32: LeFevre's challenge

American Journal of Economics and Sociology, The, April, 2004 by Damon J. Gross

But this example, particularly with LeFevre's new twist, does not help his argument. The higher rate of return that the elderly couple realize is not a return on their investment at all. It is wages of management. Additionally, one cannot help but get the impression that these "rental properties" are not bare land, but also include significant amounts of capital. This is because bare land hardly needs "management." It is the dwelling units, not the land, that need management in the case of rental property like apartment houses, for example. Even in the case of farmland, what needs to be managed is what and when to plant, maintenance of fences, tiling and terracing, and barns and sheds, whether and what fertilizers and pesticides to apply, etc. and these are all improvements--capital, not land. But George argued that wages and interest would rise under the single-tax system, (21) a contention that LeFevre never disputed. So the new twist that LeFevre put on the old argument does not help his case.

Although LeFevre never directly addressed the issues of wages and interest in his critique, he did challenge the Georgist view on land speculation and use. The Georgist argument that wages and interest would rise under the single-tax system depends partly on the contention that the single tax would discourage land speculation and encourage better land use. We therefore turn to what LeFevre had to say about land use and speculation.

Concentration of Land

LeFevre thought that the single tax would lead to a concentration of land in the hands of a few and would not discourage land speculation. He argued:

   It should be seen at once that if land use is to be absolutely at
   the discretion of the contracting party, then the Georgist theory
   will have only this result. The taxes (land value rents) paid to the
   state would enormously increase, thus impairing the willingness of
   many people to try to become original contractors for land. But
   speculation would continue, and, indeed, on the basis of the newly
   invoked land scarcity, it could be expected to increase. The
   long-range result could be expected to produce a new class of land
   holders who, while not actually owning the land, would in all
   respects be a privileged land-holding aristocracy. Since only the
   very affluent could attempt such holdings, it is reasonable to
   assume that land holdings would become consolidated into huge
   estates, each reserved for its own special kind of use. The very
   evils which George presumed to wipe out with his theory would be
   extended. (22)

LeFevre did not indicate why he thought that if fewer people tried to acquire land it would become more scarce and speculation would increase, but his argument for greater concentration seems to be: (1) Under the Georgist system the tax on land would be "enormously" higher than it is now. (2) Consequently only the very affluent could afford to acquire land. (3) Therefore land will become concentrated in the hands of a few holders, "a privileged land-holding aristocracy." LeFevre was concerned in the previous argument that the price of land would drop to zero. But here he claims that the single tax would make land so expensive that only the super rich could afford it. So what effect would land-value taxation really have on the affordability of land?