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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. ... read the whole
chapter
Louis Post: Outlines of Louis F. Post's
Lectures, with Illustrative Notes and Charts (1894)
— Appendix: FAQ
Q6. If a land-owner builds, does not that
increase the value of his land and consequently the
amount of the tax he would have to pay? If so, would
not he be taxed for his improvement?
A. No. Upon the value of the building he would never
pay any tax. It is true that his improvement might
attract others to the locality in such numbers as to
make land there scarcer and consequently dearer. His
own lot would in that case rise in value with the other
land and be taxed more, just as the rest would be. But
that would not take any of his labor in taxes; he would
still have his building free of taxation. Thus: If on a
lot worth $1000 a building worth $1000 were erected,
making the whole worth $2000, the tax would fall only
upon the $1000 which represents the value of the lot.
If land then became so scarce that the lot rose in
value to $1500 the tax would be raised. But the owner's
improvement would be still exempt. When his property
was worth $2000 he was taxed on $1000, the value of the
lot, leaving $1000, the value of the building, free;
and now, though he is taxed on $1500, the value of the
lot, $1000, the value of the building, is still free.
... read the
book
Mason Gaffney: The
Taxable Capacity of Land
To stimulate building is also to uphold
and fortify the tax base, even though you do not tax
the new buildings directly. Some people fault the
"depressing" canyons of Manhattan, between the
skyscrapers. In my observation, it is not the canyons
that depress Manhattan. When the GM building went
up, Fortune Magazine reported it doubled the rents of
stores across the deep canyon so formed.
Its spillover effects were highly
positive. What really depresses Manhattan are rather the
centenarian firetraps and the activities they attract.
They tend to downvalue other lands nearby, eroding the
tax base.
Consider the effect of
floorspace rentals on ground rents and land values.
Doubling floorspace rentals will more than double land
values, through a kind of leverage effect. That is
because all cash flows above a constant
amount required for the building will inure as ground
rents. The higgling and arbitrage of the market
will see to that. Once that constant is met, everything
above it goes to landownership as such, raising land
prices which are the land tax base.
When you observe cities
much, the positive neighborhood effects of replacing old
buildings with new are irresistible and contagious,
raising land prices all around. The converse is also
true: the negative neighborhood effects of letting old
junkers stand without replacement are depressive. Thus,
when you take the tax off new buildings, and put it on
the land under old tumbledowns, you kick off a general
process of revitalization that turns gloom into hope into
optimism: optimism that boosts land prices and the land
tax base. ...
Read the
whole
article
Fred Foldvary: Geo-Rent: A Plea to Public
Economists
A site’s geo-rent is not based on the particular
activity at that site. The geo-rent of a site containing
lavish buildings and gardens equals what the geo-rent
would be if, for some strange reason, those improvements
suddenly disintegrated. A fully developed site has about
the same geo-rent (per acre) as an adjacent vacant
lot.
Suppose I own a 50-acre site that is pristine,
unimproved. That site would rent for $100,000. Hence, the
geo-rent is $100,000. The next year I build a large
beautiful and successful shopping center on the site. My
geo-rent is still only $100,000 (assuming the amount for
which my site unimproved would rent has not changed).
However, if my shopping center makes neighboring land
more valuable, it does increase
my neighbor’s geo-rent.
The interrelation between one landowner’s
improvements and his neighbor’s geo-rent is an
interesting matter. Another interesting matter is a
landowner’s contribution to improvements on
neighboring lands, such as sponsoring a new road. If the
new road would increase his geo-rent tax bill, geo-rent
taxation, it would seem, would reduce his incentive to
sponsor such an improvement.1 But here I leave these tangents
aside, with the summary judgment that I do not think that
such issues do much, if anything, to weaken the case for
tapping geo-rent.
1 The effect on geo-rent would
be smaller if the road is a toll-road, because then
more of the value added is internalized, i.e., captured
by the road owners. ... read the whole
article
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