I. The many important functions and implications of land data

Why are we interested in "taking inventory" of land? Land is hardly an inventory of the usual kind. My real estate man may speak of "warehousing" vacant land -- we never call it speculating -- and we speak here of "taking stock". It is even true that land values appear on balance sheets along with canned goods as economic "funds" rather than "flows". Yet land is no inventory in the usual sense: it never turns over, but remains constant in physical quantity while real "stocks" or "funds" come and go and come again, like Brahma. Land is not subject to theft, at least in the usual sense, and we do not take inventory to detect pilferage or spoilage.

There is irony in making this point here in the shadow of The Midway because Frank Knight, the granddaddy of Chicago economists, took great pains to destroy the concept of turnover and its reciprocal, the period of investment, and thus to erase the distinction between land and capital. But in this company I can assume we recognize there is something distinctive called land which warrants our interest. But why?

A. Concentrated holding.

The Founding Fathers put great stock in a wide diffusion of landholding as the basis for a viable economy, social welfare, and a workable democratic polity. That ethic has not altogether died, although its detractors are mighty. But the march of concentration and absenteeism, seemingly inexorable at times, has recreated conditions here increasingly like those that Jefferson and his peers found objectionable in the Spanish colonies and in England.

The U.S. Census avoids studying land titles. Its data are organized by operating units, not ownership units, Tenancy and leasing are recognized, but fifty tenants means fifty farm units, be there one landholder or fifty. The Census is not stingy with information about many things, such as the excellent detail on indoor plumbing, but it is silent concerning who holds title to how much of the basic resources that constitute the essence and definition of the nation. It contains little or nothing on the citizenship of landholders, a matter of growing concern as foreign investments flood into our territory. So here is a data vacuum worthy to be filled: a challenge worthy of your steel.

‍B. Property taxation.

To place values on land and study its characteristics is to realize that it yields an economic surplus. It dawns on some as quickly as a bursting tropical daybreak, and on others more like a boreal twilight, that a surplus may be taxed, and that the property tax on land garners that social surplus for the public treasury without impairing any functional private economic incentive.

It may, indeed, often sharpen incentives. Here we meet a perceptual bias. It is like my family where when father speaks, no one listens; but when he burps, everyone comments. Likewise when the land tax helps the market work better the free-market preachers look elsewhere; but when it drives scarce class-A farm soils into vulgar urban uses, everyone takes notice.

But no one ever said life is fair. So let us just note that the whole movement for preferential assessment of farmland is a grudging tribute to the power of land taxes to sharpen market incentives. If you like the market's decisions you credit private enterprise; if you don't you blame the assessor. Assessors, after all, only make wages and seldom leave large bequests.

For any government to place values on land, whatever the ostensible purpose, is to provide the infrastructure prerequisite to taxing it, and to refute by demonstration the claim that valuation is impracticable. Hence there is a certain exaggerated sensitivity to land valuation programs. In 1909, indeed, the House of Lords committed virtual kamikaze in a desperate defense - ultimately successful - to forestall any valuation of land in England.

To some people all taxes are equally terrible. But one unsung virtue of land as a tax base is becoming daily more compelling as the I.R.S., increasingly desperate, grows increasingly importunate, intrusive and unloved. The land tax is not like the income tax a personal liability, but is just in rem, levied on the objective thing, not the person as such. That means that the government's remedy for unpaid taxes is limited to seizing the rem, the land, and it cannot do even that without following specified legal procedures safeguarding rights of individuals.

The I.R.S. operates under no such carping inhibitions. It seizes land upon simple administrative discretion of collection agents protected from personal liability. It also seizes chattels and intangibles and cash flows and accounts receivable and wages and salaries and you name it. Victims struggling from its nets are labeled as cheats and dishonest and even criminal. It can and does harass and intimidate and threaten and commandeer and close down and garnishee and pry and spy and hire informers.

The garnisheed miscreant is allowed to keep personal effects not to exceed $1,500 in value, and current income of $75 a week. Try living on that. You also get $25 for each dependent, a thoughtful touch. Bankruptcy is no excuse or escape. And all this can be credibly threatened over nothing more substantial than a clerk's misreading your social security number or shredding your appeal late Friday afternoon. Next time you see your local property tax assessor as the major threat to traditional American rights and freedoms, think on those things.

Certainly, at any rate, land is the oldest tax base, and we keep coming back to it even after Howard Jarvis and all that. The property tax in the United States now raises some $93 billions/year on a base of $7 trillions, a large share of which is land value (in California nearly half).

This article is an excerpt from an invited paper presented at the Assessment Workshop cosponsored by USDA-ERS-NRED and the International Association of Assessing Officers, Chicago, IL, June 25-26, 1985. The paper was published in Almy, Richard R., and T.A. Majchrowitz (eds.), Property Tax Assessment (Chicago: U.S. Department of Agriculture, International Association of Assessing Officers, and The Farm Foundation, 1985), pp. 91-109. The whole paper will be published daily in increments over this week and part of next week. This is excerpt 1 of 9.

© Text Copyright Mason Gaffney, Ph.D. rights reserved.
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