Henry George -- Site Value Charges
GroundSwell, January-February 2007]
A letter to St. Louis Post-Dispatch's Business
Columnist David Nicolaus regarding his 1-24-07 column "City
must Replace Its Earnings Tax to Survive". (That column
referred to U. of MO-Columbia Prof. Joseph Haslag's study just
published that proposes replacing the earnings tax with a new tax on
the value of all land in the city.)
To collect a different rate of government revenue from land and
buildings (improvements) will require an amendment to the state
constitution. That is why you and the Post-Dispatch need to keep
informing the public of the importance of doing such a revenue
shift. Reducing taxes on buildings and increasing fees / charges on
land should start out revenue neutral. It should not be used to
increase revenue immediately. As suggested it should be changed
gradually over ten years and watch the revenues grow from the
improvement in the economy and the city. Yes, other taxes could be
reduced by ever increasing revenues from land fees. Housing costs go
down when homes (the buildings) are not taxed. Now homes (housing)
are taxed out of existence...look at all the vacant buildings in the
City of St. Louis.
Wherever there is idle land there will be idle (under employed and
We should all be laughing at the foolish politicians who do not
understand "economic ground rent."
Government revenue from land is a fee not a tax. When you park
your car you pay a fee for time and space. There are buildings
parked in the city at various locations. Just like parking, some
space cost more than others because of where they are located. The
same holds true for buildings.
Yesterday in the Post-Dispatch on page A8 in the World section
there is an article about a tiny studio apartment being sold for
$335,000. The apartment is 77 square feet and needs electricity that
will cost another $59,000.
[Henry George's Answer -- England is still playing King and Queen.
It refuses to become a mature democracy. The queen when asked to pay
taxes quickly volunteered to pay income taxes on her government dole
of over $20,000,000. She did not want to pay any taxes on her and
her family's extensive real estate holdings. When governments
continue to give privileges to a privileged class of people there
will never be an end to various forms of involuntary servitude.]
The city is giving out taxes abatements to a privileged group of
people who are politically powerful, politically astute, politically
rich, and / or politically crafty.
Everyone including churches, veterans organizations and any other
kind of nonprofit should pay "land fees" or ground rent if
they have title / deed to land.
I want to thank you for your article. Write more of the same.
ST. LOUIS FEDERAL RESERVE BANK STUDY SUPPORTS LVT ADOPTION
"An Introduction to Two-Rate Taxation of Land Buildings"
is authored by Jeffrey P. Cohen and Cletus C. Coughlin, who quote
Nobel Laureates Milton Friedman and William Vickey. The study's
sections on The Welfare Effects of Taxation Using Demand and Supply
Curves has subsections on Consumer Surplus, Producer Surplus,
Effects on Taxes, and Taxes and Welfare. The study has a section on
The Theory of Land Taxation and a section on Two-Rate Taxation in
the United States. The section on Effects of Two-Rate Taxation has
subsections on The Pittsburgh Experience, Short-Run Initial Effects,
and Simulation Studies. There is a section on Implementing Two-Rate
Taxation: Some Practical Problems, and a section on The Political
Economy of Two-Rate Taxation which includes subsections on
Efficiency and on Opposition.
The Conclusion says: "Proponents of two-rate taxation stress
that the taxation of real property involves two taxes. One falls on
man-made capital, such as buildings, while the other falls on land,
which is provided by nature. The taxation of capital tends to deter
its formation. The higher the tax rate is in a specific location,
the larger the incentive for investors to direct their capital
elsewhere. The taxation of land, however, does not deter either the
formation of land or encourage its relocation because land is
essentially fixed in quantity and immobile. Therefore, the taxation
of land does not generate the changes in behavior that one sees with
the taxation of capital. This differential effect of taxation
provides a justification for real property taxation that taxes
buildings and land at different rates. ..."