world. Henry George’s nomination was no accident. The working-people of New York, like their fellows throughout the country, have been reading and talking over his books, and are better acquainted with them, and have a keener appreciation of them, than most men of leisure and culture. They have learned from Henry George’s teachings an effectual and peaceful method of righting their wrongs, by the reformation of law on the lines of justice. They have got from him a new hope and courage; they have learned that the remedy must be political, since the wrong is political, proceeding from enactments that give to a few that which belongs to all. Henry George has taught them that it is not desirable nor possible to divide land equally; that the right of the individual is not to an equal division, but to an equal benefit from a common ownership. Henry George has shown that the beautiful economic law of rent suggests a simple and peaceful means of giving to every human being just what belongs to him of the common estate. He shows that rent is a good, not a bad, thing; that it is a gauge of the degree of progress from semi-barbaric, nomadic conditions up to conditions of the highest civilization. He shows that economic rent — that “unearned increment” which attaches to land by reason of the growth of population and the progress of civilization — is a value produced by the social aggregate, as distinguished from the value produced by the individual, and that thus is provided, by natural law, a common fund which may be drawn on for common needs without hampering capital or oppressing labor by taxes which check production and raise prices. He shows that it is just that he who is permitted to enjoy the advantage or privilege of occupying a larger or choicer portion of the common estate than is open to another, should pay the highest market price for this advantage: that is rent. The wrong is not in the payment of rent, but in its diversion from a common treasury into private pockets, and in the locking up of natural opportunities by the speculation which the possibility of appropriating this public revenue provokes. Henry George has taught that in this appropriation of rent by private persons, and in the forestalling which it engenders, is to be found the cause of that increasing poverty which is the dark side of progressing civilization, the true cause of the industrial depressions in which productive power is so enormously wasted, and in which willing hands cannot clothe the naked back, or feed the hungry stomach, because labor is shut out from natural opportunies for its employment by the speculation that holds land idle until it can get a blackmail price.

How this speculation in land grinds down the wages of labor, cuts down the profits of capital, and brings about these periodical industrial depressions, “Progress and Poverty” and “Social Problems” have taught the thousands on thousands who have read them. They have shown how the simple remedy of the appropriation of economic rent to its proper purpose, the public use, would destroy speculation in the elements of nature, and thus open to labor the natural opportunities which are required for the production of wealth; how in reality there is no conflict between labor and capital, but that the real conflict is between labor and monopoly. Workingmen have learned from Henry George that the simple reform which would thus give them the highest possible wages would make the cost of living much lower, since the enormous taxes which now fall with oppressive weight on the poor, and are a fruitful source of political corruption, could be entirely remitted, as no longer necessary. All the public needs that are now supplied by taxation, and many public conveniences and advantages which we have not yet become civilized enough to supply at public cost, could be provided for out of the common fund — the rent which individuals would pay to a community that included themselves.
When, therefore, organized labor, as represented in the Central Labor Union of New York City, determined to take political action, it was necessary and fitting that the doctrine of “the land for the people” — the doctrine that all are entitled to share in the benefits provided by their Creator, and the advantages which come with social growth and improvement — should be made, as it was, the chief principle of their platform, — a platform which, in its bold simplicity, is in inspiriting contrast to the straddling duplicities of the old party declarations. And it was equally fitting that they should call on Henry George to become their spokesman and standard-bearer. No other man could so well fit the platform.

When, some three or four months ago, members of the Central Labor Union began to talk among themselves of the propriety of political action, the most sanguine among them had little hope of doing more than making a small beginning. Mr. George from the first was spoken of as the candidate who could command the strongest following; yet the best they hoped for was that an independent Labor candidate might get some 15,000 votes. For they sadly remember how, a few years ago, a Labor candidate for Mayor polled only 87 votes. They knew by experience how strong were the political organizations of New York, how potent the “influences” on which these relied, and how general was the indisposition of men to "throw their votes away” on a candidate who had not a “regular” nomination. Mr. George’s own friends felt that his world-wide reputation, and the cause with which he, more than any other man, is identified, should not be subjected to the risk of being made ridiculous by a hopeless canvass. But pressed to accept the nomination, and anxious to maintain the dignity of his cause, and to inspire those disposed to vote for him with confidence in themselves, Mr. George conditioned his acceptance on a pledge from 30,000 voters, explaining the significance of the movement and of his candidacy in his now famous letter to the Secretary of the Labor Union Conference. That letter began the campaign. It infused into the movement a peculiar dignity and enthusiasm. Clergymen, lawyers, teachers, authors, business men of all kinds, joined the Labor men in requesting Mr. George to be a candidate, and crowded the meetings held to ratify his nomination.

The campaign is so recent that it would be useless to recount it here. Great as must have been the growth in economic and political education, in self-respect and self-restraint, in the ranks of organized labor to produce the astonishing result, yet it must be conceded that no other platform and no other candidate could have secured such a tremendous moral victory. It is the reputation of the candidate, his high genius and exalted character, his practical wisdom and masterly leadership, his tireless energy, the strange fascination his personality exerts, and the almost religious enthusiasm which he has been able to inspire by his presentation of the cause, that have given to the 68,000 men, who, in spite of all difficulties, voted for him, and to the thousands more in New York who are now prepared to join them, the consciousness of power, the conviction of duty, and the confidence of ultimate success. Thus has come to the front a new Land and Labor party, from henceforth utterly distinct from all other parties, prepared to go forth conquering and to conquer; and on the same platform and under the same leader to repeat, at the earliest possible moment, in the State and in the nation, this magnificent canvass, and to more than repeat the moral victory of the late municipal election in New York.

Edward McGlynn.

Congressman Maguire's speech on Chinese Exclusion - October 13 & 14, 1893 --- and the remedy

This is a very long speech; it stretched over 2 days.  It was occasioned by discussion of legislation on Chinese exclusion.  James G. Maguire (1853-1920) represented San Francisco in Congress from 1893 to 1899.  Georgists are acquainted with him in part because of his writings in The Standard, Henry George's weekly newspaper, including the 1887 speech to the Anti-Poverty Society in NYC in which Judge Maguire spoke of seeing the cat, which soon became a shorthand for that AHA! moment when one starts to see the full beauty of Henry George's ideas. 

I've seen parts of this speech in various places, but don't always see what I think is the most important and remarkable part of it.    

The situation Congressman Maguire describes in San Francisco is dramatic, and one can see why explaining the situation to his mostly East Coast colleagues in Congress was a challenge. 

In the district which I represent there is a vastly greater number of adult Chinese male population than of adult males of the Caucasian race, citizens and aliens combined. That is the situation there. That was true of the whole city of San Francisco, according to the statistics, until quite recently. I believe it to be the condition in San Francisco now. I believe the census returns of Chinese population in San Francisco to be wholly and grossly inaccurate.

At the end of the first section, we get a hint of where the speech is going.

You see the hardships imposed by our Federal laws upon the Chinese, and your sympathies go out to them because you do not see the other side of the picture. We see the oppression, misery, degradation, and slavery to which our own laborers are reduced as a direct result of Chinese immigration. We see that the imported Chinese coolies are mere agencies in the hands of monopolists—domestic and foreign—by which our own people are gradually reduced to a condition of wretchedness approximating to the social condition of the Chinese slaves, and without the slightest feeling of malice against the unfortunate Chinamen we demand their exclusion and their deportation as necessary measures of defense to our own people.

Saving for Retirement

It is worth considering that one of the reasons that people are having more difficulty saving for retirement now than they did, say, 10 or 20 or 30 years ago, is that housing costs are absorbing a larger portion of their wages than used to be the case.

And I'm rather sure that if one looked at the sum of their housing and commuting costs as a percentage of income, that, too would have risen significantly.

The old rule of thumb was to spend no more than 1/4 of one's income on housing.  I assume that was construed to include not just the rent or mortgage payment, but also property taxes, condo or association fees, homeowner's or renter's insurance, heating fuel, and utilities such as electricity, water, sewer and telephone.  That was probably before TV was a monthly bill, and before an internet connection became, if not essential, nearly so.  And it may have been before borrowing more than 80% of the purchase price became common, adding in costs for private mortgage insurance, costing 0.32% to 1.2% of the loan principle.  It doesn't take into account the likely costs of maintenance, sometimes estimated at a few percent of the house's value.

Thirty or forty years ago, one couldn't get a standard mortgage whose payments, plus property taxes and homeowners' insurance, exceeded 28% of gross income, or take on a mortgage when the sum of those costs and other debt service (credit card, student loans, car loans) exceeded 35% of income.

Today, according to the Consumer Financial Protection Board, "Qualified Mortgages" generally don't exceed a debt-to-income ratio of 43%.   But that doesn't appear to include expenses for utilities.

John Farrell, The Philosophy of the Single Tax, Part IV: The Heart of the Matter

The Daily Telegraph (Sydney, NSW: 1883-1930)  Sat 9 Nov 1889  Page 10

The Philosophy of the Single Tax
by J. Farrell

No. IV   The Heart of the Matter

"The laws of distribution are obviously laws of proportion, and must be so related to each other that any two being given the third may be inferred." When it is known what the total value of a product, is, what portion of that value is taken as rent, and what as interest upon invested capital, it can readily be ascertained how much will remain to go in the shape of wages to those who engaged in the work of production. Presuming that the readers who have followed me up to this point have perfectly comprehended the differences between Henry George and the earlier teachers, and the important difference in conclusions which they must involve, I will now proceed to deal with a part of the question in which he is practically in accord with them — the law of Rent.

This, as stated by Ricardo, who more than any former writer devoted himself to the subject and who has been widely accepted as the standard authority, is as follows: — "The rent of land is determined by the excess of its produce over that which the same application of labor can secure from the least productive land in use." Here the definition of the word "land" must be borne in mind. It must be remembered that "land" means not only the surface of the earth but all natural agencies and means of production, such, for instance, as forests, mines, fisheries, &c. Rent is the advantage (expressed usually in money) which one natural avenue of production possesses over another, and can only refer to natural advantage. Rent is commonly and erroneously accepted as meaning payment for the use of buildings or improvements of any kind effected by labor or capital, but that error must be avoided. Such payment is wages or interest for the labor or capital expended in making the buildings or improvement, not rent. It must be remembered, too, that rent arises not only when the owner of land and the user of it are separate persons. If the owner and user are one and the same person, that portion of his income which he might obtain if he leased his land to a second party instead of putting it to use himself is rent. When land is purchased the purchase money — exclusive of any sum paid in consideration of improvements upon it — is simply rent capitalized. The purchaser pays in a lump sum what, if he leased the land, he would pay in rent. It must not be supposed that Ricardo's law assumed usefulness to be the basis of rent. No matter what especial advantages a piece of land possessed, rent could not attach to it while another piece, equal in every respect, was open to free use. And the expenditure of labor or capital upon such a piece of land would not in any way affect its rental. If improvements worth a million pounds stood upon it still not a single

John Farrell, The Philosophy of the Single Tax, Part IX: The Method of Reform

The Daily Telegraph (Sydney, NSW: 1883-1930)  Sat 1 Feb 1890  Page 5

THE PHILOSOPHY OF THE SINGLE TAX.
By J. Farrell.

IX. — THE METHOD OF REFORM.

We propose to do nothing whatever beyond changing the basis of taxation from industry, production, exchange or incomes to land values. We propose to exempt everything else from taxation and derive not only the whole necessary revenue for governmental purposes from land values, but if there is more than enough for such purposes to divide the remainder equally among the members of the community in the form of annuities, or in any tray that may he determined upon. Land value belongs to the entire community by right, and neither individual nor communal justice is being done while any part of it is being diverted from the true owners. I have already shown that the State recognizes that the value of land results from the presence and needs of the whole people by paying the proceeds of the sale or lease of Crown land into the public Treasury. But, in selling, it gives to a private owner the power to take to himself, without further payment, all future increment of value arising from precisely the same source as the first value, for which he paid, had arisen. And in leasing a similar wrong may be done when the duration of the lease is a long one. Before it falls in the growth of population, the expenditure of public money and other causes may make the land leased worth much more than the lessee pays annually to the State, in which case he secures an unfair advantage over others.

The single tax, unlike any other, is simply a payment by the individual for value received from the State. All other forms of taxation are appropriations by the State, for public use, of individual earnings. The doctor, the lawyer, the merchant, as well as the industrial producer of every class fulfill necessary functions — in some cases, no doubt, functions made necessary only by an entirely false condition of society. But for every shilling of income they may receive through the exercise of their various callings they have given in return a value of service or of some tangible thing which these who paid them

Another Wise LTE, from 1932

A fellow named Hugo W. Noren, of Pittsburgh, wrote to the Philadelphia Inquirer, in January 1932:

To the Editor of The Inquirer:

A gentleman of your city who appears to give largely of his time to promote its welfare sends me an editorial quoting Mr. Franklin Spencer Edmonds to the effect that taxation must be stabilized and your own that taxes on real estate must be reduced.

Perhaps we shall never make any progress so long as we think of it as a tax problem.  The term "real estate," too, is confusing.  It includes land from which wealth is drawn and wealth drawn from the land.  There is no possibility of arriving at a solution if we treat land as wealth.  Land is not wealth.  It is the surface of the planet earth.  It is not produced.  No man can add an inch to it or reduce it an inch.  Wealth is produced and has no limit.  It is in our power to destroy it all or double it.

It seems necessary to grand land titles for security of possession.  But in granting such exclusive possession equity requires that an equivalent be rendered in return for the grant.  Unless such equivalent payment, called rent, is required, the possessor has an advantage over his fellows: he has a privilege.

Wherever land has a market price we know that public funds have gone astray.  Wherever public funds go astray public business must suffer.  It is no remedy to go out and punish business men, raising funds by levying penalties on production and exchange of wealth in lieu of failure to collect the public fund.

To stabilize taxes would be a guarantee to private parties a perpetual untaxed income from public funds.  Anyhow, one would hardly look for such proposal from Philadelphia, the birth place of Henry George.

To which I can only add that California's Proposition 13, which "stabilizes" the property tax, is exactly what Mr. Noren is referring to.   No wonder seniors remain in homes too large to clean, to maintain, to cool or heat, close to jobs from which they're retired and schools their children attended decades ago.  Every dollar by which their cost of living is subsidized comes out of others' pockets, in the form of higher taxes on their new neighbors, and the long commutes which younger people must endure to get from a rental they can afford or a mortgage for which they can qualify to the jobs which support themselves and their families!

Having One's Cake, and Eating it Too

A bit in the Philadelphia Inquirer of 1931-09-08 signed by Girard, describes an interesting point made by Harold Sudell:

"According to Harold Suddell, noted single-taxer, Herbert Spencer and I have made the same mistake.

I do not know if Herb would feel more foolish than I at this comparison.

Mr. Sudell insists that land is one thing which knocks cockeyed the old theory that you cannot eat your cake and have it.

While land grows in value it may also yield a good rate of interest on the investment.

In that way it beats plain, old fashioned compound interest.  But, as Mr. Sudell says, if he had his way -- the way of all single-taxers -- all that land would get would be what it earns, never that potential "unearned increment," about which Henry George grew so eloquent.  

Which policy, of course, would forever end any possible speculation in land.  What would Miami do then for a living?

And there is no such thing as a free lunch ... when it comes for free, it is coming from someone else's labor.

A Poem of Political Economy -- likely J. W. Bengough, from 1887

A Poem of Political Economy
from Grip, mid-1887
likely by J. W. Bengough

Capital, Land and Labor
    Were triplets at their birth,
And started out together
    To cultivate the earth;

Quoth they, “We’ll work together,
    And all the wealth we make
Will be divided fairly,
    And each a third will take.

“Capital’s share is Interest,
    Land’s share we’ll know as Rent,
While Labor’s we’ll call Wages.
    And each will be content.”

The business grew and prospered,
    And wealth was made galore,
But, lo! while Land waxed wealthy
    The other two grew poor.

And it was seen, most strangely,
    That with the rise of Rent,
Both Interest and Wages
    Lower and lower went!

“There’s something wrong, dear brother.”
    The others said to Land,
“There’s something crooked somewhere
    We’d like to understand.

“While you are fat and jolly,
    And from all care are free.
We, though we do our portion
    Are pressed by poverty.”

Said Land, “My dearest brothers,
    The facts are as you state—
While capital and wages fall
    Rent grows at inverse rate.

“And why? — the thing is simple,
    And very plain to see: —
For all your raw material
    You’ve got to come to me.

“And I (through ‘private ownership’)
    Am thus empowered to say,
As much as I see fit to ask
    You both have got to pay.

“We’re on a different footing,
    As you may now perceive,
You’ve got to have my help, you know,
    Or, simply, you can’t live.

“And since (through ‘private ownership’)
    I ask more than my share,
It follows that my partners
    Are left a little bare!”

“Most excellently reasoned,”
    Said Labor. “clear as day!”
“The very thing,” said Capital,
    “That I was going to say.”

“Well, now,” said Labor thoughtfully,
    “I think I see the chip
That spoils our dish of porridge—
    It’s ‘private ownership.’

“We’ll just dissolve this little firm
    And form again with two
Called Capital & Labor —
    Both workers — that will do.

“And Land (or raw material)
    Since it by Heaven is sent
We’ll treat as common property
    By wiping out all rent.

“Then while the wealth producing
    Will go on as before,
The workers will enjoy it,
    And neither will be poor.”

 

J. W. Bengough was a prolific illustrator and cartoonist, and he clearly had a way with words.  He published Grip for many years, and late did weekly cartoons for The Public.  See also his Up-To-Date Primer and Whole Hog.    He coined the phrase "Natural Public Revenue."     Look for "Grip" on Google Books; you won't be disappointed!

It's Milk That Makes the Cream ...

This is from a newsletter about 100 years ago --

SONS OF MARY — AND OF MARTHA

“Ninety per cent of the world of men

Are envying daily the other ten

 

Who somehow seem to cut the pie

As days and weeks and years roll by.

"They’re lucky guys" these other ten

Who are envied by the rest of men;

But the ninety wishers never seem

To sense it's the milk that makes the cream.

Beneath the surface the reason lies

Which proves the ninety are not "wise."

For why are they not like other men

These few we call the Upper Ten?

Once and for all the reason learn:

Because they Own instead of Earn!

 

Legalized privilege gives them gold

Beyond the dreams of a pirate bold.

 

The Community's natural income—rent,

To these sons of Mary is given and spent:

Become a ground hog, that's the wheeze

If you aspire to "raise the breeze!"

Well—what can the sons of Martha do

To unscramble this economic stew?

For public revenue let them take,

The rent, that everyone helps to make.

From all taxation thus set free

The human family will live in glee,

’Cause each will have what will be ‘‘bon,"

A full return from his brain and brawn.

Why do the Ninety suffer a flaw

To darken the mirror of Natural Law?

Lack of knowledge?-—there's the cat

That's eating the proletariat.

J. R. Dickson.
Ottawa.

11 Taxing Questions, from 1916

Making ’Em Think

Editor of Reedy's Mirror:

The State of California has a Tax Commission, which, unlike most tax commissions, is disposed to study the question of taxation. It is agitating the subject of taxation by asking the people questions. Here is a list of eleven questions it has just propounded to the people of this State:

Would you favor the exemption from taxation of all factories and manufactured products? (Effort is being made along this line in several States, particularly New Jersey.) Give reasons.

If most of our public revenue continues to come from property taxation, do you believe any property should be exempt from paying in some way, its percentage of such tax? If so, what property would you exempt?

Would you favor the discontinuance of the tax on personal property and the adoption of a reasonable income tax in its place? (This has been recommended by various tax commissions, and has been partially put into operation in Wisconsin, and recently adopted in Massachusetts.) Give reasons.

Do you believe improvements on land (houses, trees, etc.) should be taxed in the same proportions as the land itself? Give reasons.

Do you favor the gradual reduction of taxation upon buildings, trees and vines and the assumption of that tax burden by the land? Give reasons. (This proposition has been discussed in New York and other States, and attempted in Canada, New Zealand, and elsewhere. It is estimated that land in California is assessed at about one-half its full value, and it has been argued that if it were assessed at full value, improvements could be exempted without increasing the tax rate.)

It is argued that land values in cities and other social centers are greatly augmented by the amount of population, and that the community itself, and not any effort on the part of the owner of the land, gives it the high value. If this is true, do you, or do you not, believe that a man who gains this extra wealth from the community, instead of by his own efforts, should pay a greater tax proportionately? Give reasons.

If you state in your answer to the preceding question that you are in favor of a greater tax upon unearned land values, then what percentage of this unearned value do you believe should rightly come bark to the community, instead of being retained by the owner? Give reasons.

Do you believe that land held for speculation should be taxed heavier than the land used for home, agricultural or business purposes? Give reasons.

Do you favor the idea of setting aside certain classes of property to be taxed for certain purposes (for instance, for State or county purposes solely) without regard to the relative burden of tax borne by the different classes of property? Give reasons.

Do you favor classifying property according to its earning ability and taxing it in proportion to that ability? Give reasons.

Do you favor a system of indirect taxation for city and county governments, similar to that now used by the State? Give reasons.

Such questions as these are likely in time to have disturbing results to entrenched privilege. They are calculated to make the people think, and that is always unfortunate for those who profit by popular thoughtlessness. If a man thinks long enough and hard enough he is likely to get back to the beginning of the subject. He is likely to become a convert to the Single Tax.

The Forty-Niner.

San Francisco, Cal.

This letter to the editor appeared in Reedy's Mirror, a weekly newspaper published in St. Louis, August 25, 1916.

James Maguire's speech in the House of Representatives: 1894-01-31 Direct Taxation of Land Values

Search this on "Santa Marguerita" and on Salinas River.

 

DIRECT TAXATION OF LAND VALUES,

Speech of HON. JAMES G. MAGUIRE, of California.
In the House of Representatives, Wednesday, January 31, 1894.

The House being in Committee of the Whole on the state of the Union, and having under consideration the bill (H. R. 4864) to reduce taxation, to provide revenue for the Government, and for other purposes, and the question being upon an amendment thereto offered by the gentleman from Tennessee (Mr. McMillan), providing for a tax on incomes, etc., the following proceedings were had:

MR. MAGUIRE. Mr. Chairman, I offer the amendment which I send to the desk. The amendment was read, as follows:

Amend the amendment by striking out sections 1 to 18 thereof, both inclusive, and inserting in lieu thereof the following:

"And be it further enacted, That a direct tax of $31,311,125 be, and is hereby, annually laid upon land values in the United States, and the same shall be, and is hereby, apportioned to the States and Territories and District of Columbia, respectively, in proportion to population as ascertained by the census enumeration of the year 1890.

"Sec. 2. That the said direct tax laid by this act shall be assessed and laid on the value of all land exclusive and irrespective of the improvements thereon; Provided, That all lands belonging to the United States, or to any State, county, or municipality, shall be exempted from assessment and taxation under this act; And provided further, That all land subject to taxation under this act shall be valued and assessed, for the purpose of taxation, at its full market value, on the first Monday in March of each year, the valuation for the fiscal year commencing on the 1st day of June, 1894, to relate to the first Monday of March, 1894.

"That, for the purpose of assessing said tax and collecting the same, sections 9 to 12, both inclusive; sections 14 to 48, both inclusive, and sections 53 to 58, both inclusive, of that certain act entitled 'An act to provide increased revenue from imports to pay interest on the public debt, and for other purposes,' approved August 5, 1861, are hereby re-enacted and made of full force and effect hi so far as they provide for the assessment and collection of direct taxes on lands and lots of ground, and for any and all methods and procedure in the levying, collection, and enforcement of such taxes."

Mr. MAGUIRE (continuing) said:

Mr. Chairman: The arguments in support of the pending amendment have all proceeded upon the theory that the proposed tax upon incomes, above $4,000 per annum, will compel the rich to bear a fairer proportion of the expenses of the Government than they now bear, and that the people will be satisfied with the accomplishment of that result. The people do, indeed, very much desire the establishment of such a system of taxation, and their claim for a more equitable distribution of the burdens of taxation is unquestionably just. But they are really desirous of substantial relief from the present power of the rich to use their wealth for the oppression of the poor; and they expert some measure of that relief to come to them through the income tax.

Such relief will not come from the income tax, nor will that change in our system of taxation even tend to curb the oppressive power of wealth. It simply puts a 2 percent tax mainly on the results of useful investments and of personal effort. The control of labor by wealth, in certain forms of investment, and the consequent unfairness in the distribution of the products of labor is a matter of infinitely greater importance to the people than the equalization of the burdens of government, which is sought to be accomplished by the income tax. I am in favor of the income tax, as proposed by the Committee on Ways and Means, because it is better than the system of taxation now prevailing; because the burdens which are laid by the income tax, wherever they may ultimately fall, are all for public uses, while under the tariff system three parts of the burden are laid for the enrichment of private individuals to every one part that is collected for public use.

As a choice between the income tax and any extension of tariff taxation, beyond that provided for in the "Wilson" bill, I will unhesitatingly vote for the income tax.

UNDUE POWER OF WEALTH.

But, sir, I seek by the amendment which I have just submitted to establish a system of taxation by which the revenues necessary for the support of this Government can be raised without any burden whatever upon either industry or commerce, and by which, at the same time, the power of accumulated wealth over labor will be destroyed. The power of wealth to oppress labor results almost entirely from the present investment of wealth in the control of the natural resources, from which alone labor can produce wealth.

Land is the storehouse in which the Creator has placed the raw materials of all wealth, and labor is the means by which those raw materials are changed into forms of usefulness for the satisfaction of human wants. Wealth is the result of labor applied to land, or to the products of land, and land furnishes not only this raw material for all wealth, but it constitutes also the home and the working place of all labor. All of these things the Creator freely provided for the use and sustenance and shelter and comfort of mankind by giving the land of the world, with its abundant resources, as an equal heritage to the whole human race. The same Creator made man a land animal. He must live upon the land, and from the fruits of the land, if he shall live at all. All of his food and clothing and shelter, and every other thing that will tend to satisfy his wants, natural and acquired, come from the land. Indeed, his whole physical body comes from the land, and goes back to the land again at the close of his life.

Separated from the land, man must perish, just as a fish would perish on being separated from the water, which is his element. Therefore, if man has a natural and inalienable right to life and to liberty and to the pursuit of happiness, he must have a natural and equally inalienable right to the means which the Creator, who gave him life, has freely and abundantly provided for his support. There can be no right to life more sacred than the right to the means of sustaining life. "You take my life when you do take the means by which I live." Liberty is impossible to one man so long as another man controls his means of living.

From Case to Shiller: on the Bubble

http://blogs.wsj.com/economics/2014/09/17/a-poetic-tribute-from-case-to-shiller-on-the-real-estate-bubble-of-course/

A poetic tribute from Case to Shiller, on the real-estate bubble, of course

• By JASON ZWEIG

At a conference Friday at Yale University in honor of newly minted Nobel laureate Robert Shiller, economist Karl Case of Wellesley College paid tribute to his long-time research partner with an original poem on the lessons of the real-estate bubble and its aftermath. In the 1980s, after many years of research, Case and Shiller together created what are now known as the S&P/Case-Shiller residential real-estate price indexes—the measures that led Shiller, in 2005 through 2007, to predict that home prices would collapse.

While economics professors are not known for their appreciation of rhyme and meter, Case’s poetic tribute received a warm round of applause from the academic audience. We reprint the full text of the poem here, with Case’s permission, a few tiny tweaks and without further commentary.

Reflection on the Housing Market: Seven Years After the Fall
By Karl E. Case

For the last dozen years we have shed many tears
Living through a recession
The world was broke and it was not a joke
When we talked of another depression
Fifteen million without a job
Foreclosures and banks that fail
401k’s became 201k’s
And everything’s up for sale
How could it be? What didn’t we see
That led to all of this trouble?
There is little doubt that the proximal cause
Was a bursting housing bubble
But other than that who can we blame?
And what do they lament?
Millions of people contributed to
This hundred year event

For me it began in ’76
With a house on Cleveland Road
At 54 thousand, I thought it a lot,
For a small three-bedroom abode
But 10 years later that very same house
Would sell for five times the price
I was glad that I bought … I remember the thought
“This may not be fair but it’s nice”

In Boston alone, that boom created
100 billion in wealth
We spent more, saved less, and I have to confess
It was good for our mental health
We had to know that it couldn’t go on
Someday prices would fall
We knew there were risks – to ourselves and our fiscs
If those prices were ever to stall

It all began in 2001

Is a land value tax the solution to our housing affordability problem?

http://www.propertyobserver.com.au/housing-affordability/is-a-land-value-tax-the-solution-to-our-housing-affordability-problem

Is a land value tax the solution to our housing affordability problem?

By Catherine Cashmore |  Monday, 25 November 2013

There’s been a lot of debate around property taxation in Australia - significantly negative gearing, which allows an investor to use the short fall between interest repayments and other relevant expenditure, to lower their income tax.  

The policy promotes speculative gain meaning the strategy is only profitable if the acquisition rise in value rather than holding or falling - therefore, in Australia, investor preference is slanted toward the established sector  – the sector that attracts robust demand from all demographics and as such, in premium locations, has historically gained the greatest windfall from capital gains.  

Aside from the impact this creates in terms of affordability (pushing up the price of second-hand stock, burdening new buyers with the need to raise a higher and higher deposit just to enter ownership), it also negatively affects the the new home market, which traditionally struggles to attract consistent activity outside of targeted first home buyer incentive; albeit, the headwinds resulting from planning constraints and supply side policy should also not be dismissed.  

Additionally, capital gains tax and stamp duty have also received much debate. Both are transaction taxes, and therefore have a tendency to stagnate activity, acting as a deterrent to either buying and selling.  

Stamp duty, as modelled by economist Andrew Leigh, is shown to produce a meaningful impact on housing turnover, leading to a potential mismatch between property size and household type – a deterrent to downsizing and therefore selling.  

Additionally, it burdens first time buyers by increasing the amount they need to save in order to enter the market and frequent changes of employment concurrent with a modern day lifestyle, are hampered as owners, unwilling to move any meaningful distance outside their local neighbourhood, search for work in local areas alone.  

But, outside of academia and intermittent articles, there is scant debate in Australian mainstream media regarding land value tax and it’s practical impact.  

The theory is taken to its extreme and best advocated by American political economist and author, Henry George, who wrote his publication Progress and Poverty - an enlightened and impassioned read - and subsequently inspired the economic philosophy that came to be known as ‘Georgism.’  

The ideals of Henry George reside in the concept that land is in fixed supply, therefore we can’t all benefit from economic advantage gained from ‘ownership’ of the ‘best’ sites available without effective taxation of the resource.  

George advocated a single tax on the unimproved value of land to replace all other taxes – something that would be unlikely to hold water in current political circles. However, his ideals won favour amongst many, including the great economist and author of Capitalism and Freedom, Milton Friedman, and other influential capitalists such as Winston Churchill, who gave a powerful speech on land monopoly stressing:  

“Unearned increments in land are not the only form of unearned or undeserved profit, but they are the principal form of unearned increment, and they are derived from processes which are not merely not beneficial, but positively detrimental to the general public.”  

In essence, raising the percentage of tax that falls on the unimproved value of land has few distortionary or adverse affects.  It creates a steady source of revenue whilst the landowner can make their own assessment regarding the timing and type of property they wish to construct in order to make profit without being penalised for doing so.  

However, when the larger percentage of tax payable is assessed against the value of buildings and their improvements – through renovation, extension or higher density development for example – not only can those costs be transferred to a tenant, there is less motivation to make effective use of the site. This has a flow on effect which can not only exacerbate urban ‘sprawl’, but also increase the propensity to ‘land bank.’  

The Henry tax review commissioned by the government under Kevin Rudd in 2008 concluded that “economic growth would be higher if governments raised more revenue from land and less revenue from other tax bases,” proposing that stamp duty (which is an inconsistent and unequitable source of revenue) be replaced by a broad based land tax, levied on a per square metre and per land holding basis, rather than retaining present land tax arrangements.  

The Australian Housing and Urban Research Group attempted to mimic the proposed changes using their AHURI-3M micro-simulation model in a report entitled The spatial and distributional impacts of the Henry Review recommendations on stamp duty and land tax .  

And whilst it’s difficult to qualify how purchasers may factor an abolition of stamp duty into their price analysis, perhaps adding the additional saving into their borrowing capacity, and therefore not lowering prices enough to initially assist first homebuyers.  It does demonstrate how over the longer-term falls in house prices have the potential to exceed the value of land tax payments, assisting both owner-occupier and rental tenant as the effects flow through.  

Additionally, increasing the tax base would provide developers with an incentive to speed up the process and utilise their holding for more effective purposes.

And importantly for Australia, it can provide a reliable provision of revenue to channel into the development of much-needed infrastructure.  

The rational for this is coined in the old real estate term ‘location, location, location.’  Everyone understands that in areas where amenities are plentiful – containing good schools, roads, public transport, bustling shopping strips, parks, theatres, bars, street cafes and so forth – increases demand and therefore land values, invoking a vibrant sense of community which attracts business and benefits the economy.  

The idea behind spruiking a ‘hotspot’, such a common industry obsession, is based on purchasing in an area of limited supply, on the cusp of an infrastructure boom such as the provision of a new road or train line for example, enabling existing landowners to reap a windfall from capital gains and rental demand for little more effort than the advantage of getting in early and holding tight whilst tax payer dollars across the spectrum fund the work.

Should a higher LVT be implemented, the cost and maintenance of community facilities could in part, be captured from the wealth effect advantaging current owners, compensating over time for the initial outlay.  Imagine the advantage this would offer residents in fringe locations who sit and wait for the failed ‘promises’ offered, when they migrated to the outer suburbs initially. 

Take New York for example – between the years 1921 and 1931 under Governor Al Smith, New York financed what is arguably the world’s best mass transit system, colleges, parks, libraries, schools and social services shifting taxes off buildings and onto land values and channelling those dollars effectively.  

The policy influenced by Henry George ended soon after Al Smith’s administration, and eventually lead to todays landscape - a city built on a series of islands, with limited room to ‘build out’ facing a chronic affordable housing shortage with the population projected to reach 9.1 million by 2030.

More than a third of New Yorkers spend half their pay cheque on rent alone yet like London, there is little motivation for developers to build housing to accommodate low-wage workers concentrating instead on the luxury end of market, broadening the gap between rich and poor as land values rise and those priced out, find little option but to re-locate.  

New York’s Central Park is the highest generator of real estate wealth.  The most expensive homes in the world surround the park with apartments selling in excess of $20 million, and newer developments marketed in excess of $100+ million.  

Like London it’s a pure speculators paradise – in the 10 year period to 2007, values increased by 73% - owners sit on a pot of growing gold and there’s little to indicate America’s richest are about to bail out of their New York ‘addiction’ with an expansive list of A-list celebrities, high net worth individuals, and foreign magnates, owning apartments in the locality.  

New mayor-elect, Bill de Blasio, who won his seat, based on a promise to narrow the widening inequality gap - preserve 200,000 low and middle income units, and ensure 50,000 affordable homes are constructed over the next decade, will struggle to subsidize plans whist facing a deficit reputed to be as much as $2 billion in the next fiscal year.  

Yet economist Michael Hudson has recently assessed land values in New York City alone to exceed that of all of the plant and equipment in the entire country, combined.  

Currently more than 30 countries around the world have implemented land value taxation - including Australia - with varying degrees of success not only based on the percentage split between land and property, but how those funds are channelled back into the community and the quality of land assessments in regularly updating and estimating value.  

Pennsylvania is one such state in the USA to use a system which taxes land at a greater rate than improvements on property – I think I’m correct in saying 19 cities in Pennsylvania use land value tax with Altoona being the first municipality in the country to rely on land value tax alone.  

Reportedly, 85% of home owners pay less with the policy than they do with the traditional flat-rate approach. When mayor of Washington county, Anthony Spossey, who also served as treasurer from 2002 to 2006 and under his watch enacted an LVT, was interviewed on the changes in 2007, he commented:  

“LVT ..helps reduce taxes for our most vulnerable citizens. We have an aging demographic, like the county, region and the state. Taxpayers everywhere are less able to keep up with taxes, and that hurts revenue. LVT helps us mitigate the impact both to them and the city. It’s a win/win.”  

Until fairly recent times, another good example to cite is Pittsburgh. Early in the 1900s the state changed its tax system to fall greater on the unimproved value of land than its construction and improvements.  

Pittsburgh’s economic history is a study in itself, and has not been without challenges.  For those wanting to research further, I strongly advocate some of the writings of Dan Sullivan - (former chair of the Libertarian Party of Allegheny County, (Pittsburgh) Pennsylvania) - who is an expert on the economic benefits of LVT and has written extensively on the subject.  

Sullivan demonstrates that Pittsburgh not only enjoyed a construction boom whilst avoiding a real estate boom under a broad based LVT system, but also effectively weathered the great depression whilst maintaining affordable and steady land values along the way.  

In comparing it to other states struggling to recover from the recent sub-prime crisis he points out:  

“In 2008, just after the housing bubble broke, Cleveland led the nation in mortgage foreclosures per capita while Pittsburgh's foreclosure rate remained exceptionally low. Since then, the foreclosure rates in Las Vegas and many Californian cities, none of which collect significant real estate taxes, have passed Cleveland's foreclosure rate. However, on September 15, 2010, The Pittsburgh Post-Gazette reported that while at the end of the second quarter of 2010, 21.5% of America's single-family homes had underwater mortgages (the American term for negative equity), only 5.6% did in Pittsburgh. As a result Pittsburgh was top of a list of the 10 marketswith the lowest underwater mortgage figures.”

When land value tax is implemented - with the burden taken of buildings and their improvements, ensuring good quality assessments and sensible zoning laws – it not only assists affordability keeping land values stable, but also benefits local business through infrastructure funding, discourages urban sprawl, incites smart effective development of sites, reduces land banking, and as examples in the USA have demonstrated – assists in weathering the unwanted impacts of real estate booms and busts.  

Despite the numerous examples across the world where a broad based land value tax has been deployed successfully, changing policy and bringing about reform is never easy and rarely without complication.  

Additionally, the implications of a yearly tax on fixed low-income retirees must be handled with care and understanding, as there are ways to buffer unwanted effects whilst changes are implemented.  

Therefore, the process adopted in the ACT which is abolishing stamp duties over a slow transitional 20 year period to phase in higher taxation of land is not altogether unwise.  

With any change to the tax system, the headwinds come convincing the public that it’s a good idea. In this respect balanced debate and conversation is necessary, as questions and concerns are brought to the fore.  

The increased tax burden also falls on those who have significant influence across the political spectrum; therefore strong leadership to avoid lobbying from wealthy owners with vested interests is essential.  

Albeit, as I said last week, we have a new and growing generation of enlightened voters who are well and truly fed up with battling high real estate prices, inflated rents, and care not whether it’s labelled as a ‘bubble’ – but certainly care about their future and that of their children.  

Therefore – I do see a time when all the chatter around affordability, will finally evolve into real action – and a broad based LVT should form an important part of that debate.

 

---

Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.

 

Shiller: Too Many Graduating Seniors Go Into Finance

One might be led to ask, how many is enough, and how we might go about encouraging our best and brightest into careers that serve others instead of rent-seeking.  Two generations ago, many became doctors, engineers and teachers.  

• What changes in public policy will reduce the returns now funneled so generously to the rent-seekers, leaving more for the folks who labor in the productive sectors of the economy?  
• Why do we pay so little attention to rent-seeking?  
• Why is rent-seeking taught to our MBAs, but the impacts of rent-seeking not taught to our liberal arts, social sciences, political science, public policy students?   
• D'ya think that the rent-seekers might really really like it this way??

Shiller: Too Many Graduating Seniors Go Into Finance

http://www.moneynews.com/Economy/Shiller-financial-field-speculative/2013/09/25/id/527558

Too many of the our brightest people may be choosing careers in finance, undertaking economically and socially useless — and even harmful — activities, Robert Shiller, a Yale University economics professor, writes in an article for Project Syndicate.

A survey of elite U.S. universities showed that 25 percent of Harvard graduating seniors, 24 percent of Yale graduating seniors and 46 percent of Princeton graduating seniors were going into financial services in 2006, notes Shiller, co-creator of the Case-Shiller home price index. 

While those proportions have fallen more recently, he explains that might only be a temporary effect of the financial crisis.

And more are going into speculative fields like investment banking rather than traditional finance such as lending, he says, citing a study by Thomas Philippon of the Stern School of Business, New York University and Ariell Reshef of the University of Virginia. 

We need some traders and speculators, Shiller concedes, as they provide some useful service — sorting through information about businesses and trying to judge their real worth.

"But these people's activities also impose costs on the rest of us," he explains. Much of their speculation and deal making is "pure rent-seeking." 

"In other words, it is wasteful activity that achieves nothing more than enabling the collection of rents on items that might otherwise be free."

Those working in speculative finance fields are like a feudal lord installing a chain across a river to charge fees on passing boats, he argues. Making no improvements to the river, the lord does nothing productive and helps no one but himself. Few people will use the river if enough lords put chains across it to collect fees. 

Those working in speculative fields, he says, "skim the best business deals, creating a 'negative externality' on those who are not party to them."

For example, they can reject bad assets, such as subprime mortgage securities, offloading them to less knowledgeable investors. 

The repeal of the Glass-Steagall Act, which blocked commercial banks from investment banking, allowed bankers to act more and more like those feudal lords collecting fees.

"In fact, the main advantages of the original Glass-Steagall Act," he says, "may have been more sociological than technical, changing the business culture and environment in subtle ways. By keeping the deal-making business separate, banks may have focused more on their traditional core business."

A paper by economists at Columbia University and Princeton published on the Social Science Research Network website showed that over-the-counter (OTC) traders allowed informed dealers to extract excessive rents and to undermine organized exchanges by "cream-skimming" the best deals. 

"The informational rents in OTC markets in turn attract too much talent to the financial industry, which would be more efficiently deployed as real-sector entrepreneurs," the paper asserts.

Plus, OTC dealers' rents tend to increase "as there are more informed dealers, because the greater cream-skimming by dealers worsens the terms entrepreneurs can get for their assets on the organized exchange, and therefore their bargaining power on OTC markets."

"the collectively earned increment"

I came across an interesting article from 1908, with what strikes me as a well-described concept:

http://archive.org/stream/worldswork17gard/worldswork17gard_djvu.txt

November, 1908

MUTUAL TOWN-BUILDING IN ENGLAND
"GARDEN CITIES" OF INDIVIDUAL, DETACHED HOMES BUILT WITHOUT THE AID OF PHILANTHROPY — A BETTER PLAN THAN REBUILDING THE SLUMS

BY WILHELM MILLER
(who visited these cities to make a first hand study of them)

LETCHWORTH, "the perfect city," less than five years old but with 6,000 inhabitants, is thirty-four miles north of London and is reached by the best trains in fifty minutes. It has 3,818 acres and its population is limited to 35,000 inhabitants, so that there will never be any crowding. The factory quarter can never be enlarged; it is situated as far as possible from the residence quarter and the prevailing wind carries the smoke away from the homes. Nearly one-sixth of the town site, or two hundred acres, is perpetually reserved for open spaces, including parks, jjlaygrounds, and a golf course.

And even if the surrounding country should build up as solidly as London, the people of Letchworth are always sure of enjoying a beautiful rural scene because a large belt is perpetually reserved for agriculture. This belt comprises 2,500 acres, or 65 percent of the whole estate. It will undoubtedly be occupied by market gardeners and dairymen, for gardens yield about eleven times as much profit per acre as farms.

A man can buy a house at Letchworth or he can rent one, but he cannot buy the land. He cannot even lease it for 999 years, because that would enable him to sell or lease his property in such a way as to make a profit from the unearned increment. He can lease the land for ninety-nine years without revaluation and the improvements will not revert to the landowner. In any case, he has every advantage enjoyed by the man who owns the land outright — save one. He cannot get rich from what Henry George called the "unearned increment" but which in Letchworth is called the "collectively earned increment." Even if he rents his house and land from week to week he cannot be dispossessed by some one who offers more money. In the agricultural belt, the tenant is allowed to continue in occupation as long as he is willing to pay as much as anyone else, less 10 percent, in favor of the present tenant.

Letchworth has been built upon a plan whereby people in any part of the world can make a city that is practically perfect without asking any rich man to give money, and without facilities for borrowing any large amount. The essence of the scheme is to preserve to the people the "collectively earned increment." The Letchworth people take some pride in the use of this phrase, and justly. For, merely by moving to Letchworth and living there they created in four and a half years a net increase of half a million dollars. They do not get that half million now, but some day they will get 95 percent of it in the form of abolition of taxes. And that day, in my opinion will come in about twenty years, for by that time the city should be able to pay back all that its public works have cost.

THE TWO OTHER "GARDEN CITIES "

There are two other successful "garden cities," Bourneville, a suburb of Liverpool built by the Cadbury Cocoa Works, and Port Sunlight near Birmingham created by the Lever Brothers, soap manufacturers, solely for their employees.

Port Sunlight is the most beautiful because the Messrs. Lever have gone to the unnecessary extreme of making no two houses alike. Also, they have spent more upon ornamentation of
houses than is necessary and they plant and care for all the front yard gardens.

The tenants at Port Sunlight get more for their money than elsewhere for two reasons. First, the rents are too low, because they are calculated only to pay expenses. Second, the social institutions, though more elaborate than elsewhere, cost the people nothing originally and they can and do manage them so as to keep expenses down to the mininum.

THE "taint" of philanthropy

The one great drawback to the Port Sunlight idea is that it involves too great an expenditure on the part of one man or one firm, and it is hard to prove to a factory owner that the investment is worth while. In this case, the factory owners disclaim all idea of philanthropy and are positive that it pays, because their employees are healthier, happier, more prosperous and therefore more efficient.

The Lever Brothers rejected all direct profit-sharing schemes because they thought this the only plan that would benefit the wives and children of the men. There is the keenest competition for a chance to work in that factory and live in one of those houses. But all the profits to the firm are indirect. Rarely, if ever, can they be expressed in dollars and cents and indirect profits can never be expected to weigh in the mind of the average employer against the appalling fact that Lever Brothers have put about $1,700,000 into their paradise at Port Sunlight and have never directly gotten back one cent.

In other words, if this is not philanthropy, it is too much like it to be generally copied. Humanity cannot look to great employers for the solution of the housing problem. And employees do not want philanthropy.

And at Bourneville there is less of the philanthropic spirit. The employees of the Cadbury Cocoa Works get a normal social life, which the people of Port Sunlight do not have. The cocoa workers are not obliged to live in Bourneville and only 42 percent of the tenants at Bourneville are employed at the Cadbury factory. Thus Bourneville is a mixed community and the ideal community must be mixed — not merely industrial, or suburban, or composed exclusively of any one class. It is sad to see the magnificent clubs, lecture halls, baths, and other social features at Port Sunlight languish for attendance, but it is only human nature. On getting home after a day's work, a man wants to forget thoughts of his work. And if he lives in a city where every house and every person he sees on the street suggests the workroom, he is bound to escape to the next town where he can get a drink or otherwise forget his daily routine. The only serious complaint which the tenants at Port Sunlight have any right to make is that they live in the atmosphere of a single class.

Mr. Cadbury gave Bourneville to the people. How then does it escape the "taint" of philanthropy?"

A GREAT FUND FOR PROPAGANDA

It is true that Mr. Cadbury gave the property to a trust which administers it for the benefit of the people, but eventually this trust will be able to finance hundreds of other garden cities that will be purely cooperative. For instance, people wishing to live in a "garden city," where all the "collectively earned increment" benefits all alike instead of going to the building up of individual fortunes, can form a stock company with shares as low as $25. If the Bourneville trust approves of their plan, it will lend them enough money to start a town. But the company must pay it back, so that the Bourneville trust can use it again and again.

How does the Bourneville trust hope to get this fund? Its income, which is almost wholly rent, doubles every five years. At this rate, in fifty years it will have an annual income of five million dollars. Long before that, Bourneville will have reached its limit of population. And since the trust never has to pay back the cost of the houses, roads, or other public works, it will be able to roll up a vast sum for the propagation of the "garden city" idea.

The all-important point is that the Bourneville trust will never give anyone something for nothing. It will merely lend money to people who are building "garden cities."

THE HEALTH AND BEAUTY OF THESE CITIES

These are far healthier and more beautiful than cities that have grown up normally; healthier because crowding is prevented by a limit to the population and because more and better provision is made for outdoor sports — to say nothing of architecture in which health is the first thought. The average town death-rate in England is 15 per 1,000. Letchworth has cut this down to 2.75. The birthrate at Port Sunlight is twice the average for the rest of England.

The greater beauty of these garden cities lies chiefly in the architecture and gardening. The houses and stores all conform to one general style of architecture, but are never monotonous. Every building must be approved by the city's architect. The houses are all of brick and built to last. There are no long rows of houses just alike. The first idea was to have no two houses alike but that is a needless waste of money. For poor people it is impossible to get good houses cheap enough without building three or four in a row and this row can be duplicated in another part of town without harming the total effect. Moreover, Bourneville has shown how much can be saved on ornamentation. The plainest houses are transformed in three years by the use of climbers. Bourneville's head gardener sees that every house has a different set of vines. Not merely is the plainness soon hidden thereby, but also the individuality of each home is notably increased.

Gardening is compulsory at Bourneville and Letchworth. If a tenant neglects his garden at Bourneville and will not hire some one to weed it, the estate notifies him that he will forfeit his lease unless he makes his place look decent. But there have been only two cases of neglect.

The estate plants a hawthorn hedge all round each man's place, digs and manures his vegetable garden, lays down the lawn, sets out dwarf fruit trees, plants the climbers on his house, and digs his flower-beds. These expenses are considered part of the cost of building and the rent is based thereon. The tenant must keep it in good condition but he can buy plants from the estate cheaper than from a nurseryman and he gets instruction for nothing. There is no chance for a beginner to get discouraged.

A FIVE-ROOM HOUSE FOR $7.80 A MONTH

I am almost afraid to tell how much a tenant gets for his money at one of these garden cities. The cheapest houses at Bourneville rent for only $7.80 a month, which includes taxes and water rates. Such a house contains five rooms and a wonderful "folding bath" which stands up like a cabinet when not in use. Clerks and artisans, however, generally pay about $12.30 a month for seven rooms and an eighth of an acre.

The ideal amount of land at Bourneville is one-eighth of an acre, and the average value of the fruits and vegetables produced on such a plot is about $32.24 a year, or sixty-two cents a week the year round. The smallest lots at Letchworth are a twelfth of an acre, which is the same as 25 x 145 feet, and is 45 percent larger than the typical New York lot, on which many families are allowed to live. In addition to these direct benefits the tenant gets a chance to play cricket, tennis, bowls, quoits, and hockey near by at no expense or at less cost than in an ordinary club.

All rents at Bourneville are figured at 8 percent of the cost. Taxes, insurance and repairs cost 3 percent, leaving a profit to the Bourneville estate of 5 percent. With this 5 percent, it employs a permanent staff of about one hundred builders and has about fifty houses under construction all the time.

OBSTACLES OVERCOME AT LETCHWORTH

The Letchworth company had its hands full with public works, for it had to construct eight miles of road, eleven miles of sewers, and seventeen miles of water main. Also it had to build a reservoir for water, a gas making plant, and an electric power station to supply the factories, of which it now has twenty-four. Another difficulty overcome was transportation. The company has cooperated with the railroad so well that its "commuters" can make their thirty-four miles to and from London daily in less than an hour, though most trains require an hour and a quarter.

The income of the land company is partly from the sale of water, gas, and electricity, but chiefly from ground rent. It never sells any land or houses. Ground rent may seem a very small source of revenue, but every man, woman and child in England contributes for ground rent an average of $10.50 a year. The Letchworth company can, and doubtless will, raise the ground rent as its limit of population approaches, but even if it should raise it as high as the average for England, the tenant will pay less than elsewhere, for taxes will eventually be abolished.

Postscript -- a few hours after I posted this, a google alert on ground rent brought me a story about Letchworth, at http://www.thecomet.net/news/letchworth_businesses_finally_land_meeting_over_rent_rise_1_2311500

1909's Dangerous Subversive; Rents and Davos; the Skivers and Shirkers

"We are being parasitised from above, not below, and the tax system should reflect this."

I'm going to take the liberty of quoting someone's blog post in full. The author is Richard Murphy, and the post is found at http://www.taxresearch.org.uk/Blog/2013/01/22/its-time-to-increase-the-tax-on-unearned-income-its-so-glaringly-obviously-true-why-will-no-one-say-it/

It’s time to increase the tax on unearned income. It’s so glaringly obviously true why will no one say it?

Jan 22, 2013 

George Monbiot has an excellent article on tax in the Guardian this morning. At its core is an argument for land value taxation, which he explains has long had powerful support. As he puts it:

In 1909 a dangerous subversive explained the issue thus. “Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -– and all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived … the unearned increment on the land is reaped by the land monopolist in exact proportion, not to the service, but to the disservice done.”

Who was this firebrand? Winston Churchill. As Churchill, Adam Smith and many others have pointed out, those who own the land skim wealth from everyone else, without exertion or enterprise. They “levy a toll upon all other forms of wealth and every form of industry”. A land value tax would recoup this toll.

What Churchill was more broadly describing was the concept of economic rents. So is Aditya Chakrabortty in the Guardin this morning when he says with reference to the philosophy of Davos:

[W]hat’s wrong with the argument the Terry Leahys and the Bob Diamonds make for their extreme wealth? Look, the line runs, we work bloody hard for it; we’re worth it. And it’s true: unlike previous generations of the ultra-wealthy, many of the modern super-rich work for a living, in running major businesses or in finance (although the Davos guestlist still includes plenty of sheikhs and royals). But that doesn’t mean they truly earn the millions they claim.

Take a look at who’s in the Davos set. Last spring, two American academics, Jon Bakija and Brad Helm, and a US Treasury official, Adam Cole, published the most comprehensive analysis yet of the richest 0.1% earners, based on tax returns. Of these top dogs, nearly two in three were top corporate executives and bankers. And the story in both those professions has not been of brilliant returns to shareholders or vast improvements for society, but of wealth extraction and lobbying politicians, Davos-style. In particular, the tale of modern high-finance is of generating transactions, whether in corporate mergers or sub-prime mortgages and then skimming off some of the cash.

That’s extracting rent in exactly the same way that the property owner does. Economically the logic is the same. This is all unearned income, and we should not be granting it favours which increase the divisions and stresses in society; we should be taxing it.

That means we need land value taxation for sure, but we need progressive income taxation, capital gains tax at the same rate as income tax and enforceable corporation tax too if these rents are to be collected. And then there’s the need for reform of inheritance tax.

I really must get round to writing the Joy of Tax. It is next on my list.

 

Another post on the subject is at http://taxjustice.blogspot.com/2013/01/the-skivers-and-shirkers-are-economic.html

The skivers and shirkers are the economic rent extractors

From the UK's Guardian newspaper:

"This is where the debate about workers and shirkers, strivers and skivers should have led. The skivers and shirkers sucking the money out of your pockets are not the recipients of social security demonised by the Daily Mail and the Conservative party, the overwhelming majority of whom are honest claimants. We are being parasitised from above, not below, and the tax system should reflect this."

Although this is a UK-focused story, it has international relevance. As we've noted several times before, Land Value Tax is an essential element of any good tax mix. It's progressive, it doesn't damage productivity, and it curbs the abusive practice of economic rent extraction. The article has a particular opinion:

"It's not really a tax. It's a return to the public of the benefits we have donated to the landlords. When land rises in value, the government and the people deliver a great unearned gift to those who happen to own it."

What's not to like?

See also http://www.newstatesman.com/economics/2013/01/whats-justification-land-value-tax

George Montbiot's article is titled "A Telling Silence."  It is on his blog, with footnotes, at http://www.monbiot.com/2013/01/21/a-telling-silence/  A few excerpts follow, but I encourage you to read the whole piece, which follows.

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.

continue reading

Thomas Shearman: The Coming Billionaire (1891)

When there is even one billionaire, there will be several half-billionaires and many hundred-millionaires.  The fact will be an indication of a tremendous concentration of wealth, and of the dwindling proportion of wealth held by the farmers and wage-earners of this country.  The billionaire will bring an army of paupers in his train.  Possibly the actual average wealth of farmers and mechanics then may be a little greater than it is now.  Optimists of that day may assure them that they are richer, by ten dollars each, than their ancestors were; and therefore that all is for the best in this best of all possible worlds.  But the discontent of the masses, under a system which gives to one man a larger amount of wealth than can ever be attained by a million of his fellow citizens who are fully his equals in skill and merit and far his superiors in industry, is certain to be great and ever increasing.  Indeed, universal experience demonstrates that discontent among the masses is far greater than when the weight of oppression is somewhat diminished than it was before.

...

The vast majority of any community must always have incomes so small that they cannot help spending three fourths of what they receive.  But the small minority of large property-owners do not need to spend one eighth of their incomes, and as a rule they do not spend one half.  Looking at the subject with reference to accumulated wealth, the man who is worth $1,000 usually spends at least $500 a year on the support of his family, while the man who is worth $1,000,000 rarely spends $50,000.  Indirect taxation, therefore, obviously bears at least ten times as heavily upon the former as upon the latter.  Under absolutely direct taxation, no poor man would ever pay a larger share than a rich man, and, indeed, most of the working classes would pay no taxes at all; because the collection of direct taxes from them would be too laborious and expensive to be maintained. 

...

Direct taxation, on a large scale, is near at hand.  The men who bought and paid for the present Congress can now choose what its form shall be.  They can have a general income tax, or they can have something less open to fraud, less inquisitorial in its nature, less oppressive upon honest men, and offering no premium to perjury.  But they know nothing about the science of taxation, and they do not care to learn; so that the whole matter will be left over to the new Congress, and a general income tax, objectionable as it is, seems most likely to be adopted. 

The Coming Billionaire

The Forum, January, 1891, page 546-557

In the FORUM for November, 1889, the question was asked, "Who owns the United States?" and reasons were given for the belief that one half of all the national wealth is owned by 40,000 families and that three fourths of it is in the possession of fewer than 250,000 families.  These estimates were based in part upon official tax returns, but in part, also upon private information as to the wealth of 70 estates, specifically named, each estimated to be worth more than $20,000,000 and averaging $37,500,000.  The correctness of these statistics, as well as that of the inferences drawn from them, has been somewhat bitterly denied.  Hostile critics have assumed that the estimates of individual wealth were based entirely upon newspaper reports; and many newspaper editors, acting presumably upon their own experience, have unhesitatingly declared that such statistics are necessarily worthless.

But not one tenth of these names were given upon the authority of newspaper estimates, while a large majority were given upon very trustworthy private information.  It has been said that no one can tell what a man's wealth amounts to without access to his books, which, it has been assumed, is impossible.  In several instances, however, the information came from persons who had access to the necessary books or had been permitted to inspect the securities; in some cases it was obtained from tax returns; and in other cases it was taken from the oral or written statements of the owners themselves.  For example, one gentleman, whose wealth was set down at $100,000,000 had actually exhibited $75,000,000 in securities, and had testified in a court of law to the possession of $10,000,000 more of one kind, all encumbered.  During the year which has now elapsed, not one tenth of these names have been specified by any one as erroneously entered upon the list or as seriously overrated, and in only three instances has any probable error been established.  These names might be omitted, and their places might be supplied by others of the twenty million grade.  Errors of understatement have been discovered which largely counterbalance all overstatements.  The least that can be said is that there are 70 American estates that average $35,000,000 each, not including Trinity Church, which perhaps should not be classed with strictly individual owners.  During the year, by the consolidation of two estates, one individual has become worth at least $200,000,000.  Two brothers, whose property is held as a unit, together own even a larger amount than this.  Some great estates have been divided up by inheritance, but others have been divided up by inheritance, but others have been still more concentrated by that means.

Henry George's chapter in McNeill's "The Labor Movement: The Problem of Today" (1887)

I stumbled across an excerpt from this in The American Cooperator, and when I couldn't find the material in any of George's other books, I went looking for the source, an 1887 book with chapters by 16 authors.  

Enjoy!  (It prints out as about 9 pages, if you're so inclined)

http://archive.org/stream/labormovementpro00mcneiala/labormovementpro00mcneiala_djvu.txt

THE LABOR MOVEMENT;
THE PROBLEM OF TODAY.

THE HISTORY, PURPOSE AND
POSSIBILITIES OF LABOR ORGANIZATIONS
IN EUROPE AND AMERICA; GUILDS, TRADES-
UNIONS, AND KNIGHTS OF LABOR; WAGES AND PROFITS;
HOURS OF LABOR; FUNCTIONS OF CAPITAL; CHINESE LABOR:
COMPETITION; ARBITRATION; PROFIT-SHARING AND
CO-OPERATION; PRINCIPLES OF THE KNIGHTS OF
LABOR; MORAL AND EDUCATIONAL AS-
PECTS OF THE LABOR QUESTION.

EDITED BY GEORGE E. McNEILL,
First Deputy of Mass. Bureau of Statistics of Labor; Sec.-Treas. of D. A. 30, Knights of Labor.

ASSOCIATE AUTHORS: TERENCE V. POWDERLY, G. M. W., K. of L.; DR. EDMUND J. JAMES, University of Pennsylvania; HON. JOHN J. O'NEILL, of Missouri; HON. J. M. FARQUHAR, of New York; HON. ROBERT HOWARD, of Massachusetts; HENRY GEORGE, of New York; ADOLPH STRASSER, Pres. Cigar Makers' Union; JOHN JARRETT, of Pennsylvania; REV. R. HEBER NEWTON, of New York; F K. FOSTER, of Massachusetts; P. M. ARTHUR, Chief Engineer Locomotive Brotherhood; W. W. STONE and W. W. MORROW, of California; FRANKLIN H. GIDDINGS, "Springfield Union"; JOHN McBRIDE, Secretary Coal Miners' Union; D.J.O'DONOGHUE, of Toronto, Canada; P. J. McGUIRE, Secretary Carpenters' Brotherhood, Ohio.

NEW YORK: THE M. W. HAZEN CO.
1887.

Copyright 1886, by
A M. BRIDGMAN & CO.

CHAPTER XXIII.  THE LAND QUESTION.

MAGNITUDE OF THE QUESTION — FIRST PRINCIPLES — THE LAND-OWNER THE ABSOLUTE MASTER OF MEN WHO MUST LIVE ON HIS LAND — THE ORDER OF NATURE INVERTED — EQUAL RIGHTS TO THE USE OF THE EARTH — SELFISHNESS, THE EVIL GENIUS OF MAN — THE IRISH PEOPLE FORCED TO BEG PERMISSION TO TILL THE SOIL — APPROPRIATION OF THE CHURCH-LANDS — LAND IN ITSELF HAS NO VALUE — THE GREAT CAUSE OF THE UNEQUAL DISTRIBUTION OF WEALTH — NO HOPE FOR THE LABORER, SO LONG AS PRIVATE PROPERTY IN LAND EXISTS — NOTHING MYSTERIOUS ABOUT THE LABOR QUESTION — THE DIFFICULTY IN FINDING EMPLOYMENT — NATURE OFFERS FREELY TO LABOR — NATURAL MEANS OF EMPLOYMENT MONOPOLIZED — SPECULATION IN THE BOUNTIES OF NATURE.

BENEATH all the great social questions of our time lies one of primary and universal importance, the question of the rights of men to the use of the earth.

The magnitude of the pecuniary interests involved, the fact that the influential classes in all communities where private property in land exists are interested in its maintenance, lead to a disposition to ignore or belittle the land question: but it is impossible to give any satisfactory explanation of the most important social phenomena without reference to it; and the growing unrest of the masses of all civilized countries, under conditions which they feel to be galling and unjust, must at length lead them, as the only way of securing the rights of labor, to turn to the land question.

To see that the land question does involve the problem of the equitable distribution of wealth; that it lies at the root of all the vexed social questions of our time, and is, indeed, but another name for the great labor question in all its phases, it is only needful to revert to first principles, and to consider the relations between men and the planet they inhabit.

We find ourselves on the surface of a sphere, circling through immeasurable space. Beneath our feet, the diameter of the planet extends for eight thousand miles; above our heads night reveals countless points of light, which science tells us are suns, that blaze billions of miles away. In this inconceivably vast universe, we are confined to the surface of our sphere, as the mariner in mid-ocean is confined to the deck of his ship. We are limited to that line where the exterior of the planet meets the atmospheric envelope that surrounds it. We may look beyond, but cannot pass. We are not denizens of one element, like the fish; but while our bodies must be upheld by one element, they must be laved in another. We live on the earth, and in the air. In the search for minerals men are able to descend for a few thousand feet into the earth's crust, provided communication with the surface be kept open, and air thus supplied; and in balloons men have ascended to like distances above the surface; but on a globe of thirty-five feet diameter, this range would be represented by the thickness of a sheet of paper. And though it is thus possible for man to ascend for a few thousand feet above the surface, or to descend for a few thousand feet below it, it is only on the surface of the earth that he can habitually live and supply his wants; nor can he do this on all parts of the surface of the globe, but only on that smaller part, which we call land, as distinguished from the water, while considerable parts even of the land are uninhabitable by him.

By constructing vessels of materials obtained from land, and provisioning them with the produce of land, it is true that man is able to traverse the fluid-surface of the globe; yet he is none the less dependent upon land. If the land of the globe were again to be submerged, human life could not long be maintained on the best-appointed ships.

Man, in short, is a land-animal. Physically considered, he is as much a product of land as is the tree. His body, composed of materials drawn from land, can only be maintained by nutriment furnished by land; and all the processes by which he secures food, clothing and shelter consist but in the working up of land or the products of land. Labor is possible only on condition of access to land, and all human production is but the union of land and labor, the transportation or transformation of previously existing matter into places or forms suited to the satisfaction of man's needs.

Land, being thus indispensable to man, the most important of social adjustments is that which fixes the relations between men with regard to that element. Where all are accorded equal rights to the use of the earth, no one needs ask another to give him employment, and no one can stand in fear of being deprived of the opportunity to make, a living. In such a community, there could be no "labor question." There could be neither degrading poverty nor demoralizing wealth. And the personal independence arising from such a condition of equality, in respect to the ability to get a living, must give character to all social and political institutions.

On the other hand, inequality of privilege in the use of the earth must beget inequality of wealth and power, must divide men into those who can command and those who are forced to serve. The rewards which nature yields to labor no longer go to the laborers in proportion to industry and skill; but a privileged class are enabled to live without labor by compelling a disinherited class to give up some part of their earnings for permission to live and work. Thus the order of nature is inverted, those who do no work become rich, and "workingman" becomes synonymous, with "poor man." Material progress tends to monstrous wealth on one side, and abject poverty on the other; and society is differentiated into masters and servants, rulers and ruled.

If one man were permitted to claim the land of the world as his individual property, he would be the absolute master of all humanity. All the rest of mankind could live only by his permission, and under such conditions as he chose to prescribe. So, if one man be permitted to treat as his own the land of any country, he becomes the absolute sovereign of its people. Or, if the land of a country be made the property of a class, a ruling aristocracy is created, who soon begin to regard themselves, and to be regarded, as of nobler blood and superior rights. That "God will think twice before he damns people of quality," is the natural feeling of those who are taught to believe that the land on which all must live is legitimately their private property.

Who Benefits by Single Tax?

It seems a hard thing for many to understand how the single tax, as applied at Fairhope or elsewhere, can benefit both those who have little and those who have much. They think that if the tax burden upon the wealthy man's fine improvement is decreased, it must be at the expense of his poorer neighbor; or on the other hand, if the poor man's burden is lightened, it must be because it is shifted to the well-to-do. The fact is that the wealthy man whose wealth is genuine wealth, houses, stores, stocks (of goods) and other things which are the product of labor — not the possessor of monopoly privileges — will be benefited by the freeing from taxation of these forms of wealth, and the poor man will be benefited by the exemption of his smaller improvement if he be a home-owner, and if he be not, by the destruction of land speculation, making it easy for him to secure land for a home or for cultivation, and by an increased demand for his labor from others and the increased ability of others to buy his products if he be a producer.

"But somebody must be hurt by your policy. You can't benefit everybody, the beneficiaries of the present system as well as its victims," will say the skeptic. To which we say: There is plenty of room for the argument as to whether the enthronement of Justice ever did or can hurt anybody; but so far as the colony is concerned, there are no beneficiaries of injustice. No one has ever been given the privilege of collecting tribute in the form of unearned land values, and the wealthy and the poor are alike benefited by the taking for public use of that which belongs and has been held from the beginning to belong to the public, but elsewhere is made the privilege of a favored few.

Outside the colony the application of the single tax to present conditions would take somebody's privileges and profits, and it will be those who are "reaping where they have not sown" in the collection of land values rightly belonging to the public for the two highest reasons: first, because their collection for the common benefit is necessary to insure to each his inherent right to live upon the earth; and second, because such values are the result of their joint presence and activity, and not traceable to individual exertions.

-- Fairhope Courier, quoted in The American Cooperator (1903)

The Earth-for-All Calendar: December 16 -- Grant Allen

"Of course the fact that a chief or land-owner has bought and paid for a particular privilege or species of taboo, or has inherited from his fathers, doesn't give him in any moral claim to it. The question is, Is the claim in itself right and reasonable? for a wrong is only all the more a wrong for having been long and persistently exercised."

— GRANT ALLEN, The British Barbarians. (Words spoken by Bertram.)

Land Speculation in Rural Indiana

It isn't just urban land that is the subject of speculation.  Rural farmland can also be speculated upon, to the private benefit of individuals, and the loss of ... the rest of us, the community!   

 

http://www.indystar.com/article/20121110/NEWS05/211100339/StarWatch-investigation-State-paid-twice-what-some-69-land-worth

StarWatch investigation: State paid twice what some I-69 land was worth
To secure path for I-69, INDOT offered $7M for property appraised at $3.34M
Written by Ryan Sabalow and Tim Evans  |  7:47 PM, Nov 10, 2012   

BLOOMINGTON, Ind. -- In 2006, Barry Elkins paid $850,000 for about 200 acres in Monroe County owned by former Indiana University basketball coach Bob Knight.

$4,250 per acre

Elkins told a local newspaper he had no plans to develop the land. He said he also was quite aware state officials planned to acquire at least some of the property for the new I-69 freeway project.

Nonetheless, Elkins told a reporter: "It's a heck of a piece of ground."

Turns out, it produced a heck of a profit, too.

In July, state highway officials paid Elkins $2.41 million for an easement covering 140 of the 200 acres. That's almost four times the $658,800 that state appraisers said the easement was worth.

$17,214 per acre for the 140 acres. $658,800 is $4,705 per acre. The $2.41 million represents a profit of $1.56 million since 2006, still leaves the owner with 60 acres with no easement and 140 acres with an easement.  The $1.56 million profit in 6 years on an $850,000 investment is 84%!  Quite a return!  For what effort?  What did society get in return?

... 
According to I-69 cost estimates INDOT provided this summer, $162.6 million in state and federal funds were spent on right-of-way purchases along the new stretch of freeway.

...

He said the property payments also haven't caused the project to go over budget. He said the I-69 project is 25 percent under budget estimates. Officials this summer pegged the cost of the Evansville-to-Bloomington project at $1.5 billion.

...

The land Elkins bought from Knight wasn't the only Monroe County property along I-69's path that he sold to the state for far more than its fair market value. He and two co-owners also got $348,600 for a 27-acre property appraised at $194,625; and $795,956 for 58 acres appraised at $278,295.

As for the former Knight property, the state purchased the easement to create an "environmental mitigation site" to make up for damage to forests, wetlands, wildlife habitat and other natural resources caused by the new freeway.

After the $2.41 million payday -- which was nearly three times the amount Elkins paid Knight for the entire 200 acres -- Elkins still owns the picturesque expanse of undeveloped pasture and woods about eight miles southwest of Bloomington.

The easement forbids any development on 140 acres of the land but allows Elkins to use it for "low-impact" recreational activities such as hiking, photography and hunting.

And he doesn't have to pay property taxes.

One might reasonably ask what valuation Elkins was paying property taxes on before the transactions.

One might reasonably ask how much the labor costs on this project were -- what men and women got paid for their hours of labor put into building the highway, and then compare that to Mr. Elkins' and others' receipts as passive landholders!!  Quite amazing that we treat the "rights" of landholders as more sacred than we make the rights of the community or of those who work.

One might reasonably wonder how soon the communities along the route of this new highway will revalue their land, and whether the communities will collect more from those whose land benefited from the presence of this highway (and less from those whose properties were in reality negatively impacted, should that be the case).   In general, the aggregate benefits will far exceed the aggregate negative impacts, and would likely be enough to pay all the costs of the construction.

Mr. Elkins' free lunch did not come out of thin air.  And likely, his heirs will continue to enjoy the benefit of it.  

THIS is how wealth concentrates.  This is why we are forced into taxing wages, and sales, and other things we have no business taxing!

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.

You Didn't Build That!

seen on Twitter:

"If you extract economic rent from the value of your land, you didn't build that." -- Henry George http://en.wikipedia.org/wiki/Geoism

 

We -- WE! -- built that -- and we ought to be collecting it, month in and month out, and keeping our hands off what the individual or small business or corporation DID build.  (Of course, this presumes that each of us is expected to compensate the community for the pollution we create, and the non-renewable resources we take.)

A Right-to-Life Platform -- 125 years old

As I listen to the 2012 party platforms, I am reminded of what they ought to be focused on, embodied pretty well in this platform from 1886-87. 

PLATFORM OF THE UNITED PARTY.
Adopted at Syracuse August 19, 1887.

We, the delegates of the united labor party of New York, in state convention assembled, hereby reassert, as the fundamental platform of the party, and the basis on which we ask the co-operation of citizens of other states, the following declaration or principles adopted on September 23, 1886, by the convention of trade and labor associations of the city of New York, that resulted in the formation of the united labor party.   

"Holding that the corruptions of government and the impoverishment of labor result from neglect of the self-evident truths proclaimed by the founders of this republic that all men are created equal and are endowed by their Creator with unalienable rights, we aim at the abolition of a system which compels men to pay their fellow creatures for the use of God’s gifts to all, and permits monopolizers to deprive labor of natural opportunities for employment, thus filling the land with tramps and paupers and bringing about an unnatural competition which tends to reduce wages to starvation rates and to make the wealth producer the industrial slave of those who grow rich by his toil.

'“Holding, moreover, that the advantages arising from social growth and improvement belong to society at large, we aim at the abolition of the system which makes such beneficent inventions as the railroad and telegraph a means for the oppression of the people and the aggrandizement of an aristocracy of wealth and power. We declare the true purpose of government to be the maintenance of that sacred right of property which gives to every one opportunity to employ his labor, and security that he shall enjoy its fruits; to prevent the strong from oppressing the weak, and the unscrupulous from robbing the honest; and to do for the equal benefit of all such things as can be better done by organized society than by individuals; and we aim at the abolition of all laws which give to any class of citizens advantages, either judicial, financial, industrial or political, that are not equally shared by all others."

We call upon all who seek the emancipation of labor, and who would make the American union and its component states democratic commonwealths of really free and independent citizens, to ignore all minor differences and join with us in organizing a great national party on this broad platform of natural rights and equal justice. We do not aim at securing any forced equality in the distribution of wealth. We do not propose that the state shall attempt to control production, conduct distribution, or in any wise interfere with the freedom of the individual to use his labor or capital in any way that may seem proper to him and that will not interfere with the equal rights of others. Nor do we propose that the state shall take possession of land and either work it or rent it out. What we propose is not the disturbing of any man in his holding or title, but by abolishing all taxes on industry or its products, to leave to the producer the full fruits of his exertion and by the taxation of land values, exclusive or improvements, to devote to the common use and benefit those values, which, arising not from the exertion of the individual, but from the growth of society, belong justly to the community as a whole. This increased taxation of land, not according to its area, but according to its value, must, while relieving the working farmer and small homestead owner of the undue burdens now imposed upon them, make it unprofitable to hold land for speculation, and thus throw open abundant opportunities for the employment of labor and the building up of homes.

While thus simplifying government by doing away with the horde of officials required by the present system of taxation and with its incentives to fraud and corruption, we would further promote the common weal and further secure the equal rights of all, by placing under public control such agencies as are in their nature monopolies: We would have our municipalities supply their inhabitants with water, light and heat; we would have the general government issue all money, without the intervention of banks; we would add a postal telegraph system and postal savings banks to the postal service, and would assume public control and ownership of those iron roads which have become the highways of modern commerce.

While declaring the foregoing to be the fundamental principles and aims of the united labor party, and while conscious that no reform can give effectual and permanent relief to labor that does not involve the legal recognition of equal rights, to natural opportunities, we nevertheless, as measures of relief from some of the evil effects of ignoring those rights, favor such legislation as may tend to reduce the hours of labor, to prevent the employment of children of tender years, to avoid the competition of convict labor with honest industry, to secure the sanitary inspection of tenements, factories and mines, and to put an end to the abuse of conspiracy laws.

We desire also to so simplify the procedure of our courts and diminish the expense of legal proceedings, that the poor may be placed on an equality with the rich and the long delays winch now result in scandalous miscarriages of justice may be prevented.

And since the ballot is the only means by which in our Republic the redress of political and social grievances is to besought, we especially and emphatically declare for the adoption of what is known as the “Australian system of voting,” an order that the effectual secrecy of the ballot and the relief of candidates for public office from the heavy expenses now imposed upon them, may prevent bribery and intimidation, do away with practical discriminations in favor of the rich and unscrupulous, and lessen the pernicious influence of money in politics.

In support or these aims we solicit the co-operation of all patriotic citizens who, sick of the degradation of politics, desire by constitutional methods to establish justice, to preserve liberty, to extend the spirit of fraternity, and to elevate humanity.

The Earth-for-All Calendar: August 13 -- Emerson

Then he says: "If I am born into the earth, where is my part? Have the goodness, gentlemen of this world, to show me my wood lot, where I may fell my wood, my field where to plant my corn, my pleasant ground where to build my cabin."

"Touch any wood or field or house-lot on your peril," cry all the gentlemen of this world; "but you may come and work in ours for us, and we will give you a piece of bread."

— EMERSON, The Conservative.

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: August 1 -- Giffen and Howells

It is certain, however, that a large part of the improvement is due to the increasing value of advantageous sites, an unearned increase of value such as Mr. Mill speaks of, and therefore a kind of profit which the State may restrict with least harm.

— ROBERT GIFFEN, Essays in Finance, 1st Series (1871), Chap. X., p. 244. 

The rise in value which the industry of others providentially gives to the land of the wise and good.

— W. D. HOWELLS, A Hazard of New Fortunes, Part IV., Chap. 3.

The Earth-for-All Calendar: July 29 -- Ecclesiastes

The profit of the earth is for all.

— Ecclesiastes, V., 9.

The Earth-for-All Calendar: July 27 -- John Morley

It will be thought an intolerable thing that men shall derive enormous increments of income from the growth of towns to which they have contributed nothing — that they shall be able to sweep into their coffers what they have not produced — that they shall be able to go on throttling towns, as they are well known to do in some cases. It is impossible to suppose that the system will not be vigorously, powerfully, persistently and successfully attacked.

—JOHN MORLEY, Speech at Forfar, October 4, 1897. The Times, October 5, 1897, p. 5, column 3.

The Earth-for-All Calendar: July 26 -- Walker

The unqualified ownership of land thus established (viz., "in a way which in this age would be regarded as monstrous and corrupt"), enables the land-owning class to reap a wholly unearned benefit at the expense of the general community.

— FRANCIS A. WALKER, Political Economy, Part VI., Chap. 7, Sec. 418.

Resource Rentals for Revenue -- The 3 R's of fixing our economy

I came across an excellent site at http://www.resourcerentalsrevenue.org, and thought their FAQ page particularly worth sharing.   The links will take you to answers.

We don't HAVE to burden ourselves and our economy with taxes which throw a wet blanket on jobs, on production, on homes.  There is a better way to finance our common spending!

Resource Rentals for Revenue.

The following list comprises the most commonly asked questions about the concept of making land and resource rentals the source of revenue for government. As you continue this study, you will see the value from giving resources the respect they deserve and the benefits resulting from the freeing of labour, production and exchange from taxation. If you have any questions which are not covered here, or observations you would like to put to our panel, please feel free to do so by sending your question as an e-mail query and we will attempt to respond.

The inclusion of land and resources in the economic equation is central to any solution for revenue raising. A taxation solution which does not consider the nature of taxation itself and allows the continuing private monopolisation of community land and resources fails to recognise the essential role land plays in the economic equation and will not work. Land is the only element in the economic equation which is both fixed and finite. It can be monopolised. It is a unique class of asset which must be treated accordingly. If we were to wrest not the land itself, but its unimproved value from private monopolies and return the value to the community — whose very presence creates it — then we would have reduced many problems in one stroke with great benefit to production, to the environment and to the cause of individual freedom and justice.

On the subject of land and resource rents, Henry George said this:

The tax upon land values is the most just and equal of all taxes. It falls upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses. When all rent is taken by taxation for the needs of the community, then will the equality ordained by nature be attained.

1.Understandings

• What’s with all the terminology?
• Won’t the site rent be passed on to the tenant?
• It sounds too simple
• What is the difference between Land Value and Land Price?
• What is meant by ‘unimproved’ value?
• Why is income from land ‘unearned’ income?
• There is no such thing as a free lunch.
• There is no unimproved land value!
• This tax, like a debits tax, ignores two of the basic principles of raising tax
• It’s incorrect to suggest that income derived from holding land or resources out of use is not a productive activity. It is, since it produces income for the owner.

2.Interest Groups

• Will I be better off with Resource Rentals?
• Are resource rentals fair?
• Wouldn’t the wealthy simply find some way of evading it?
• Wouldn’t the wealthy sell up and flee with their wealth?
• Won’t the poor get caught, while the rich escape as usual?
• Would farmers be able to afford the tax?
• How will it affect multinationals (MNC’s)?
• How will it affect lenders and borrowers?
• Entrepreneurs and Manufacturers?
• Exporters and Importers?
• Environmentalists?
• Won’t it fall harder on the prince in his mansion than on the pauper in his hovel?
• How would old age pensioners on valuable sites be able to pay the site rent as suggested?
• What happens to the self-funded or partly self-funded retiree?
• Unemployed adults - currently untaxed but perhaps owning their own home? Will they have to pay as well?
• The investor in a site has taken a risk, and tied up their capital – who else could possibly be entitled to their capital gain?

3.Implementation

• How would such a system be implemented?
• What would happen to Land Prices?
• If resource rentals are such a good idea, why don’t we have them?
• Why would anyone want to own land under this system?
• How do I buy a property?
• If site values fall, won’t revenue fall too?
• How will it curb unemployment?
• Wouldn’t we run out of space?
• Who wins; who loses?
• Will pensioners and retirees - currently untaxed but living in their own property, be liable for site rents? Will they be reimbursed for past taxes paid?
• New enterprises - yet to realise any profit but paying tax on the property from which they operate? If you tax them, won’t they fail?
• Why don’t we impose reciprocal import duties?
• What about anti-pollution tax rebates?
• What about a Debits Tax?
• Site Rent for Revenue is a crackpot idea.
• Why put the entire burden of taxation on one area of economic activity?

Good questions -- and good answers!

The Earth-for-All Calendar: June 9 -- John Stuart Mill

The essential principle of property being to assure to all persons what they have produced by their labor and accumulated by their abstinence, this principle cannot apply to what is not the product of labor, the raw material of the earth.

— JOHN STUART MILL, Political Economy, Book II., Chap. 2, Sec. 5.

When the "sacredness of property" is talked of, it should always be remembered that any such sacredness does not belong in the same degree to landed property.

— JOHN STUART MILL, Political Economy, Book II., Chap. 2, Sec. 6.

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 Earth-for-All Calendar: April 1: Queen Elizabeth's Prayerbook

Thou, O Lord, providest enough for all men with Thy most liberal and bountiful hand, but whereas Thy gifts are, in respect of Thy goodness and free favour, made common to all men, we (through our naughtiness, niggardship and distrust), do make them private and peculiar. Correct Thou the thing which our inequity hath put out of order, and let Thy goodness supply that which our niggardliness hath plucked away.

— A Prayer for Them That Be in Poverty, from Queen Elizabeth's Private Prayer Book (1578).

The Unearned Increment -- Unearned By Whom?? Earned by Whom?

another excerpt from Dawson (1910 -- see an earlier post, below) -

IT is necessary now to consider more fully than hitherto the question, cannot society with right claim the increased value given to land by distinctly social causes? We have seen the various factors which tend to create what is generally known as "unearned increment." In one sense this term is very inaccurate. The increment is by no means unearned; what is meant, when the phrase is used, is that the landowner has not earned it. Society, however, has; and earned it honestly by heavy toil, by exertion of body and brain, by plodding industry, by bold enterprise, by culture and enlightenment, by progress in numbers, in wealth, and in morality. There is not a yard of land in the country — be it used for the growing of corn, the pasturing of cattle, or the habitations of men — whose value has not been enhanced by these social causes. It was the settlement of men with their various activities upon the land which originally gave it value, and the increase of population has been a constant and potent factor in value-growth since the primitive communities first established the institution of private property in the common soil. And yet, while society has for centuries been growing and labouring to increase the value of the land it required for its food, its industries, and its habitations, it has ever done so to its own detriment. While enriching the landlords it has impoverished itself.

This, indeed, is the greatest anomaly presented by the social increment problem. As a community develops and prospers, owing to its energy, enterprise, and enlightenment, it is all the time preparing a rod, armed with which the landlords will sooner or later turn upon it. A town's residents are punished for their industry and merited success by having to pay the landlords more and more money for the land they use. Did not tradesmen, by dint of perseverance and pluck, succeed and thrive, the demands made upon them would not increase; but simply because they reap in prosperity the reward of exertion, the landlords require growing tribute in the form of higher rents. And so it is in all departments of social life. In the eyes of the owners of the soil, human communities become, in fact, simply value-creators, rent-producers. The landlords reap where they have not sown, they gather where they have not strawed. Little of the value of that land which they lend and sell, at prices which are often so fabulous, has been created by them, yet they appropriate it all.

The Unearned Increment, and Land Speculation

I'm reading a 1910 book by William Harbutt Dawson entitled "The Unearned Increment."  I found these paragraphs particularly compelling.   I think about the 2003 Schiller and Case article about the expectations of home buyers that their purchases would rise in value.  The homebuyers of the last decade didn't understand why land should rise in value -- indeed, most of them weren't conscious of it being land appreciating, not the houses themselves -- but they seemed sure that it would rise forever, and they thought it essential to their own well-being that they get in on that appreciation.

100 years ago, there seemed to be a much better popular understanding of land economics than we have in 2012.  It was widely discussed in quite a number of popular journals read by ordinary people.  One might speculate on why we in the 21st century aren't better informed than we are on the subject.  In whose interests is it that ordinary people not understand the importance and the dynamics land economics?

 

And here it will be convenient to refer to the plea often advanced that speculation in land is legitimate, and that there is no difference between making profits from the sale of land and making profits from the sale of ordinary commodities. Those who hold this view forget or ignore the fact that land differs from every product of man's hands in that, besides being a necessity of existence — the maintainer of life, it is a monopoly article. God made the earth as big as it is, and man cannot make it any bigger. There is so much land in the world, and no one, not even a Rothschild or a Vanderbilt, can add an inch to it. Hats, boots, and coats — manufactured goods in general — can be multiplied indefinitely. The supply is only regulated by the demand, and almost invariably the cost decreases as the demand is augmented. With the land it is otherwise: the absolute supply cannot be increased, and the cost grows with the growth of the demand. Moreover, in paying for the goods offered by the manufacturer, we pay largely for labour; but no amount of labour can produce land. It existed before man existed, and is not produced. Landed property is the one commodity of exchange in respect of which civilised society refuses to recognise absolute rights.

It may be granted at once, however, that it is impossible to artificially prevent the value of land from increasing. It would be absurd to try to check the operation of social forces which act from necessity. If there were no private ownership of land, but the State were the custodian and grand lessor, the value of that commodity would inevitably tend to increase owing to a multiplicity of causes which act independently of private and collective possession of the soil. Yet while it may not be possible artificially to prevent value-growth, it is possible and expedient to check artificial value-growth. Were the unearned increment secured wholly or even in part to society, there would be less inducement to speculation in land, and the increase in its value would be dependent upon healthier and socially more desirable causes. Men do not speculate commercially for amusement or the mere love of excitement, but for money, and if there were no prospect — or little prospect — of contingent gain, the great inducement to land speculation would be taken away.

At the idea of resistance to speculation the individualist will raise his hands in alarm and remonstrance. But these pages are written on the assumption that the interests of speculators cannot claim any partial consideration in the adjustment of the important problem under discussion — or, indeed, of any problem affecting the well-being of society. Those who hold the views here expressed would not dream of prohibiting speculation in land; all they say is, that society is not called upon to sacrifice its interests to the speculators, or to offer to the latter any facilities for doing it mischief. It cannot surely be considered a social advantage that a small class of men should be able, owing to their possession of a monopoly in land, to force up its value to fictitious and fabulous heights; nor can it be regarded as desirable that the value of land should be increased in order to allow of speculators enriching themselves. The result is to create extortionate rents, which, so far as trade and industry are concerned, make production dearer, and thus injure the consumer, and, so far as concerns dwellings, compel the householder to disburse an excessive proportion of his income in the mere sheltering of himself and his family within stone walls. Apart from the gains which fall to the intermediary speculator who does not buy land to keep, but to sell, the owners of the soil pocket the public tribute paid in the form of increasing rents. For their part, the house occupiers suffer in two ways by the growing value of land: they must pay more for the dwellings they live in, and more for the articles they use and consume. It cannot be to the interest of society that the rents of town dwellings should average, say, £20 instead of £15, and should increase 5% or even 2% every year. If such an increase fell to the whole community, the evil would not be so great, for those who paid it would in one way or another reap the benefit; but, as matters are, it all goes into the landlords' purse.

Bob Andelson: The Earth is the Lord's!

I've taken some liberties with the formatting, because sometimes bullet points help ... you can find the original in the online library at http://schalkenbach.org/  I was fortunate enoguh to meet Bob

The Earth is the Lord's

by Robert V. Andelson
Professor Emeritus of Philosophy,
Auburn University, Auburn, Alabama

George Bernard Shaw, in a letter written in 1905 to Hamlin Garland, describes how, more than twenty years earlier, he had attended Henry George's first platform appearance in London. He knew at once, he said, that the speaker must be an American, for four reasons:

• "Because he pronounced 'necessarily' . . . with the accent on the third syllable instead of the first;
• because he was deliberately and intentionally oratorical, which is not customary among shy people like the English;
• because he spoke of Liberty, Justice, Truth, Natural Law, and other strange 18th-century superstitions; and
• because he explained with great simplicity and sincerity the views of the Creator, who had gone completely out of fashion in London in the previous decade and had not been heard of there since."

George's magnum opus, Progress and Poverty (the centenary of which occurred in 1979), is characterized by the same moral and religious emphasis remarked by Shaw in its author's London lecture, an emphasis that rises in the final chapter to the noble declaration of a faith revived. It is, I think, therefore entirely appropriate that I focus today on the moral and religious aspects of his basic proposal for economic reform — his proposal to lift the burden of taxation from the fruits of individual labor, while appropriating for public use the socially-engendered value of the land.

For land value taxation is

• not just a fiscal measure (although it is a fiscal measure, and a sound one);
• not just a method of urban redevelopment (although it is a method of urban redevelopment, and an effective one);
• not just a means of stimulating business (although it is a means of stimulating business, and a wholesome one);
• not just an answer to unemployment (although it is an answer to unemployment, and a powerful one),
• not just a way to better housing (although it is a way to better housing, and a proven one);
• not just an approach to rational land use (although it is an approach to rational land use, and a non-bureaucratic one).

It is all of these things, but it is also something infinitely more: it is the affirmation, prosaic though it be, of a fundamental spiritual principle — that "the earth is the Lord's, and the fulness thereof."

It is the affirmation of the same principle to which Moses gave embodiment in the institution of the Jubilee, and in the prohibition against removing ancient landmarks, and in the decree that the land shall not be sold forever. It is the affirmation of the same principle to which the prophets of old gave utterance when they inveighed against those who lay field to field, and who use their neighbor's service without wages. It is the affirmation of the same principle to which Koheleth gave voice when he asserted in the fifth chapter of Ecclesiastes that "the profit of the earth is for all."

The earth is the Lord's! Consider what this means. It means that

• our God is not a pale abstraction.
• Our God is not a remote being who sits enthroned on some ethereal height, absorbed in the contemplation of his own perfection, oblivious to this grubby realm in which we live.
• Our God is concerned with the tangible, with the mundane, with what goes on in the field, in the factory, in the courthouse, in the exchange.
• Our God is the maker of a material world — a world of eating and sleeping and working and begetting, a world he loved so much that he himself became flesh and blood for its salvation. In this sense, then,
• our God is eminently materialistic, and nowhere is this more clearly recognized than in the Bible, which, for that very reason, has always been a stumbling-block and an offense to those Gnostics, past and present, whose delicacy is embarrassed by the fact that they inhabit bodies, and for whom religion is essentially the effort to escape from or deny that fact.
• Our God is not a dainty aesthete who considers politics and economics subjects too crass or sordid for his notice.
• Neither is he a capricious tyrant who has enjoined an order of distribution that condemns retirees after a lifetime of toil to subsist on cat food while parasitic sybarites titillate palates jaded by the most refined achievements of the haute cuisine. It is men who have enjoined this order in denial of his sovereignty, in defiance of his righteous will.

The earth is the Lord's! To the biblical writers, this was no mere platitude. They spelled out what it meant in concrete terms. For them, it meant that the material universe which had been provided as a storehouse of natural opportunity for the children of men was not to be monopolized or despoiled or treated as speculative merchandise, but was rather to be used reverently, and conserved dutifully, and, above all, maintained as a source from which every man, by the application of his labor, might sustain himself in decent comfort. It was seen as an inalienable trust, which no individual or class could legitimately appropriate so as to exclude others, and which no generation could legitimately barter away.

The earth is the Lord's! With the recognition of this principle comes the recognition of the right of every man to the produce which the earth has yielded to his efforts. As the Apostle Paul says in his first letter to the Church at Corinth, if the ox has a right to a share in the grain which it treads out, surely a human being must have a right to the fruits of his labor. For the exercise of this right, he is, of course, accountable to God — but against the world, it holds.

To one who takes seriously, as I do, that insight about human nature which is expressed in the doctrine of original sin, there can be nothing self-evident about the rights of man. In the words of my friend, Edmund A. Opitz, "the idea of natural rights is not the kind of concept which has legs of its own to stand on; as a deduction from religious premises it makes sense, otherwise not." The French Revolution and its culmination in the Reign of Terror demonstrated that humanistic assumptions afford no secure foundation for the concept of human rights. That concept, for the believer, can be neither understood nor justified except in terms of what Lord Acton so eloquently speaks of as "the equal claim of every man to be unhindered in the fulfilment by man of duty to God."

This is what it comes down to: How can a person be "unhindered in the fulfilment of duty to God" if he be denied, on the one hand, fair access to nature, the raw material without which there can be no wealth; and on the other, the full and free ownership of his own labor and its earnings?

You who have studied the history of the Peasants' Revolt in sixteenth century Germany know that in calling for the abolition of serfdom and the restoration of the common lands, the peasants were simply voicing demands which were logically implied by Luther's doctrine of the priesthood of all believers — that the service of God to which all the faithful are elected requires, as I have said, access to the land and its resources, and the free disposal of one's person and of the guerdon [editor's note: reward] of one's toil. Despite the excesses that accompanied this uprising, Luther's part in the suppression of a movement which stemmed logically from his own teaching must always be a source of pain to those of us who revere him for his spiritual genius and integrity.

The earth is the Lord's! The same God who established the just authority of governments has also in his providence ordained for the major source of revenue. Allow me to quote from Henry George:

In the great social fact that as population increases, and improvements are made, and men progress in civilization, the one thing that rises everywhere in value is land, we may see a proof of the beneficence of the Creator . . . In a rude state of society where there is no need for common expenditure, there is no value attaching to land. The only value which attaches there is to things produced by labor. But as civilization goes on, as a division of labor takes place, as men come into centers, so do the common wants increase and so does the necessity for public revenue arise. And so in that value which attaches to land, not by reason of anything the individual does, but by reason of the growth of the community, is a provision, intended — we may safely say intended — to meet that social want. Just as society grows, so do the common needs grow, and so grows the value attaching to land — the provided fund from which they can be supplied (George 1889).

On another occasion he wrote:

The tax on land values is the most just and equal of all taxes. It falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses (George, P&P, 421).

And yet, my friends, in the topsy-turvy world in which we live, this provided fund goes mainly into the pockets of speculators and monopolists, while the body politic meets its needs by extorting from individual producers the fruits of honest toil. If ever there were any doubt about the perversity of human nature, our present system of taxation is the proof! Everywhere about us, we see the ironic spectacle of the community penalizing the individual for his industry and initiative, and taking away from him a share of that which he produces, yet at the same time lavishing upon the non-producer undeserved windfalls which it — the community — produces. And, as Winston Churchill put it, the unearned increment, the socially-produced value of the land, is reaped by the speculator in exact proportion, not to the service, but to the disservice, done. "The greater the injury to society, the greater the reward."

We hear constantly a vast clamor against the abuse of welfare. I do not for a moment condone such abuse. Yet I ask you, who is the biggest swiller at the public trough?

• Is it the sluggard who refuses to seek work when there is work available?
• Is it the slattern who generates offspring solely for the sake of the allotment they command?
• Or is it the man — perhaps a civic leader and a pillar of his church — who sits back, and, with perfect propriety and respectability, collects thousands and maybe even millions of dollars in unearned increments created by the public, as his reward for withholding land from those who wish to put it to productive use.

Talk about free enterprise! This isn't free enterprise; this is a free ride.

But if that same person were to improve his site — if he were to use it to beautify his neighborhood, or to provide goods for consumers and jobs for workers, or housing for his fellow townsmen — instead of being treated as the public benefactor he had become, he would be fined as if he were a criminal, in the form of heavier taxes. What kind of justice is this, I ask you? How does it comport with the Divine Plan, or with the notion of human rights?

Let me make this clear: Acquisitiveness, or the "profit motive," if you will, is a well-nigh universal fact of human nature, and I have no wish to suggest that the land monopolist or speculator has any corner on it. Even when I speak of him as a parasite, this is not to single him out for personal moral condemnation. He is not necessarily any more greedy than the average run of people. As my late friend, Sidney G. Evans, used to say: "if you have to live under a corrupt system, it's better to be a beneficiary than a victim of it." But the profit motive can be channeled in ways which are socially desirable as well as in ways which are socially destructive. Is it not our duty to do everything we can to build an order without victims one in which the profit motive is put to use in such a way that everybody benefits?

I do not harbor the illusion that the millennium is going to be ushered in by any program of social betterment. My theological orientation does not happen to be one which minimizes the stubbornness of man's depravity. Yet to make the depth of human wickedness an alibi for indifference to the demands of social justice is to ignore the will of him who said:

Take away from me the noise of your songs;
to the melody of your harps I will not listen.
But let justice roll down like waters,
And righteousness like an ever-flowing stream.
(Amos 5:23-24)

To some of you, the promotion of specific programs for social justice is seen as part of the responsibility of the institutional church; to others it is not. But all of us, I am sure, can agree that the individual Christian (or Jew or Moslem, Hindu or Buddhist, as the case may be) has a solemn moral obligation to study the issues carefully, and then involve himself strenuously in whatever social and political efforts his informed conscience tells him best advance the cause of right.

O shame to us who rest content
While lust and greed for gain
In street and shop and tenement
Wring gold from human pain,
And bitter lips in blind despair
Cry, "Christ hath died in vain!"
Give us, O God, the strength to build
The city that hath stood
Too long a dream, whose laws are love,
Whose ways are brotherhood,
And where the sun that shineth is
God's grace for human good.*

The earth is the Lord's!

* From "O Holy City, Seen of John" by Walter Russell Bowie. Copyright, 1910, by A. S. Barnes and Company. Quoted by permission.

Henry Ware Allen: Special Privilege

Special Privilege

BY HENRY WARE ALLEN
from Land and Freedom, 1938

As our time honored political maxims become hackneyed they are very apt to pass into what Grover Cleveland would call innocuous desuetude. We subscribe to the sentiment that "eternal vigilance is the price of liberty" and yet little is done to counteract those aggressive forces which nullify that freedom which we profess to prize so highly. Even the prayer, "Thy Kingdom Come," is repeated as a mere wish that something good would happen rather than with a determination to bring about those righteous conditions which make for a heaven on earth. Possibly the most neglected of all of our national ideals is our professed adherence to that most democratic of all maxims, "Equal rights for all and special privileges for none." For at the present time our country is honeycombed with special privilege that has become so entirely entrenched as to be regarded on all sides as vested right. Special privilege is condoned by force of its familiarity. Like vice it is endured, then pitied, then embraced.

There lived in a Colorado city years ago a housewife who made convenient use of coal cars on the side track across the street from her dwelling with which to replenish her stock of fuel. This she did without any qualm of conscience but as a special privilege which, by the sanctifying touch of time had grown into a vested right. This woman doubtless was punctilious in the ordinary obligations of life and would have hotly resented any statement to the effect that she was stealing coal. She was guided by that all too common kind of honesty which is based upon expediency rather than principle. Not on any account would she have withheld what was due from her to a neighbor who would have suffered by her delinquency, but the advantage to her of getting this coal was so great and the loss to some impersonal owner of same, mine, railroad, or smelter, was relatively so negligible that the argument was all in favor of her acting in her own interest without question. No personal equation was involved and if at first there had been any hesitation on her part of this practice, that was long ago a thing of the past. But the railroad company put a watchman on guard and her supply of fuel was thereby stopped. She then turned to the local charity organization with request for a continuation of the supply which had thus been rudely taken from her and the very righteous indignation with which she told her story was ample proof of entire absence of comprehension on her part that she had been stealing.

This incident, which is a true story, illustrates very nicely the evolution and the nature of that special privilege which eventually becomes a vested right. And if the searchlight of analysis is turned upon our social system we may be surprised to find the presence of special privilege in unexpected places and of a volume that is, in the aggregate, enormous.

As a basis for this inquiry it may be well to state the fundamental truth that property may be secured in three ways only; first, by labor; second, by gift; and third, by theft. If this test is repeatedly kept in mind, the task will become easier. One of the commonest forms of special privilege is that which is provided under ninety-nine year leases on valuable business property sites. These leases convey to the owner of the land a stipulated income after the tenant has paid all taxes and expenses. In the parlance of political economy this revenue consists of what John Stuart Mill defined as unearned increment, a value which is produced by no individual but which is purely the result of population reflected upon desirable locations. For this revenue to be turned over to individuals as is now the unquestioned custom in all of our large cities and to an amount of billions of dollars annually is a procedure which is precisely in the same class as the stealing of coal from the railroad car by the Colorado housewife.

A much larger source of public revenue which is diverted to individuals is that of the rent of valuable property in excess of a fair interest return upon the intrinsic value of improvements on the property. This applies to practically all property located at the center of our large cities and involves enormous revenues. There is a mixture here of legitimate return on capital invested with the unearned increment which belongs absolutely to society but the case is not less clear on that account.

Another prolific source of public revenue which is diverted to individuals is that which comes from the lucky possession of oil wells. This possession frequently gives incomes of thousands of dollars daily to those who have no more claim on such revenue than is involved in the possession of the land upon which the wells were developed. The wealth that has by this means been given to certain sections of the country and certain groups of people has run into the billions of dollars. The Osage tribe of Indians in Oklahoma are said to have been made the richest people in the world due to this special privilege. Such beneficiaries are no more justly entitled to the revenue which they receive than was the Colorado woman justified in stealing coal from the railroad car. It will be said that the oil industry involves a great deal of capital and that many dry wells are paid for before a single producing well is developed. This is true and therefore makes the proposition somewhat more complicated but does not alter the conclusion.

Another source of revenue which diverts public funds into private hands is speculation in land. Purchase of inside property sure to increase in value is the one investment that has been invariably recommended by shrewd financiers. This speculation is far greater than has been generally realized. More than one-half the area of New York City consists in vacant lots which are held out of use for speculative purposes, and the same is true of all our larger cities. Incidentally, this speculation has the effect of enhancing the selling price of desirable land to artificially high figures. When land which is purchased with a hope of subsequent rise in value, the investor practically lays a trap by which he may secure values that rightfully belong to the community. And this process makes an artificial scarcity of land with consequent artificially high cost to those who must use it. This process of securing a profit, of getting something for nothing, is persistently the same in character as that by which the Colorado housewife secured her supply of coal. Here again objection may be interposed to the effect that land frequently has to be sold for less than it cost. This is an objection that was raised by no less an economist than Francis A. Walker, the foremost critic of Henry George during his lifetime. General Walker exclaimed, "Mr. George has much to say about unearned increment: He says nothing, however, about unrequited decrement." Mr. George's rejoinder to this was an expression on his part of his inability to discuss the problem with one who spoke of unrequited decrement in something which originally had no value. In other words, so far as society is concerned its interest is only in the rental value which is produced from year to year and which rises or fall accordingly as population grows or wanes. The important fact is that this increment, whether large or small, belongs to the community which produced it.

The most spectacular form of special privilege which we have to deal with today is that provided by the protective tariff. This protection enables the America manufacturer to secure an artificially high price for his product. The common argument in support of the protective system is that the American standard of living must be maintained by this artificial means, but this argument falls to the ground, if at the same time, we permit any improvement in labor-saving machinery which naturally has far greater effect upon the labor market than is produced by the competition of merchandise imported from abroad. The enormity of special privilege due to the tariff is perhaps more conspicuous in the State of Pennsylvania than elsewhere, a single family in Pittsburgh, the direct beneficiaries of the tariff on aluminum, being reputed to be worth in excess of $2 billion. There will be found that, with a few rare exceptions, the great fortunes of America are based upon special privilege of one kind or another.

Although there are many minor sources of special privilege which are embedded in our political and social institutions, those above enumerated are the principal ones.

The special privileges provided by legislative action at Washington are in a different class from those which have become a regular part of our system of taxation but are none the less to be condemned. The most flagrant of these in recent times was the appropriation by Congress and approved by President Hoover, of $500,000,000 of tax payers' money for the specific purpose of stabilizing or artificially enhancing the price of wheat, cotton, and other farm products. It was presumed by the makers of this law that it would have the effect of giving artificial advantage to the farming class, which would offset in a measure the special privileges which had been given so generously to Eastern interests by means of the protective tariff. The plea for this farm legislation was repeatedly based upon that consideration. It so happened that even the immense waste of money involved by the farm marketing act was negligible as an influence in the world wide markets and that it did not affect in any considerable degree the law of supply and demand upon the prices of the agricultural products which were supposed to be favored. But the very fact that this legislation was put through with little opposition furnished a very good illustration of the fact that special privilege legislation is regarded as perfectly legitimate. And this has been further illustrated in monstrous degree by the New Deal legislation under President Roosevelt.

There is everywhere consciousness of a mysterious force which is responsible for easily acquired fortunes on one hand together with an increase of unemployment and consequent lower incomes on the other hand. Each succeeding census report makes more appalling this undemocratic and unjust condition in our social fabric.

If prosperity is to be secure, there must be an end to special privilege of every kind, and a system of taxation inaugurated in place thereof which shall be based upon justice to all. Henry George has demonstrated how this should be done.

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: #36 -- the land in the path of progress (2)

36.  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 -- and rising -- lease prices, for generations.  Is it right to change our tax code to tax -- heavily -- year in and year out, the economic value of that land?

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)

The Land Questions: #27 -- Financing a New Subway Line

27. A new subway line costs $2 billion.  Suppose that its construction increases the surrounding land values by $2 billion. (Assume 5 miles long, 10 stations, 0.5 mile radius, average lot size of 0.10 acre.   How should the new subway line be financed?

A. Taxes on sales of groceries, clothing, etc. within those 1/2 mile radius areas

B. Taxes on sales of groceries, clothing, etc., all over the city the subway line connects to

C. Taxes on sales of services within those 1/2 mile radius areas

D. Taxes on sales of services of all kinds, all over the city the subway line connects to

E. Taxes on wages of those working in those 1/2 mile radius areas

F. Taxes on wages all over the city the subway line connects to

G. Taxes on wages of those living within the 1/2 mile radius areas

H. Taxes on capital gains and dividends of those living within the 1/2 mile radius areas

I. Taxes on capital gains and dividends of those with residence anywhere in the city

J. Taxes on all real estate within those 1/2 mile radius areas

K. Taxes on all real estate, all over the city the subway line connects to

L. Taxes on just the buildings within those 1/2 mile radius areas

M. Taxes on all the buildings, all over the city the subway line connects to

N. Taxes on the land value within those 1/2 mile radius areas

O. Taxes on the land value, all over the city the subway line connects to

P. Transfer taxes on either or both of buyers and sellers whenever a property within the 1/2 mile radius is sold

Q. Transfer taxes on either or both of buyers and sellers whenever a property anywhere within the city is sold

R. An inheritance tax when a house or commercial property is transferred from a decedent to a survivor.

S. Your suggestions?

 

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: #22 -- Infrastructure and Land Values

22.  The creation of a new subway line raises the land values near each of the stations.  Who should reap the benefit?

A. People who own homes there

B. People who own businesses there

C. People who own land there, whether or not there is a highest-and-best-use building on it

D. Corporations who own land there

E. Universities and other private landholders who own land there

F. Foreign corporations and private equity funds who own land there

G. Pension funds and sovereign wealth funds who own land there

H. The community as a whole, since the community paid for it

 

Download Fred Harrison's book, "Wheels of Fortune"

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?

A 1938 NYT Letter to the Editor: Collecting Ground Rent

I came across this rather good letter to the editor, from 1938.  (Trinity Church Corporation, a major landlord in downtown Manhattan, was the subject of a NYT article this past week, as well as the subject of a major series in the NYT in December, 1894):

1938-09-03 Letters to The Times

Collecting Ground Rent
Single-Tax System Regarded as No Detriment to Building

TO THE EDITOR OF THE NEW YORK TIMES:

Fabian Franklin, in his letter to THE TIMES discussing the demolition of John D. Rockefeller's Harlem tenements in order to save taxes, writes:

"That objection is simply that virtual abolition of land ownership, which the single-tax plan is designed to effect, would make the building of houses in a city an extra-hazardous business, because, under the single-tax regime, in the great majority of cases the investment would result in a disastrous loss to the owner of the building.  I was neither blaming nor praising Mr. Rockefeller for the demolition of Harlem tenements."

What is the so-called single-tax system?  It is the collection by the government, through the taxing officials, of the entire economic or ground rent of land and the repeal of all taxes on buildings and other products of labor and capital.  That ground rent is estimated to be 9% of the capital value of the land.  New York City is now collecting one-third of this ground rent.  The market value of the lots is the remaining two-thirds, capitalized.  Dr. Franklin's thesis is that if the entire ground rent is collected no one would erect buildings, because "in the great majority of cases the investment would result in a disastrous loss to the owner of the building."

Some of the finest buildings in New York City are erected on leased land and the lessee pays the ground rent 100% besides a tax on the building.  There are hundreds of buildings erected by lessees of lots owned by Trinity Church, Astor estate, Rhinelander estate, Sailors Snug Harbor and others.  The lessees must pay all the taxes, both on land and building, amounting to 3% of the assessed value of both, and to the landlord 6% of the market value of the land.

Thus the entire ground rent is paid by the lessee, but only one-third to the government representing the people who made that value by their presence and activities, the remaining two-thirds to the landlord.  Notwithstanding that they are thus obliged to pay 100% of the economic rent, bankers and business men erect buildings costing millions.  Under the Henry George plan they would have to pay less, for the taxes on these costly structures will have been repealed.

Perhaps if Mr. Rockefeller had not been obliged to pay taxes on the buildings he might not have pulled them down; or, if he had, would have erected better buildings in their place in order to get a return on his investment in buildings.  The ones who will benefit most from the adoption of the Georgian philosophy are the owners of humble homes.  The average small homeowner's house is assessed for at least twice the assessed value of the lot.  If the house is relieved from taxation and the lot taxed the entire ground rent, his tax will be less than it is now.  The difference will be made up from vacant lots and lots that are worth more than the improvements.

After all, the building of houses is like any other business.  The builder takes the risk of lessened demand because of changes in fashion, obsolescence, competition.  It is estimated that 95% of new businesses ultimately fail. With the adoption, however, of the philosophy of Henry George, commonly called the single tax, failures in the housing and other businesses will be much fewer.  This is because neither houses nor goods nor anything else will be taxed.  The collection of the entire ground rent will not lessen the area of the surface of the earth one inch.  On the contrary, it will open to occupation and use land that is now held for speculation purposes. 

The taxation of any product of labor and capital will add the amount of the tax to the price, lessen demand and thus curtail production.  The result is unemployment and misery.

Frederic Cyrus Leubuscher
Essex Fells, N. J., Aug. 31, 1938

NYT Invitation to a Dialogue - A National Service Program

Invitation to a Dialogue - A National Service Program - NYTimes.com Published: February 14, 2012

To the Editor:

David Brooks suggested in a recent column that the country needs a national service program to unite the diverging classes in society. He’s right.

Not long ago, we had one that did so very well. It was the draft. Every young man — regrettably, only men — shared a potential obligation to his country.

Any serious discussion of comprehensive national service means talking about a draft. It’s hard to imagine the Supreme Court upholding nondefense conscription, but if civilian service were an alternative to military duty, the prospects would improve.

The all-volunteer military is exemplary for its professionalism, sacrifice, meritocracy and diversity. (I have a son with two college degrees who enlisted.) But the benefits and burdens need to be shared more widely. There have been too many multiple deployments of regulars and reserves, and if draftees were in the mix once again, perhaps there would be no more wars of choice.

Many domestic needs could be served by a comprehensive national service program. Like the Depression’s best idea, the Civilian Conservation Corps, it could involve people from all classes in repairing our parks, roads, bridges and other infrastructure. It could also bring fresh ideas and talent to teaching, law enforcement, social work and other underpaid public services. The benefits to our national character, as Mr. Brooks suggests, would be immense.

There are past and present models of a national service program in more than a dozen other nations. It is time we gave it a try.

MARTIN A. DYCKMAN
Waynesville, N.C., Feb. 14, 2012
The writer is a retired associate editor and columnist for The St. Petersburg Times.

Editors’ Note: We invite readers to respond to this letter for our Sunday Dialogue. We plan to publish responses and Mr. Dyckman’s rejoinder in the Sunday Review. E-mail: [email protected]

LVTfan's observation: Every investment in improved infrastructure creates land value.   Most projects that have value -- education, law enforcement, social work, improved public health -- will also increase land value.

A project is, by definition, worthwhile if it creates more in land value than it costs to do,* and, it could be argued that, when comparing two infrastructure projects that cost the same amount, say, $100 million, if one creates $200 million in land value and the other creates merely $150 million in incremental land value, the $200 million project should probably take priority, all other things being equal.

*which isn't to say that many public spending projects which don't create increased land value aren't worthwhile, too, for other reasons.

These projects, some will say, fall into the category of "pork" spending.

Pork barrel is the appropriation of government spending for localized projects secured solely or primarily to bring money to a representative's district. The usage originated in American English.^[1] In election campaigns, the term is used in derogatory fashion to attack opponents. Scholars, however, use it as a technical term regarding legislative control of local appropriations.^[2]

History

The term pork barrel politics usually refers to spending that is intended to benefit constituents of a politician in return for their political support, either in the form of campaign contributions or votes. In the popular 1863 story "The Children of the Public", Edward Everett Hale used the term pork barrel as a homely metaphor for any form of public spending to the citizenry.^[3] After the American Civil War, however, the term came to be used in a derogatory sense. The Oxford English Dictionary dates the modern sense of the term from 1873.^[4] By the 1870s, references to "pork" were common in Congress, and the term was further popularized by a 1919 article by Chester Collins Maxey in the National Municipal Review, which reported on certain legislative acts known to members of Congress as "pork barrel bills". He claimed that the phrase originated in a pre-Civil War practice of giving slaves a barrel of salt pork as a reward and requiring them to compete among themselves to get their share of the handout.^[5] More generally, a barrel of salt pork was a common larder item in 19th century households, and could be used as a measure of the family's financial well-being. For example, in his 1845 novel The Chainbearer, James Fenimore Cooper wrote, "I hold a family to be in a desperate way, when the mother can see the bottom of the pork barrel."^[6]

Definition

Typically, "pork" involves funding for government programs whose economic or service benefits are concentrated in a particular area but whose costs are spread among all taxpayers. Public works projects, certain national defense spending projects, and agricultural subsidies are the most commonly cited examples.

Citizens Against Government Waste^[7] outlines seven criteria by which spending can be classified as "pork":

1.  
   1. Requested by only one chamber of Congress;
   2. Not specifically authorized;
   3. Not competitively awarded;
   4. Not requested by the President;
   5. Greatly exceeds the President’s budget request or the previous year’s funding;
   6. Not the subject of congressional hearings; or
   7. Serves only a local or special interest.

The last of these seems as if it might be the most important one.

So here's the question: How should we finance these projects, if they are to be done?  How would we pay for a modern CCC? (Ah -- this sounds like The Land Questions ...)

A.  By a local tax on land value.  This would necessitate regular reassessment of the land value in every community in America, say, every 3 years, which could be done for well under $40 per parcel.  It would probably also require some state and/or federal oversight, checking values against transactions to verify that all municipalities or assessing units are doing high-quality market-based assessments. [In Maryland, they're already doing assessments every 3 years.  In Connecticut, assessments every 4 years are required.  In southern Delaware, the assessments are 30+ years old.  In California, the assessments are meaningless, due to Proposition 13.  It would take a few years for some of these entities to update their assessments.]

B. By a state tax on land value. [same issues apply]

C. By a national tax on land value.

D. Let's just use the federal income tax.  It's there.  It's easy.

E. Let's use a national sales tax.

F. Let's use a tax on imports.

G. Let's tax buildings.

H. Let's tax services.

It seems to me that a national service corps of some sort has a lot of merit.  It could promote a lot of highly desirable goals.  It could provide a lot of home-front protection in the event of natural disasters.  It could get some important projects done, including the maintenance of existing infrastructure currently under-maintained,and the provision of services we believe are important (particularly when we are the beneficiaries).

But the financial benefits ought not to fall into private or corporate pockets; they ought to accrue to all of us, and ease the burdens of financing other kinds of federal spending.  Land value taxation strikes me as the answer to so many of our supposedly intractible problems.

 

 

The Opposition to Land Value Taxation

It is frequently pointed out by Georgists that there are no really good rebuttals to land value taxation.

This excerpt from a 1971 letter to my grandfather from a colleague describes where the opposition comes from:

There may be be no "arguments that actually oppose LVT" as Bill says, but there are plenty of people who not only actually but actively oppose it.  These are the people who are making hundreds of millions of dollars a year on the unearned increments land speculation gets as a result of land being so undertaxed that the landowner puts up only a trifling share of the enormous community investment needed to make his land reachable, livable and readily saleable.  Of 7 million-odd New Yorkers I would guess that perhaps 70,000 people profit by today's misapplication of the property tax while 7 million lose by it, but the problem is that the 7 million have no idea of what they are losing while the 70,000 jolly well know that they have a good thing going for them and fight to keep it.

I've been trying for a year to get my friend, J___ C___, past president of the Realtors and Chairman of the Realtors Economic Research Committee to stop fighting LVT, but he keeps coming back to how his father bought some land near San Diego for $20 an acre before 1900 and sold it for $4,000 an acre around 1950 and his father could not have held it all that time if he had had to pay more than a nominal tax.

I don't think anyone should take the equity argument seriously.  Just because the ownership of underused land has been subsidized for years does not entitle its owners to expect the subsidy to be continued forever, and likewise, for those who bought land in the expectation that the subsidy would be permanent.  The equity objection to increasing the tax on land would apply almost equally to any other tax increase.

A week later, another letter includes this:

Just because landowners have had a wonderful subsidy racket going for them in the past should not give them any claim on having that subsidy continue ad infinitum.  I do agree with Lowell that the transition to LVT would raise problems, and in any area with a high tax rat on property I can see that the transition would have to be staggered over a period of years, probably not less than five or more than ten, dpending on how big a tax rate was to be shifted off improvement values onto location values.

In the same file, a copy of a 1969 letter from the same person to Lowell (Harriss):

I don't see how tripling the tax on land could fail to force almost all owners of underused land to get busy and put it to better use.  Conversely, I don't see how taking the equivalent of a 51% sales tax off improvements could fail to be a tremendous stimulant to improvements.  If a 7% Federal tax credit on improvements was so effective, what would wiping out a 50% tax do!

 

Land Speculation

Continuing through some old files, I came across this eloquent statement in the minutes of an executive committee meeting for the Robert Schalkenbach Foundation:

"Middle income homebuyers, especially, are having to pay a lot more for their homes because of the inflation in land prices.  They are having to pay more for their financing, too, because financing also reflects land prices.

What land speculators can get for their land, they can get because of the enormous expenditures of tax money to make that land usable.

I do not think the American conscience is sufficiently sensitive to be aroused because land speculators get rich at the expense of the government, because the public has come to regard the government as a cow to be milked.  It would, therefore, be unwise to place the emphasis on how speculators get rich at the government's expense.  Rather ... we should emphasize that the homebuyers are the ones who have to pay, have to dig deep into their savings to pay speculators more for the land, not because the speculators did anything to earn a higher price, but because taxpayers spent millions to make it better."

-- Perry Prentice, 3/5/1965

California, with Prop 13, should take note.  Anyone who wants a more stable economy should take note.  Anyone who would like to see the cost of living for ordinary people be stabilized and reduced should take note.