I. The Theory of Land Value Taxation The Single Tax is the governmental collection of the full annual income of land (hereinafter referred to as rent) in place of taxes on things produced by labor. Some Single Taxers would gradually increase the tax on rent until nearly all the annual land rent were collected in taxation and settle for replacing as many other taxes as possible on things produced by labor. In brief, either way the proposal is to tax locations, not production.
These are the advantages claimed for the Single Tax: 1. Land is not a product of human labor—it was produced by God equally for us all—and hence it is not justifiably private property. It is an economic opportunity that should be equally accessible to all. But practically speaking, land must be privately owned as now, so let land continue to be privately owned so long as its rent is collected for the use of all residents by the government in place of taxes on production. Then both justice and practicality can be satisfied (the owner will have a special privilege (i.e., more than equal access) but he'll be paying others for it and then the government needn't violate the private property rights of labor and business via taxation. 2. Rent is created when society creates jobs, shopping and other amenities and the government creates roads, schools, protection, social services, etc. near a land-site. It would seem logical and moral for society and government to collect through taxation what they themselves create rather than what individuals create. These two advantages are moral in nature. Let us now turn to the four main economic advantages of taxing rent (within rational zoning limits). 1. All land sites would have to be efficiently used, for it would be too expensive to keep land out of full use, which is the highest-and-best or the most appropriate use. For instance, if the site were fully taxed, it would be uneconomic for a rundown inadequate building to be located on a valuable downtown site because the land value tax on the site would be greater than the income from the building; landowners would therefore construct a more desirable building or sell to someone who would. The result would be new construction and new jobs. Here, then, is a governmental revenue source that actually would create economic growth. The more rent that is taxed, the more economic growth would result. In the early 21st century, this can become of pressing importance because it can be the only way for the U.S. federal government to avoid bankruptcy; soon it will have to meet the quickly mounting obligations of Social Security, Medicare-Medicaid, various entitlements, other new governmental programs, and interest on the federal debt. This re-payment would be greatly exacerbated if a recession or costly foreign entanglement occurred (nothing but sheer desperation is likely to drive the voters and politicians to adopt the Single Tax). 2. Unwanted urban sprawl into farming areas and open-space land would be contained. If urban land is developed more intensively, as it likely would be with the Single Tax, homeowners and businesses wouldn't sprawl needlessly into farming or open-space areas. For example, a home would be built on a quarter acre in a city instead of on five-or-so acres in a farming or open-space area (putting a large office building on land best suited to growing corn would not be appropriate and would be a sure money-loser under any tax system). 3. Developers needn't invest any money in prospective land-sites because the selling price of land would be zero—whatever rent the landowner might collect from the land would be turned over to the government in taxation at the end of the year; no net annual rental income means a zero selling price (the selling price being equal to the net annual rental income multiplied by the current mortgage rate). Current landowners would be compensated by the down-taxing of the improvements they own. 4. Taxes on production—on buildings, incomes, sales, payroll, imports, etc.—would be much reduced or abolished altogether. This by itself could lead to unprecedented economic growth. As of this writing, fully 18 jurisdictions in the United States have already shifted some of their local property tax on buildings to land. Numerous studies by competent authorities (available upon request) show that all the above advantages have actually occurred in land value taxing jurisdictions. If the Single Tax is so provably good, how come it has not been widely adopted or become well known in the United States? There are many reasons for this, but the principal reasons are these: 1. Its immediate full adoption would cause tremendous economic disruption. Some property owners who are holding land-sites out of their full use, although they're certainly in a minority, would find themselves suddenly confronted with a huge tax increase. They could face bankruptcy and would likely convince their political representatives to oppose a Single Tax. 2. In their ignorance, the voters are likely to sympathize with these few landed property owners (who are usually absentees), and anyway they're not interested in a proposal which they think could never be adopted in the foreseeable future............. ================================================= Steven Cord, Steven B. Cord is a Professor-Emeritus in American History from Indiana University of Pennsylvania, and a former President and Research Director of the Henry George Foundation of America and the Center for the Study of Economics. He is also the editor of Incentive Taxation, a journal on land value tax research. He is the author of many articles, booklets and books (one of which, Henry George: Dreamer or Realist? was published in 1966 by the University of Pennsylvania Press and is still in print). He has been instrumental in inducing 18 jurisdictions to collect about $70 million annually in extra land value taxation. He is currently writing a book entitled The Most Important Statement Ever Made—a rational proof for equal rights. Contact Information: Research Director Center for the Study of Economics 1191 School St. Indiana, Pa. 15701 Phone: 724/463-3993
