Giving Life to the Property Tax Shift
|December 11, 1998||Posted by Jeffery J. Smith under Academic Articles|
of The Geonomy Society
1611 SE Nehalem St, #2; Portland OR 97202 USA
For Redefining Progress
SECTION 1: BACKGROUND — PROBLEMS & REFORMS
SECTION 2: INCENTIVE DESCRIPTION — REAL WORLD EXAMPLES
SECTION 3: POLICY IMPLICATIONS — RESULTS & THORNY ISSUES
SECTION 4: POLITICAL ISSUES — PROSPECTS & STRATEGIES
SECTION 5: RP_S ROLE AND FIT
SECTION 6: OTHER SUPPORT
APPENDIX A: Possible Timeline
APPENDIX B: Phase-by-Phase Budget
APPENDIX C: Bibliography
APPENDIX D: Contact Groups
SECTION 1: BACKGROUND — PROBLEMS & REFORMS
John Muir is right. “Tug on any one thing and find it connected to everything else in the universe.” Tug on the property tax and find it connected to urban slums, farmland loss, political favoritism, and unearned equity with disrupted neighborhood tenure. Echoing Thoreau, the more familiar reforms have failed to address this many-headed hydra at its root. To think that the root could be chopped by a mere shift in the property tax base — from buildings to land — must seem like the epitome of unfounded faith. Yet the evidence shows that state and local tax activists do have a powerful, if subtle, tool at their disposal. The “stick” spurring efficient use of land is a higher tax rate upon land, up to even the site’s full annual value. The “carrot” rewarding efficient use of land is a lower or zero tax rate upon improvements.
Economic Problems to Solve
Taxing built-value penalizes construction and maintenance of buildings. This deadweight loss on the local economy constrains housing supply and raises land values, driving speculation. Fewer people can then own parcels for homes and businesses, and debt levels increase.
Environmental Problems to Solve
Rus (rural regions) provide resources as urbs (cities) provide services. Yet neither does so efficiently now. Allowed by a present property tax that takes aim at buildings while treading lightly on sites, owners of sites and resources both overextract and withhold appropriate land from use, speculating on a higher future return. Vacant and underused sites waste on the average about 22 percent of city surface. Using land less than optimally means more land must be used. Clark County, Washington, combines the empty storefronts, vacant lots, run-down buildings in Vancouver, the county seat, with one of the fastest growth rates in the nation. The inflated prices are hardly affordable by governments intending to purchase open space; hence parks are smaller and fewer.
Political Problems to Solve
To manage growth, counties adopt boundaries and other restraints — which are neither effective nor politically stable. The once “green” Oregon legislature, for instance, in ’95 and ’97 (controlled by Republicans) passed over ten bills to drastically weaken long-established land use laws. Also under siege is the property tax, formerly the largest source of public revenue in the US (back when the federal and state governments were much smaller). Voters in many states have passed caps and rate reductions, spurring a search for alternative revenue sources.
Equity Problems to Solve
America is rapidly turning back the clock; we are on the path to becoming a two-class society struggling on a ravaged planet. For the first time since European settlers carved out their own country, tenants outnumber owners. Farm workers outnumber farm owners. Growers under dictatorial contracts to food processors outnumber farmers still calling their own shots. Tenants, as in Portland, Oregon, outnumber homeowners. That gulf widens dramatically when defining owners as those not under a mortgage. In communities of rapid turnover, crime invades along with government corruption.
Previous Reform Attempts that Failed
To bolster their local economies and fatten their tax base, local governments compete to attract large new employers. Hoping to recoup down the road when businesses pay full property taxes, elected officials offer such inducements as five-year abatements and low system development charges. Yet each locality must outdo others’ incentives. Enterprise zones and tax privileges amount to major subsidies that would otherwise generate substantial tax revenues.
Already, Washington, Oregon, and other states employ a nonregulatory means to reward preservation of unbuilt-upon land. They assess farm and resource lands at current use rather than at market value to avoid pressuring owners to develop. However, as long as demand for land persists, and the more central locations are not offered in the market, then the temptation before farmers to sell out to developers also persists.
Our Different Idea
To send a clear message to new businesses that their growth will not be unnecessarily impeded, government can permanently shift taxes off sales, income, and buildings and onto land. Since taxing land lowers its cost, business could pay this greater land tax from what otherwise would be spent on purchasing land. This higher land levy would remain affordable as long as owners use their land efficiently.
Developers argue that abundant land lowers its price and thus the property tax burden. While true, newly-available land need not be current open space. Without baring the countryside to new development, both land price and the property tax can be lowered. The price of land drops when the tax rate on land is raised. And yet this higher rate, if coupled with a lower or absent rate on buildings, does not swell the property tax burden of most residents. Indeed, this property tax shift (PTS) is progressive, providing relief for most residents. And by taxing land, society impels owners who had been speculatively withholding or underutilizing theirs to develop or offer their parcels for development. Hence the newly-available land comes from recycled sites, not from open space.
The PTS not only lowers the price of land, it also lowers the cost of buildings. Untaxing structures, besides reducing their cost, also augments their supply. More buildings means lower prices and rents. As the prices of both buildings and land drop, more people are able to purchase a home, apartment, or condominium.
Ethically, the PTS simplifies the revenue system, leaving fewer decisions to be made by politicians in favor of their backers. All the essential facts are open to public scrutiny: the land’s owner, value, use, and levy. And since mere speculation would no longer be profitable, owners would have less monetary motive to try to unduly influence the political process.
SECTION 2: INCENTIVE DESCRIPTION — REAL WORLD EXAMPLES
The application of the PTS — both historically and currently — paints a picture of a reform powerful enough to win the world we all want.
History — Past Political Victories
If past is prologue, the political situation in which geonomics could win adoption is almost any imaginable. The property tax shift has been adopted by voters, by enlightened elected officials, by lobbied elected officials, by enlightened despots, and by self-serving dictators. Ironically, while the aim of the officials elected democratically (more or less) was to improve the economy, the goal of the tyrants was to improve equity — which was not too hard as peasants had no where to go but up.
About a 100 years ago, California adopted the land tax for a while. The legislature allowed irrigation districts to fund dam and canal construction by taxing the resultant rise in land value. This legislation was the fruit of the effort of one legislator, C. Wright, who left teaching school to run for office, pass his bill, then returned to teaching. As voters, farmers were beginning to have more representation than rich ranchers. Then the idea of a Single Tax on land values, made popular by writer Henry George, was current. Unfortunately, once the irrigation improvements were paid for, the land tax was allowed to languish, as speculators regained political control.
Earlier this century, George’s ideas were still popular and respectable. Both Presidents Wilson and Franklin Roosevelt had Georgists in their cabinets. Al Smith (who once lost to FDR), while governor of New York, allowed New York City to exempt new buildings for ten years (the 1920s).
Other times the officials were hoping to do things right from the beginning, as in Australia, New Zealand, and Singapore. Yet as these settlements grew urbanized and the logic of taxing land grew fuzzy, all three of these repealed their land tax at the federal level, one state in Australia gave it up, and Singapore abandoned it all together. However, land speculators have had less luck in replacing the land tax at the local level, where the voter/government relationship is more intimate.
Elsewhere, the land tax has been implemented by dictators. When Chiang Kai-shek took refuge on Formosa, he could retreat no farther — behind him lay nothing but open ocean. To win the support of the peasantry on that feudal and impoverished island, he borrowed a page from his mentor, Sun Yat-sen, who was a follower of Henry George, the noted advocate of the Single Tax on land. To break up the few landed estates which had extended across the entire isle, the Nationalists taxed agricultural land.
A more enlightened despot was Frederick, a Danish prince who in 1790, when physiocracy was all the rage (the Toms Jefferson and Paine were physiocrats) overthrew the king, his uncle, in order to tax land. Ever since, Denmark has enjoyed the highest rate of owner-occupied farms in Europe.
Advocates can learn from failure, too. Around the beginning of the 20th century, three idealistic leaders tried to implement a land tax. In Mexico, Francisco I. Madero was murdered (by the US backed side). In Russia, Alexander Kerensky was deposed by more aggressive reformers. And in England, Lloyd George was thwarted first by the last vote of any political import by the House of Lords (to vote that day, senile and deranged noblemen were wheeled into Parliament from the asylums ringing London) and last by World War One. Eventho’ the tax had at last passed, it was never implemented due to the absence of a decent assessment which was not performed owing to the exigencies of war.
Elsewhere in Latin America, in Argentina in the 1840s, President Rivadavia, proposed physiocracy and in Guatemala in the Reagan years, President Cerezo advocated a land tax. Both were deposed by their respective armies. Neither leader included a tax reduction, but there’s no way to know if that would have made a difference. Yet it’s probably best to promote the shift rather than advocate the raise of one tax.
Historically, victories by land taxers and property tax shifters over landholders have been rare. They occurred when either the people understood the proposal or someone in a position of power did. Plus, at issue was either equity or the economy or both, so that people were attuned to new proposals.
History — Past Economic Successes
A century ago, many farmers and miners went without water because cattlemen like Henry Miller owned 1,000,000 acres in California. Miller could drive his herds from Mexico to Oregon and spend every night on his own land. In 1886 Mill won full rights to the water of the Kern River. To correct this aggrandizement, the state allowed communities to create by popular vote irrigation districts to build dams and canals and pay for them by taxing the increase in land value. Once irrigated, land was too valuable to use for grazing, and the tax made it too costly for hoarding. So cattlemen sold off fields to farmers and at prices the farmers could afford. In ten years, the land rent tax turned the Central Valley into over 7,000 independent farms. Over the next decades, those treeless, semi-arid plains became the garden of America.
Several countries have taxed land on the national level. On the other side of the Pacific Rim, Australia, New Zealand, and Taiwan levied a federal land tax for a while. Repeating the success of California, Taiwan was able to redistribute huge plantations into many family-sized farms. Recently, in an attempt to control their skyrocketing location values, both Japan and Korea have begun to tax land, though only at low rates.
Taiwan instituted land taxation during the 1940s to redistribute land and increase food production. Prior to the arrival of the Nationalist Party, most of the island’s people were landless peasants and were afflicted with hunger. Less than 20 families monopolized the entire island. So the new Nationalist government implemented its “land to the tiller program,” which taxed farm land according to its value. Soon the large plantation owners found themselves paying out about as much in taxes as they were getting back as rent. Being a middleman was no longer worth the bother, so they sold off their excess to farmers at prices the peasants could afford, which, according to the World Bank, lay the foundation for subsequent rapid development. Working on their own land, new owners felt inspired to work harder. They produced more, kept more, and lived better. Twenty years later, Taiwan had growth rates of 10% per annum in their GDP and 20% in their industry, while from 1950 to 1970 population growth dropped 40% and hunger ceased.
Denmark, during the 1950s, tried to move toward a land tax nationwide. In 1957 the tiny Georgist Justice Party won a few seats and was accepted into the ruling coalition. Land speculators feared that the rest of parliament would go along with shifting taxes toward land. So investors shifted their portfolios from speculation to production. One year later, inflation had gone from 5% to below 1% ; bank interest dropped from 6.25% to 5%. By 1960, 100,000 unemployed had found jobs in a country of just five million people. Nevertheless, next election, the landowners spent enough money to sway public opinion and removed the Justice Party from parliament. Speculation was safe again. Inflation quickly climbed back up to 5% and by 1964 reached 8%. From 1960 to 1981, land prices skyrocketed, increasing 19-fold while prices of goods and services increased merely fourfold.
Present — Recent Political Victories
For fans of democracy, the most recent victory of the PTS came about via the initiative. The votes were cast in Allentown (Pennsylvania is one of the few states that permits separate rates for land and buildings). A key local leader knew of the success that Pittsburgh, Harrisburg, and other Pennsylvania towns had had with the PTS and had the clout to make the shift part of a total revision of the city charter. When the revision passed, propertied opponents put the repeal of the PTS on the ballot separately. Advocates of the split conducted a typical grassroots campaign of phone banking while opponents relied on paid advertisements. Altho’ the dollars spent during the campaign heavily favored repeal, the voters heavily favored keeping their new fiscal toy.
Abroad, during the last year or two, a few jurisdictions have turned to taxing land. Estonian officials felt that they had little choice; all other taxes are too difficult to collect. If a government is willing to evict owners who fail to pay, the land tax is easy to collect. Unlike wealth, land can not be moved or hidden and its owner must step forward to retain hers (sic) possession. Colombia, whose cities are swamped by squatters, has granted mayors the power to negotiate a land tax with individual land owners in the hope that a higher charge will stimulate development of underutilized sites, generating more affordable housing.
Cape Town, South Africa, quit the regular property tax in favor of a land levy. Altho’ sited on one of the world’s major shipping lanes, Cape Town’s development had always lagged behind the inland Johannesburg, an abandoned mining town that prospered in part from levying only locations and not any improvements. Not knowing what to expect in the aftermath of apartheid, Cape Town’s civic leaders wanted to ease the transition to a sound, integrated economy.
Present — Recent Economic Successes
Cities with either a phased-in two-rate land-weighted system, as in Pennsylvania, or with a full land tax, as in Australia and New Zealand, have consistently shown that:
- Taxes on the majority of owner-occupied and rental homes were reduced.
- The steep escalation of housing prices and rents experienced by most US cities was averted in the two-rate cities as housing supplies increased.
- Construction and rehabilitation of homes, stores, and offices increased.
- Central business districts drew more private investment and were renewed.
- More efficient land use followed putting the city’s idle lots and under-used buildings into productive use; reducing the pressure for urban sprawl.
Australia has operated under various forms of site value taxation for nearly a century. Many studies have estimated the improved rates of construction, housing, rise in wages, and even expanded agricultural lands under land value taxation in Australia. Two cities fully exempt buildings. Canberra, the nation’s capitol, exists on public land and leases lots. Sydney taxes land, not buildings. Neither one recovers all the land’s annual market value and rely on some revenue from the federal government. Yet their lower-income areas appear much more livable than the dilapidated ghettos of many US cities. In the two most populous states, Victoria and New South Wales, revenues from land taxes increased significantly in the eighties. In Victoria revenues nearly doubled and in NSW, they nearly tripled from 1984 to 1990, accounting for inflation.
In 1951 the federal government also taxed land. All states except Victoria still have a land tax in some form. Over the last two decades, the percentage of government revenue collected in land rent at all levels was estimated to drop from 6.3 percent to 3.7 percent. In the recent decade, under influence of wealthy interests most states have diluted the land tax.
Following this trend away from capturing unearned land values, municipal revenue from property rates has fallen to 50 percent of the budget. One city, Hervey Bay, Queensland, now collects only about 20 percent of its revenues from site-values. Fixed charges or fees for particular purposes have gained popularity instead, including a minimum rate for all properties in some instances. Nationwide, all levels of government collected $148 billion in 1993-94. One estimate suggested that the present uncollected annual rental revenue in Australia would be about $40 billion, depending on the capitalization rate used.
Despite this drift away from site rent, especially among municipalities, a two-volume report commissioned by the Brisbane City Council in 1989 found significant advantages to taxing land. Comparing it to taxes on “heads” (the poll tax), sales, income, improved property value, and license fees, the research committee unanimously rated “rating” (the Aussie term for taxing property whether land or building) as best. They stated, “In principle, the unimproved value of land is a logical and appropriate basis for revenue raising irrespective of the level of government.” They noted that land taxes are virtually impossible to evade, tap every member of the community, are simple and inexpensive to administer, and its compliance costs for citizens are minimal.
New Zealand’s Experience
Kiwiland has used the land tax for over 100 years, political pressures along with economic swings have whittled it down to 0.4 percent of the federal budget in 1989. That year it became a political football. Since 1896, the federal government had independently recorded the market values of the land, the improvements, and the composite or capital value. In 1989, federal authorities reassessed land during a sharp rise in commercial values, primarily in Auckland (which doesn’t collect land rent); but they actually collected the revenues a year later when land values suddenly fell. Genuine inability to pay ensued.
The previous ruling party, the National Party, raised the rate on commercial land as it exempted all rural land. That gave a nice tax cut to 1,300 of the richest people in New Zealand. Where sites were underdeveloped, perhaps due to the ineffective level of the land tax, too few site users could manage to pay the tax. The resulting hardship reinforced the ruling Labour Party’s right-wing proposals for abolishing the land tax and replacing it with taxes on goods, services, and users. More recently, since 1991 the land tax as such is considered a dinosaur on a national scale, although some 90 percent of the municipalities employ land-value rating (rates are levied on the rental value a property as assessed by the city council annually). Since Wellington has adopted capital value rating (the regular property tax), its renewal has faltered. Most recently the concept of “resource rental” is floated in national debates as a substitute for taxes on land and capital assets.
W.W.II, when its steel industry plummeted, Pittsburgh widened its two-to-one land-building ratio. The city watched 60 new buildings and skyscrapers, valued at $700 million then, stand up in industrial areas. This privately financed renewal brought 16,000 new jobs to an area that had employed 4,000. Then-Mayor David Lawrence, noting the power of the stick, said the higher rate on land “discouraged hoarding of vacant land for speculation.” His successor, Mayor Joseph Barr, noting the carrot effect, explained, “Fine structures erected through private investment as part of the renewal program benefited by the lower tax rate on buildings.” When many decaying cities were seeking federal aid, Pittsburgh’s Golden Triangle brought the city national fame.
In 1951 the Pennsylvania legislature granted all cities the two-rate choice, omitting any ratio limits. Over two decades later in 1975, Harrisburg, the capitol, shifted its property tax landward. The value of its private real estate grew from $212 million in 1981, when it was cited as the second most distressed city in the nation, to over $880 million in 1994. Its mayor during much of this recovery, Stephen Reed, noted another benefit: “Many states try to save farmland by buying development rights. That’s expensive. Without spending a dime, we can achieve the same goal with a two-tier tax. Unused urban land is what pushes development into open spaces. This tax, by assuring better use of unused land in cities and suburbs, will discourage the gobbling up of farms.”
Ailing, small towns in distressed Appalachia passed the shift in the eighties: McKeesport, New Castle, Duquesne, Washington, Aliquippa, Clairton, Oil City. In 1990 Titusville chimed in. A year later Coatesville, DuBois, Hazleton, and Lock Haven followed. In 1996, after repeated vetoes by the mayor, Allentown came on board with its 100,000 residents. That makes 16 municipalities with the two-rate property tax. All of them are growing by densification unlike many of their neighbors.
In 1992, Uniontown reversed its adoption of the PTS. (It was one of the towns one of these co-authors lobbied. It seems he may have pushed to hard. They accepted a higher initial rate which spurred a backlash which scuttled the whole program. Damn eagerness!) Like many others in the region, this city of 12,000 needed help; 80 percent of downtown sites were empty. Their big mistake was to introduce the two-rate reform under 34 year-old assessments which underestimated the value of lots with abandoned structures. The few retailers left were hit with a drastic increase. Moreover, officials did not give out public information in advance. When people got their tax bills, they were angered and uninformed, causing the city council to revoke the shift.
While the 1951 law abolished ratio limits, it has been used only to increase the land portion. In 1979, Pittsburgh moved to a three-to-one ratio and in a few years moved to six-to-one. Six others have chosen five-to-one. In 1995 Washington, 30 miles from Pittsburgh, shifted to taxing land 11 times higher than buildings; Aliquippa to 16-to-one.
These spreads are diluted by overlapping counties and school districts which still levy property taxes of one rate. When the city, county, and school taxes are figured in, Pittsburgh is dampened to a 2.5-to-one ratio. To address this lack of uniformity, the legislature granted permission to school districts and boroughs the option to split their rates. So far, only two noncity jurisdictions have taken advantage of this option, totally 18 jurisdictions, including Pittsburgh, that have opted for a higher rate on land and a lower one on buildings. Across the Delaware River in New Jersey, officials recently held a public hearing on the PTS.
Partial Applications — Abatements
With first Spanish and then Mexican control, much California land had been pueblo, or public. Though very little of that pueblo land remains, some of it is still quite valuable. In the 1960s, various towns sitting on San Diego Bay designated their water fronts as the Port District. The Port Authority collects hundreds of millions of dollars of land rents each year and is one of few local government agencies with a consistently positive cash flow. Where does that cash flow to? While not into any bloated bank accounts of private owners, by law it can not flow back to the “pueblo.” Instead, it must be spent by the Port Authority who tend to take numerous trade missions to exotic destinations and redecorate their offices each year.
Benefits of the PTS have also been achieved with building tax abatements and by simply obeying assessment laws.
During World War One, in New York City construction nearly ground to a halt. After the war, housing in the City was in short supply and the demand for new homes was doing little to relieve the shortage. Then, in 1920, despite fears of revenue losses, the legislature enacted enabling legislation so that NYC could pass an ordinance that exempted taxes for ten years on new buildings used only for dwellings. The City continued to tax land beneath buildings. Within two months of enactment, a building boom swept the city. Restored neighborhoods and public improvements generated higher land assessments. Housing became an attractive investment, civic panic faded, and municipal revenues rolled in.
The boom lasted until builders saw the decade-long window closing The law was not extended or expanded. First, because the law exempted just new construction, not all housing, it failed to lower rents for middle and low-income tenants. Second, the real estate industry argued that government should stay out of “the free market”. Yet such a building tax exemption is more accurately a market correction, not an interference, since it removes the market disincentive to build.
To arrest urban decay in the seventies, reformers tried temporary abatements. Peoria, Illinois, set up an enterprise zone that granted a ten-year abatement on the value of new or repaired commercial or industrial buildings. As land values rose, the tax on land was allowed to keep pace. Within three years, the dollar value of industrial and commercial construction permits within the zone climbed from eight to 21 percent of the city’s total. The maverick business leader behind the idea, John Kelly, extolled the turnaround: “Enormous building investments led to a consensus that this abatement of taxes on new construction is the best development program Peoria ever undertook.”
On the down side, abatements usually don’t apply to all areas and are ripe for political cronyism. Businesses in older buildings despise subsidizing tax breaks and new buildings for their competitors. Abatements tend to be less effective in the housing market. The many smaller housing developers shy away from the “abatement game” and are reluctant to risk major projects.
Partial Applications — Assessment Precision
Another way to mimic a PTS is to follow the letter of the law in assessing site value for accuracy and currency. Over the decades, US assessors have consistently undervalued land relative to improvements. The more poorly the land is utilized, the lower our officials assess it, despite uniform appraisal laws. This bias has overemphasized the detrimental half of the tax and crippled the beneficial part.
Consider Rosslyn, Virginia, across the Potomac from Washington, DC. In the late forties this part of Arlington was so rundown it inspired an advisory group to require the state to conduct a countywide reassessment in 1950. They stipulated that close attention should be paid to the true market value of sites without regard to use. Rosslyn valuations jumped; the core 154-acres saw increases from $300 to $2,300 per acre. A five-acre commercial tract jumped from $3,000 to $196,000 an acre.
How did they soften the blow to property owners? First, all new assessments were mailed at once; owners saw they were treated uniformly. Second, the assessment gurus read the market better than most owners; the updated assessments in Arlington rivaled the highest in quality in the US. Third, chief assessor, Francis Austin, saw himself as an educator, not an enforcer. He assisted owners to make better land use decisions. Instead of suing, several land owners sold their lots at healthy profits. Soon new enterprises took off, turning Rosslyn into a district of top-notch hotels, offices, and apartments. The success was also supported by annual reevaluations. As Rosslyn land values increased with accurate assessments, the pressure for renewal remained and removed the profit and incentive of speculation. By 1975 Rosslyn returned $43 million annually to the county and received $13 million in public expenditures.
Another outstanding example of simply following appraisal laws is Southfield, Michigan. State law required all taxable property to be appraised at market value. Buildings there in 1960 were assessed at 70 to 80 percent of value and land at five to 10 percent. After Mayor S. James Clarkson took office on a promise to correct this violation, and after a fight with the assessor, special interest groups, and the courts, the city stopped overvaluing new construction and remodels and began appraising land by its highest and best use. Soon the contrast with the slums of nearby Detroit were patent. Mayor Clarkson stated that Detroit taxed land values “next to nil” under Depression era assumptions. Voters reelected him four times on his promise of fair assessments. Average homeowners paid 22 percent less in taxes immediately. Those who held large empty lots in desirable locations saw huge tax increases but reaped windfall profits from selling or developing. As Detroiters migrated outward, accurate assessments enabled Southfield to capture rising land values, bulking up its tax base by 20 percent a year.
Fundamentals — How to Implement
the US, the federal government traditionally relied on tariffs, then selling the west, and now the income tax. States relied on sales and now income taxes. Localities relied on property taxation. This traditional divvying of the tax base pie is not embedded in the constitution. During the Civil War, the federal government enacted both a property tax and an income tax — and could do so again.
Some state constitutions prevent the PTS. Decades ago, speculator-led initiatives enacted amendments to require the same rate on structures and sites. To repeal this stricture, a future amendment could be either a statewide mandate or local option. (The former orders and the latter allows local jurisdictions to adopt the PTS.) Both Pennsylvania’s and a currently proposed amendment in New Jersey permit municipal, county, and local districts to adopt differential rate property taxes, including 100% land taxes.
Some states permit localities or their voters to establish assessment districts to fund a particular service such as beautification. Some states direct their ADs to collect only the rise in ground rent; others define assessment charges similar to property taxes, falling on the combined value of sites and structures. In some states, assessment charges fall within limitations upon taxes; in other states they don’t. The ideal state for setting up ADs in place of the property tax may be California whose Prop 13 severely curtailed the property tax yet whose Supreme Court has given ADs pretty much free reign.
Most jurisdictions already appraise the value of land and buildings separately (however poorly), a taxing body could without delay adopt the PTS. Yet to derive maximal benefit from the PTS, many jurisdictions will have to upgrade their assessments.
In real estate there are two basic tautologies. One, land value is unrealized rent and rent is realized land value. Two, the annual rental income from a parcel is its market price multiplied by the interest rate, and land price is capitalized land rent (usually over a 30 year term). Since collecting land rent shrinks, even eliminates, land price, it becomes necessary to determine annual rent and use that as a basis for the rate on land.
Where density is low and growth rapid, land price inflates and assessments usually fail to keep up. Yet when land price inflation decreased from 15% to 10% annually, a land tax rate of 95% would capture the gain in land value and impact land allocation. Fortunately, the PTS precludes land price inflation, even lowers land price (tho’ high density areas being developed would likely keep prices high).
Where assessments are inaccurate, the PTS will be less effective. Under valued assessments, common on large residential lots in Clark County, Washington, “produces the undesired outcome of tax reductions rather than tax increases” (Gihring, 1996). Room for improvement persists in most regions nationwide. How much better could today’s assessments be, had state legislatures allowed localities to abolish taxes on buildings all together? Both the cities of Rosslyn and Southfield did in fact request just that. In Australia, with its long history of local reliance on site-values, accurate assessment is more the rule than the exception.
SECTION 3: POLICY IMPLICATIONS — RESULTS & THORNY ISSUES
While the results of the PTS are quite encouraging, the proposal does generate much initial resistance, especially regarding the loss of rent by landowners. Yet a gradual shift of the property tax should allay this objection.
PTS Improves the Economy
Land that is higher taxed is lower priced. Cheaper land reduces buyers’ debt. Less demand for loans lowers the lending rate. Cheaper capital means more investment and more employment. In Australia, in the province around Melbourne, some towns levy the regular property tax, others tax only land. Those with the same rate for sites and structures suffer more bankruptcies; those with one rate for land enjoy more successful business start-ups.
The PTS encourages investing in high-yield use of parcels. Developing land generates jobs in construction. As those construction workers spend their incomes, they generate more business for local merchants. For the few years that New York exempted buildings in the 1920s, the city boomed more than any other US city. In New Zealand, over 80% of the towns tax land, not buildings. Before the 70′s oil shock hit, they enjoyed over a decade of employment at 99%.
A stable source of revenue is a virtue in the eyes of any government. When recession strikes, governments that tax income or property must borrow more to make ends meet. The disincentives built into ordinary taxes deepen and prolong the recession. When taxes upon effort are eased, the economies can recover.
The PTS can cure local recessions. Spurring building, while not burdening it, keeps a web of regional suppliers, installers, architects, financiers, and others in greater demand. In the 17 Western Australian cities in the Perth area that had shifted to land taxation, new construction increased by 34% from 1971-76, while nine localities with ordinary property taxes saw a .02% decrease. From 1974-84, a period marked by recession in the latter half, towns near Melbourne that tax land alone saw the number of businesses increase by 11%, whereas cities without land taxation witnessed a drop of 20% (Cord 1998). Similarly, in the early 1990s, Connellsville and Washington, Pennsylvania, turned to the PTS; both enjoyed more new construction and housing (CSE 1997). Such examples illustrate the stable growth unleashed by the PTS.
PTS Improves Sustainability
Good for the economy, the PTS is also good for the eco-system. Were land levied, the owners of the most valuable sites would feel most pressure to develop; their sites tend to be closer to the city center. Hence those owners draw any needed development, infilling cities, sparing suburbs further encroachment. Other highly valued sites are those rich in natural resources. Again, using them more intensely frees up sites of lesser natural endowment. Thus, besides conserving sites, the PTS also conserves resources.
Higher efficiency makes feasible the goal of sustainability. Going sustainable must radically alter five basic strands in an economy: agriculture, home building, resource extraction, energy, and transportation.
The segment of the economy wasting the most resources is probably transportation. Sprawl exacerbates the need for mobility while infilling reduces it. Presently, cars claim 50% of urban surface. Land dues would motivate owners to put their asphalt devoted to cars to higher and better uses, ones that serve humans. A higher human density provides mass transit with more riders so that the system could expand and automobile dependency contract, letting both city and suburb blossom.
Another resource-consumptive segment of the economy is construction. Developers now profit from value. Losing that to land dues, they’d seek a replacement income. They’d be inclined to use cheaper recycled materials and build homes of higher value, with more insulation, heat exchangers, light tubes, rain cachements, a front for the street and a face for the south, fiber-optic wiring for the computerized building, edible landscaping, etc.
Many building codes mandate certain features (thick insulation, smoke detectors, etc). All these add-ons raise improvement value which the polity then taxes. The PTS repeals the penalty for improving structures. Another current obstacle to more efficient construction is that renters, unlike owners, have little vested interest in upgrading the structure. Lower land prices put more people into their own homes. As owner occupants, people tend to be more motivated to plug heat leaks and conserve energy, thereby slowing climate change.
Another candidate for least sustainable is factory farming. What makes mechani-chemical agribusiness financially feasible is the ability to borrow against pumped up land values. Land dues end land’s role as collateral, leaving growers little choice but to entertain the organic option. To ease the transition, the locality could disburse collected rent to residents. Plus, untaxing labor makes it more affordable to hire a helping hand. And, where cities are compacted, farms can stay closer to local markets. As Italy discovered centuries ago, nearby open space keeps fresh food — whether grown, raised, gathered, or hunted — readily available to satisfy the quality-sensitive urbanites. Further, as city folk enjoy more open space and grow closer to nature, they become a growing informed market, preferring local, organic, tasty, and healthy produce.
Applying the PTS to rural resources has the same conserving effect as on urban land. Sites yielding resources most easily would be used more intensely, forcing the abandonment of marginal sites. These sites could then revert to other uses, such as outdoor recreation or, once restored, natural habitat for other species. Here, too, the land dividend helps former loggers and miners adjust and become guides and foresters. Untaxing labor makes such new jobs more affordable to new companies. Other labor-intensive enterprises could compete with the capital-intensive ones. Recycling, which has the barest minimum of overhead, would grow more profitable as virgin extraction grows less.
PTS Improves Equity
Not only is the PTS efficient, it is also fair. For ages, people have debated the just basis for taxation: ability to pay versus benefits received. The property tax shift settles the argument in favor of both sides. First, land “dues” (taxes, fees, liturgy, or some combination of the forgoing), especially when coupled with an untaxing of homes, jobs, and enterprises, are inherently progressive. Second, land dues are scaled according to site values. Site values measure not what an owner puts into the “common kitty” but what one takes out. A prime location has the most advantages; it’s the one enjoying the best that society and nature have to offer. For owners to enjoy those locations exclusively, and to pay more for doing so, is exquisitely just.
Eventho’ almost everyone would worry about paying more tax, the PTS is inherently progressive. Studies of the towns in Pennsylvania that have shifted some tax from buildings to land show that about 75% come out ahead (nearly the entire bottom four quintiles of income earners), 20% break even and 5% pay more (together a bit larger than the top quintile of income recipients), who are usually absentee owners.
First-time home buyers make out like bandits. They’d pay a higher land dues to their community but lower total taxes to government, a lower price to the seller, and a lower mortgage to the lender. Is it fair that one group should benefit so prodigiously? Yes. In many US cities, renters now outnumber owners. High rates of tenancy, as shown in Goldschmidt’s 1940s study of the Central California towns Arvin and Dinuba, engender apathy and indifference, which are bad for democracy, community involvement, street safety, and environmental protection. The sooner young families can become homeowners, the better off all members of society will be.
Presently, when land prices rise (or the land tax), owners charge more to buyers and renters. After a PTS, the higher rate on land makes owners eager for customers. Plus, there’d be more owners in competition, as former speculators become new developers. Thus the PTS stabilize prices, saving money for small businesses and those in the lower income brackets.
PTS Improves Politics
The PTS reduces the profit from land, making land use less of a political football. Developers will have less money to spend on distorting the democratic process. Then society can more easily resolve land use issues.
Thorny Issues — Economic
Tho’ the levy upon site values is an immensely powerful tool for social advance, having benefited every jurisdiction that tried it, the proposal does meet initial resistance. However, since the shift is such a powerful tool for development, serious objections (those that can be substantiated) have focused less on the shift’s economic merit. Instead, challenges have been made on grounds of equity and sustainability.
Thorny Issues — Environmental
Owners paying higher land dues feel pressured to develop their land in order to pay their dues, and development is already blighting many suburbs and farmland. Won’t the PTS force premature or excessive development, losing open space and ecologically sensitive areas? Environmentalists should understand that development is actually needed to spare land. Using some land more intensely means using other land not at all. The PTS stimulates construction in the most intensely-used locations; compact urban form leaves more surrounding countryside pristine. Since about one-fifth of urban areas are vacant or underused land, and half is devoted to cars, there’s plenty of room in cities for growth. While suburban commercial centers compete with downtown for redevelopment, each new building, whether for business or residents, must find tenants.
Higher density is the expected result of the PTS, yet many people oppose higher density. However, the noxious component is not a higher density of population but of automobiles, creating congestion, noise, noxious smells, and danger. The PTS, by clearing out the infestation of vehicles, makes human habitats more livable and the added people unnoticeable.
Without coercion or remote planning, the PTS improves our settlement patterns. Regulations and zoning, some assume, might be vitiated or obviated, become obsolete. Instead, the PTS makes it easier for regulations and zoning to do their job. Since the land tax lowers land price, buying land for parks and reserves is more easily afforded. The loss in revenue from removing the newly public lands from the tax rolls would be offset somewhat by the corresponding rise in value of sites near the protected open space. Creating green spaces raises the density of already developed land, and thus its value. Furthermore, land dues reduce the profit from land development, making it a less attractive investment, and land use decisions of less economic consequence. After a while, people with deep pockets would turn to investments that, post-shift, would be untaxed. Reserving land for recreational or natural uses becomes less contentious; people could more easily determine an optimum proportion of green space to developed space.
Redirecting land rent from owner to government might merely pass the motive to exploit from owner to state, possibly the next implacable force against conservation. However, while an individual must use their own land most intensely to maximize profit, a government must optimize land use to maximize its land tax base. That is, land value thruout the jurisdiction is lower when there is border-to-border development; overall values are higher when some space is kept open. From the government’s point of view, there’s more rent to be collected when highest and best use includes nonuse.
Winners & Losers
Might the PTS fall heavily on low-income land holders and elderly homeowners? The land-rich, money-poor old widow could suffer if society were to levy sites. Eventho’ the vast majority of poor people would come out ahead, there probably will be the rare exception. To deal with “the widow on a valuable lot”, the new policy could include deferments.
Just as some poor could pay more, some rich could pay less, such as the owners of a skyscraper that’d be the highest (literally) and best use of a site. While a PTS could be a tax break for a few, the intent of the shift is not so much to whittle away fortunes as it is to promote prosperity, equity, and sustainability. Were society to attain such goals, letting some fortunes escape unscathed is a small price to pay. Also, putting a site to best use, while profitable, also benefits the community by providing convenient employment, bringing money into the local economy, and by precluding less efficient development, such as sprawl.
Since the shift is progressive, then the rich are footing the bill for everyone else. To answer this charge that one group will pay more (those who can afford it), proponents could note that the amount one pays is scaled according to the value of what one takes — a parcel of nature. The payment is for exclusive use to our common heritage. Those who exclude the rest from the best must expect to pay the most.
An obvious loser is a resource extractor such as an Oregon timber harvester (Weyerhauser is the biggest landowner in the state). All the rent that society now allows them to retain, they’d lose. Perhaps there is a silver lining to corporate mergers and diversification and interlocking stock holding; the huge corporations holding resources would have other profitable lines to turn to.
An obvious winner, balancing the losses of the extractor, are the service-providing companies located off the beaten path, like a neighborhood cafe. After centuries of just getting by, smaller enterprises would gain by competing on a level playing field. What they’d gain (that is, retain) is the fruit of their labor. Conversely, what big business would lose is the commonwealth generated by all.
What determines one’s new bottom line is how intensely one uses land. The PTS raises the tax burden on low intensity users of land, such as: slum lords, car dealers, speculators sitting on unused land, mall owners and probably their tenants, and farmers on land near a city’s limits, assessed according to potential use, and not granted deferments. On the other hand, owners of homes, condos, apartments, neighborhood-based, pedestrian-friendly businesses, and industrial facilities generally use land intensively. The PTS would save them money, although only slightly for home owners, based on studies of King and Clark Counties, WA (Gihring, 1994, 1996). Agricultural parcels far removed from suburban areas, given very low value, may also come out ahead.
Thorny Issues — Equity
What’s won or lost is a value generated by society. That is, land rises in value where a new resource is discovered (during a gold rush, more money is made by land developers than by prospectors), where population grows (see the Sun Belt and verdant Northwest), where technology advances (witness the land values in the various Silicon Valleys, Forests, etc), where infrastructure expands (e.g., near a new road or sewer), and where society cooperates (e.g., in communities that organize street fairs, neighborhood watches, etc). These factors driving land value are not improvements made by lone owners but by the entire community. The closest correlation to land value is density and no one person creates that. Hence the site value levy merely puts public values in the public treasury for public benefit, as untaxing homes, sales, and income leaves privately-generated values in private pockets.
“Home equity” (actually, site equity), the only equity most people have, would be consumed by the land dues. Eventho’ the complete geonomic tax shift would let people improve their homes, increase their incomes, expand their businesses, and augment their savings without increasing their tax liability, homeowners would still lose their “home equity”. Proponents need to lead off with the bottom line and underscore the fact that even with lost equity, numbers show a vast majority would pay less were taxes shifted. Those savings could be invested in stocks or bonds for an equivalent return. And were the new policy to include a per capita rebate, then the geonomic package would merely convert one’s expected equity into a certain annuity. Instead of cashing in one big lump sum later, residents would be cashing in smaller amounts all along.
Thorny Issues — Political
In PTS, the T stands for tax. Taxes, at best, are grudgingly accepted as “the price of civilization”. The property tax, a threat to home ownership, is roundly disliked. Rather than recognize the two different taxes rolled up in the property tax, most reformers and most electorates simply choose to cap the property tax rate (and thereby inflate the price of land). To parry the anti-tax fervor, it is possible to rename the proposal as a “sprawl tax” (as does Alan Thein Durning in Tax Shift). This name suggests the new charge would counter a negative condition. It’s also possible to formulate the proposal as a user fee. A jurisdiction could raise the fee for deeds and collect it annually, as states do for titles to vehicles, and thereby technically avoid being a tax.
The proposal is often seen as a tax on land, on one’s private property, the under girding of one’s home, “everyman’s castle”. The associations with land are so positive, and the connotations of tax are so negative, that the proposal feels to the public like a threat to one’s own niche in the universe. One way to try to defuse this emotional reaction is to replace “land” with terms such as “site” and “location”. Also, proponents can insert the word “value” which is not only more accurate, it’s also more abstract, softening the emotional blow.
People prefer “the devil they know”. People may not like their tax burden, but they sure don’t want to risk letting it go any higher. Yet the proposal is to increase the land tax rate or deed fee. Plus, a levy on site value, in the many growing jurisdictions, constitutes a higher charge on something growing — site values. To prevent “inflating residents out of their homes”, the proposal could either (a) exempt the first $20,000 or so of site value, ensuring that the poorest landowners pay at most a modicum, or (b) rebate some rent (collected site value) once some threshold is reached, say when the land dues owed by the poorest quintile equal, say, 5% of average local income. (The actual trigger figure needs more thorough calculating.) PTS proponents could present their proposal as an even lower cap on improvements, down even to zero, with an equivalent quasi-cap on locations, above which any surplus collected rent would automatically be rebated to residents on a per capita basis. This higher rate on land may be made even more sellable than a lower one were the PTS hitched to a reduction of taxes on income or sales, too.
The PTS is social engineering, an attempt to manipulate behavior. Yet all taxes spur a different response from taxpayers. Hence legislators offer credits, deductions, exemptions, deferments, abatements, and assess property at current use versus market value. Which is the real distortion of free choice? The present practice of privatizing publicly-generated land values or the proposed policy of sharing rent while respecting earnings?
Transition to Taxing Only Land
Starting in 1914, Pittsburgh and Scranton introduced “the graded tax.” Over a decade they phased in a higher rate on land until it was twice the rate on buildings. Doing so gradually allowed residents and businesses time to adapt, giving the PTS political acceptability. Tho’ this delayed benefits, land speculators offered little opposition since they did not face the sudden effects of the full shift. Such an approach is still prudent today.
On the other hand, the shifting the property tax can be rapid and orderly. Economies and societies do endure price shocks, such as the doubling of gas pump prices in the early 70s. Yet to avoid that resultant acrimony, the PTS could be phased in gradually. Over five years, tax rates could change 20% per year. Year One, the levy upon sites, resources, and government granted privileges (e.g., utility franchises, medical licenses, taxi medallions) would increase by 20% of uncollected annual value. All other taxes would fall by 20%, or policymakers could exempt the bottom quintile form taxes. Year Two, if all goes well, 40% of natural value would be collected while other taxes would fall 40%. Years Three and Four, the process continues. By Year Five, if all goes well, all natural value is collected while all other taxes are eliminated. If government projects a shortfall in revenue, the process could be drawn out.
Governments can rely on land rents, not on property, as a stable source of revenue thruout the business cycle. Such reliable revenue flows should give governments the confidence to alleviate hardship with various reductions, eventho’ doing so would reduce revenue. Ways to ease the transition include monthly or quarterly payments, discounts for early payments, rebates of income or sales taxes, and a cap on how fast land dues may rise. Ways to lift the burden from those unable to pay include exemptions for the elderly over a declining term, deferral until sale or bequest of property, deferral for the certified unemployed, partial exemptions for farmers at a set amount, purchase-and-demolition reimbursement, and moving cost-sharing.
A Least-Cost Strategy
The cost of shifting the property tax, with or without a land dividend, is negligible. Other than erasing or lowering the tax rate on buildings and raising the rate on locations, a mere matter of reprinting the codes, there is no cost. The assessment and billing mechanisms are already in place. Some jurisdictions will need to update their cadastre, which should be done routinely anyway.
For this policy to come to fruition (once adopted), little else is required. The main administrative issues are two: (1) maintain an up-to-date and accurate assessment of all parcels, urban and rural, and (2) increase the period of mailing land dues notices — and any land dividend — from yearly to monthly.
How long would it take for the PTS to take effect? A clue comes from Johannesburg, South Africa. That city taxes land, not buildings, and has the fastest site recycling rate in the world, a little over 20 years. That means, within a few decades of shifting the property tax, cities could be rebuilt by market-based incentives to human-scale, becoming relatively car-free. At last civilization could realize its promise to humanity.
SECTION 4: POLITICAL ISSUES — PROSPECTS & STRATEGIES
Out With the Old Failed Policy
The failed policy that the PTS would replace is the present property tax. This is actually two taxes in one, one on land and another on improvements. The tax on improvements penalizes owners for improving. This negative incentive does its greatest damage at the margin, where profit is slim. There, rather than pay a higher tax, owners let buildings dilapidate into slums. The lack of much tax on land keeps overhead on speculators affordable. This negative incentive lets owners under-utilize prime sites, even withhold them from use entirely. Kept from prime sites, development sprawls outward.
Sprawl inflates the values of suburban and rural land. Leap-frog development raises a few spikes in a land value map that soon pull up values everywhere, increasing the property tax burden of owners of previously developed sites, unless the tax is capped. The resultant sprawl also raises enormously the cost of extending infrastructure and makes auto-dependency a given.
The PTS reverses all these negative consequences. Rather than burden construction, taxing only land spares it. Rather than spread development (hooking us on cars), taxing land concentrates it (providing a market for mass transit). Rather than inflate land price, a land tax squashes it. Rather than enrich the owners of prime sites or itself, a land-taxing government could rebate some collected site rent as a dividend, perhaps in the form of a Housing Voucher, making home ownership inflation-proof.
Another failed practice is assessment. Now assessors must combine building and land values and slip into evaluating by current use which is often less than potential use. They also undervalue large lots, vacant lots, parking lots, and underused locations. Value that should have been assigned to the location they attribute to the building, a capital asset which for income tax avoidance can be rapidly depreciated, benefiting the wealthiest land owners. Thus the property tax is made regressive.
Assessing property is more laborious, infrequent, and less accurate than simply assessing land. Freed from tallying changes in improvements, assessors could calculate market values of locations from actual sales or leases. Plus, assessors can turn to modern technology. Computer aided mass appraisal (CAMA), now accepted, facilitates annual assessments of all properties. The simpler the assessment process, the fairer and more progressive the taxation.
Political Situation — Constituencies who Make PTS Viable
Since the PTS is little known and on the surface appears to cost residents, its support is in general sparse. Yet there groups who already endorse the PTS and others who, upon hearing the right message, would be likely to lend their support. Targeting such groups should be the first step in the PTS movement. Who are the potential allies?
There is an incipient groundswell within the green movement. Two new books, Tax Shift from Northwest Environmental Watch and The Natural Wealth of Nations from Worldwatch, argue for the PTS, since it encourages more rational and efficient use of sites and resources. This makes life easier for planners. Environmentally-conscious areas, such as New England, Wisconsin/Minnesota, and the Pacific Coast, could incorporate PTS into their larger growth management strategy.
As more religious groups embrace the sanctity of the Earth and the morality of sharing her worth, their openness to the PTS grows. Already, prominent authors among the green religious vanguard — John Cobb and Matthew Fox — have endorsed PTS.
Affordable housing is high on the list of urban advocates. President Bush’s Commission on Housing endorsed the PTS, as did Jack Kemp in his book, American Renaissance. Given such support from conservatives, one might expect even more from liberals yet such has not been forthcoming. Housing advocates tend to eschew a deeper analysis in favor of demanding subsidies (not an unusual strategy in the political arena). However, as government costs rise (notably for prisons and medicare), subsidies for weaker constituencies do fall. Already, housing advocates are finding themselves in need of a substitute source of funds, which a Housing Voucher could provide. An alliance between cutting-edge urban advocates and environmentalists would realize the heretofore unattainable dream of progressives of left and green unity.
People trying to revitalize mainstreet won Allentown. Since the need is widespread, so are such people everywhere around the country. In minority ghettoes, the Rust Belt, and rural areas — wherever the youth and the workforce are fleeing for better opportunity elsewhere — activists struggle to energize their local economies. The PTS would do this plus staunch the hemorrhaging of local land values to distant credit lenders. Mortgage lending rates are a subtle way of disguising rent as interest, of turning buyers into temporary yet serial tenants (since people move so often and the first five years of mortgage payment is nearly pure interest). Land dues are a way to keep locally generated social values circulating in the local community.
Laborists might appreciate the fact that renewing and infilling generates jobs in construction initially and in the new structures ultimately. Places that used a PTS to some degree — New York, New Zealand, Denmark — all upped employment.
Most parents hope their state will find stable and sufficient sources of revenue for schools. In most states, the school unions pack a hard punch in legislative forums. And tax caps are forcing them to seek an alternative to the ordinary and failed property tax.
Retirees represent a high percentage of home and condo owners. They stand to receive a tax cut after a PTS. Plus many elderly are idealistic, generous, and active in political movements.
Libertarians rival greens as the most ready to hear the PTS message. The PTS is a plank in the platform of the state parties of Virginia and of Maryland (the home state of this writer whose friends are the party activists responsible for these planks). Why? Not only is it possible to draw public revenue from public values (instead of from private ones), it is also possible to collect this rent with fees rather than with taxes. For instance, land rent, the largest type of public value, could be collected not via a land tax but via a deed fee; that is, from a higher and periodic charge for registering and defending titles to sites and resources. These two potentials of the PTS — exempting private values and eschewing taxation — win support from the more socially-conscious libertarians.
Fiscal conservatives, too, could find a feature to cheer. The PTS generally reduces the number of government assessors, arbitrators, and staff by 40 percent. Computer Aided Mass Appraisal (CAMA) also saves tax dollars.
Two other groups who have yet to fly the PTS banner but who stand to gain substantially are small businesses and service businesses (often the same). For a small business (this writer used to work in his father’s), taxes are a double levy — the tax owed and the fee for the accountant. Big companies have an easier time absorbing the costs of recording, verifying, and paying taxes. The simplification of taxation inherent in the PTS could appeal to small business people.
The other potentially supportive businesses — service providers — do not consume much in the way of resources or prime locations. Even service providers on valuable sites, were they to pay more, could still come out ahead in the better business climate of zero taxes on sales, on paid wages, on customers’ income, and of less onerous mortgage. Presently taxes and mortgages consume about 65% of the average worker’s income, drastically reducing discretionary spending.
Political Situation — Opponents who Might Switch
The vanguard group for tax shifters, the broad environmental movement, conflicts with two American values: private property (altho’ why absentee owners need privacy is unclear) and land speculation. The land tax in particular directly confronts these two values left over from the days of westward expansion. As the PTS wins adherents and looms as a threat to speculators, mortgagors, et al, the potential losers become vocal.
While the PTS may seem to pit land sellers versus land buyers, it need not. Coupled with an untaxing of homes, sales, and income, and with a Housing Voucher, the PTS could benefit both sellers and buyers. Sellers, usually of higher income, would benefit more from untaxing capital. Buyers, usually of lower income, would benefit more from a tax upon never-produced land, which would lower the price.
Despite the fact that the shift would improve their bottom line, many homeowners would worry that just the opposite would occur. It’d be an easy matter for the actual losers — developers, Realtors, banks, et al — to stoke those worries. Investors in land will, as they always have, fiercely and financially oppose the PTS every step of the way until an overwhelming majority supports the policy — as in Allentown. Hence an intensive campaign is needed to move from the cutting-edge, thru critical mass, to a majority.
It may be possible to mollify some potential opponents. Speculators and holders of underused sites, particularly in high value areas, are the most likely “losers”. Efforts to educate this sector, prior to politicizing the public, may prevent loud opposition. The lesson from Southfield, Australia, and most two-rate cities in Pennsylvania is that, post PTS, land values in urban areas increase. Although higher values mean higher taxes, they also mean a higher potential profit. The owner could put up an income-earning structure or sell out at a higher price.
Developers might learn to like the PTS, since financial loss does not necessarily follow. First, tho’ the land tax would preclude a huge profit from a few sales, it would also, by unplugging effective demand for housing, create many more sales of smaller profit. Second, instead of profiting from locational values, they could make more money — untaxed — by adding value, such as total weatherization, heat pumps, light tubes, built-in wiring for the cyber-house, etc. Third, to buy land, developers would not need to go so deeply into debt. Fourth, by building on central sites, they could drastically reduce their systems development charges, which, were they pegged to full costs, would be up to $30,000 in Oregon. For these four reasons, developers could break even.
Realtors, too, may remain on the sidelines. Tho’ housing prices will decline, more owners will afford the cost of entry. The volume of home sales climbs after the PTS.
Convincing those already benefiting by unjust rules won’t be easy. Down Under, wealthy corporations threaten the traditional land tax. Australian writer Julie Smith warned that:“Public appropriation of development rights, the major element in the value of land, is politically difficult. Since urban land is so valuable, and particular locations command semimonopolistic prices, public efforts to capture full land rental values are compromised by corruption and favoritism. The influence and capabilities of democratic political institutions … are crumbling under the force of vested corporate interests and the increasing integration of the world economy. Modern governments cannot cope effectively with the problems our society confronts because governments are unresponsive to the needs of disadvantaged groups, yet responsive to demands by strong private interests which they helped entrench; political parties are powerless to resist pluralist and corporatist influences; distinctive public interests are not articulated or are applied by ineffective or irresponsible bureaucracies beholden to powerful interests.” These same potent interests are likely to line up against PTS in America, too.
While beneficiaries have a hard time envisioning their gains, losers have an easy time calculating their losses. The big loser is not homeowners; while losing equity, they keep all earnings untaxed. Nor is it realtors, while losing their few big sales, they gain many smaller ones. Nor is it developers; while paying higher infrastructure fees, they’d pay less for prime land. No, the big losers would be banks who’d have to readjust to pre-World War II levels of lending rates. As they probably won’t want to give up their unearned income, advocates of PTS will need to use moral arguments (as in the struggle against slavery) to gain public support and use practical arguments to pry realtors, developers, service businesses, and small businesses aside, thereby isolating lenders.
Future Prospects — Windows of Opportunity
As the ancient Chinese character has it, crisis is danger plus opportunity. As civilizations draw ever closer to a new two-class society on a battered planet, the windows of opportunity for the PTS are not closing but opening wider. Our worsening environment, especially traffic and sprawl, is pushing more people toward environmental reforms (polls say). As a green reform, the PTS can stand on both ethical and practical grounds, winning support from both sides of the aisle. Skyrocketing housing costs, too, worry many, yet the problem yields to the PTS (history shows).
Population slosh — the sprawl of suburbs and the desertion of downtowns and small towns — is a problem topping recent opinion polls. The material motive to relocate (and to a degree to reproduce), to have more income, things, and security, loses steam under a geonomic regime. Collecting and disbursing natural rent across an entire jurisdiction lets residents live where they love, love where they live.
Youth crime and alienation, detritus in the wake of dead communities, are more attention-grabbing problems. Both are ameliorated by widespread and secure home ownership and more free time for working parents, two essentials for functional families and functional communities. A Housing Voucher offers hope along both these lines. Even without the voucher, the land taxing city of Pittsburgh enjoys by far the lowest crime rate of any major US city.
Rising government costs with deteriorating government services is another growing problem claiming our attention. On this issue, tax shifters can make common cause with those striving to cut bureaucratic overhead and corporate welfare (as is done by FOE on the national level in Washington, DC). As people feel overwhelmed by so many seemingly divergent problems, they seek an analysis — and prognosis — that ties these issues together and applies to them one of Thoreau’s chop at the root — a role made for the PTS.
With these general windows of opportunity are specific ones: the many and ongoing conferences on environmental, economic, and social issues, the many and ongoing meetings of groups seeking speakers (e.g., Lions), the public hearings, radio and TV talk shows, the newsletters of organizations, etc.
Which Strategy Wins the Masses?
In the past, the land tax was able to win support from various constituencies. Today, the PTS could appeal to those same segments of the population plus to the bell-weather environmental movement. Initially, proponents could target the issue-oriented people already most sympathetic, then move to groups about ready to show support, then scatter seed amid the public at large. Thus, begin with environmentalists, including planners, then downtown revitalizers (as in Pennsylvania), housing advocates next, then libertarians, moving on to small and service businesses, wrapping up with working mothers and (other) single parents who are the first to feel the pangs from our worsening time famine. Ultimately, proponents would use mass media to reach the general public.
A new proposal that reaches critical mass — a solid base of support among activists, sympathy for the concept among the broader public, and favorable press coverage — can win as a politician-led bill (like most legislation). The task becomes finding the legislative leadership. A more advanced proposal that enjoys majority backing in opinion polls could also win via an initiative, a lobbying effort, or as a key campaign issue. The task is to organize a political campaign.
The former strategy — enrolling a politician — is easier, yet may not be open to PTS advocates, and not from a lack of elected supporters. Because active constituencies push the PTS, and bottom line, the vast majority come out ahead, the movement already has some elected officials in Washington, DC, and in several states. Yet by themselves it’s unlikely these statesmen could overcome opposition from entrenched interests now hogging most rents. To counteract opponents, proponents must rally the public, which could mean an initiative campaign. The workload of such a campaign can be lightened in some states which let the legislature avoid voting the policy up or down and instead put it on the ballot.
Top Priority — Engaging Semantics
While the PTS is already gaining attention, there are issues which, were they addressed, would facilitate the spread of the idea. One issue is external to the movement, lying in the broader society. People consider land speculation, reaping megaprofits from fast-developing areas, as something normal. Most people fail to realize that there is a commonwealth of socially-generated economic values apart from values individually-generated. Understanding who creates land value is crucial to the success of the PTS. While this may not be an issue that lends itself easily to a mass educating campaign, some effort to raise public awareness of its own assets must be made. In doing so, advocates would learn how best to present the distinction between what’s ours and what’s not.
The other issue that needs to be tended to early on is internal to the movement. That is, the terms that package the policy often push the wrong buttons, such as “land tax”. Because the land tax works and works well, it is tempting to use the phrase. For instance, high-taxed, low-priced land would shrink the debt now weighing down the economy. Growing debts — both public and private — continually and worseningly harry workers and taxpayers. Yet many people will never follow the explanation far enough if the policy is presented as a land tax. Coupling collection of land rent with a reduction of taxes on labor and capital, especially homes, might be more persuasive. Calling this policy a “Property Tax Shift” might let proponents get a foot in the mental door.
Were people to struggle and win the PTS, the gain for each member of the disorganized majority would be minimal while the loss for the defensive elite would be great. The policy would be more of an issue for its opponents than for its intended beneficiaries. To sweeten the pot beyond cutting taxes, geonomic policy could include a rebate of rent as some sort of land dividend. A winning description for the dividend might be “Housing Voucher”. For an overwhelming majority, their land dividend would be greater than their land dues. Not only would they be comfortable paying money to government, they’d encourage others to. Imagine tax compliance becoming a new virtue, increasing public trust in government.
Leading with the land dividend and following with the land dues (instead of vice versa) may counter our short attention span. The case for the PTS alone demands a bit more attention than voters, accustomed to sound bytes, may be willing to give. Given our pressing time famine, the offer of a dividend, of money in the pocket, may pique the interest of voters concerned with the loss of leisure, family life, and community cohesion.
Unavoidable Showdown — Resolving Fear of Loss
In the final analysis, can those who would redefine progress and other social reformers avoid the issue of what to do with the immensity of Earth’s worth? No. The present policy of low land taxes and the movement to abolish all taxes on landed property assume that Earth is ours for the exploiting. It is a mindset that must be contradicted and laid to rest — as was the justification for slavery — if environmental and planetary values are ever to ascend to the same level as property rights. The profit from speculation or over-extraction withers away when land dues are put in place.
The old notion of not just owning but belonging to Earth needs resurrecting if all that needs doing is to be done. Envision the tasks before us: recycling 100%, de-automobilizing society, plugging the leaks in local economies, putting nature in cities and cities in nature, growing food without chemicals, heavy equipment, possibly even without the plow (if permaculturists are correct), converting from fossil fuels and the “oiligarchy” to renewable energy and grassroots democracy. A big problem needs a big solution which in turn needs a matching shift of our prevailing paradigm. Geonomics — advocating that we share the social value of sites and natural resources and untax earnings — does just that.
SECTION 5: RP’S ROLE AND FIT
Missions Overlap — Alignment with RP’s Purpose
Redefining Progress pursues a balance of three basic goals: an economy that works, the environment in good health, and social equity for all. All three of these objectives are brought closer by reforming the flow of public revenue. Hence RP works to raise public awareness of the tax shift option.
Cutting-edge environmental activists urge taxing bads like pesticides and untaxing goods like income. The logic behind the proposal is so transparent, it almost argues itself. Yet of the various green tax shifts, the one that gives “greens” the biggest bang for their buck is the one that is also the least known and, were it known, the most contentious. RP exists in part to present powerful new ideas, such as the Property Tax Shift, in disarming, assimilable ways. Hence this scoping paper.
What makes the PTS so revolutionary in more ways than one? Follow this Confucian chain. To cut pollution, cut thru-put. To cut thru-put, cut demand. To cut demand, use land most efficiently, reducing travel distances. To spur efficient land use, charge for holding land. Now head back to this logical chain’s beginning. Having to pay dues, owners then put sites to best use, compacting downs, conserving resources, thereby cutting thru-put and byproducts such as pollution.
Sprawl keeps us addicted to cars, the worst of polluters. The gratis profit attached to land makes development too rewarding, makes local politics too difficult. Hence efficient land use is the most powerful environmental reform, and the property tax shift the most crucial of the green tax shifts. By spurring development, it puts the economy into action. By drawing development to appropriate locations, it sustains the ecosystem. By adding affordable housing, while perhaps paying a land dividend, it extends equity.
It is amazing that one shift could do so much. Yet it does more that’s right up RP’s alley. It accomplishes efficiency not via mandates but via true-cost price signals. Leaving publicly-generated rents in private pockets rewards speculation, inflating the price of land. Putting public rents in the public treasury merely charges owners for the social infrastructure that serves their parcel. As the PTS improves everyone’s lot, people can appreciate land as the source of both life and wealth.
Advancing Previous RP Work
It is surprising that RP’s book, Tax Waste, Not Work, did not address taxing wasteful use of land. However much taxing bads reduces pollution and depletion, a significant amount must remain as long as land is used wastefully. Extending the green tax shift to the property tax, so that sites bear a higher levy and buildings are exempted, would penalize sprawl and concentrate development. As compact urban form conserves resources, it also reduces the “upstream” depletion and the “downstream” pollution.
Resource Incentive Program Match and Scope
Just as prices in general leave out the replacement costs of resources such as water, air, forests, and soil, so does the property tax in particular undervalue, indeed misvalue, land. By missing much rent, a low-rate property tax inflates price and under-charges for social services. It also rewards speculative withholding in already developed areas, causing leap-frog development into resource lands. Charging for these costs (via a higher rate for holding land) would tend to preclude them.
Our society considers ground water to be part of the commons. Ground rent, via a land dividend, could likewise become part of the commons. Receiving a share of site rent should inspire recipients to protect sites and resources, the source of this added income.
While wasting resources is endemic, wasting sites might be even more so. Unsustainable land use plagues every area in the US, making the geographic breadth of the PTS undertaking vast. Since land use policies are primarily made by the numerous states and localities, the scope of opportunity is almost unbounded.
Although much data on the PTS are available, more is needed. People want to know the effects on their area. Their curiosity offers advocates an opportunity to become respected authorities who can be counted on to provide credible, repeatable information. A PTS Program should conduct studies to answer these frequently asked questions:
1. Bottom line, who are the winners and losers? A colleague found out for King and Clark Counties, Washington. His work revealed the shifts in tax burden under various ratios of land-to-building rates by percentage and economic sector. In Oregon, we plan to find out for Salem (120k pop.), since government leaders would likely see the results; for Portland, the largest city and the bulk of the state’s voters; for a city such as Coos Bay (20k), where fishing and logging have declined; for a city such as Medford (80k) or Bend (50k), where growth has ballooned, causing air quality problems.
2. How much ground rent is available? For either social services or general rebates or both?
3. Is ownership of land value concentrated? More so than other wealth? It’s hard to unveil the largest landowners who own land under different names or corporations, or together with partners and family members. Best guesses tend to underestimate the concentration. One study of a Pennsylvania town of 15,000 found that 1.5 percent of landowners owned 53 percent of the land value. Under a land tax, they would pay 53 percent of the revenue.
4. How much of the central business district (CBD) is owned by absentees? One argument for a hotel tax is that it taxes out-of-state visitors who don’t vote (locally). Yet in North Carolina, for example, nine of the ten largest private landowners are headquartered out-of-state. In Los Angeles, more than half of the CBD is owned abroad. In all of LA, an even greater amount of land is held by absentee Americans due to chain stores owning land there but being based elsewhere. Easy political targets for PTS?
5. Will the PTS profit CBD redevelopers? Will it attract investment, jobs? Select ten un- or under-developed sites, have a realtor identify their most profitable use, then compare what the most profitable development would pay under a same rate property tax versus under a land value tax.
6. Has the PTS promoted new construction? Compare the number and value of building permits issued for three years before a town’s switch to three years after. Over the years, some 400 such case studies have been conducted worldwide. To date, not one has shown a decline in new construction.
7. Has the PTS put vacant and underutilized sites to better use? Compare the number and acreage of vacant sites in three years prior to the shift to three years after the shift. Similarly, the change in money value of vacant site development can be documented. Comparing this result to neighboring and similar-sized cities would give further importance to the numbers.
8. Has the PTS over developed pristine areas? Or did it recycle sites?
9. Has the PTS increased density? Has it meant more riders for mass transit? Has it meant lower energy bills for people living in contiguous apartments and condos?
10. Does the PTS generate new jobs? If so, in what sectors?
How to Popularize — Long-term Multifaceted Program
Draft a plan that would set up a domino effect, with other states copying the initial one. Screening states with a progressive criteria, list those that have a history of embracing novel reform, have voted recently to “fix” taxes, have an influential environmental movement, require a simple majority to modify taxes, have a smallish, manageable population, have one metro area that can carry the rest of the state, have a visible spokesperson for the PTS, permit citizen initiatives, and have reformed campaign financing. Gauging their legal and constitutional requisites, determine the work load, timeline, and resources necessary. The ideal states already have PTS efforts underway. Target a state.
Some promising possibilities are: New Hampshire, New Jersey, Wisconsin, Minnesota, Oregon, and Washington. New Hampshire already has no tax but the property tax and is holding hearings to convert that into either a two-rate or a land tax, as is New Jersey (which also has many other taxes, too). Wisconsin has in the past entertained PTS bills and is the home of the progressive college town, Madison, and the Land Tenure Center. Minnesota has already addressed a CO2 tax and is familiar with the notion of shifting taxes onto things we don’t want. Washington is the home of NW Environment Watch and the King and Clark Counties PTS studies. Oregon constantly reconsiders and reforms its taxes, focusing on its property tax.
Conduct focus groups to determine the best wording. Identify potential supporters and opposers by calculating who’ll pay more, who less. Since the vast majority receive a tax cut, the number of backers — both contributors and volunteers — could be legion. What can’t be done with a high financed campaign must be made up with thousands of volunteers. To measure early support, conduct a poll of 75 male and 75 female Democrats, Republicans, and independents (450 total). Release results, making headlines.
Lobby elected officials, support their campaigns, making them ambassadors of the PTS, and field candidates for legislative office. And/or collect signatures for an initiative drive. If the option of taxing land higher than improvements were given due attention in this legislative arena, the legislature may even be moved to refer a constitutional amendment to the ballot; this may require two or more sessions of discussion and evaluation, however.
As states shift their property tax, the federal government, heeding our urging, might follow suit. Leaving land value to localities, the federal government could collect rent from subsurface resources, from supra-surface resources (broadcast spectrum, as Peter Barnes, Working Assets founder urges), from cross-border polluters, and employ tariffs as a sort of downstream foreign rent collector. Ultimately, the federal constitution could be amended to require states to collect rent before taxing private values, thus bringing any remaining recalcitrant states into line.
Work Load and RP’s Role
A PTS campaign requires much research, both academic and activist, such as impact studies, rent totals, focus groups, and opinion polls. Any or all of these could be an RP “strategic initiative.”
Few enviros, tax shift proponents, even many academics are versed in Pennsylvania’s experiences with property tax shifts. RP could help thoroughly review the results from Pennsylvania’s post-PTS cities and published the findings as a new book, Property Tax Shift, similar to Tax Waste, Not Work. Such a policy document might also include data from abroad and present the various methods for alleviating hardship cases.
Winning a PTS in one state might cost between $249,000 to $738,000. Five impact studies alone would require from $10,000 to $15,000, depending on the size of the cities and the quality of the assessment data. To publish a small book, budget another $25-35,000 for four months of research and writing by two co-authors (without printing and distribution costs, since a desired print run is not known).
Authors’ Potential Role
The Geonomy Society has experience in research and education in the special niche of shifting property taxes towards land. This growing organization works with both academics and activists. We know the people who can assist us with matters we haven’t encountered. We’d be happy to share our bag of tricks with you. Together we could:
- plan conferences for mobilizing support of the PTS reform;
- consult with organizations wishing to build campaigns for passing PTS legislation;
- provide expert testimony at PTS hearings and presentations;
- design and conduct impact studies for medium to large cities;
- help research and write a small book like Property Tax Shift;
- develop a 30 minute video for presenting to groups’ meetings and at conferences that could both augment and substitute for a verbal presentation; and
- assist RP on writing proposals, visiting foundations, and securing funding.
We are adding interns and staff as we expand our activities and funding base. While we are most versed in the politics and opportunities in the Northwest, we would be adept at applying our experience and knowledge to any state-level effort to shift the property tax. We look forward to exploring the many opening doors with RP.
SECTION 6: OTHER SUPPORT
Working on the property tax shift are three movements: the Georgists, some far-sighted “greens”, and some Jeffersonian libertarians. Each of the three descend from the philosophy of a different century. The idea of taxing land and nothing else appears regularly in a century cycle. In the 1600s, Locke, Spinoza, and William Penn advocated the idea. In the 1700s, the physiocrats did. Their ranks included Jefferson and Paine, Rousseau and Voltaire. In the 1800s, J. S. Mill and Henry George did. In this century, it has been the environmentalists.
Today’s Georgists are the remnants of a once hugely popular movement in this country which peaked about a century ago. They were inspired by the writing and public speaking of a self-taught economist, Henry George. His movement won some victories, most notably in New York and California, which were temporary, and in Pennsylvania, which continue until today.
The Georgists consist of a handful of committed individuals and a few wealthy organizations. The hardworking idealists are scattered across the globe. They are responsible for the PTSs that have taken place in recent decades in Pennsylvania, South Africa, Estonia, and elsewhere. These soloists, known personally by these co-authors, are more than willing to offer their expertise and data. Some of these activists and their nonprofit organizations receive support from the few wealthy Georgist foundations.
The least endowed of the Georgist outfits is the most activist; the most endowed is the least activist. At the active end of the spectrum is Common Ground, a membership political group. Its main activity is its Letter Lobby, which most recently helped win a legislative hearing for the PTS in New Hampshire.
At the endowment end of the spectrum is the Lincoln Foundation with its $150 million. Until recently, they ignored grassroots politics and public education and tried networking with “name” institutions and government agencies. Lately Lincoln has softened its standards, probably out of concern over a suit filed against them by Georgist activists. The Lincoln founder, as he clearly stated in his corporate charter, intended the funds to be spent on promoting the PTS which his descendants have been negligent in doing. Hence Lincoln now seems more willing to help than they have been in the past.
In the middle of the Georgist spectrum are the Henry George School and the Robert Schalkenbach Foundation. The school concentrates its resources on offering free adult ed classes at night which are attended mainly by immigrants hoping to improve their English and chances for a job. Schalkenbach concentrates on publishing books and articles and one scholarly journal by Georgist researchers.
Over the years, all four foundations have been helpful to the Geonomy Society to various degrees. The big three foundations are leery of funding any political programs, but do support educational efforts. At this stage of the PTS movement, much educational groundwork is required before a political attempt would be victorious. As our organization grows in the Northwest, and as our efforts show signs of bearing fruit, we can expect perhaps even greater support in the future.
The second strand in this rope promoting the PTS are environmentalists. Such support is a recent phenomenon that is beginning to catch on. Lately there have been endorsements from Worldwatch, Northwest Environmental Watch whose writers coined the phrase, “sprawl tax”, and the Center for a Sustainable Economy. Earlier environmental endorsements come from many.
The Schumacher Society, promoters of the minimalist philosophy of E. F. Schumacher (Small Is Beautiful), in their outreach literature write: “In his book Progress and Poverty Henry George shows how the ability to monopolize land … can create prosperity … and lead to increased poverty.” The International Society for Ecological Economics (founded by Herman Daly and Robert Costanza at the University of Maryland), in its newsletter (1995, April) ran a cover story by Josh Vincent of the Henry George Foundation titled, “No Left, No Right, Only Green and George” which asked, “Why not give it a whirl on a larger scale?”
The Ralph Nader Study Group on land ownership in California advocated a similar idea, as does Nader’s Public Citizen and Nader himself in private conversations. The Sierra Club of Maryland belongs to a coalition promoting the PTS. The national Sierra Club in 1985 rewrote its land use policy statement to include “Tax laws should be modified to … prevent low density sprawl.” The Energy Foundation, a fund of the US oiligarchy, the oil-owning families, while silent about sharing natural rent, suggested (1993 Report, pp 9, 13) half the PTS:“tax reform could build environmental damages into the price of fuels” and lift the property tax burden off alternative energy improvements.
What these groups can do is alert their members and cohorts in the selected to lend a hand. They can also include our legislative targets in their own letter lobbies. Perhaps one of their members could serve on a PTS board or committee.
Among green writers, many prominent voices endorse the PTS. While writers can not be counted on to be activists, their endorsements do help win publicity and funding.
Theologian John B. Cobb, Jr. with Herman Daly in their For The Common Good (1989), wrote (p 256, 328): “(George’s) specific proposal about taxation can be supported on the basis of a shared rejection of the idea of land as only a commodity… Whereas a higher tax on buildings encourages holding land unused or allowing buildings to deteriorate, a higher tax on land encourages efficient use of the property.” With Cobb, two more are green religious researchers. Matthew Fox, founder of creation spirituality, in A Spirituality Named Compassion (1979) said, “Henry George sees his movement as an alternative… By taxing land more than we do and in a special way, we will be able to tax work and income derived from it considerably less…” Doctor of theology John Hart, in The Spirit of the Earth (p. 144; 1984), wrote “Another possibility for a land tax … might be some development and application of the single tax idea of Henry George.”
With support from Margaret Mead, John McConnell (a friend of a friend) founded the first Earth Day on the vernal equinox (proclaimed by the City of San Francisco in 1970 and UN Secretary General U Thant in 1971). Since 1980 he has pushed his Earth Bounty Program. “Those who own land, oil, gold, or other minerals should pay a 2% royalty to a fund that will provide the homeless a stake in their planet. Afterwards, distribute royalties equally to shareholders worldwide.”
Kirkpatrick Sale, New York Greens founder and a NATION columnist, in his Human Scale (p 385, 1980): “The Georgist principles provide a way for a community to secure its financial interest in a rational economy of usufruct.” Jonathan Porritt in his Seeing Green (1984, p 181): “the Liberals have given up trying to get across the ideas of Henry George. And that’s a pity … the only way to break the monopoly of landownership (is) some form of land tax.”
Robert Gilman in his magazine IN CONTEXT (1984 winter; the publication is now called Yes!) wrote, “George claimed that his land tax would be sufficient to pay for all the costs of government. (Yet) the benefits from government programs are generally unevenly spread. (So instead) distribute (rent) directly to people as a Common Heritage Dividend (about $4,000 per person per year in the US).” Ernest Callenbach, author of Ecotopia, in private correspondence (1988): “If I’d heard of Georgism before publishing (his classic), I would have incorporated Georgist tax policies into its economic system.” Paul Ekins with Mayer Hillman and Robert Hutchinson in The Gaia Atlas of Green Economics (1992) (introduction by Dr. Manfred Max-Neef of Chile who also proposes the new term, geonomics) on page 151 say, “taxes need to be shifted away from labor and on to the use of resources and the environment. One such tax, first proposed by the American reformer Henry George … is land value taxation.”
Molly Ivins wrote (1995 March), “Henry George must be in his grave spinnin’ like a cyclotron. We, the people at large, make the land more desirable; and then the landowners want us to pay them because we won’t allow them to poison the air or to pollute the rivers.” James Howard Kunstler, former Rolling Stone editor and contributor to NYT Magazine, in his Home From Nowhere (1996, p 206), wrote, “Reform of our property tax … along the lines advocated by Henry George is a straightforward means for restoring the economic health of our ailing towns and cities — no smoke, no mirrors, no voodoo.”
Beyond American borders, there are several key supporters. Ex-British cabinet economist James Robertson of TOES in his Future Wealth (pp 105-6; 1989) wrote, “Tax the site-value of all land in its unimproved state. This tax was first proposed by the 19th century American economist Henry George. We should envisage the eventual removal of all taxes on incomes and value added, savings and financial capital. Taxes will take the form of rents and charges reasonably paid in exchange either for the use of resources that would otherwise be available for other people, or for damage caused to other people.” In his 1994 essay, “Benefits & Taxes”, he argues the feasibility of a basic income in lieu of other entitlements (“enticements” is more like it).
Several Green Parties have endorsed the taxation of land values, including those of Finland and Scotland (and of Marin County, California in the 1992 GREEN VOTER GUIDE, p 10; the Cal GP did, too, until it grew leftward). The Brits’ Manifest for a Sustainable Society (1988) states, “Without this (tax on land), the economic pressures of the present land system (including land speculation) will defeat all attempts to remedy ecological and allied problems.“ The British Green Party’s platform (1986) claims, “Rent should never have been allowed to fall into private hands… it should now go back to everybody: it should reduce the burden on effort-based taxes in financing social services and the Basic Income Scheme.” The Irish Green Party’s Manifesto (1989) states, “The land tax, used together with energy and other (‘sin’) taxes (and user fees) as a source of funding of guaranteed basic income, is a means of ensuring that everyone shares in the wealth of the land by virtue of citizenship.“
The rock group Midnight Oil, whose lead singer Peter Garret ran for the Australian Senate as the nominee of their green party, the anti-nuclear party, had a popular hit about paying rent. This group had helped anti-nuclear groups fundraise; maybe they’d be helpful in pulling together a benefit concert for the property tax shift.
Libertarians and Friends
The third leg of this stool supporting the PTS are some libertarians. The shift is in the planks of the Libertarian Party Chapters of Pittsburgh, Virginia, and Maryland. The Maryland members helped lobby the City of Baltimore and the state legislature when a bill was on the floor. In Portland, the local chair had us give a presentation to their group. The Heartland Institute in Chicago proposes the property tax shift in its Policy Faxes sent to legislators. An alliance with libertarians helps open many doors with small businesses.
Conservative commentator William F. Buckley endorses the Georgist shift. Nobel laureate Milton Friedman does, too. Anthony Downs of the Brookings Institute had an op-ed in theWashington Post (’96 Oct 6) advocating the shift. Republican Jack Kemp in his American Renaissance wrote (p 96) “Property taxes could profitably be revised to fall more heavily on land, rather than, as at present, penalizing property improvements.” Former President Bush’s Commission on Housing Affordability came to the same conclusion, as did decades ago Michigan Governor George Romney.
Given sufficient support, PTS advocates can weave all these strands into a concerted movement that will eventually, if not sooner, lead to sharing Earth’s worth in lieu of taxing our efforts.
Advocating the PTS in a state whose constitution would need amending (to either mandate a statewide shift or allow cities and counties to shift) might follow this timeline: Phase 1: Months 1 — 12
- Core advocates form coalition/organization and begin impact studies.
- Invite likely allies — growth management, transit, housing, and environmental groups — to help brainstorm a packaging and a strategy.
- Hold a statewide conference on the PTS.
- Secure funding for several impact studies and complete them.
Phase II: Months 6 — 12
- Pass a bill to study stability and sufficiency of rent under various rates and economic scenarios; report results to the legislature, as did Oregon’s Tax Shift Commission.
- Plan and conduct focus groups to mould packages for the PTS.
- Recruit support from likely winners.
- Plan and conduct a statewide poll of voters to measure early support.
Phase III: Months 12 — 18
- Address the concerns of opponents immediately.
- Draft a constitutional amendment.
- If legislators failed to act, file an initiative.
- Amass data, testimonies, and anecdotes from places that tax land or use two-rates.
Phase IV: Months 18 — 24
- Continue fund-raising and coalition building and begin signature gathering.
- Mobilize volunteers to write editors, leaflet door-to-door, phone banking, etc.
- Appeal to intended beneficiaries.
Phase V: For the next few years, if the version passed is local option, then:
- Target municipalities where the PTS impact studies have been conducted.
- Contact those sectors that stand to pay less under the land-weighted system.
- Build a coalition of support that will mobilize to lobby city council.
- Introduce an ordinance through a council member to shift to the tax rate landward.
- If the council vetoes the PTS, initiate a local ballot measure.
APPENDIX B — Budget
I: Mos. 1 — 12
- the PTS impact studies @ $2,500 avg. ea.
- Admin. costs (alliance bldg., travel, office, etc.) @ $500/mo.
- for 2 @ $1k ea./mo
II: 6-12 mos.
- lobbying @ 5 mos. (travel, phone, office) @ $1k/mo.
- Statewide poll of 1,000 voters (professional)
- Coalition building @500/mo
- Optional: Wages for 2 @$1k ea./mo
With wages 25-40,000
III: 12-24 mos.
- Draft, file initiative, collect signatures 12-18 mos.@ $2k/mo
- Admin./research @500/mo
- Optional: Wages for 2 @$1k ea./mo
With wages 54-108,000
IV: 4-6 mos.
- Campaign flyers, mailings, radio ads
- Admin. @ $1000/mo
- Optional: Wages for 2 @1k ea./mo
With wages 112-518,000
V: Assume 2 cities require organized effort; others to follow on own
- Admin. @500/mo. for 12 mos
- Optional: Wages for 2 @1k ea. for 12 mos
With wages 30,000
APPENDIX C: Bibliography
- The American Journal of Economics and Sociology, GENOVESE, Frank C., Ph.D., Editor-in-chief. Pub-lished quarterly under grants from the Francis Neilson Fund and the Robert Schalkenbach Founda-tion. Scholars examine the ideas of Henry George.
- American Renaissance. KEMP, Jack.
- Corruption of Economics. GAFFNEY, Mason & HARRISON, Fred. (1995) Available in the US from Schalkenbach in New York. Missing link: fact-filled history of mainstream economists twisting their science to beat back fair land tenure.
- Economy of Nature. ASHWORTH, William (Oregonian, author of Late Great Lakes). (1995) Houghton Miflin. After openly showing organic nature of economies, shyly concludes with replacing taxes and subsidies with fees and shares. 333.7
- For the Common Good. COBB, John and DALY, Herman. (1989) Altho’ wanders off a bit from organic approach, offering some statist interventions, it does include taxing land (thanks to Redefining Prog-ress’ own Cliff Cobb). 330.1
- Future Wealth. ROBERTSON, James (ex-economist for the British Cabinet, now of TOES, The Other Economic Summit). (1990) Sound analysis and conclusion — tax land use and abuse and pay out shares.
- The Gaia Atlas of Green Economics. EKINS, Paul w/Mayer Hillman, Robert Hutchinson; forward by Dr. Manfred Max-Neef, using “geonomics”. (1992) Cites George and need to tax rent. 363.7057
- Home From Nowhere. KUNSTLER, James Howard (acclaimed critic of architecture and urban design). (1996) Another, a la Frank Lloyd Wright, to see the sense in taxing location, not improvement.
- Human Scale. SALE, Kirk. (1980) Bioregional vision citing Henry George’s call to collect and share the rent from Earth as a crucial component. 306.3163
- Liberating the Early American Dream. ANDERSON, Alfred (Oregonian; one of few WW II pacifists). (1985) Transaction Books. Most holistic; least restrained in prescribing what’s needed: share earth’s worth, secure our earnings.
- The Losses of Nations: Deadweight Politics vs Public Rent Dividends. HARRISON, Fred, Editor. (1998) Othila Press, London. Shows the collateral damage of most taxes but one, the property tax, which may not be so regressive as thought as it stimulates the generation of income.
- Natural Wealth of Nations: Harnessing the Market for the Environment. ROODMAN, David Malin. (1998) The Worldwatch Environmental Alert Series. W. W. Norton, New York. Suggests capturing the windfall rent jumps in settled areas.
- Nature, Technology, and Society: Roots of the Current Environmental Crisis. FERKISS, Victor. (1993) Cites Henry George’s solution among many others.
- Politics of Land: Ralph Nader’s Study Group Report on Land Use in California. FELLMETH, Robert C., Project Director. (1973) Grossman Publishers. Explains how well-intended laws to curb sprawl backfire and enrich speculators. Suggests getting the rent.
- Power In the Land. HARRISON, Fred. (1983) Lacks environmental slant but great explanation of what Bionomics leaves out — untaxing effort and collecting Earth’s worth is key.
- Progress and Poverty. GEORGE, Henry. (1879) Available from Schalkenbach. Classic. Sold more copies in English than Das Kapital or any other book on economics. Explains why and how the sin-gle-tax on land is needed. 330
- Seeing Green. PORRITT, Jonathan. (1984) Founder of UK Friends Of the Earth and UK Green Party. States need for land tax. 363.7
- A Spirituality Named Compassion. FOX, Matthew. (1979) Cites H. George and need to restructure owning and by using the taxing system.
- Tax Shift. DURNING, Alan Thein & BAUMAN, Yoram. Northwest Environment Watch (spun-off from Worldwatch) Report No. 7 (1998, April). First green book to stress total tax reform, even locally — untax buildings and tax locations.
- The $30,000 Solution SCHULTZ, Robert. (1996) A detailed plan for a Citizens Dividend. Was unclear if the $30 k was for an individual or a family of four. Either way, I’ll take it.
APPENDIX D: Contact Groups
Following are ways to contact the groups noted above:
- Center for the Study of Economics, Josh Vincent, Director, 2000 Century Plaza, Suite 238, Columbia, MD 21044; 410/740-1177
- Center for a Sustainable Economy, Scott J. Anders, State Projects Coordinator, 1731 Connecticut Ave NW, Ste 500, Washington DC 20009; 202/234-9665; fax 202/588-1297; email@example.com
- Common Ground — USA, Nadine Stoner, President, 1118 Central Av, Beloit, WI 53511; 608/362-7873
- The Energy Foundation, 75 Federal St, San Francisco, CA 94107
- Henry George School, Oscar Johannsen, President, 121 E. 30th St, New York, NY 10016; 212/889-8020; fax 212/889-8953
- The International Society for Ecological Economics, founded by Herman Daly and Director Robert Costanza, University of Maryland at Solomon’s Island, MD, 20688
- Lincoln Foundation, Vice President Kathryn Lincoln, 1741 E. Morten Av, Phoenix, AZ 85020; 602/944-7400; fax 602/944-8930
- Northwest Environmental Watch, alan Thein Durnnig, Exec. Dir., 1402 Third Av, Ste 1127, Seattle, WA 98101-2118; 206/447-1880; fax 447-2270; firstname.lastname@example.org
- Robert Schalkenbach Foundation; Ted Gwartney, Exec. Dir., 149 Madison Av, #601, New York, NY 10016-6713; 212/683-6424; fax 683-6454.
- The Schumacher Society, Bob Swan, President, Box 76, RD 3, Great Barrington, MA 01230; 413/538-1737
- Sierra Club, Appalachia Chapter, John Baer, contact, 10 Laney Av, Annapolis, MD 21401.
- Worldwatch Institute, Lester Brown, President, 1776 Massachusetts Av, NW, Wash-ington, DC 20036; 800/555-2028; 202/296-7365.
Jeffery J. Smith is President of the Geonomy Society. For more Geonomy Society information, go to http://www.progress.org/geonomy
- What is a Citizens Dividend?
- Where a Tax Reform has Worked
- Property Tax Shift Highlights
- Recent Articles
- The Original Geonomist Quarterly
- Likeable Links
- Property Tax Shifts
- The Definitive Report on the Property Tax Shift -
A Landmark Paper
- How Communities Leak Economic Value
Property Tax Shift Study for Salem, Oregon:
(PDF file, 69K)
(PDF file, 1.5MB)
(PDF file, 537K)