Property Tax Reform to Share Nature's Gifts to Us All

Carl Shaw

[A presentation to the Calhoun County, West Virginia Commission, 18 October 2009. Reprinted from GroundSwell, May 2012]

The earth and its resources was created by a higher power, God, Mother Nature, or a big bang. Whatever its origin, it was not created by human beings.

Ownership is grounded in exertion, or production. In as much as we did not produce the earth, neither can we own it. But in order to live we have to get access to the earth’s space and resources.

And by we I mean all of us. Fairness and sharing are human traits which have helped make us civilized. Civilizations which were crashed were civilizations owned by a few. The USDA 1978 land ownership survey showed that 4% of Americans own 95% of the privately owned land. And by owned they meant with deed or title in hand. This doesn’t sound like sharing to me.

Security of tenure and ownership are not the same thing. We needf security of tenure in order to encourage construction and development. Ownership is a sometimes thing, and is valid only as long as the property tax is paid.

The property tax not only raises funds, but insures sharing. Here in WV we don’t do a very good job of land sharing. Our land tax rate is one of the two lowest in America. Mississippi is the other. Low land taxes encourages investment, and hoarding, not sharing. There are land owners here in WV who own scores of acres, far more than they can ever use.

The property tax is two very different taxes. The improvement tax, based on the construction cost and probable sale value of the building, ends up being a punishment for enterprise. The more you improve, and the larger the building the higher are the taxes.

The land part of the property tax collects part of the annual site rent. The tax bill presented to us is based on the sale price, reduced to a 60% assessed value, then multiplied by the millage rate.

Many business district land owners and some farmers routinely deal with the rent concept. They lease land to a tenant for an annual payment, called rent.

Rental value is based totally on the market. Downtown Charleston advantageous sites lease for $3.00 per square foot per year. Manhattan, NYC, leases for $15.00 per square foot. My Lee District acreage could bring $30.00 per acre (keep in mind an acre is 43,560 square feet.)

Rent, I like to call it site rent, also called economic rent or ground rent, depends on the population around the site and their economic activities. Rent is the social product of civilization. It exists because people are there, growing, making, producing, trading, building, living.

Rent belongs to all of us. The study I gave to you recently shows that only 9-22% of Calhoun County’s rent gets collected as a property tax. And the 22% applies only to the village. The land owners get to keep and/or capitalize the residue into sales prices.

Taxing rent has economic and moral ramifications. Highly taxed land encourages its owner to make good use of the parcel so as to gain income with which to pay the tax. Low taxed or untaxed sites plays no part in economic development. This means little labor or capital employed.

Our current recession has been coming on for 30 or more years. Since WW2 taxation has been more and more based upon the production of labor and capital, less on rent. Bill Moyers in his book, “Moyers on Democracy” especially chapters 13, 15, 16, and 18, points out the growing discrepancy between a rich class and the rest of us.

Pres. Obama, most politicians, and the media believes that consumer spending determines economic production. They ignore the proper sequence of production.

All wealth is a product of labor and capital on land using natural resources. Unless a land owner approves, no production will take place on his land. Obviously higher land taxation will drive owners to put land to use.

Do I have to point out that basic land production results in all other types of production – tomato processing factories employ workers for instance, who need food, clothing, transportation, health care, education, computers, vacations, entertainment, and on and on. It all starts with the earth.

Taxation of buildings, and the low taxation of land lies at the basis of economic hard times.

Economic problems are human caused problems. They are capable of solution by we humans.

You are in a good position to influence the Legislature to reform our property tax system. Legislators seek issues—there are no more important issues than poverty, unemployment, out migration, slow businesses. Our WV tax code was set up in 1932 for the welfare of land owners. You can see economic problems right here in Calhoun Co. Vacant former commercial-industrial buildings, run down housing, lots of vacant houses, good land sites vacant, high unemployment, outmigration for jobs, loss of population. You ran for this position in order to solve problems. There are plenty of problems.

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