Al Smith’s 1920 tax reform law and its aftermath
|February 12, 2002||Posted by Staff under Progress Report, The Progress Report|
The Resurrection of New York City after 1920
Al Smith’s 1920 tax reform law and its aftermath
Mason Gaffney, 8 January 2001
This paper is for urbanists, and others interested in the growth and health of cities and their peoples: economists, land planners, traffic planners, valuers, lenders, homeseekers, welfare workers, jobseekers, city officials, epidemiologists, conscientious citizens of all kinds. Its particular focus is on urban tax policies and their effects on land use and population.
The prime specific purpose here is to show the aftermath of NYC’s 1920 law exempting new housing construction (but not the land values) from the property tax, until the end of 1931. The finding is that NYC population did grow much faster, percentagewise, than that of comparison cities, from 1920 to 1930, and for a while thereafter. See Tables I and II for city population data, 1890-1998. Data in Table I then point us to some other cities with decades of fast growth, which we examine.
NYC had been losing ground just before 1920. After 1930, NYC continued to grow. It grew slower then than before, but it was the Great Depression, when most comparison cities stopped dead, and began to waste away. NYC not only held its #1 population ranking among U.S. cities, it grew faster, even in percentage terms. This finding tends:
- a, to refute the “convergence” thesis, which would have all cities becoming more alike, regardless of public policies;
b, to refute the thesis of “regression towards the mean,” which would have the top city of one decade or generation be subject in the next generation to being replaced at the top;
c, to support a thesis that the 1920 law (associated with New York State Gov. Al Smith) had the intended effect of reanimating NYC at a time when it would otherwise have stagnated and begun to rot like other older eastern cities;
d, to support a thesis that cities and states, through their public policies, can control their own destinies.
A cognate finding arises a posteriori from the population data themselves. It is that a few other comparison cities also had impressive growth spurts. Many of these occurred during periods when they applied Henry-George-like policies similar to (but not identical with) the Al Smith Law in NYC. These cities and periods are Cleveland, 1900-20, under Mayors Tom Johnson and Newton Baker; Detroit, 1890-1940, initially under Mayor, later Governor Hazen S. Pingree; Toledo, 1890-1920, under Mayors Samuel Jones and Brand Whitlock; and Milwaukee, under Mayor Daniel Hoan, 1916-36. Chicago, 1890-1900, is another possible instance, but I omit it because it is complicated by annexations in 1889 that tripled the City’s area (Hoyt, p.153). Columbus’ growth, too, is complicated by mergers and annexations. I have limited the data to cities in the rectangle north and east of Kansas City, so many, many important stories remain untold here, of Houston, Vancouver, Portland, Seattle, San Francisco, Los Angeles, California’s farm towns, et al. – the whole Pacific Coast and most of western Canada were infected with George-like single-tax fever during their fastest growth period.
The original stimulus for this study is a pamphlet by Charles Johnson Post, titled How New York Solved its Housing Crisis. Post gives data on per capita spending on new buildings in NYC and four comparison cities for the years 1910 to 1929. These data show that NYC suddenly recovered from stagnation in 1920, and outstripped the other cities: Philadelphia, Boston, Minneapolis, and, to a lesser extent, Chicago. Post credits the housing tax holiday, enacted in 1920, for this recovery. Post’s findings cry out for substantiation because what he asserts is momentous, while what he writes is casual.
Post gives no sources for his data, which stop after 1929. His evangelizing style makes a reader uneasy. Edward Polak (1924), Register of Deeds for Bronx County, published a brief chapter on the years from 1921 through 1923, giving data consistent with Post’s, showing a startling 7-fold increase in construction outlays compared with the previous three years, 1918-20. Geiger (1933, p.438) deals with it only cursorily, yet he concludes, without his characteristic caveats, “There is little doubt that the tremendous building boom in the years immediately following 1920 was a direct result of that exemption.” Geiger, though, provides no data or other support, and does not even cite Polak.
Literature on this episode is disappointingly sparse. So I will tentatively accept Post’s data, subject to confirmation. I assume his data came from city sources. (U.S. Census data on construction and housing do not go back that far.) The population changes documented herein track Post’s construction data quite well, adding to his credibility.
Post describes the enabling law (NY State Laws of 1920, ch. 949, section 4-B, and later amendments) rather too offhandedly. Apparently the new construction, to qualify, had to be ready for occupancy by April 1, 1927; and the exemption lasted through Dec. 31, 1931. However, Post writes loosely, and there were later changes, with possible extensions, and who knows what administrative latitude. Polak, in 1924, described the law a little differently – and perhaps it was different, then. Geiger (1933, p.438, n.137) refers to a cap of $1,000 per room, and $5,000 per house or apartment building, later raised to $15,000; and in 1927 a new 20-year exemption for dwellings built by “limited dividend companies under the State housing law.”
The law had a political history, that relates it to the Georgist episodes in Cleveland, Detroit, Toledo, and Milwaukee. In 1920 Gov. Al Smith called a special session of the NY State Legislature to address a “housing crisis” in NYC (Polak, 1924). This law was the outcome, so we will call it “The Al Smith Law.” Smith, like all political leaders, had to be pushed, but before Smith was Governor, Albany had blocked several single-tax bills, 1909-16, so it is plausible to credit Smith’s leadership. Earlier, as majority leader of the Assembly, he had blocked a 1911 effort (the Sullivan-Shortt Bill) along similar lines, influenced by the Roman Catholic hierarchy and the New York Real Estate Board (Marsh, 1911, 1953). He changed his mind by 1920. We may surmise that his success in reviving NYC helped boost him to the Democratic nomination for U.S. President in 1928; it may be that ambition that turned him around.
Both efforts (1911 and 1920) were pushed by the single-tax clubs of NYC, the enduring legacy of Henry George’s runs for Mayor of NYC in 1886 and 1897. After George’s campaigns, “New York has been, more than any other city, a center of sustained single tax activity and influence” (Young, p.215). The dead man left many disciples. These several organizations and their activism are well documented in Miller (pp.19, 440-43), Young (pp.215-29, 244), Marsh (1953, pp. 17-36), Barker (pp. 521, 622-23), Post (1930, pp. 50-53), and Geiger (pp. 436-37). They left literary tracks in long reports and proceedings (Marling, 1916; Haig, 1915). “In NYC … later Georgism (i.e. after 1897) … was aggressive, and it had power” (Barker, pp.622-23). Those involved in or supporting or patronizing the movement included Gov. Charles Evans Hughes, John Moody, Senator Tim Sullivan, lender Charles O’Connor Hennessy, Jacob Riis, Lillian Wald, Frederic Leubuscher, Florence Kelley, Samuel Seabury, and Lawson Purdy – quite a roster of visible leaders, across the spectrum from social reformers to conservative lenders. Ben Marsh was ever the dedicated sparkplug and organizer; Joseph Dana Miller the recorder and journalist. In 1912, Marsh got Theodore Roosevelt to speak for a George-like tax change and he “made a rattling good speech … which got splendid publicity” (Marsh, 1953, p.30). Lillian Wald even raised contributions from Jacob Schiff, and the Warburg brothers, all of Kuhn Loeb.
In addition to the Al Smith law, Georgist activism had made NYC assessors up-value land in the tax base, and down-value improvements, by recognizing depreciation and obsolescence. The leader in this work was Lawson Purdy (Young, p.216; Geiger, p.436; Barker, pp. 582, 590, 623; Marsh, 1911, p.107). Purdy was an early militant single tax campaigner, a young associate of Henry George’s later years, who became the President of the Board of Taxes and Assessments of the City of New York. As such he published The Assessment of Real Estate. Professor R.M. Haig of Columbia University, in the Foreword, describes Purdy as “the acknowledged authority in this field.” The single-tax warrior had made it in New York society, while remaining a leader of the Manhattan Single Tax Club (Barker, p.521).
In form, Purdy’s short treatise is procedural and administrative, gray and even a bit dull, but it wastes no words. It is mostly about how to value land, and draw up and publicize maps of land values used in assessing real estate for taxes. It draws on and enriches W.A. Somers’ earlier work in Cleveland, which Mayor Tom L. Johnson sponsored and publicized. Indeed, Purdy had gone to Cleveland in 1909 to consult with Somers, to teach and to learn (Barker, p.625). Barker describes Johnson as Henry George’s “field commander” during George’s later life. Johnson also became a major power in Ohio State politics (Russell, passim). Purdy continued to be an officer in the Manhattan Single Tax Club, and a Director of the Schalkenbach Foundation: there is no doubt where he was coming from.
Purdy tells NYC assessors to value the land first, as though it were bare, and then assign any residual value to the building. “The full value of any building is (only) the sum which the presence of the building adds to the value of the land.” Even a new building, if in the wrong place, has no more than “junk value” (Purdy, p.13). Today we call that the “building-residual method” of separating land from building value. Such attitudes are straight from the single-tax movement. Thanks to them, the value of land in the NYC tax base considerably exceeded the value of buildings during the Purdy era, coinciding with period the Al Smith Law covered.
Note that NYC, in granting this tax holiday for new housing, was not “racing to the bottom” in terms of public spending. It financed one of the world’s best mass transit systems, and the nation’s best city college system, the “poor man’s Harvard” with a most impressive roster of graduates in the professions. It led the nation in high culture, in pop culture, and (for better or worse) professional athletics. NYC was not lowering taxes, but shifting them off buildings and onto land values.
For comparison with NYC, I have selected cities northeast of Kansas City, mainly with fixed boundaries. I have grouped them as follows, presenting aggregate data for each group (as well as the individual cities).
A. Other major cities in NY State: Albany, Syracuse, Rochester and Buffalo. Statewide policies would affect all these the same – but the Al Smith enabling law (although “local option” in form) was tailored for NYC only (Post, 1984, p.1). Rochester and Buffalo and, to a degree, Albany, also pick up influences from the Great Lakes economy, which influences reach NYC also.
From 1920-40, these cities grew by 13.8%, while NYC grew by 32.7%.
B. Other major cities along the mid-Atlantic coast: Boston, Providence, New Haven, Philadelphia, and Baltimore.
From 1920-40, these cities grew by 7.3%, while NYC grew by 32.7%.
C. Nearby New Jersey neighbors of NYC: Jersey City, Newark, and Paterson. (Jersey City and Newark might also be lumped with the cities in “B”, but are such close locational substitutes for NYC that separate treatment seems warranted.)
From 1920-40, these New Jersey neighbors of NYC grew by 2.8%, while NYC grew by 32.7%.
Do those facts speak for themselves? Not entirely: in the multivariate world of economics, “proofs” are always subject to doubt and open to challenge. A sequence is not always a consequence. Certainly, though, this tax holiday was a cause, with a definite effect expected a priori. The expected happened, starting immediately, somewhat as the Dow-Jones jumps when Fed Chairman Greenspan announces an interest-rate cut, but with more lasting results. Anyone questioning cause and effect here should shoulder some burden of proof.
I have also disaggregated NYC into its boroughs. Manhattan actually lost a little resident population, 1920-30: the explosive population growth was in the outer boroughs of Bronx, Brooklyn, and especially Queens. This raises the qualifying possibility that NYC had simply merged with its inner suburbs, unlike some comparison cities, which provided it with land to expand, lacking in, say, Boston or Pittsburgh. There are two reasons to doubt the weight of this qualification, however. One is that the population density of NYC was double that of any comparison city, vast although NYC is. The other is that the merger occurred about 1900, while the growth revival we are studying didn’t happen until 20 years later, after NYC appeared to be choking from lack of housing.
Tax policy did not work alone. NYC in the 1920s coordinated its tax policy with developing its mass transit system, and holding fares down, much as Cleveland had done in the Johnson-Baker era, 1900-20. If Cleveland was known for Johnson’s 3-cent fare, New York was famous for its 5-cent fare under many administrations, clear up to 1947. Tunnels under the East and Harlem Rivers linked up with existing rail lines in the outer Boroughs, fructifying them quite abruptly (Dick Netzer, letter, 30 Dec 2000). By 1930, 91% of the population lived on 40% of the land area – the land within strips served by elevateds and subways (Cornick, p.86). NYC held down fares by covering capital costs, and perhaps some operating deficits, from property taxes. (For details on New York’s transit development, see Hammack, Fitch, Chernow, Jackson, and Hood.) With many new buildings being tax-exempt, and Purdy in charge of assessments, that meant raising taxes on land values.
Milwaukee (which we focus on later) provides an object lesson in the futility of annexation alone. Milwaukee grew faster than most other cities up until about 1960, at which time it annexed all of northwest Milwaukee County and doubled its area. Yet, the City started losing population at that very time, by hollowing out. It takes more than annexing land to grow a city. Most of them already have lots of derelict land, what they need are incentives.
Data in Table I, gathered for the original purpose above, point us to other cities that grew rapidly during parts of 1890-1940. In several cases, their rapid growth was associated with George-like policies and attitudes similar to those of NYC under its “Al Smith Law,” and its Lawson Purdy assessment practices. This, of course, tends to substantiate Post’s and Geiger’s and Polak’s confident assertions of cause and effect.
1, Cleveland, 1900-20
Cleveland grew very fast, 1900-20. For most of this time it was under the administrations of single-taxers Tom L. Johnson, 1901-09, and Newton D. Baker, 1911-16. In 1906, Mayor Johnson inaugurated a very low 3¢ trolley fare, entailing possible deficits to be met by taxing real estate. In 1909, he formally put in place reformed machinery for land assessment. W.A. Somers, who had furnished his “standard unit” system of mapping land values to Johnson in 1901, was made Chief Clerk. They raised assessments from $180m to $500m, with a new emphasis on land values. For the first time there was a fair assessment in Cleveland (Russell, p.291; Bremner, Chap. 14, pp.153-64).
Tom Johnson as Mayor of Cleveland looked into property assessments, and found that assessors had been undervaluing holdings in rich neighborhoods, and overvaluing those in poor. Johnson put up large maps showing this, inviting discussion and suggestions from the public. To aid understanding he pushed “the Somers unit system” – a system later used by Purdy in NYC. A Standard Unit was one front foot, 100′ deep, with formulas to adjust for corner influence, depth influence, etc.
To win support for up-valuing land and down-valuing buildings, Johnson set up a City-sponsored Tax School in 1901. The biggest landowner in Cleveland sued to stop it, and won, but by the time it was closed, it had operated for 20 months, and prepared the public mind for a large rise of land assessments (Johnson, pp.127, 129; Bremner, pp. 129, 136, 157-58). Johnson’s parting shot upon leaving office in 1909 was to see his candidates take control of the City Board of Equalization, which had the last word on assessed valuations (Bremner, pp.162-64). There is still a statue of Tom L. Johnson in central Cleveland, holding a book with the clearly legible title, Progress and Poverty.
Johnson’s City Solicitor and ally, Newton D. Baker, won back the mayoralty in 1911, so the anti-Johnson interlude was brief. Baker implemented Johnsonian policies until President Wilson made him Secretary of War in 1916 (a recognition of the political power of the single-tax movement in that era). However, Baker left behind a large city debt, and the infrastructure it had financed, assuring that the City would still need heavy land taxes for a time. Peter Witt, a fiery single-taxer, ran to succeed Baker, and lost only narrowly, indicating that Johnsonian policies would not suddenly vanish. After that, though, Cleveland fell into old-line Tory hands (Cramer, p.7), and began its long slide into torpor and mediocrity. From 1900 to 1920, Cleveland’s population had more than doubled. If it had continued growing at the Johnson-Baker rate, its population today would be 15 millions or so, double that of NYC, and 30 times the half million it actually has today.
2, Detroit, 1890-1930
Detroit’s soaring growth, 1900-30, obviously involved the auto industry, but why did that industry focus on Detroit? Growth began under Mayor, then Governor Hazen S. Pingree (Lorenz, pp.17-18; Johnson, p.91). Pingree had called Tom Johnson to Detroit in 1899 to help beef up the street car system and lower fares, under public ownership (Lorenz, pp.17-18; Johnson, pp.91-97; Bremner, p.42; Bemis). (It is ironic that the Motor City, whose firms later did so much to destroy mass transit, got started by providing cheap mass transit.) Pingree was growth-oriented, and Johnson-oriented. Writers have neglected Pingree, as compared with Johnson and Baker of Cleveland, and Jones and Whitlock of Toledo, but Joseph Dana Miller, in the Single Tax Yearbook, rates Pingree with Johnson and Whitlock as a single-taxer (Miller, pp. 411-12).
Table II, 1950-98, shows an equally sensational collapse of Detroit after 1970 or so, also calling for analysis (a bootstrap city, dependent on one industry, is inherently unstable?)
Toledo grew fast under single-taxers Samuel M. “Golden Rule” Jones, 1897-1904, and his disciple, Brand Whitlock, 1905-1913, a graduate of Gov. Altgeld’s administration in Illinois. Many cities grew fast in this period, but Toledo grew by 200% (tripled its population), 1890-1920, outpacing most other cities.
Milwaukee grew fast for 20 years, without stopping or staying, under its left-wing Mayor, Daniel Hoan, 1916-36. This was a period of slowing growth in most other cities in Table I. Hoan’s brand of “sewer socialism” consisted in applying the principles of marginal-cost pricing to Milwaukee’s infrastructure, meaning keeping transit and utility user-rates low, and meeting deficits by raising property taxes. Hoan also expanded social services, and pressed city assessors (in Milwaukee these serve at the Mayor’s pleasure) to up-value land and down-value buildings (Hoan, 1936, pp.26-27). Hoan had his assessor distribute maps of city land values, block by block, to enlist citizen aid and support for assessing land first, and buildings “residually” – the way to get land up-valued. Like all progressive mayors of the era, and like Tax Commissioner Purdy in NYC, Hoan studied and learned from the achievements of Tom L. Johnson (Hoan, passim).
Hoan’s immediate successor, Mayor Frank Zeidler, was also a “sewer socialist” of the Hoan school, but he believed annexation was the way to provide cheap housing for workers. Having doubled the city’s area, he quickly stepped down for Henry Maier, whom he mistakenly thought would carry on. Maier turned out to be retrograde. Under him, Milwaukee started rapidly to hollow out and lose population.
The formula for growing and revitalizing cities seems to be the same, whether under a “socialist” like Hoan, a colorful populist like Johnson, a reluctant dilettante like Whitlock, or a good gray administrator like Purdy: supply infrastructure, keep rates low, raise land taxes, and go easy on buildings. It is simply the economists’ theory of “marginal-cost pricing” as articulated by Hotelling (1938), and later developed at length by William Vickrey in many books, lectures and articles.
Set against those cities with spurts of rapid growth there were others frozen in time. Lincoln Steffens, in his Tale of Two Cities, contrasted Cleveland, the best-governed city, with Cincinnati, one of the worst, and we will do the same.
After 1890 Cincinnati poked along only slowly under its various “business-friendly” administrations. All during the years of Tom Johnson and Newton Baker in Cleveland, and Samuel Jones and Brand Whitlock in Toledo, Cincinnati was the power base of the old Tory guard who opposed them and all they stood for, and put Ohioans McKinley, Taft and Harding in the White House (Steffens; Russell, pp.131, 136, 149, 155, 174, 203, et passim; Bremner). Under their guidance, Cincinnati grew so little and shrunk so much that is is now smaller than it was in 1910 (see Tables I and II).
Mark Hanna of Cleveland made McKinley President, and himself Senator. Hanna enjoyed support from the richest American, Clevelander John D. Rockefeller, and Cincinnati Bosses Cox and Foraker, but could not control his own front yard because Johnson did (Russell, p.120). So Hanna hated Johnson. Johnson was a “socialist-anarchist-nihilist.” Socialism was the equivalent of anarchism, said Hanna, and it was an anarchist who had shot McKinley, so you see what kind of man this Johnson is. Johnson, a native southerner, was a “carpetbagger followed by a train of all the howling vagrants of Ohio,” quoth Hanna.
It went beyond name-calling. Elizabeth J. Hauser, editing and prefacing Johnson’s autobiography, contributed this insight:
“In Cleveland, as in these other (Ohio) cities, there was organized as if by instinct a sympathetic, political-financial-social group whose power and influence made itself known the moment it was touched. It included the banks and trust companies with their directors. Banks that did not sympathize with this conspiracy were coerced by fear into compliance with the will of the stronger institutions. Through the banks, manufacturers, wholesale and retail merchants were reached. Business men who openly sympathized with the low-fare movement were called to the directors’ rooms in the banks and advised, sometimes in guarded language, that their loans might be called or their credit contracted. … cowed at meetings of the Chamber of Commerce … threatened with boycott. The lawyers were almost a unit. At one time fourteen of the leading law firms of the city were employed against the movement. Many physicians and in a large measure the clergy were affiliated with this class. … all who were seeking favor socially, professionally or commercially, lined up with Privilege.
“The newspaper persecution of Mr. Johnson was not confined to Cleveland. A publicity bureau supplied the country papers of the State with material …
“To all of this was added the power of social ostracism. It was carried into the clubs and employed against all who distantly believed in or liked Mr. Johnson.
“‘For the greater part of nine years,’ writes Frederic C. Howe, ‘Cleveland was an armed camp. There was but one line of division. It was between those who would crucify Mr. Johnson and all of his friends, and those who believed in him. … If any kind of cruelty, any kind of coercion, any kind of social, political or financial power was left untried in those years to break the heart of Mr. Johnson, I do not know what or when it was’” (Johnson, p. xxii).
Ohio was not alone in having such a power structure. For another such case, see “The Beast,” by Judge Ben Lindsey of Denver. Ohio was a little unusual, rather, in having Tom Johnson. Johnson, inspired by Henry George, had the courage, skill, dedication, and accumulated wealth to confront The Beast and tame it.
Johnson died in 1911, but the spirit, like that of Henry George, outlived the body. Single-taxers were hard at work in the Ohio constitutional convention of 1916, pushing for direct democracy to overcome plutocratic and boss rule. They believed that the Initiative and Referendum would open the gate for the single tax. Yisroel Pensack reports (in a letter to the writer) that he examined the Proceedings of this convention. They show “pro-business” forces going to extreme lengths to guard against such an outcome, to the extent that Ohio’s Constitution now provides that I&R may be used for almost any purpose EXCEPT to uptax land values and downtax buildings.
The population growth records, though, suggest an arresting hypothesis, that left-wing administrations are good for business – productive business, that is – and “pro-business” administrations are bad. San Francisco and New York, with their leftwing democratic traditions, seem to hold up well compared with other old cities. Mark Lause has named NYC as the focus of radical politics back to 1820 or so, during the time it was emerging as our largest city. During this long period, NYC was collecting a large bite from land rents (Geiger, p.427). Bridgeport, CT, under its one-time “socialist” regime, bears investigating. Even Los Angeles came close to electing a socialist mayor, Job Harriman, in 1913, and supported Upton Sinclair of Pasadena, a land-taxer, for Governor in 1934. It raised property taxes to spend lavishly on public water supply, public power, harbor facilities, sewers, city-owned rails, and other public works. Houston, under single-tax assessor J.J. Pastoriza, grew by some 25%, 1911-15, until a court ordered him to go back to the old ways (Geiger, pp.434-35). Vancouver, B.C., quintupled in population, 1895-1909, after exempting first 1/2, and then 3/4 of building values from the property tax, as described by Mayor L.D. Taylor (Marsh, 1911, pp.33-37). I do not pursue those threads here, but they surely call for vigorous research, and review of stereotyped ideas about “pro-business” governments and “leftwing” governments.
Pittsburgh, however, is an anomaly. Urban and tax scholars routinely cite Pittsburgh, with its “graded tax plan,” to exemplify a tax-induced growth effect roughly like what New York’s law induced. Whatever happened in Pittsburgh, however, has not made its population rise. Its fall after 1980, especially, is steeper than most.
No one publishing on Pittsburgh’s plan, pro or con, has addressed this point, to my knowledge. Various studies have shown rapid building in Pittsburgh under this stimulus – that by Oates and Schwab is the latest and most ambitious, methodologically. Whatever is the answer, champions of the Pittsburgh graded tax plan need to explain this fall of population.
One reason is that Pittsburgh’s plan, compared with New York’s, is not focused on housing. It has the effect of encouraging high-rise commercial building, and industry, which might actually take land from residential use within the city limits, while stimulating residential demand in the suburbs. Pittsburgh is also tightly constricted in area, unlike NYC, and perhaps should be compared with Manhattan, rather than all of NYC.
Another reason, perhaps more telling, is that Pittsburgh under Mayor Richard Caliguiri imposed a wage tax of 4% during the 1980s. He also raised gross receipts taxes. In 1989 a new Mayor, Sophie Masloff, commissioned research by Ralph Bangs of the University of Pittsburgh to explain the exodus, and Bangs identified the wage tax as a major cause (letter from Pittsburgh researcher Daniel Sullivan, 29 Dec 2000). Neither Masloff, 1989-93, nor her successor Tom Murphy has abated the wage tax. Murphy has given special tax abatements to large businesses that agree to locate in Pittsburgh.
A third reason is that the City of Pittsburgh, the one with the graded tax plan, does not control its own assessments the way Johnson did in Cleveland, Hoan did in Milwaukee, and Purdy did in NYC. The Allegheny County Assessor is in charge. Mark Belko, in the Pittsburgh Post-Gazette, writes on 12 January, 2001, that city assessed land values are so low “they weren’t anywhere near reality,” quoting George Donatello, operations director for Sabre Systems, a firm hired to reassess Allegheny County in 2000. There is great resistance among modern crusaders for “2-rate” tax reform to address and deal with this vital matter, because they consider it politically dangerous – even though Johnson, Purdy and Hoan all overcame the dangers and made their cities work.
Most recent researchers, too, have neglected this aspect of the matter, because it is messy, and the modern style is to grind out complex econometric models that are already too messy and fragile, even with good firm numbers, and often impossible when the input numbers are fuzzy. It is possible that the Pittsburgh plan has been more nominal than real all along. There is wide latitude in the assessment process, latitude that can be used either to subvert a Pittsburgh Plan, or, as in Pastoriza’s Houston, 1909-15, to subvert the taxation of buildings and implement a de facto single tax regime.
We may surmise that City officials who support taxing wages are generally not oriented toward encouraging population, so the wage tax may be just one of several such devices. The morals seem to be 1, that one must look at the totality of city policies, not just the structure of the property tax, to determine the overall impetus of public policy on population; and 2, Pittsburgh’s administrations have been more interested in favoring capital than labor.
Population growth is not the only goal of civic policy, to be sure. Some cities discourage population growth, while seeking to import and retain taxable capital. Federal tax policies of recent times, shifting more and more of the tax burden off of property income and onto labor income, have suppressed local incentives to attract people. Population, however, is surely a factor to consider, even from the particularistic local view.
In this neo-Malthusian era, it is perhaps necessary to point out that luring people from city A to city B is a zero-sum game, from a national population view. From a national and world view, indeed, growth of cities by luring people from farms tends to lower birthrates. From a distributive and full-employment view – the one taken here – it is vital to the interests of labor to have cities competing to attract people by fostering good use of land. That is, indeed, the main point of Progress and Poverty, George’s major work. It is also vital to the interests of all people as consumers, especially of housing.
“Labor” includes most people, and all kinds of workers: professional, managerial, white and pink-collar, actors, athletes, programmers, public employees: everyone except passive rentiers. As to the last, however, the rise of land prices in NYC (which C.J. Post also documents), and their fall in torpid cities and neighborhoods, says that landowners, too, gain from urban health and vigor. As to active investors in new buildings, too, interurban competition tends to raise the marginal rate of return on capital. How is all this good news possible? A healthy economy generates surpluses that bely the Chicago slogan that “there is no free lunch.”
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Populations, NYC and Comparison Cities, 1890-1998
Ranked by 1900 populations
Source: U.S. Census of Population, Decennial Volumes
Population in (000)
Growth rates are decennial, in percentages
In two tables: I, 1890-1950; II, 1960-1998
TABLE I: 1890-1950
City 1890 1900 1910 1920 1930 1940 1950 NYC 2507 3437 4767 5620 6930 7455 7892 Rate/dec. 37.1 39 17.9 23.3 7.6 5.9 Chicago 1100 1698 2185 2702 3376 3397 3621 Rate/dec. 54.4 28.7 23.7 24.9 .67 6.6 Philadelph. 1047 1294 1549 1824 1951 1931 2072 Rate/dec. 23.6 19.7 17.7 7.0 -1.0 7.3 St Louis 452 575 687 773 822 816 857 Rate/dec. 27.2 19.5 12.5 6.3 -.7 5.0 Boston 448 561 670 748 781 771 801 Rate/dec. 25.2 19.4 11.6 4.4 -1.3 3.9 Baltimore 434 509 558 733 805 859 950 Rate/dec. 17.3 9.6 31.4 9.8 6.7 10.6 Pittsburgh 239 452 533 588 670 672 677 Rate/dec. 89.1 17.9 10.3 14.0 .3 .7 Cleveland 261 382 562 797 900 878 915 Rate/dec. 46.4 47.1 41.8 12.9 -2.4 4.2 Buffalo 256 352 423 507 573 576 580 Rate/dec. 37.0 20.2 19.9 13.0 .52 .69 S Francisco 299 343 417 507 634 635 775 Rate/dec. 14.7 21.6 21.6 25.0 .16 22.0 Cincinnati 297 326 363 401 451 456 504 Rate/dec. 9.8 11.3 10.5 12.5 1.1 10.5 Detroit 205 286 466 994 1569 1623 1850 Rate/dec. 39.5 63 113 58 3.4 14.0 Milwaukee 204 285 373 457 578 587 637 Rate/dec. 39.7 30.9 22.5 26.5 1.6 8.5 Newark 182 246 347 414 442 430 439 Rate/dec. 35.2 41.1 19.3 6.8 -2.7 2.1 Jersey City 164 206 268 298 316 301 299 Rate/dec. 25.6 30.1 11.2 6.0 -4.7 -.7 Minneapolis 165 203 301 381 464 492 522 Rate/dec. 23.0 48.3 26.6 21.8 6.0 6.1 Providence 132 176 224 238 253 254 249 Rate/dec. 33.3 27.3 6.3 6.3 .4 -2.0 Kansas City 133 164 248 324 400 399 457 Rate/dec. 23.3 51.2 30.6 23.5 -.25 14.5 Rochester 133 163 218 296 328 325 332 Rate/dec. 22.6 33.7 35.8 10.8 -.9 2.1 Columbus 88 126 181 237 291 306 376 Rate/dec. 43.2 43.7 30.9 22.8 5.2 22.9 Toledo 81 132 168 243 291 282 304 Rate/dec. 63.0 27.3 44.6 19.8 -3.1 7.8 Syracuse 88 108 137 172 209 206 221 Rate/dec. 22.7 26.9 25.6 21.5 -1.5 7.3 New Haven 86 108 134 163 163 161 164 Rate/dec. 25.6 24.1 21.6 0.0 -1.2 1.9 Paterson 78 105 126 135 139 140 139 Rate/dec. 34.6 20.0 7.1 3.0 .7 -.7 Los Angeles 50 102 319 577 1238 1504 1970 Rate/dec. 104 213 80.9 114.6 21.5 31.0 Albany 95 94 100 113 127 131 135 Rate/dec. -1.1 6.4 13 12.4 3.2 3.1 Dayton 61 85 117 152 200 211 262? Rate/dec. 39.5 37.6 29.9 31.6 5.5 24.2? Hartford 53 80 99 138 164 166 177 Rate/dec. 50.9 23.8 39.4 18.8 1.2 6.6 Yonkers 32 48 80 100 135 143 153 Rate/dec. 50 67 25 35 5.9 7.0 Akron 28 43 69 208 255 245 275 Rate/dec. 53.6 60.5 201.4 22.6 -3.9 12.2 MAJOR BOROUGHS OF NYC Manhattan 1513 1856 2331 2284 1867 1890 1960 Rate/dec. 22.7 25.6 -2.0 -18.3 1.2 3.7 Brooklyn 806 1167 1634 2018 2580 2698 2738 Rate/dec. 44.8 40.0 23.5 27.8 4.6 1.5 Bronx 201 431 732 1265 1394 1451 Rate/dec. 114.4 69.8 72.8 10.2 4.1 Queens 152 284 469 1079 1297 1550 Rate/dec. 86.8 65.1 130.1 20.2 19.5 GROUPS OF CITIES NY State-4 572 717 878 1088 1237 1238 1242 Rate/dec. 25.4 22.5 23.9 13.7 .1 .3 Major Mid-Atlantic 2147 2648 3135 3706 3953 3976 4236 Rate/dec. 23.3 18.4 18.2 6.7 .6 6.5 N. Jersey neighbors of NYC 424 557 741 847 897 871 877 Rate/dec. 31.4 33.0 14.3 5.9 -2.9 .7
Populations, NYC and Comparison Cities, 1890-1998
Ranked by 1900 populations
Source: U.S. Census of Population, Decennial Volumes
Population in (000)
Growth rates are decennial, in %
TABLE II: 1960-98
City 1960 1970 1980 1990 1998 NYC 7782 7895 7072 7323 7420 Rate/dec -1.4 1.5 -10.4 3.6 1.3 Chicago 3550 3367 3005 2784 2802 Rate/dec -2.0 -5.2 -10.8 -7.4 .6 Philadelph 2002 1949 1688 1586 1436 Rate/dec -3.4 -2.7 -13.4 -6.0 -9.5 St Louis 750 622 453 394 339 Rate/dec -12.5 -17.1 -27.2 -12.4 -14.0 Boston 697 641 563 574 555 Rate/dec -13.0 -8.0 -12.2 2.0 -3.3 Baltimore 939 906 787 736 646 Rate/dec -1.2 -3.5 -13.1 -6.5 -12.2 Pittsburgh 604 520 423 370 341 Rate/dec -10.8 -13.9 -18.7 -12.5 -7.8 Cleveland 876 751 574 506 496 Rate/dec -4.3 -14.3 -23.6 -11.9 -2.0 Buffalo 533 463 357 328 301 Rate/dec -8.1 -13.1 -22.9 -8.1 -8.2 S Francisco 740 716 679 724 746 Rate/dec -4.5 -3.2 -5.2 6.6 3.0 Cincinnati 503 453 385 364 336 Rate/dec -.2 -9.9 -15.0 -5.5 -7.7 Detroit 1670 1511 1203 1028 970 Rate/dec -9.7 -9.5 -20.4 -14.6 -5.6 Milwaukee 741 717 636 628 578 Rate/dec 16.3 -3.2 -11.3 -1.3 -8.0 Newark 405 382 329 278 268 Rate/dec -5.8 -5.7 -13.9 -15.5 -3.6 Jersey City 276 261 224 228 232 Rate/dec -7.7 -5.4 -14.2 1.8 1.8 Minneapolis 482 434 371 368 352 Rate/dec -7.7 -10.0 -14.5 -.8 4.3 Providence 207 179 157 151 Rate/dec -16.9 -13.5 -12.3 Kansas City 475 507 448 435 442 Rate/dec 3.9 6.7 -11.6 -2.9 1.6 Rochester 318 296 242 231 217 Rate/dec -4.2 -6.9 -18.2 -4.5 -6.1 Columbus 471 540 564 633 670 Rate/dec 25.3 14.6 4.4 12.2 5.8 Toledo 318 384 355 333 312 Rate/dec 4.6 20.8 -7.6 -6.2 -6.3 Syracuse 216 197 170 152 Rate/dec -2.3 -8.8 -13.7 New Haven 152 123 Rate/dec -7.3 Paterson 144 145 148 Rate/dec 3.6 .7 Los Angeles 2479 2816 2966 3485 3598 Rate/dec 25.8 13.6 5.3 17.5 3.2 Albany 130 94.3 Rate/dec -3.7 Dayton 262 244 203 182 167 Rate/dec 0.0 -6.9 -16.8 -10.3 -8.2 Hartford 162 158 131 Rate/dec -8.5 -2.5 Yonkers 191 204 195 188 190 Rate/dec 24.8 6.8 -4.4 -3.6 1.1 Akron 290 275 237 223 216 Rate/dec 5.5 -5.2 -13.8 -5.9 -3.1 MAJOR BOROUGHS OF NYC Manhattan Rate/dec Brooklyn Rate/dec Bronx Rate/dec Queens Rate/dec
GROUPS OF CITIES NY State – 764 Rate/dec Major Mid-Atlantic 2911 Rate/dec Near neighbors of NYC 648 Rate/dec
APPENDIX: Questions wanting further research
1. Urbanization in the northeastern U.S. was very rapid during the 1890-1900 depression. In sharp contrast, urbanization stopped cold in the 1930-40 depression (except in NYC, where it just slowed down). This dead stop was hardly due to suburbanization in that era of no-growth. The difference between the two depressions calls for some explanation. In the “dirty ‘thirties,” apparently people returned to marginal farms, for survival. What was different in the 1890s?
2. Urbanization revived weakly, 1940-50, but de-urbanization began after 1950 or so, and after 1960 turned into a rout, led by the Interstate Highway System. NYC resisted this 20 years longer than most other cities.
3. Meantime, a new kind of quasi-urbanization at low densities and high auto-dependency was taking over the south and southwest, as exemplified by our one data set from there, for Los Angeles. (Many newer cities are of much lower density than L.A. and its suburbs, in spite of their reputation.) This also led to rapid growth in a few eastern cities specializing in autos and components: Detroit, Akron, and Dayton, which, however, began shrinking even while the auto boom was rising.
4. New cities have grown so fast that the minimum population required to be among the “top 100 cities” keeps rising, decade by decade. Thus U.S. cities, on the whole, have not “disappeared” so much as they have migrated, lowered their densities, disintegrated, and changed their settlement patterns.
5. Columbus has been a “sleeper,” growing quietly from 88,000 in 1890 to 633,000 in 1990, becoming the largest city in Ohio. One reason is extensive annexation of and/or mergers with areas already populated. Further explanation is not attempted here.
6. Chicago grew by 54%, 1890-1900. This is complicated by annexation (Hoyt, p.153), but is still a notable spurt, even in that decade of urban growth elsewhere. Chicago did not just spread out, it pioneered the skyscraper, and centralized its transit system like few other cities ever did.
Many signs point to a single-tax trend in Chicago during this period. John Peter Altgeld, humanitarian and reformer, was Governor of Illinois, 1892-96. His administration contained several single taxers, including young Brand Whitlock, future Mayor of Toledo, whom Altgeld inspired (Bremner, pp.57-58). Altgeld directly corresponded and worked with Henry George, and, according to Whitlock, “understood” George’s ideas like few others (Barker, pp. 594, 607, 609).
It was during this regime that Altgeld’s Bureau of Labor Statistics, under George Schilling, published its famous 8th Annual Report, 1894, including comprehensive Lorenz-Curve data on the concentration of landownership in The Loop of Chicago. There is no comparable study, to my knowledge, of any other American city. It is most likely that such radicalism in Springfield had its effect locally in Chicago. The relationship of Governor Altgeld with Chicago needs confirmation, but Chicago was certainly a vibrant center of radical thought and activity in this age of Clarence Darrow, Henry D. Lloyd, Jane Addams, Julia Lathrop, Thorstein Veblen, Frank Lloyd Wright, Edward Bemis, Louis F. Post and his Georgist journal (The Public), Gene Debs, Vachel Lindsay, the young Carl Sandburg, Florence Kelley, et al.
Chicago did not originate the skyscraper by overtaxing buildings – Louis Sullivan and much of the Chicago School of architects, including Frank Lloyd Wright, favored downtaxing their products. At the same time, Chicago did not develop its highly centralized mass transit system without taxing real estate to permit of low fares, as did Tom Johnson in Cleveland. A city that taxes real estate without overtaxing buildings must be taxing land values.
Chicago’s consciousness of land values is shown by its being the only city to have anything like George C. Olcott’s annual Blue Book of Land Values – Olcott also being a supporter of the Chicago Single Tax Club. Chicago inspired Homer Hoyt’s classic One Hundred Years of Land Values in Chicago.
None of that yet adds up, however, to a definitive showing that a city administration consciously shifted taxes to land values, as in Toledo, Cleveland, New York, Detroit and Milwaukee. More research into Chicago’s political history is needed.