Gaffney & Noyes (1998): The Income-Stimulating Incentives of the Property Tax

Overview

"The Income-Stimulating Incentives of the Property Tax" is Chapter 8 (pp. 206–233) of Fred Harrison (ed.), The Losses of Nations: Deadweight Politics versus Public Rent Dividends (London: Othila Press, 1998) — the same volume that carries Tideman & Plassmann's deadweight-loss chapter and Gaffney's own Chapter 7, "The Philosophy of Public Finance", which immediately precedes it (pp. 175–205; the two chapters' pagination is continuous).[1] Unlike the rest of the wiki's Gaffney corpus, this chapter is co-authored with Richard Noyes. The wiki carries a dedicated page on Noyes as the editor of Now the Synthesis (1991) and a New Hampshire newspaper publisher and state representative; the dates, subject matter, and Georgist-movement circle all match the same person, though this page treats the identification as a well-supported inference rather than a independently confirmed fact, since the chapter itself carries no biographical note.[9] The chapter has two independent parts: a state-level empirical argument by both authors (below), and a solo Gaffney appendix, "An Inventory of Rent-Yielding Resources."

Part 1: Does Property-Tax Reliance Raise State Income?

The Claim and the Method

The chapter's thesis: across the 50 US states, a higher ratio of property tax to all state/local tax revenue is associated with higher personal income per capita, and the authors argue the direction of causation runs from the tax mix to income, not the reverse. The data are the Advisory Commission on Intergovernmental Relations' Significant Features of Fiscal Federalism for 1994 (reporting 1992 state-level tax and income figures), supplemented by 1996–97 US Commerce Department and New Hampshire state-agency data for the New Hampshire narrative specifically.[1]

Method, stated plainly: this is not a regression. The authors rank all 50 states by the ratio of property tax to total state/local tax revenue, then compare unweighted means of the top ten and bottom ten states (and, in an earlier pass, the top/bottom five and top/bottom eleven) on personal income per capita, total tax burden, and property tax burden. Moving from the Bottom Ten's mean to the Top Ten's mean: personal income per capita rises 48%, all taxes rise 71%, and the property tax itself rises 173%.[1] The authors' causal argument is an elimination test, not an identification strategy: a 52% income gap between the "New Hampshire five" and their comparison group cannot plausibly explain a 92% gap in all taxes and a 173% gap in property taxes if income were driving the tax mix, so — they reason — the tax mix more plausibly drives the income difference.[1] No regression, confidence interval, or control for omitted state characteristics (education, urbanization, industry mix, proximity to major metros) appears anywhere in the chapter.

New Hampshire

New Hampshire anchors the case: it is "the only state in the Union where more than half of all government revenue... comes from the property tax" (64% of state/local revenue in 1992, versus a US mean of 32%), while running a top-five lowest overall state tax burden and no broad sales or income tax.[1] The authors report New Hampshire's personal-income-per-capita rank rising from 25th in 1967 to 8th in 1992 (per the 1994 ACIR data) and to 7th by 1996 (per the US Commerce Department's October 1996 Survey of Current Business), alongside a state unemployment rate consistently "at least two points below" the national rate and population growth outpacing its New England neighbors (Maine, Vermont) two-to-one.[1] The authors' one policy datum is that the state removed personal property (stock in trade, livestock, mills and machinery) from the property tax base in the early 1970s, after which the land share of the remaining base rose from under 20% to nearly 40% by 1990 — offered as the proximate trigger for the growth era that followed, though the chapter does not test this claim against any comparison state that made a similar change.[1]

California: A Sudden Break

The chapter's other half is Proposition 13 (1978) as a natural before/after case. California's personal-income-per-capita rank fell from 7th (1978) to 12th (1992); the authors marshal a long list of contemporaneous indicators as corroborating decline — median rent rising 132% against a 64% CPI rise over the same 1980–89 period, K-12 spending-per-pupil rank falling from 5th (1965) to 40th (1985), a net outmigration of 236,000–426,000 people (1993–94, depending on the Census measure used), the state's bond rating falling to last among the 50 states, and localized cases (Orange County's 1995 bankruptcy, San Bernardino's welfare rate rising from 18% to 40% of residents between 1985 and the mid-1990s).[1] The authors anticipate the obvious objection — that defense cutbacks and the end of the Cold War, not Proposition 13, explain the 1990s slump — and counter it with a historical comparison: Los Angeles lost three-quarters of its aircraft workers and 80% of its shipbuilders at the end of World War II, a far larger shock, yet rebounded immediately into a manufacturing and business-formation boom (citing Jane Jacobs 1969) — a period, the authors note, when California still taxed land heavily. The 1990s slump did not rebound the same way, which they attribute to the property tax's 1978 rollback rather than to the defense drawdown alone.[1] This is a single before/after comparison with one plausibility check, not a matched natural experiment with a counterfactual state or synthetic control.

Explaining Away the Outliers — a Real Methodological Weakness

Four of the ten highest-income states (Maryland, Hawaii, Alaska, Nevada) have low property-tax-to-total-tax ratios, which would seem to cut against the thesis. The authors address each with a state-specific, ad hoc explanation — Hawaii's cost of living and Japanese investment cycle, Alaska's cost-of-living premium, Maryland's federal-spending proximity to Washington, Nevada's gambling revenue.[1] Each explanation is individually plausible, but offering a distinct post hoc story for every disconfirming case, without applying the same scrutiny to the confirming cases, is a standard sign of a non-falsifiable argument — a limit this wiki states plainly rather than smoothing over.

Standing of Part 1

This is a co-authored, advocacy-published book chapter, not a peer-reviewed econometric study: no regression, no standard errors, no control variables, and a symmetric-outlier problem the authors do not address. It corroborates, in a US-state, cross-sectional form, the same directional claim the wiki already carries from the OECD's cross-country panel — see Taxing land and rents increases productivity, Claim A: "recurrent taxes on immovable property being the least distortive tax instrument" — but it is Gaffney-and-Noyes-observational evidence, not a quasi-experimental or peer-reviewed design, and per the wiki's standing convention for this class of source it is cited as context, not listed among that page's supported_by evidence.

Part 2: Appendix 1, "An Inventory of Rent-Yielding Resources" (Gaffney solo)

The chapter closes with a solo Gaffney appendix (pp. 220–233) cataloguing categories of economic rent excluded from the "simple colloquial concept of land as platted or surveyed land surfaces" — the same omitted-rent argument that anchors Gaffney's 2009 "Hidden Taxable Capacity of Land", here organized as a taxonomy rather than a revenue estimate. Most of its entries restate ground the wiki's Gaffney corpus already covers in more depth and are cited here only as corroboration, not new evidence: oil and gas rent shares (already the subject of Gaffney's Alaska leasing report and California severance-tax essay), water rights (already Gaffney's Kaweah case study and taxable-surplus proposal), timber rent fractions (already Gaffney's Faustmann monograph and forest-tax survey and gaffney-financial-maturity-timber), and rights-of-way/franchise rent (already touched in gaffney-mineral-leasing-tax-reform and, more generally, concepts/resource-rents).

Two genuine deltas stand out.

Spectrum — Giveaway-Era Concentration Data

The wiki's Spectrum Auctions page opens its factual record at the FCC's first competitive auction in 1994. Gaffney's appendix supplies concrete, dated pre-auction and immediate post-auction evidence the wiki did not previously carry: specific 1993–95 transaction values showing spectrum rent capitalizing into sale prices even before or just as competitive bidding began — AT&T's $12.6 billion purchase of McCaw Cellular, "a smallish regional firm whose assets consisted of spectrum licenses" (Los Angeles Times, Aug. 17, 1993); Disney's $19 billion acquisition of Capital Cities/ABC (1995), on which Gaffney credits Warren Buffett with "over $2 billion" of "unearned increment" from the deal; the FCC's March 1995 auction dominated by a handful of deep-pocketed bidders (AT&T, the Baby Bells, and a Sprint/Tele-Communications Inc./Cox/Comsat consortium); and a specific pre-auction turnover statistic — "[f]rom 1985–94, 85% of cellular licenses turned over," with the license itself "account[ing] for approximately 60% of the sale price" (citing Cohen 1995) — direct evidence of rent being bought and sold on the secondary market before the public ever priced it by auction.[1] Gaffney frames this explicitly through the "strong hands" concentration lens the wiki's Land Monopoly page already documents for land: "[l]ike other untaxed natural resources, spectrum is being concentrated in a few strong hands." (D-claim: an advocacy essay's contemporaneous business-press citations, not independently re-verified against the original 1993–95 press reports — treat the specific dollar figures as Gaffney's own citations, [VERIFY].)

"Falsified Land Values" — A 23-Point Measurement Taxonomy

The appendix closes with a list of 23 distinct devices by which conventional land and rent measurement understates true value — from treating land as a residual after buildings ("reductio ad absurdum" when demolition implies a negative building value the assessor still records as positive), to omitting option value on favorable zoning, to "cashflow bias" (overlooking noncash and unrealized gains), to treating corporate land assets as untaxed "intangibles."[1] This is a genuinely distinct contribution — a checklist of why conventional statistics undercount land value, as opposed to the 2009 Hidden Taxable Capacity paper's argument for which categories of rent are omitted from the tax base entirely. No other page in the wiki's corpus organizes this specific measurement-bias taxonomy; it complements, without duplicating, Gaffney's hidden-taxable-capacity argument.

Standing and Limits

• Claim class. Part 1 is a B-claim (empirical, cross-sectional, correlational) argued by committed Georgist advocates without formal statistical controls; Part 2 is a mix of C-claims (taxonomy/definition) and specific, individually citable B-claims (the spectrum transaction data).
• Not independent of its subject. Co-author Richard Noyes was a long-serving New Hampshire state representative and newspaper publisher in the state the chapter's central case study praises; this is disclosed nowhere in the text itself and is noted here as an honest limit on the New Hampshire narrative's objectivity, not a reason to discount the underlying ACIR data.
• OCR/extraction note. The source PDF (28pp, CVISION-processed scan) carries a legacy machine-generated text layer; body prose extracts cleanly, but several of the chapter's statistical tables (8:III and 8:IV especially) show column misalignment and dropped digits under pdftotext -layout extraction. This page relies on the chapter's own prose summaries of the table findings (which restate the headline figures cleanly in running text) rather than the raw table cells where the two diverge; readers checking exact state-by-state figures should consult the source PDF directly. [VERIFY: exact cell values in Tables 8:III and 8:IV].

Bears On

• Benefit: Taxing land and rents increases productivity — a US-state-level, Gaffney-and-Noyes-observational corroboration of Claim A (property-tax reliance associated with higher income per capita), carried as attributed context, not listed in supported_by (Gaffney-observational, not quasi-experimental, per the standing house convention).
• Concept: Spectrum Auctions — the giveaway-era concentration data extends the page's factual record earlier than 1994.
• Concept: Resource Rents — the 23-point falsified-land-values taxonomy.

See Also

• Gaffney (1998): The Philosophy of Public Finance — the immediately preceding chapter of the same book
• Tideman & Plassmann, Taxation and the Losses of Nations — another chapter of the same 1998 volume
• Gaffney (2009): The Hidden Taxable Capacity of Land — the omitted-rent-categories argument this appendix's taxonomy complements
• Richard Noyes — co-author
• Taxing land and rents increases productivity
• Spectrum Auctions
• Proposition 13
• Mason Gaffney

Sources

1. Mason Gaffney & Richard Noyes (1998), "The Income-Stimulating Incentives of the Property Tax," Chapter 8, and Mason Gaffney, "An Inventory of Rent-Yielding Resources," Appendix 1, both in Fred Harrison (ed.), The Losses of Nations: Deadweight Politics versus Public Rent Dividends (London: Othila Press, 1998), pp. 206–233 — used for all claims, figures, and quotations on this page; read in full from a local mirror of the source PDF. Free PDF (masongaffney.org); local mirror at sources/gaffney/text/G45-IncomeStimulatingIncentivesPropertyTax.txt.
2. Richard Noyes wiki page — used for the co-author identification (New Hampshire Georgist activist, state representative, dates consistent with this 1998 chapter); treated as a well-supported inference rather than an independently confirmed fact (A-claim for the underlying biographical facts, D-claim for the identification itself).