Some Economic Facts
Carl F. Shaw
GroundSwell, November 2011]
No human created this earth.
The concept of fairness is usually the primary consideration in human
social interaction. The 1978 USDA land ownership survey showed that 4%
of our population owned 95% of the privately owned land. There is
nothing fair about this. In fairness we are all entitled to a space on
the earth in order to earn our living.
Any land of value is worth so much rent per year. Lands rent is
the product of all the population and our economic activities.
When land is taxed it is the rent which gets publicly collected. All
land rent is a public product and in fairness should be shared by all
of our population. The products of labor and capital are wages and
interest. Taxing wages and interest is a punishment for having
produced wealth. Laborers and capitalists can easily provide for
themselves when they have access to land.
When all the annual rent of land is publicly taxed land will no
longer have a sale price. God told us three times in the Holy Bible
NEVER to sell the land. Humans in some locations have in recent
centuries been forced to pay money (or equivalent) in order to obtain
the right to live on the earth. No animals, wild or domestic, are
forced to buy the land in order to live on this earth.
In recent years land values have reached record high levels, because
of low land taxation and low interest rates. Land in 2007 was far too
expensive for labor and capital to afford. All production of wealth
begins on land, using natural resources. When labor and capital can
not afford land they are unemployed, poor, and the economy suffers.
Here is the actual sequence of productionsuppose Carl Shaw grew
a large tomato crop. I would need help to grow and harvest. We would
put the fruit in baskets, then into a truck, to be taken to a
processing plant. Such a plant would have various equipment, staffed
by workers. When the tomatoes are processed and canned they are put in
boxes, loaded onto trucks, taken to a warehouse. Such warehouse
employs a staff who stacks canned fruit on pallet skids, for storage
until purchased by a retail vendor. In time a buyer from a grocery
store comes to purchase those tomatoes, loads them onto a truck,
drives them to the store, where another staff displays fruit on
shelves for sale. All this equipment, containers, vehicles, buildings,
etc had to be manufactured by workers, staffed by other workers, who
live in houses, wear clothing, eat food, have children. Granted there
are several other types of earth based resources which are also being
exploited by other workers, such as oil and gas, animal grazing,
timbering, mining, fishing, grain growing, etc. If Carl Shaw did not
grow tomatoes, and none of the other earth based resource activities
were exploited, then none of the listed economic activities would have
happened. All economic activity begins on the land.
We are told to spendBUT we cant eat catsup until a farmer
grows tomatoes. We cant have steel until a miner digs up iron
and coal. Then all the laborers and capitalists who turn raw materials
into finished products need houses to live in, food to eat, clothing
to wear, vehicles to transport to their jobs, education,
entertainment, medical care, education, etc. The rest of the economy
supplies these needs.
If none of this activity happened there would be little to no
economy. True, only a few workers are actually employed on land based
jobs. But if these folks did not produce land based products no one
else would have any type of work! Our situation today is that there is
too little land based production, due to the high cost of land.
Despite modern mass produced wealth tomatoes are still grown on land,
timber is still derived from fallen trees, etc. The economy does not
begin with government spending programs, bank loans, or customers
buying autos, computers, and appliances. The economy begins with
production on the land (food, timber, cattle, oil and gas, fishing,
mining, ) This is how the economy has worked ever since there have
People must learn about basic Political Economy. They must decide to
act on land ownership and tax reformtoward the concept of
The Fundamental Math of Real Estate.
Heres how to calculate the rent of land. Find the current
appraised land value, Multiply that by the current interest rate to
get a product, Add to this product the present annual land tax amount.
The result is the current annual land rent. Typical center city land
rent is $3.00 per square foot per year. The rent of rural areas is
more like $40 per acre! All the Land Rent should be the only source of
Land sale price is the result of capitalizing the net rent after land
taxation. Suppose the gross land rent is $1,000 per year, and $100
gets taxed. The net rent is therefore $900. $900 represents Income.
Lets say that the interest rate is 5%.
Here is the capitalization process. I means Income, R means interest
Rate, V means Value. I ÷ R = V. Income divided by the Interest
rate equals Value. $900 ÷ 5% = $18,000.
There is a simple way to reduce and later eliminate the $18,000 sale
price of land. Its called taxing the rent of land. For example
$1,000. rent minus a tax of $1,000 = zero net income. Zero income ÷
5% = Zero value.
Everyone then could afford land, without down payments, interest or a
generation of mortgage payments.
Our state tax code can be changed to permit the full taxation of land
rent. Currently only about 10% of the land rent is taxed in WVone
of the lowest in America. This tax code can also be changed to stop
the unfair taxation of labor and capital.
There are only three factors in the production of wealth, or three
subjects which can be taxed Land, Labor and Capital -
nobody else is left! Higher Land taxation encourages owners to put
their land to highest and best use, by hiring labor and capital
(capitalism) in order to bring in enough income to pay the higher land
Those who discuss taxation might analyze the economic effects of the
3 sources of revenue. People dont work harder because they are
taxed. Taxing the rent of land on the other hand encourages the better
use of land. These changes can and should be phased in over several
Numerous taxing jurisdictions around the world have taken steps as
described above. For instance 900 cities in Australia and New
Zealand do not tax buildings. Altoona, PA after a 10 year phase-out
stopped taxing buildings this year. Denmark taxes about 50% of the
rent, which encourages production.
Land owners usually not only oppose land reform, but will do
everything to thwart reform. They enjoy leasing Gods earth to
the rest of us, rather than producing wealth via their own efforts.
This is a question of Justice. Justice must prevail - not
This economic principle has been known of since 1752. when Dr.
Cadwalater Colden, Lt. Gov. of New York, proposed taxing only the
land. The French Physiocrats proposed essentially the same reform
beginning in 1758. Henry George made a whole social philosophy of this
concept. Land ownership means social and economic control. If I own Your
land, I own you. We should all have equal control.
Maynard Keynes book, The General Theory of Employment,
Interest, and Money published 1935, is 332 pages long, uses the
word Land for the first time on page 326, to point out
that land is a limited resource, and so owners can charge rent for its
use. He never points out that the economy begins with land, or
discusses the significance of limited land ownership, or the effects
of land taxation on the economy. When genuine Economists discuss
relationships between all the factors of production, land usually
plays a key role. The European immigrants who came here in the 1600?s
were not financed by government spending, or banks. They learned to
grow food from the Natives, on free land. By 1700 Americans
wages were the Worlds highest. Land can be made free again.
There is no shortage of land. 300,000,000 Americans could live on the
300,000,000 acres represented by fewer than 9 US states the size of
Illinois (of course many of those acres would have to be
industrialized). WV has enough land so that every resident could have
8 1/2 acres. How many West Virginians do you know who own 8 1/2 acres?
Some have many times 8 1/2 , while others are lucky to own the shirt
on their back.
The Occupy movement knows of our economic injustice. But
they dont know its reasonor what to do about it, in
order to bring equality. They could make real progress toward equality
if they were to campaign for land reform via land rent taxation.
Economic equality is more fundamental than political equality.
TAX THE LAND-NOT LABOR AND CAPITAL
(Carl Shaw is a former State Tax Dept. real estate appraiser.)