Henry George and the land question

Denerick

The economist Henry George crafted an economic system in the 19th century based on reconciling 'free' capitalism with 'feudal' landowning patterns. The natural result of this was the assertion that land is owned equally among all humans, but that anything humans create belongs to them as private property. I see little contradiction between this view and the Lockean notion of private property (basically all property owes its origins to God, and that human beings managed to create a system wherein property was regulated amongst inheritors and those who mixed their labour: "He has mixed his labour with, and joined to it something that is his own, and thereby makes it his property") George simply takes it one step further, and says that the legitimacy of land ownership cannot be substantiated, and thus it is reasonable to conclude that anything which emerges out of nature belongs to the people as a whole, while anything that emerges from individuals belongs to those individuals. For example, a manor house may belong to the Lord of the manor, but the land it is built on belongs equally with his servants? Bit of a mind****, isn't it?

I'm curious about this approach to land ownership, and whether it still has a few admirers in the world today? It is his influence amongst Irish nationalists which interests me specifically, and there is little doubt that he influenced the Irish land League and Michael Davitt with his ideas. He's not a socialist and does believe in private property, but his questions about the legitimacy of land ownership are fair, I think.

LVTfan

There are many people out there who have encountered George's ideas over the years. Some picked themselves up and moved on without noticing that they have the potential to change the world.

Others have found inspiration in these ideas. They provide a route to economic justice, to a sustainable environment, to a stable economy, to an end to involuntary poverty, to opportunity for all, to an end of privileges which enrich some at the expense of others.

Most people would be find any one of these goals to be sufficient reason to explore these ideas more deeply, and two sufficient reason to be ecstatic!

To your comment about the lord of the manor, as things exist now, the landed gentry collect the rent on all the land they claim title to. The servants, being landless, have the choice of working for the lord of this manor, or the lord of that manor. But if among themselves, the lords have monopolized all the land, that is the range of their choices. If there is still land available, they have the option of employing themselves on it.

We all need the gifts of nature. Those who claim some portion of them as their own owe the rest of us for that value. Once they've paid that, what they create from those bits of nature is rightly theirs to use as a raw material, and the worked-up goods are theirs to sell or gift to others; Georgists wouldn't tax those transactions. To the extent that any of us claim a bit of land as our own, we owe our fellows an annual payment for our exclusive access.
[*] No matter what we build on that site, we haven't mixed our labor with that site; and if the site becomes so valuable over the years because of what others, including the community's public spending, create nearby, our building may become obsolete, and worthless. More precisely, the rental value of the site may become so high that our building no longer makes sense there.

* Note that if title to a particular piece of land comes with the responsibility to pay to the community its full rental value and the understanding that that value is likely to rise over time, one is not going to pay the previous holder of that title much, if anything for that title; it will change hands for a token price. The seller of the building will receive what the building is worth to the buyer, which will be its depreciated value if it is of use to him, or nothing, if it will cost him to remove it to replace it with a different building. The buyer will likely borrow to pay for the building, but need borrow nothing to acquire the land. This frees up capital for productive purposes. It also means that one's tax burden is proportionate to the value of one's land holdings, not to one's productive activity or one's holdings of buildings.

To the distinction between socialism and capitalism, I think it is fair to call George's way a third way. You might look for an essay entitled "Henry George and the Reconstruction of Capitalism." It is online at http://www.wealthandwant.com/ along with many other pages related to George's ideas. (The URL comes from the subtitle to the original version of George's most famous book, "Progress & Poverty.")

silverharp

A couple of questions. Does it imply that Google for instance would only need to pay the same amount of tax as say a large farmer?

Does it imply that a peasant in South America is entitled to a cheque from an Opec country? or do "gifts" only include land?

LVTfan

If Google chooses to conduct its business from a 200-acre site in rural Iowa, with no more services provided by community infrastructure than the farmer is receiving -- paved roads, electricity, schools -- their land tax would be about the same as the farmers. LVT would not tax the farmer on his improvements to his land -- barns, fencing, clearing, drainage, manuring or whatever fertilization is used, irrigation -- but just on the locational value of his land. LVT would not tax his neighbor Google for their buildings, or servers, or parking lots, or foosball, or cafeterias.

At the same time, a fellow who chooses to continue to farm in the middle of Silicon Valley would, under LVT, pay a land tax similar to that of his neighbor who conducts a high-tech business on his comparable piece of land. LVT would not subsidize the underuse of that no-longer-just-for-agriculture piece of land. (Specially-suited areas are different: land which is very suitable for grapes may be in its highest and best use growing premium wine grapes, rather than serving as, say, a high-end bed-and-breakfast.)

Going a step further, if Google decided to buy the 200-acre property in Iowa farm country, its presence would increase the annual rental value of surrounding property by some amount, likely causing the neighboring farmers to have to move on. Farming would no longer be the highest and best use of those neighboring sites, if Google arrived with, say, 1000 workers and their families. The nearest town would prosper. Those who owned land there would quickly be able to sell it or rent it for more, and land would be put to new uses: hotels, more schools, etc.

Sites which pre-Google had commanded relatively low annual rent would suddenly be worth far more. Some people would be displaced, if they didn't want to take part in the higher level of activity which this new employer's presence would create. Others would find a wide range of opportunities dumped into their laps. Some who had been occupying sprawling in-town lots would find it impossible to keep their large lots, and would sell off the excess land -- and not receive much money for it. (But they didn't create the land value anyway, even if they'd been hoping that it might rise in value if they held it for long enough.) Some farmers some distance away (perhaps some approaching retirement) would seek to sell out to developers of subdivisions, creating checkerboard development and sprawl. If there were LVT, this trend would be reduced or eliminated; sites close to the center of things would be developed first, and farmers displaced would then buy out the improvements and sites of those a bit further away who wanted to retire.

Does any of this get at your question, or have I missed?

Denerick

I think you (And I assume you must be Henry Georges great grandson or something ) have displayed very competantly, the merits of the system. I'd enjoy reading an impartial criticism from someone else though.

LVTfan

I don't think that most Georgists would suggest that the peasant in South America should get a check from OPEC, but certainly all the residents of countries in which oil is being removed from the ground ought to benefit fully from their country's resources. That benefit could be through a citizen's dividend similar to what every permanent resident of Alaska receives from the invested proceeds of a portion of Alaska's oil revenue, or through the construction of infrastructure -- reliable electricity, water supply, broadband, sewers, transportation systems, etc. -- and services such as schools, available to all -- paid for by oil revenues, or the provision of all services from this revenue source (Alaska has no state sales or income tax, as far as I know). Obviously these goods and services would increase the rent where each is provided, and a smart country or city would collect that land rent and apply it to public purposes, rather than permitting its privatization by the owners of the best sites -- be they local, out-of-town or completely absentee.

So the social surplus created by the efficient provision of public goods ought to be our common treasure, not the private windfall of some fortunate landholders -- individual or corporate, domestic or foreign.

There is a sort of "render unto Caesar's that which is Caesar's" quality to this -- the land rent is for the good of the local community, and it is difficult to justify sending it outside the country. I could, however, make a strong case that the awesome amounts of land rent which, say, a NYC creates are due not just to the activities of NYC metro residents, and that some portion of that land rent ought to be passed along for federal purposes. Sure beats a federal tax on wages!

LVTfan

Well, I'm the granddaughter of 3 Georgists, and I couldn't/wouldn't see the wisdom in it until they were all gone. How I wish I'd had their brains to pick! Thank you. I'll be curious to see others' responses. (George's granddaughter, by the way, was the choreographer Agnes DeMille; she wrote an excellent intro to the 1979 edition of P&P, widely available online.)

Joycey

Quick question(s):

Is this an economic system which would need to be instituted on a large scale in order to be functional, or could smaller areas shift over time to this new form of economic organisation? (Im thinking about objections from landowners, as there inevitably would be, and whether a state can suddenly decide to be Georgist or whether it could spread slowly from a few converts to many more.)

Presumably this economic model is based on some conception of "justice", and very possibly "human nature". If these are made explicit in George's thinking, could either of you say what they are? I would read the text myself but im fairly busy at the moment, but if I have the time id like to.

Following on from the last point, if it is George's position that his proposed system of land distribution or ownership or whatever is such that it will result in the only or most just organisation of society, what mechanism is in place to correct the injustices which have been permitted to occur under capitalism as it has existed thus far? It seems to me from my limited understanding that his proposals are merely an organising system, something akin to the market, which impersonally and without care for relative disparities in human wealth distributes, hence always favouring those already controlling large amounts of wealth.

Correct me if im wrong with any of the above and excuse the lack of any knowledge whatsoever about this system before reading this thread :pac:

silverharp

LVTfan wrote: »

Does any of this get at your question, or have I missed?

all seems reasonable. It would imply a low tax economy? apart from maybe some local taxes for local infrastructure the main taxation would be based on rental values and not labour, profits or consumption. Given that the pensioner, teacher and doctor could all in theory be neigbours the tax would have to be set at the lower end of the range?
It would seem to be an efficient form of tax collection subject to it not being set at a very high level
One observation, the rethoric sounds quite "lefty" but given that land is not as significant a factor as it used to be, were the ideas not more relevant to he 19thC?

LVTfan

"Is this an economic system which would need to be instituted on a large scale in order to be functional, or could smaller areas shift over time to this new form of economic organisation? (Im thinking about objections from landowners, as there inevitably would be, and whether a state can suddenly decide to be Georgist or whether it could spread slowly from a few converts to many more.)"

In one sense, it is a great example of "think globally, act locally." It can be looked at as a simple reform of the conventional property tax, reducing the millage rates on buildings and increasing the millage rates on land, while remaining revenue neutral. A number of cities and towns in Pennsylvania have done this, most notably Harrisburg, with good results. It has also been done in some small former steel-mill towns, also with good results. (Check the urbantools.org website for more information.)

The good incentives created by this, and the bad ones removed, could be expected to produce some very good results -- ones which likely would cause neighboring towns to consider doing the same thing.

Looking at it on the local level, the next step, after eliminating the millage rates on buildings, would be to look at what other local taxes are being used and what their effect is on the local economy. A local sales tax, particularly one which other neighboring areas don't have, is certainly a burden. Removing the sales tax, and collecting that revenue from landholders in proportion to the value of their landholdings, should help business. This is definitely true if neighboring towns don't follow suit, but should also be helpful even if they do. I'm currently writing from Delaware, a state which has no sales tax. My son, raised where 6% and 8% sales taxes are standard, marvels at the local fast food experience. And certainly Delaware is a retail magnet. (In Chicago, perhaps 1000 miles from here, sales taxes are over 10%.)

In Philadelphia, not far across the Pennsylvania line from Delaware, they have a 4% wage tax and pitifully unbalanced assessments on their real estate. Jobs have fled the city. Sprawl is awesome -- areas that were beyond the fringe 40 years ago now are the first on the metro traffic reports. Philadelphia could benefit tremendously from getting rid of its wage tax and placing that taxation on its land value. It could again be a magnet for jobs rather than repelling them across City Line Avenue and sending commuters even further.

So, yes, a lot can be enacted locally.

LVTfan

Joycey wrote: »

Quick question(s):

Presumably this economic model is based on some conception of "justice", and very possibly "human nature". If these are made explicit in George's thinking, could either of you say what they are? I would read the text myself but im fairly busy at the moment, but if I have the time id like to.

/quote]

Joycey, I encourage you to read two speeches of George's. They were what first got me (pamphlets in my grandparents' files). I started to say "short speeches" -- but I'm sure they took a while to deliver. He much have been a riveting speaker. He toured the world and drew large enthusiastic audiences. (Search the free portion of the nytimes.com archives on his name, and you'll get a sense.)

The two speeches I'd start with are "The Crime of Poverty" and "Thou Shalt Not Steal." Both are linked from the front page of http://www.wealthandwant.com/

I'd also suggest a talk given about a dozen years ago by an American Georgist, Nic Tideman, entitled "Peace, Justice and Economic Reform," which is linked from the same page. Together, they will give you a sense of where George is coming from.

In P&P, George proposes a starting point, a law as valid as the law of gravity: "Man seeks to satisfy his desires with the least effort." All sorts of things flow from this observation, after one has sat with it for a while -- though when my gf used to say it, the self-evidentness of what he was trying to tell me didn't register at all, and neither did the significance. (It probably still doesn't -- I get a lot of aha! moments on this one, and a lot of "well, duh!" moments as well.)

Joycey

Having reread the first few posts im actually gonna go back and ask a few more questions, but just in relation to this response I also have a couple.

LVTfan wrote: »

Looking at it on the local level, the next step, after eliminating the millage rates on buildings, would be to look at what other local taxes are being used and what their effect is on the local economy. A local sales tax, particularly one which other neighboring areas don't have, is certainly a burden.

It seems to me that the way you have outlined the theory in the opening post is that the land is taxed only in accordance with the value of the surrounding land, and is hence not attuned to any of the services which the state normally provides for with taxes. For instance, in the case you mention above, it would seem to be ludicrously unlikely that the value which humanity attributes to the land of the town would exactly match up with expenditure on provision of healthcare and education and the like.

Now would I be right in saying that George is basically advancing some alternative to any kind of a state which is not specifically engaged in the policing of land taxes and other matters of legality or security, in a fashion somewhat akin to right libertarians who dont recognise the collective claim of humanity to the earth? If not, then how would these towns then care for their sick, elderly and its children, if there is no guaranteed corolation between expenditure on these services and the raw value of the land the town (or state or country or whatever) is built on?

I'm currently writing from Delaware, a state which has no sales tax. My son, raised where 6% and 8% sales taxes are standard, marvels at the local fast food experience.

To be honest I would rather marvel at the excellent healthcare or education system than the fast food experience.

In Philadelphia, not far across the Pennsylvania line from Delaware, they have a 4% wage tax and pitifully unbalanced assessments on their real estate. Jobs have fled the city. Sprawl is awesome -- areas that were beyond the fringe 40 years ago now are the first on the metro traffic reports. Philadelphia could benefit tremendously from getting rid of its wage tax and placing that taxation on its land value. It could again be a magnet for jobs rather than repelling them across City Line Avenue and sending commuters even further.

Id like to engage with this paragraph more and suggest possible alternatives but I really dont know the ins and outs of either Philadelphia or the relevant tax laws. Il reply in a minute to more general aspects of the first couple of posts

LVTfan

Joycey, you wrote,

"Following on from the last point, if it is George's position that his proposed system of land distribution or ownership or whatever is such that it will result in the only or most just organisation of society, what mechanism is in place to correct the injustices which have been permitted to occur under capitalism as it has existed thus far? It seems to me from my limited understanding that his proposals are merely an organising system, something akin to the market, which impersonally and without care for relative disparities in human wealth distributes, hence always favouring those already controlling large amounts of wealth."

George doesn't propose any reparations for past injustices, only to correct them going forward. He thought, and most Georgists agree, that his remedy was necessary, and possibly even sufficient, to right such a wide range of wrongs.

John Dewey picked up the theme 50 years later (in the depths of the US Great Depression, in a radio speech entitled "Steps to Recovery") saying this:

"I do not claim that George's remedy is a panacea that will cure by itself all our ailments. But I do claim that we cannot get rid of our basic troubles without it. I would make exactly the same concession and same claim that Henry George himself made:

'I do not say that in the recognition of the equal and unalienable right of each human being to the natural elements from which life must be supported and wants satisfied, lies the solution of all social problems. I fully recognize that even after we do this, much will remain to do. We might recognize the equal right to land, and yet tyranny and spoilation be continued.

But whatever else we do, as along as we fail to recognize the equal right to the elements of nature, nothing will avail to remedy that unnatural inequality in the distribution of wealth which is fraught with so much evil and danger. Reform as we may, until we make this fundamental reform, our material progress can but tend to differentiate our people into the monstrously rich and frightfully poor. Whatever be the increase of wealth, the masses will still be ground toward the point of bare subsistence — we must still have our great criminal classes, our paupers and our tramps, men and women driven to degradation and desperation from inability to make an honest living.' [Social Problems, Chapter 18: What We Must Do]

"Social Problems" is a book of about 25 essays -- also on the wealthandwant website -- which can be read in any order. It came after P&P, and develops some of the topics further.

But I'd recommend starting with the speeches, particularly if you're short on time.

And if you're an MP3-user, you could download a modern-language abridgment of P&P, from http://hgchicago.org/audio.

Joycey

Denerick wrote: »

The natural result of this was the assertion that land is owned equally among all humans, but that anything humans create belongs to them as private property. I see little contradiction between this view and the Lockean notion of private property (basically all property owes its origins to God, and that human beings managed to create a system wherein property was regulated amongst inheritors and those who mixed their labour: "He has mixed his labour with, and joined to it something that is his own, and thereby makes it his property")

Im afraid I do see a contradiction there though. In fact, im now struggling to see how George's view is even coherent.

George simply takes it one step further, and says that the legitimacy of land ownership cannot be substantiated, and thus it is reasonable to conclude that anything which emerges out of nature belongs to the people as a whole, while anything that emerges from individuals belongs to those individuals.

But the distinction seems to me to be far too ambiguous, even to the point of being nonsensical. Name something that is manufactured by humans, anything at all. Suppose we take this laptop, or a spoon. They have been created out of something in nature. Now, im assuming that because George is attempting to reconcile his landowning views with capitalism, his whole view on rightful transfer of private property is contract oriented.

If you could point out to me at what point I surrendered my rightful claim to every natural object in the world in order that someone could manufacture a spoon or a laptop then I would be interested. It seems to me that two things he's trying to bring together are practically irreconcilable.

For example, a manor house may belong to the Lord of the manor, but the land it is built on belongs equally with his servants? Bit of a mind****, isn't it?

But its not just a mind****, its physically impossible to distinguish the natural world from something manufactured, let alone when the manufactured object essentially becomes the land it has been built upon, and which his whole basis of taxation as compensation comes from.

I'm curious about this approach to land ownership, and whether it still has a few admirers in the world today?

I mean, I came across this and I thought, "wow thats interesting, a capitalist economist recognising some kind of collectivity of ownership", and initially thought it was interesting, but now im not sure how all these apparent contradictions are iron-outable.

Im not sure if Id go so far as to say that all of humanity "owns" the natural world, because I think that implies a domination of my surroundings which I do not feel is the healthiest way we could approach the world, for it or us. Its certainly better than splitting it up among a few individuals who claim to own it, but its a long way off from anything like a healthy relationship IMO.

I think a much more mature view of things would involve a recognition that the natural world is essentially a part of us, and we it, and to molest it in the way we are currently doing is bad in a sense which is not captured by mere reference to self interest (in that loss of biodiversity -> global warming/mass extinction of animal species etc -> bad for us), but a view of the humans-nature relationship as being a more integrated one than a dominator (or owner) and dominated.

LVTfan

"It seems to me that the way you have outlined the theory in the opening post is that the land is taxed only in accordance with the value of the surrounding land, and is hence not attuned to any of the services which the state normally provides for with taxes. For instance, in the case you mention above, it would seem to be ludicrously unlikely that the value which humanity attributes to the land of the town would exactly match up with expenditure on provision of healthcare and education and the like."

In a fully Georgist scenario, the entire rental value of the land would be taxed away. (More precisely, about 95% of it. A token of it would be left to the landholder.) The lion's share would be treated as the rightful revenue source for government spending on the various things the community agreed were needed.

The land within a town is more valuable than the land beyond its fringes, because of the taxpayer-provided infrastructure such as roads, water, sewer; and services such as fire protection, police, ambulance, schools; and the presence and vitality of economic activity. If all is well, land downtown is far more valuable than land 1/2 mile away, which is in turn more valuable than land another 1/2 mile from the center of activity. A map of the land values would probably not show any extreme gradients from one property to the next. But otherwise equivalent homes in the various neighborhoods would rent for wildly different prices due to differences in their locations (which elementary school serves, well-equipped firehouse, good drainage, proximity to coffee shop, dry cleaner and well-stocked grocery, etc., etc. Not to mention jobs one can walk to, bus service, inexpensive taxi service, manicured or wild parks, etc.)

Virtually all these things, including spending on education, on health care and on the disabled, serve to make the community more vital, and thus to increase the land value for the future -- thus producing a flow of revenue to support those services, without penalizing productive activity, as taxes on sales or wages do.

[People beyond the fringe of town can probably take advantage of the health-care offerings, and schools and all, but they lack the proximity.]

In the northeast portion of the US, the highest-paid public employee is generally the superintendent of schools: he is generally thought to be able to increase land values the most. People who can afford to will flock to well-regarded school districts, raising the property values there. And it comes to a point where only families with a really high-paid worker, or with both parents employed, can afford to be in those school districts; single parents can seldom afford those districts. Elizabeth Warren and her daughter Amelia Tyagi pointed this out in a 2002(?) book entitled something like "The Two-Income Trap: How Middle-Class Parents are Going Broke ..." She didn't see the underlying mechanism with respect to land, but still described the problem pretty well. (Warren now oversees some portion of the TARP program in Washington; her specialty is credit- and bankruptcy-related issues.)

In many parts of the American south, there are few community-provided amenities. Property values are low, and taxes are low. Is life better there? There may be good private schools, and only the children of the wealthy get the benefit. Country clubs might provide for the rich what parks would provide for all. Condo and other homeowners' associations might provide amenities to their residents which in other places the local community might provide to all. I guess those HOA's would be high-priced enclaves in the middle of low-priced towns or counties.

But since I think all children are entitled to a good education, and all people to a safety net -- though I want it to be needed rarely, I think it needs to be a good strong one -- I am in favor of collecting enough to provide these things. And I think it should not be collected by taxes on productive activity -- certainly not until or unless we'd collected the annual rental value of the land, and found it wanting. If we stop taxing productive activity, we're far less likely to need the safety net except in cases of illness and disability.

This is not as cohesive as I wish it were, for which I apologize. I hope my digressions are useful in fleshing out the picture.

Side thought: as I listen to the talk about "nation-building" in Iraq or Afghanistan, I think that the provision of dependable infrastructure -- electricity 24/7, water, sewer systems, roads, etc. -- is certainly one portion of it. So are schools and dependable, non-corrupt police and courts, under good laws. If we succeed at promoting those things, it is the landholders who will benefit the most, through being able to collect higher rents. They ought to be moving toward financing all these things through taxation of urban land rent. But since so few people are aware of this financing mechanism, we are unlikely to be able to help them get there. Yes, financing these things through royalties on oil is certainly good, but land rents ought to be used, too. Otherwise, we enrich those who hold the best land, and impoverish those who have no land or fringe land. And from the pictures I see, fringe land in these countries has no productive value or possibilities!

Joycey

Ah OK, I got the wrong end of the stick there. It does certainly like an interesting theory, especially your final point about Iraq/Afghanistan. I will definitely check out that link.

Im still slightly unsure of the mechanism whereby the land value is actually decided. Is there to be an assessment of the services we want to provide, which is then to be paid for by the taxed land, or is a value attributed first, which is then taxed and whatever services can be paid for are decided later?

Also, it would seem that a massive beurocracy is needed in order to constantly revaluate the level of tax appropriate to each tract of land. Endless legal claims would seem to be inevitable whenever a new business opens up, or a favourite teacher of a community retires, or there is less than average precipitation in a season over a given area etc. How is this to be dealt with?

My last post was more concerned with the philosophy from which all this is derived than the derivations, so to speak, and the inconsistencies I perceive in the groundwork (without having read or listened to any primary material of course) are still there. It is certainly interesting though, and if the somewhat utopian view of things which you espouse in your posts has a basis I would not be unfavourably disposed to it (what a terrible sentence :rolleyes:).

Soldie

Joycey wrote: »

Im still slightly unsure of the mechanism whereby the land value is actually decided. Is there to be an assessment of the services we want to provide, which is then to be paid for by the taxed land, or is a value attributed first, which is then taxed and whatever services can be paid for are decided later?

Also, it would seem that a massive beurocracy is needed in order to constantly revaluate the level of tax appropriate to each tract of land. Endless legal claims would seem to be inevitable whenever a new business opens up, or a favourite teacher of a community retires, or there is less than average precipitation in a season over a given area etc. How is this to be dealt with?

This.

I think the concept is fatally flawed. In many cases, the same person owns both the site and the improvements built on it, and buys and sells both together. It is impossible to divorce the value of the improvement from the value of the site, given that the value of something is determined by the market, not by external observers; such as the government, in this case. Any valuation by the government is purely arbitrary. There are countless practical problems involved: How does one calculate the original value of tilled farmland? A cleared forest? Urban land is even more complicated in that merely subtracting the buildings and roads is not enough because the land had to be cleared in the first place. Assuming my understanding of Georgism is accurate, the flaws are insurmountable -- value is entirely subjective and cannot be arbitrarily calculated by the government because it is not a market participant.

LVTfan

Valuing land well is surprisingly easy. Get a detailed local map, and gather together 10 knowledgeable local folks. Ask them what the most valuable spot in town is. (I've heard it described as "ask them to identify which corner of which block is the best place to sell, say, roasted peanuts.") Rather quickly, they'll come to a consensus. Then ask them where the next most valuable site in town is. When they have come to a consensus, ask them what percentage of the first site's value they'd ascribe to this second site. Work your way around the town. Within a few hours, with the time of a dozen people, you'll have the relative values pretty well established. Then you'll need to apply local land values to those relative values.

The market values the land with every transaction. As we all know, the three most important things in valuing a property are ... location, location and location. If you know your town, you can assume a particular home -- say, 3BR, 2 baths, 1 car garage, 30 years old, particular materials -- and you'd rapidly reach a consensus with others who know your town about what that house would be worth in each neighborhood. The difference is land value.

When you go to insure a home, you separate the land value from the building value, and you insure the building value, usually not for the current value of the existing building, which may be quite depreciated, but for what it would cost you to build a home of similar size in that place. You separate out the land value, because if the house were to burn down, you would still have the land value.

Are there teardowns in your area? Every teardown provides a rather clear reading of what local land values are. If an older home, say, sells for $500,000, and the transaction is followed by the removal of the existing building and its replacement by a new house, we have pretty good evidence that local land value for that sized lot is $500,000 plus perhaps $10 per square foot for razing and removing the old building. One isn't complete evidence, but when there are several in the neighborhood, we all get a pretty clear picture: the existing houses aren't worth a whole lot in this time and place. In Greenwich, Connecticut, a premium suburb of NYC (the closest CT suburb of NYC, with excellent schools, lots of waterfront, fabulous libraries and hospital, a parkway and an interstate, great train service to NYC, etc.), a few years ago, about a quarter of residential transactions were followed by teardowns, and the building of 10,000 sf mansions. Even 20 year old houses which anywhere else would be considered quite luxurious were being torn down. The assessor quite rightly started valuing 20 year old houses at very low levels, placing virtually all the value on the sites. There were virtually no complaints.

We're not talking about the original value of the land; we're talking about the value of the land without the current improvements on it -- the value created by sewers, city water, roads, bridges, transportation, services, neighborhood amenities. For the farm, we differentiate between value created by the owner in clearing the land -- moving the annual crop of New England rocks off it, draining it, clearing the trees and keeping it cleared -- and the value before those things were done. We're interested in the value that nature provides, and the value which the community provides, via transportation systems, schools, etc.

LVTfan

Joycey wrote, "I'm still slightly unsure of the mechanism whereby the land value is actually decided. Is there to be an assessment of the services we want to provide, which is then to be paid for by the taxed land, or is a value attributed first, which is then taxed and whatever services can be paid for are decided later?"

Land value taxation is a way to determine how the cost of providing government services ought to be allocated among all the members of society. Under LVT, if one owns, say, 0.5% of the aggregate land value, one's share of the local tax rolls is 0.5%. So everyone has an incentive to help keep the costs of government down, and not to vote in services they don't want to pay for. (California's Proposition 13, which limits assessments to the purchase price of the property plus 2% per year, even if market value has increased by 5% or 10% that year, and limits the property tax to 1% of the assessed value, provides no incentive for anyone to vote against ANY kind of spending. Property taxes are fixed, and any overage will be covered by taxing someone else or something else. Pretty neat, huh?)

As a revenue-neutral substitute for the conventional property tax (on land and buildings), LVT is not likely to go above, say, 3% of market value of the land in the absence of a tax, or perhaps 60% of the annual rent on the land. (20-years'-purchase is 5%.) But many Georgists would advocate that we ought to be collecting ~95% of the rental value of the land itself, even if the community's current spending needs don't require all that. This will be jarring for those hearing it for the first time. But the point is that to the extent that we fail to collect the lion's share of the rent, the portion we don't collect will be capitalized into the selling price of the land, which accounts for the rise in land prices. The excess could be used for additional services -- better schools, parks, public transportation -- or passed along to the next higher level of government to help finance the sorts of goods that states or federal governments provide.

LVTfan

Silverharp wrote,
"all seems reasonable. It would imply a low tax economy? apart from maybe some local taxes for local infrastructure the main taxation would be based on rental values and not labour, profits or consumption. Given that the pensioner, teacher and doctor could all in theory be neigbours the tax would have to be set at the lower end of the range?
It would seem to be an efficient form of tax collection subject to it not being set at a very high level
One observation, the rethoric sounds quite "lefty" but given that land is not as significant a factor as it used to be, were the ideas not more relevant to he 19thC?"

Re: the pensioner, teacher and doctor: we might plan differently if we knew that throughout our use of a property, we'd be required to pay the land rent for it; we might plan to live more modestly in retirement, or choose a smaller piece of land which we could afford, or move in retirement into a multifamily single-story unit sharing the cost of choice downtown landrent with a dozen other households. In California, under Prop 13, quite the opposite has occurred: seniors, who are paying property taxes based on 1978 property values plus 2% per year, compounded, are staying in the larger homes in which they raised their children, close to jobs and schools, paying a tiny fraction of the taxes paid by newcomers next door, and forcing young families to buy homes far from jobs and well-established schools. And to make it worse, the heirs of those seniors will inherit their grandfathered assessments!

Coming at the pensioner-teacher-doctor question from another point of view: the difference between the home of a teacher and a doctor is both in its location and in its amenities -- but it turns out that in many cases, the much bigger contribution to the total is in the difference in the land value. The doctor will tend to occupy a choice site and a larger one; the teacher a smaller one and less choice. The difference between their structures will likely be a much smaller percentage difference. We'd like to think that they live in the same neighborhoods, in comparable homes, but they don't.

You are correct that land value taxation is very efficient. As far as I know it is among the most efficient, supplying to government a large percentage of what the taxpayer shells out. With most other taxes, there are middlemen who benefit, and the commons receives a lower share of what the taxpayer must pay. (And don't think those middlemen don't like it, even if they don't fully understand the mechanism. Works for them!) Economists recognize this tax as having little "deadweight loss" or "excess burden."

re: "Lefty." I tend to identify with the left in many ways, and on those little political quizzes, I come out "left libertarian," though I find myself appalled by some of the things that are said and done under the banner of libertarianism. But I think this is neither left nor right; it is a third way. I think I mentioned an article called "Henry George and the Reconstruction of Capitalism" -- linked at wealthandwant.com -- and I'd also refer you to http://www.henrygeorge.org/isms.htm

To your last point, about land being less significant these days, I have to disagree vehemently! In any city, land is likely to represent more than half of the typical homeowner's monthly mortgage payment. (I started to say monthly rent, but urban residential rents may also contain some landlord-provided services: trash handling, doorman, vacuuming of common spaces, etc., which muddies the picture; but of the non-service portion, land is probably more than half). In NYC, there is an acre of land which was said a couple of years ago to be worth $400,000,000 to $1.2 billion as a teardown. At 5% per year (that is, 20 years' purchase), that's $20 million to $60 million in land rent! Think how much sales tax could be done away with, just from the proceeds of the rental value of that single acre! Think how much would be added to the economy if we lifted $20 million to $60 million of wage taxes off workers. Think what the Duke of Westminster collects each year in rental value of London land. (See http://www.wealthandwant.com/docs/Wetzel_Westminster.htm and http://www.wealthandwant.com/themes/underpop/duke_westminster.htm

No, the value of land is not insignificant today. Nor is the value of natural resources. Think of what we spend on wars over them, and what we spend at the gas pump.