Gaffney (1977): Counter-colonial Land Policy for Montana

Overview

"Counter-colonial Land Policy for Montana" is the published text of an invited address Mason Gaffney — then Professor at UC Riverside's Graduate School of Administration — delivered on the topic "Is Montana a Colony?", printed in Western Wildlands: A Natural Resource Journal (Winter 1977, pp. 16–25).[1] Gaffney frames it in two parts: "Colonialism — Pro and Con," an economic definition of internal colonial status, and "Counter Colonial Policies," his prescriptions. The piece is a conference address rather than a formal economic paper — discursive, rhetorical, and pointedly provocative about Montana's "cultural poverty" — and this page summarizes only its economics-of-rent content (resource ownership, taxation, land policy), not its broader cultural argument about the American West, which is outside the wiki's rent-capture scope.

Montana as a Resource Colony: the Economic Definition

Gaffney defines colonialism as a mercantilist relationship between "the capital" (the metropolitan financial center) and "the provinces" — not a matter of trade as such, but of who captures the surplus that trade and resource extraction generate. His diagnostic list, applied point by point to 1970s Montana, includes:

• Absentee ownership of key resources, with capital markets located elsewhere so that even locally saved capital becomes absentee-held (via, e.g., stock in a Wall-Street-controlled corporation). Gaffney cites a 1973 Congressional committee print, "Disclosure of Corporate Ownership" (Subcommittee on Government Operations, chaired by Montana's own Senator Lee Metcalf), naming Chase Manhattan, Bank of New York, Bankers Trust, and several other New York and Minneapolis–St. Paul banks as the largest shareholders of Northwestern Airlines and Burlington Northern operating in Montana, with "twenty-one and seven-tenths percent of the stock in the Burlington Northern... held by seven big New York banks."[1]
• Tax favoritism for the resident landed class as "the coin with which the capital pays off the local influentials" — extraordinary property-tax relief for cattle, minerals, timber, and recreational land, which Gaffney argues both rewards local elites and locks the province into primary-product specialization.[1]
• Monoculture and its instability: land-intensive, resource-based industries where rent is "an unusually high percentage of gross receipts" (Gaffney puts the threshold at roughly 40% for wheat, cotton, cash-grain, and cattle-breeding operations), which keeps average product of labor high but marginal product — and therefore wages — low.[1]
• Cross-subsidized, capital-directed transport rate structures: primary products moving out of the province are made artificially cheap to ship, while internal distribution within the province is comparatively expensive — Gaffney's example is federally subsidized Interstate highways connecting Montana to out-of-state markets while intra-state routes go unbuilt.[1]

The Copper and Coal Cases

Two extractive-sector examples anchor the essay's rent-capture argument specifically:

Copper. As of Gaffney's 1971 visit, the Montana State Constitution capped the assessed value of copper-bearing land for property-tax purposes at "the price paid by the original patentee to the U.S. Land Office" — about $1.25 per acre — regardless of the land's actual value; Gaffney calls this "a pretty modest property tax burden" for what Montana's own nickname called "the richest hill on earth" (Butte).[1] The 1972 state constitution left this copper exception unaddressed, in his account.

Coal. Gaffney documents concentrated federal ownership and leasing of Montana's coal: "In 1970 ten energy firms held 50 percent of 773,000 acres of federal coal leases written by the U.S. Department of the Interior," a figure he attributes to an unpublished working paper reported in the Milwaukee Journal, 29 August 1971.[1] [VERIFY: primary source not independently located — this page reports Gaffney's own citation of a secondary press report] Against this, he assesses Montana's newly adopted 30% coal yield (severance) tax as poorly designed — "one of the least efficient tax instruments known to man" — because a tax levied only at extraction gives lessees and absentee owners full control over the pace of production, and therefore over the timing of state revenue: "a tax whose revenues are turned on and off with the pace at which the lessees and owners decide to produce the coal."[1] This is the same design critique — that a pure yield/severance base cedes revenue-timing control to the resource owner — that Gaffney develops far more formally three decades later in his severance-tax analysis of California oil (2006), where he again argues for taxing the underlying value of the resource in place rather than only its extraction; this page does not restate that argument, only notes the continuity in Gaffney's own thinking across the two essays.

The Counter-Colonial Prescription: Taxing Land Values

Gaffney's central policy recommendation is a shift onto land value taxation, explicitly framed as a device that "attract[s] outside capital without promoting absentee ownership" — a benefit he argues no other fiscal instrument combines. His four-step design:

1. Exempt most capital (buildings, equipment) from the property tax, in whole or part.
2. Raise the rate on what remains — land.
3. Fund professional, well-paid assessment staff and keep assessments current.
4. Close loopholes such as Montana's copper exception, and put private lessees' possessory interests in federal land on the local property-tax roll (Gaffney cites Arizona as already doing this).[1]

Two historical case studies support the "discourages absentee ownership" claim. First, the Municipality of New Westminster, British Columbia, which "for several decades followed the policy of taxing lands substantially higher than buildings" and — while Gaffney cautions its record has been "overstated by some enthusiasts" — "ended up with one of the highest and perhaps the highest percentage of resident home-ownership of any city in Canada" during its period of single-family development, a policy it later abandoned alongside a shift toward apartment construction.[1] Second, California's irrigated agricultural districts organized under the state's Wright Act, where a land-value-based Irrigation District levy — combined with one-person-one-vote district governance, unlike most other western states' property-qualified voting — is credited with pushing the state's agricultural land from absentee cattle-and-wheat holdings toward resident, intensively farmed orchards, vineyards, and truck crops over the preceding century.[1] Both are offered as illustrative historical anecdotes, not as quantified natural experiments.

Standing and Limits

• Genre. A conference address printed in a small natural-resources journal, not a peer-reviewed economics paper — argued rhetorically throughout, including extended cultural commentary about Montana (patents-per-capita comparisons, "cultural poverty," dialect and folklore asides) that this page does not summarize because it is outside the wiki's rent-and-capture scope, not because it is uncontroversial; readers should be aware the source document is considerably more provocative in tone than this summary reflects.
• Data currency. The absentee-ownership figures (1973 Congressional committee print), the coal-lease concentration figure (1970/1971), and the population/income data Gaffney cites (Montana per-capita income falling from ~108% to ~90% of the national mean, 1950–70) are all mid-1970s snapshots; none are updated here, and Montana's coal, banking, and land-tax landscape have changed substantially since 1977.
• No independent verification of the coal-lease figure or the New Westminster homeownership claim. Both rest on secondary sources Gaffney cites (a Milwaukee Journal report of an unpublished working paper; Gaffney's own qualitative characterization of New Westminster's tax history) that this page has not independently traced. (D-claims throughout: design and incidence arguments and historical illustrations in an advocacy address, not econometric estimates.)

Bears On

• Concept: Resource Rents — the coal-leasing concentration and the copper property-tax exception are wired there as a design-failure case (absentee federal leasing plus a weak state yield tax) distinct from Gaffney's later, more developed California severance-tax and Alaska ad valorem work already on that page.
• Benefit: Capturing resource rent works — where institutions are strong — Montana's 1970s coal-leasing concentration is a fourth institutional-failure mode alongside that page's existing Alaska (design-before-windfall), California (capture built then lost), and US Forest Service (chronic non-capture) cases.

See Also

• Resource Rents
• Gaffney (2006): A Severance Tax on California Oil? — the later, more formally developed version of this essay's severance-tax design critique
• Gaffney (1977): Oil and Gas Leasing Policy for Alaska — Gaffney's contemporaneous resource-leasing design work for a different state, same year
• Capturing resource rent works — where institutions are strong
• Gaffney (1961, 1992): Diseconomies Inherent in Western Water Laws & The Taxable Surplus in Water Resources — concentrated absentee resource holding as a parallel institutional-failure mode, from that page's own cross-reference
• Land Value Tax · Unearned Increment
• Mason Gaffney — author page

Sources

1. Mason Gaffney (1977), "Counter-colonial Land Policy for Montana," Western Wildlands: A Natural Resource Journal, Winter 1977, pp. 16–25 — used for all claims, figures, and quotations on this page unless otherwise noted; OCR'd from the site's scanned PDF and quotations spot-checked against the source PDF directly this session (2026-07-18). Also mirrored on masongaffney.org under a second filename, C6-Counter-ColonialLandPolicyforMontana.CV.pdf (same title, different scan/file size — not separately reviewed; treated as the same essay). Free PDF (masongaffney.org) · archived; local mirror at sources/gaffney/.