United States

American Journal of Economics and Sociology, The,  Dec, 2000  by Walter Rybeck

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WALTER RYBEGK [*]

THE UNITED STATES has always had a measure of land-value taxation. After independence, major reliance on land taxes for public revenue lay at the very core of the nation's economic development. As will be shown later, this had a tremendous and positive impact on the character of American society.

Before the twentieth century, state and local governments began turning increasingly to non-land taxes for added revenues. After the Civil War era, economists, officials, and citizens generally seemed overcome by amnesia about the importance of land and land taxation. [1] Families of wealth and corporations, on the contrary, far from losing sight of the land, accelerated their ownership of the nation's natural resources and prime urban sites. The originally low-budget federal government, meanwhile, grew to overshadow the state-local sector, funding itself with taxes on production and income.

Land-value taxation-USA, on the cusp of the millennium, is a story of the struggle to recall and apply overlooked lessons from the nation's formative years to ease the mammoth socio-economic pathologies generated in large part by the detrimental tax policies of later eras.

A sketch of early land policy and how it was radically altered sets the stage for the movement to untax labor and capital. Some historical perspective throws light on the significance of the specific examples of land-value taxation that will be detailed later.

I

Land Access and Land Duties

THE EARLY STAGES of nation-building were characterized by severe hardships for settlers, an almost complete absence of government benevolence to ease adversity, and minimal public amenities. Despite this, Americans developed an optimistic "can-do" spirit and built the most dynamic society the world had seen. These attitudes and deeds stemmed in considerable measure from several factors related to land.

Land hunger was one of the driving forces that drew people to America. To immigrants, land meant opportunity. (Shamefully, whites deprived native Americans and African slaves of land and other basic rights. This drastic departure from democratic ideals led to war and left scars that long civil rights struggles have not yet healed; it should be kept in mind as otherwise commendable features of the nation's socio-economic climate are recalled.)

With plenty of land for farming, housing, or trade, and with neither landlords nor oppressive government to expropriate earnings, how a family prospered depended on its abilities and Prudence--so the work ethic flourished. Exploitation did not disappear, but land gave victims a way out. Abundant free or cheap land encouraged geographic mobility and mobility of status. Those in poverty, and they were numerous, were buoyed up by constant evidence of people pulling themselves up by their own bootstraps.

Easy access to land supported free market capitalism. This was in sharp contrast to the Latin American experience, where a few conquistadors quickly took dominion over vast territory and reduced the mass of society to peons, suppressing initiative and enterprise.

The inclination to amass land was no Latin peculiarity; some of America's most distinguished leaders, George Washington among them, were avid land speculators. The growth of vast estates, however, was thwarted by the US local tax system. "Local" is stressed because the federal sector in that era financed its almost unbelievably low budgets largely from customs duties.

Cities, counties, and states, the major governmental players, raised public funds almost exclusively from property taxes which, at first, were predominantly taxes on land values. These taxes imposed a financial drain on people "stuck" with large unused land holdings. To avoid tax bills, many owners sold off excess holdings. This, added to already large supplies of available land, took away what makes land grabbing and speculation so profitable and seductive--the reality or the impression of land scracity. [2]

The US was blessed not only with rich and ample land, but also with political philosophers, such as Jefferson, Paine, and Madison, who were able to link the popular notion of political equality with the more radical idea of universal access to land. They sowed the idea of distributing the public domain in parcels suited for family farming, instead of in huge grants to favored individuals; they kept "landed possessions" from becoming a constitutional qualification for voting or election to Congress; Jefferson and Paine even proposed hefty taxes on large land holdings.

The land tax helped sustain grass roots democracy. Holders of land recognized a duty to repay their fellow citizens for the privileges such land conveyed. Real property proved to be a suitable and adequate base for financing local government, enabling cities to remain true centers of power, even in the 20th century when the federal government towered over them.

The Homestead Act was not a case of sharing land values via taxation, but of sharing the land itself to provide jobs and family welfare. This act signed by President Lincoln enabled families to get 160 acres of free public domain land. By building a home and working the land for five years, they acquired title. An estimated 300 million acres were distributed in this way. [3]