Comments to the Silver Haired Legislature Finance Committee

Carl Shaw

[Reprinted from GroundSwell, 2009]

(The following presentation was made by Carl Shaw on Aug. 21, 2008 to the Finance Committee of the West Virginia Silver Haired Legislature. The non-partisan and volunteer members to the West Virginia Silver Haired Legislature House of Delegates and Senate are elected by West Virginia seniors at county senior centers. Those elected meet several days per year and enact proposals which are forwarded to the regular legislature for their consideration.)

Robert Kennedy often used a quote from George Bernard Shaw. "Some people see things as they are and ask, Why? I see things that have never been and ask, Why not?"

I favor a different approach to land ownership. It is not a new concept. All wealth is created on land, using natural resources, by human labor. Were you born with a tag fastened to your leg saying, "I created this earth for all to use, but you will have to buy it from an owner if you wish to use," Signed, GOD.

Have you ever wondered, "Why does land have a sales price?" The air we breathe is free. So is the rain and snow we enjoy. When was the last time you had to pay for sunshine? Land has a sale price because left over rent gets capitalized into sale price. Highly taxed land will not have a sale price. By left over I mean rent which is not taxed. When land is taxed it is the site rent which gets collected by the Sheriff. Today here in West Virginia only about 10% of the rent is taxed. (8% in Calhoun County). One of the lowest land tax rates in the USA. Land therefore becomes a GREAT Investment. Did God intend that land and resources become an investment? I'll give you $25.00 for every Holy Bible quote you can provide which says the land should be an investment.

Native Americans knew no such concept as buying and selling the land. This idea was brought here by the earliest settlers. Economic conditions in Europe were not good. Land cost money there. People wanted something better. So they migrated here, bringing their private land ownership ideas with them.

What would we call a reformer who wants overnight changes? Revolutionist! Would you prefer reform overnight or over time? The so-called Two Rate Property Tax is intended as a moral reform, but over time, not revolutionary. It can be gradually changed over 15 years so that eventually only the land will be taxed, and the improvements tax free. Several Pennsylvania cities are in the process of eliminating taxes on buildings. Washington, Allentown, and Harrisburg are gradually increasing the land tax rate while reducing the improvement rate. 900 cities in Australia and New Zealand do not tax buildings. New Hampshire made the change in the 1940s and today taxes land at about 40% of the rent, highest of any state in the USA. In the 1980s New Hampshire had the nation's 6th highest state income per capita and 6th in population gain. And the first 5 states were west of the Mississippi. New Hampshire has no sales or income tax. These taxes only raise revenue, and do not encourage production. In fact, in contrast to the land tax they discourage production. Denmark taxes 50% of the rent and is Europe's highest per capita and lowest in unemployment.

This tax change can be revenue neutral, so the homeowner will not see any increase or decrease in his/her taxes.

Can you see a relationship between economic development and land taxation? Suppose you owned a land parcel whose rent was $100.00 per year. The current tax is $10.00. Suppose your land is little used. Suppose the government announced that over the next 15 years the land tax was to be increased to $100.00 per year. Would you leave it idle or little used? Wouldn't you look around your area, decide what kinds of businesses were needed, and begin planning how to make better use of the parcel? Wouldn't you eventually run ads in the paper looking to hire help, to construct a building, to develop a business? Wouldn't this development reduce local unemployment? A business on that site would help bring in the full $100.00 annual rent, which you would use to pay the land tax. If we did not tax improvements, a great incentive would be provided to develop the parcel. Your own taxes would not be increased. The business would pay the increased taxes. The city would look better with new construction. Jobs would be provided. The word Unemployment would leave our language. West Virginians who had gone elsewhere for work would return to W.V. Poverty would only exist where some folks did not want to work.

I mentioned site rent. Rent, the payment for the use of land, is a social product, created by all of us. Our economic activities, and the so called infrastructure -- streets, schools, hospitals, etc. -- contribute to the rent. Where population is sparse, land values are low. The rent of my Calhoun County land is $30.00 per acre. Downtown Charleston land rent is $3.00 per square foot. If you and your friend made something together, who should own it? What if your friend took the product for himself? We all make the rent of land -- shouldn't we all share the rent? Should moral standards play a role in operating society?

In residential neighborhoods today most of the property tax is based on the improvement. In commercial neighborhoods where land values are high, building taxes still account for much of the total tax.

Where does WV stand in regard to per capital income? I?ve lived here only 25 years -- you know more than I -- W.V. is near the bottom of lots of criteria, and near the top in some things nobody wants to be tops in. Population growth is low with lots of poor housing.

In 1945 Taiwan, a Japanese colony, was about the 175th country in the world in per capital income. Today Taiwan is the world's 30th country in per capital income. Do you think this change came because of a typhoon? Tidal wave? It came about because of economic reform instituted by Chiang Kai-Sheik.

Are you aware that our young people move to other states for jobs? Would you like to see the job situation reversed so that W.V. young people would be encouraged to come back home, and people from other states would move here for jobs?

Are you beginning to see a connection between land taxation and economic improvement? Check it out. Land speculators, land hoarders, are the primary group standing between us and economic prosperity. About 4% of the population owns 95% of the privately owned land. Does this sound fair? (US Dept. Agriculture Survey, 1978) (Ownership for this survey means deed in hand.) We can certainly out-vote 4%.

My farmland is worth $30.00 per acre annual rent. The tax is $2.00 per acre. I pay the tax out of my "mad money." If the land part of my property tax were to be gradually increased over 15 years so that in 2023 all the site rent was taxed away for social benefits (and the improvements were exempt of taxation), don't you think I would either, 1) advertise for help in order to construct an appropriate building to start a business on my property, to bring in enough money to pay this increased land tax, or 2) walk away from this more highly taxed parcel and allow someone else to operate it along economic principles?

I pay $160.00 land tax annually, and $200.00 improvement tax. The land tax should be $2,400.00. You can see that the land tax is so low it is a great investment. Did the Creator make our earth so that a few people can sell it at a profit to the rest of society?

A lot of famous people have sanctioned the land tax idea. Let's start with Henry George, Leo Tolstoy, John Dewey, Francois Quesnay, Victor Mirabeau (he said the single tax on land is one of the three greatest inventions of all time, the other two being money and the alphabet), Adam Smith, Thomas Paine, Thomas Jefferson, David Ricardo, Ralph Waldo Emerson, John Stewart Mill, Abraham Lincoln, Karl Marx, Herbert Spencer, Mark Twain, Joseph Fels, Sun Yat-Sen, and dozens more, including 7 or 8 recent Nobel Prize winners in economics. Do you think these people had greediness in mind when they spoke for the land tax idea? Or did they believe in Justice.

Don?t you think this land tax idea is at least as important as is taxing alcohol, or improving the Home Exemption law?

Can Labor and Capital produce wealth without land and resources? Consider a system where labor and capital would have to BUY the land, and would not be taxed when they produced goods and services.

If we start the two rate tax system and take it to its ultimate, W.V. should rise to about the 4th state in the Union in per capita income, based upon our location and resources.

Mechanically, how it is done:

  1. Realistically appraise the land and the improvements (assessors should do this work daily).
  2. Reduce tax rates on improvements by 10% each year.
  3. Increase tax rates on land each year by enough to bring in the same revenue as prior to the 2-rate system.
  4. Over time reduce the improvement tax to zero (15 years).
  5. Over time increase the tax rate on land so that all the site rent is being collected (again, 15 years)

Some W.V. land is owned by people who live in other states. Do you think they do this so they can enjoy the scenery? The Two Rate tax would end this practice. Taxing all the site rent will ensure that everyone will get to own as much land as they need and can afford to own based upon the rent tax.

If you think I am idealist for my economic beliefs -- and you believe we can operate a fair and prosperous system wherein a few people own most of the good land sites and resources, it is YOU who are the idealist.

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