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It seems to me that we should be exploring strategies
that promote job creation. That doesn't mean subsidies
or privileges for
corporations; it means getting the incentives right for
creating a healthy marketplace. It means reducing or
eliminating the barriers to entry and
perverse
incentives that make it difficult for an
entrepreneur to execute a business plan (without
reducing the requirement that she not harm the
environment or others in the process). The excerpts on
this page speak to how we go about creating jobs. Check
the themes to the right for some issues related to
these excerpts.
Harry Gunnison Brown: Significant
Paragraphs from Henry George's Progress &
Poverty: 10. Effect of Remedy Upon Wealth
Production (in the unabridged P&P:
Part IX — Effects of the Remedy: Chapter 1 — Of
the effect upon the production of wealth)
The elder Mirabeau, we are told, ranked the
proposition of Quesnay, to substitute one single tax on
rent (the impôt unique) for all other
taxes, as a discovery equal in utility to the invention
of writing or the substitution of the use of money for
barter.
To whosoever will think over the matter, this saying
will appear an evidence of penetration rather than of
extravagance. The advantages which would be gained by
substituting for the numerous taxes by which the public
revenues are now raised, a single tax levied upon the
value of land, will appear more and more important the
more they are considered. ...
Consider the effect upon the production of wealth.
To abolish the taxation which, acting and reacting,
now hampers every wheel of exchange and presses upon
every form of industry, would be like removing an immense
weight from a powerful spring. Imbued with fresh energy,
production would start into new life, and trade would
receive a stimulus which would be felt to the remotest
arteries. The present method of taxation operates upon
exchange like artificial deserts and mountains;
- it costs more to get goods through a custom house
than it does to carry them around the world.
- It operates upon energy, and industry, and skill,
and thrift, like a fine upon those qualities.
- If I have worked harder and built myself a good
house while you have been contented to live in a hovel,
the taxgatherer now comes annually to make me pay a
penalty for my energy and industry, by taxing me more
than you.
- If I have saved while you wasted, I am mulct, while
you are exempt.
- If a man build a ship we make him pay for his
temerity, as though he had done an injury to the
state;
- if a railroad be opened, down comes the tax
collector upon it, as though it were a public
nuisance;
- if a manufactory be erected we levy upon it an
annual sum which would go far toward making a handsome
profit.
- We say we want capital, but if any one accumulate
it, or bring it among us, we charge him for it as
though we were giving him a privilege.
- We punish with a tax the man who covers barren
fields with ripening grain,
- we fine him who puts up machinery, and him who
drains a swamp.
How heavily these taxes burden production only those
realize who have attempted to follow our system of
taxation through its ramifications, for, as I have before
said, the heaviest part of taxation is that which falls
in increased prices.
To abolish these taxes would be to lift the whole
enormous weight of taxation from productive industry. The
needle of the seamstress and the great manufactory; the
cart horse and the locomotive; the fishing boat and the
steamship; the farmer's plow and the merchant's stock,
would be alike untaxed. All would be free to make or to
save, to buy or to sell, unfined by taxes, unannoyed by
the taxgatherer. Instead of saying to the producer, as it
does now, "The more you add to the general wealth the
more shall you be taxed!" the state would say to the
producer, "Be as industrious, as thrifty, as enterprising
as you choose, you shall have your full reward! You shall
not be fined for making two blades of grass grow where
one grew before; you shall not be taxed for adding to the
aggregate wealth."
And will not the community gain by thus refusing to
kill the goose that lays the golden eggs; by thus
refraining from muzzling the ox that treadeth out the
corn; by thus leaving to industry, and thrift, and skill,
their natural reward, full and unimpaired? For there is
to the community also a natural reward. The law of
society is, each for all, as well as all for each. No one
can keep to himself the good he may do, any more than he
can keep the bad. Every productive enterprise, besides
its return to those who undertake it, yields collateral
advantages to others. If a man plant a fruit tree, his
gain is that he gathers the fruit in its time and season.
But in addition to his gain, there is a gain to the whole
community. Others than the owner are benefited by the
increased supply of fruit; the birds which it shelters
fly far and wide; the rain which it helps to attract
falls not alone on his field; and, even to the eye which
rests upon it from a distance, it brings a sense of
beauty. And so with everything else. The building of a
house, a factory, a ship, or a railroad, benefits others
besides those who get the direct profits.
Well may the community leave to the individual
producer all that prompts him to exertion; well may it
let the laborer have the full reward of his labor, and
the capitalist the full return of his capital. For the
more that labor and capital produce, the greater grows
the common wealth in which all may share. And in the
value or rent of land is this general gain expressed in a
definite and concrete form. Here is a fund which the
state may take while leaving to labor and capital their
full reward. With increased activity of production this
would commensurately increase.
And to shift the burden of taxation from production
and exchange to the value or rent of land would not
merely be to give new stimulus to the production of
wealth; it would be to open new opportunities. For under
this system no one would care to hold land unless to use
it, and land now withheld from use would everywhere be
thrown open to improvement. ...
Consider the effect of such a change upon the labor
market. Competition would no longer be one-sided, as now.
Instead of laborers competing with each other for
employment, and in their competition cutting down wages
to the point of bare subsistence, employers would
everywhere be competing for laborers, and wages would
rise to the fair earnings of labor. For into the labor
market would have entered the greatest of all competitors
for the employment of labor, a competitor whose demand
cannot be satisfied until want is satisfied — the
demand of labor itself. The employers of labor would not
have merely to bid against other employers, all feeling
the stimulus of greater trade and increased profits, but
against the ability of laborers to become their own
employers upon the natural opportunities freely opened to
them by the tax which prevented monopolization.
With natural opportunities thus free to labor;
- with capital and improvements exempt from tax, and
exchange released from restrictions, the spectacle of
willing men unable to turn their labor into the things
they are suffering for would become impossible;
- the recurring paroxysms which paralyze industry
would cease;
- every wheel of production would be set in
motion;
- demand would keep pace with supply, and supply with
demand;
- trade would increase in every direction, and wealth
augment on every hand. ... read the whole
chapter
Charles B. Fillebrown: A Catechism of Natural
Taxation, from Principles of Natural Taxation
(1917)
Q58. What expected result of the single tax needs
studious emphasis?
A. That it would unlock the land to labor at its present
value for use, instead of locking out labor from the land
by a prohibitive price based upon the future value for
use.... read
the whole article
Winston Churchill: The People's Land
Tax on capital value of
undeveloped land But there is another
proposal concerning land values which is not less
important. I mean the tax on the capital value of
undeveloped urban or suburban land. The income derived
from land and its rateable value under the present law
depend upon the use to which the land is put,
consequently income and rateable value are not always
true or complete measures of the value of the land. Take
the case to which I have already referred of the man who
keeps a large plot in or near a growing town idle for
years while it is ripening -- that is to say, while it is
rising in price through the exertions of the surrounding
community and the need of that community for more room to
live. Take that case. I daresay you have formed your own
opinion upon it. Mr Balfour, Lord Lansdowne, and the
Conservative Party generally, think that is an admirable
arrangement. They speak of the profits of the land
monopolist as if they were the fruits of thrift and
industry and a pleasing example for the poorer classes to
imitate. We do not take that view of the process. We
think it is a dog-in-the-manger
game. We see the evil, we see the imposture upon the
public, and we see the consequences in crowded slums, in
hampered commerce, in distorted or restricted
development, and in congested centres of population, and
we say here and now to the land monopolist who is holding
up his land -- and the pity is it was not said before --
you shall judge for yourselves whether it is a fair offer
or not. We say to the land monopolist:
'This property of yours might be put to immediate use
with general advantage. It is at this minute saleable in
the market at ten times the value at which it is rated.
If you choose to keep it idle in the expectation of still
further unearned increment, then at least you shall he
taxed at the true selling value in the meanwhile.'
And the Budget proposes a tax of a halfpenny in the pound
on the capital value of all such land; that is to say, a
tax which is a little less in equivalent than the income
tax would be upon the property if the property were fully
developed. That is the second main proposal of the Budget
with regard to the land, and its effects will be,
- first, to raise an expanding revenue for the
needs of the State;
- secondly, half the proceeds of this tax, as
well as of the other land taxes, will go to the
municipalities and local authorities generally to relieve
rates;
- thirdly, the effect will be,
as we believe, to bring land into the market, and thus
somewhat cheapen the price at which land is obtainable
for every object, public and private, and by so doing we
shall liberate new springs of enterprise and industry, we
shall stimulate building, relieve overcrowding, and
promote employment.... Read the
whole piece
Mason Gaffney: Land
as a Distinctive Factor of
Production
Tip O'Neil, the former Speaker of the US Congress,
is oft-quoted that "All politics is local politics." One
might say the same of market power. Some lands are sold
or leased with covenants against competition, as Gimbel's
Department Store holds a covenant on a lot adjoining its
parent store on 3rd Street and Wisconsin Avenue,
Milwaukee. Such anticompetitive arrangements,
however blatant, are intra-state, and apparently immune
from sanctions under US Federal anti-trust laws.
Scholars of industrial organization, many of them doing
outstanding work otherwise, pay these grass-roots matters
little heed. Researchers and activists concentrate
on commodity markets at national and world levels - the
ones subject to Federal sanctions, such as they
are. They could probably find more severe and
blatant market failure in local land
markets.
Bargaining power increases with the number of
options one has. A large landowner with a chain of
holdings in different jurisdictions is positioned to
bargain, to play off one against the other. Thus,
the Disney Corporation, 1991-93, considered rebuilding
and expanding Disneyland at its current site in Anaheim,
or in Long Beach where it had tenure over another
suitable site. Using this leverage it won
concessions from both cities, "finally" choosing to
expand in Anaheim. It has yet to do so, however,
and nothing is really final. Disney has many other
sites around the world.
Likewise, land is a basis for oligopsony power in
local labor markets. A city's labor pool is often faced
with a local employers' association whose membership is
limited by the amount of industrial land within reach of
the labor pool. Migrant farm labor is faced with
statewide employers' associations who have the advantages
of limited numbers, wealth, ancient roots and
stability. Labor unions that organize a local plant
are faced with the threat of the "runaway shop", or
merely reallocating work among plants, when the employer
owns plants elsewhere.
Custom has dulled us to it, but a corporation is a
pool of separate individual landowners bargaining in
concert. A century ago, corporations and limited
liability were viewed with suspicion and
apprehension. Today, hundreds and thousands of
separate landowners pool their corporate strength against
labor, as a matter of course. Some employees
bargain through unions, but not as a matter of course,
and hardly ever with international options. In the
US, less than 20% of the labor force is unionized, yet
many, probably most economists treat labor as the only
threatening monopoly. They see corporations as
benign; a prime cause carried by many economists today is
to eliminate the corporate income tax completely.
Would we saw such support for eliminating the payroll
tax, the most obvious cause of unemployment. Read the whole
article
Mason Gaffney: George's Economics of
Abundance: Replacing dismal choices with practical
resolutions and synergies
George's tax program stimulates both the demand
side and the supply side. Here is the gist of why it
works where other methods fail. A land tax spurs
landowners to use land to earn cash to pay the taxes. A
land tax creates pressure on owners to hire and produce
more; other taxes create pressures to hire and produce
less. That works because it is a fixed charge: it
cannot be avoided by underusing land, and it is not
increased by using it. It applies leverage to landowners,
just as would a fixed debt service. Leverage means that a
landowner, by raising gross output 20%, for example, may
raise his net income by 100%.
On the demand side, to
repeat,
- it makes jobs by removing tax penalties from
hiring workers and creating capital.
- Second, a land tax creates pressure on
owners to hire more; other taxes create pressures to
hire less.
- Third, untaxing capital and its income
raises the incentive to invest, answering those who
still dispute Say's Law.
- Fourth, tax revenues are spent locally
(whereas rents paid to absentee owners are spent
distantly). Read the whole
article
Mason Gaffney: Full Employment,
Growth And Progress On A Small Planet: Relieving Poverty
While Healing The Earth
There is enough land, if only we use it well.
Poverty and unemployment result from owners’
withholding better lands from full or any use, creating
an artificial and specious scarcity of land relative to
population. Definition: “land” means all
natural resources (Gaffney, 1998).
Lemma:. Factor proportions are highly
variable (Gaffney, 1976); labor-stinting use of land (same
as land-lavishing use) is a form of withholding land from
full use.
Lemma 2: Growth of jobs and output
are not coupled in lockstep with resource extraction, or
with preemption of more Lebensraum. Jobs and output can and
should grow by using given lands better. Processes and
products can and should be modified in more
labor-intensive, land-conserving ways.
Lemma 3: Tyrants, and tyrannical landowning
classes, circulate the “overpopulation”
concept to conceal their own roles in famines and other
extremes of deprivation. In this, George anticipated
Amartya Sen. Read the whole
article
Bill Batt: How Our Towns
Got That Way (1996 speech)
There were many arguments to be made for the
classical tradition, the result of which would be to rely
upon payment of rent of land according to its value to
society. George recognized that land value is largely a
function of how society has elected to invest in any
general neighborhood; there is no argument for any one
titleholder to reap the reward of what others have
invested. Gaffney points out that, from the standpoint of
economic theory, the framework had the following
virtues:
- It reconciled common land rights with private
tenure, free markets and modern capitalism, a growing and
persistent problem as the industrial society took
hold.
- It enabled the lowering of taxes on labor
without raising taxes on capital.
- It reconciled equity and efficiency. It
constituted a progressive tax because land is
concentrated so much among the wealthy and because the
tax cannot be shifted. It was efficient because it is
neutral among different land-use options.
- It constituted no disincentive to business
location or population settlement. In this way it
encouraged the most efficient land use and discouraged
sprawl.
- It created jobs without
inflation, and raised government revenue without any
penalty upon its base.
- It strengthened public revenues and at the
same time promotes economy in government.
Those economists who today still
persistently hold to the view that there is something
special about land that make it unwise to treat as a form
of capital are known as Georgists. They represent a small
minority of the economics profession, but, little known as
they are, they are among its most esteemed members....
read
the whole article
Mason Gaffney: The Taxable Surplus of
Land: Measuring, Guarding and Gathering It
Taxable surplus is also what
you can tax without driving land into the wrong
use. It is not enough that the land supply is
fixed: a tax must not force underuse or other misuse of
the fixed supply.
A great advantage of taxing rent is
that it does not change the ranking of land uses in the
eyes of the landowner. Let me explain.
In a free market, the function of rent is to sort and
arrange land uses: landowners allocate land to those uses
yielding the most net product, or rent. Economists have
shown (and you can easily see) that this is socially
advantageous: the net product is the excess of revenue
over all costs, so land yielding the highest rent is
adding its utmost to the national product.
When you base your tax on the net product (or rent), the
ranking of rival land uses remains the same after-tax as
it was before-tax. That is, if use "A" yields 20% more
rent than use "B", and a tax takes 50% of the rent, then
use A still yields the owner 20% more after-tax than use
B, and the owner still prefers use A. We will see below,
(Section
D), that when you tax something other than rent (say
the Gross Revenue, G), you will drive the land into less
intensive uses, or out of use altogether.
A related advantage of taxing rent is
that you can often levy the tax on the land's
potential to yield rent,
regardless of what use the owner actually chooses.
This is, indeed, a standard way of taxing rent in most
capitalist nations. It is possible because buyers and
sellers trade land based on their careful estimates of
its maximum rent-yielding capability. The tax valuer
observes and records these value data, and uses them to
place a value on all comparable lands. Many books and
manuals and professional journals have been published on
the techniques used: it is a well established art, with
its own professional associations, of which our speaker
Mr. Gwartney is a leading member.
Such a tax is limited to the maximum
possible rent, and so will not exceed a landowner's
ability to pay - provided he uses the land in the most
economical manner (which is not always the most intensive
manner). It will surely not interfere with his using the
land in the best way, but will discourage using it any
other way. ...
When you base a tax on taxable surplus,
and keep the tax proportional to taxable surplus, you
levy taxes without twisting and inverting the landowner's
or land manager's ranking of land uses. As noted
before, the owner's preferred use after tax remains the
same as it would be without any tax. On the other hand,
if you tax on some
other basis (Gross Revenue, for example),
you bias the owner against uses more
heavily taxed. To keep the example simple,
and generally realistic, we assume here that the seller
is a "price-taker," meaning he sells on a world market
and cannot raise the price, and so has no choice but to
bear the tax.
Bear in mind that Net Revenue is the Taxable Surplus: you
cannot tax more than that without aborting the land use.
The ratio of Costs (C) to Gross Revenue (G) varies over a
wide range, from zero up nearly to one (and even above
one for subeconomic uses which, however, you do not
want). Let's compare two rival uses, A and B, for the
same piece of land. Use "A" yields more Net Revenue (N),
but has a higher ratio of C/G. We levy a tax of 10% on
Gross Revenue (G). To simplify, Expenses and Capital
Costs are consolidated as "C", so N = G-C. Table 1 shows
the effects of the tax on Net Revenue after Tax
(NAT).
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Table 1:
Effect on Net Revenues of a 10% Tax on Gross
Revenues
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|
Revenues/ %
|
Gross
$
|
Costs
$
|
Net Product
$
|
Gross/ Net
|
Tax
$
|
Net After Tax $
|
Tax/ Net
%
|
|
Land Use
|
G
|
C
|
G-C
|
G/N
|
T
|
NAT
|
T/N
|
|
A
|
$100
|
$90
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$10
|
10 x
|
$10
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0
|
100%
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|
B
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$20
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$15
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$5
|
4 x
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$2
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$3
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40%
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The higher use, A, produces more goods, makes more
jobs, and yields more Net Product: it is clearly the
higher use. The tax on G [Gross Revenue], however, turns
A into a lower use than B, in the eyes of the landowner
or manager. A 10% tax on G is a 100% tax on the N from
use A, wiping out the entire incentive to put land to use
A. It is a 40% tax on the N from use B, leaving 60% of
the Net Product for the landowner. The landowner would
choose use A in the absence of taxes, or with a tax on N;
but the tax on G forces him to choose use B, which is
socially inferior. This, in a nutshell,
expresses the damage done by imposing taxes on bases
other than N, the Net Revenue of land.
- The tax lowers output, employment, and investment
opportunities for capital, all three.
- Fourth, it lowers tax revenues well below their
maximum possible level of $10k, the Net Revenue from
use A. ... read the whole
article
Martin Luther King, Jr: Where Do We
Go From Here? (1967)
... read the
book excerpt and whole speech
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