Featured White Papers
Content provided in partnership with
Business Services Industry
2 The essential Henry George - Part I: prolegomena
American Journal of Economics and Sociology, The, Nov, 2003 by Louis Wasserman
Effect upon Particular Groups
What effect would the proposed socialization of ground rent have upon particular income groups of the community?
Clearly, the overall consequence would be that all who received rental income from landholdings would henceforth lose all but a small percentage of that income. Therefore the land would cease to have speculative value. It would, however, retain use value, reflected in its rent, which would go almost entirely to the community. Legal title would not be affected: the owner would retain his title as long as he paid his land-tax.
A. THE HOME OWNER, POSSESSING HIS HOUSE AND LOT: in market terms, the selling value of his lot would diminish, like that of every other plot of land. But his possession and use, or sale, of his property, would remain unaltered. In exchange for the annual tax on the value of his lot, he would be free from taxation on his house, personal property, private earnings, and other tax levies. If he should wish to buy or build another dwelling he could, of course, expect to receive relatively little from the sale of his original lot apart from its improvements; but he would not have to invest a large sum in a new lot, since land could be purchased cheaply by anyone willing to pay most of its ground rent to the community.
B. THE FARMER: at present he carries a disproportionately heavy burden, George believes, because of the high ratio of visible property upon which he is taxed--his crops, dwellings, barns, livestock, machinery, and the like. All that makes his production possible is now levied upon, directly and indirectly. When he improves his land he is taxed more heavily for it, even while high-priced but unimproved land in the towns is assessed at a minimum. The farmer would benefit under George's proposal in two principal ways: first, by being liberated from the oppressive levies upon his production and improvements; and second, because his land would normally be assessed at a low rental value, being on the margin of the demand area. Moreover, since the purchase of the land he works would no longer require a large investment, he could engage in farming with much less capital and use his earnings to improve his (tax-free) buildings, equipment, and livestock.
C. THE LARGE PROPORTION OF THE POPULATION WHO POSSESS NO LAND AT ALL: they would have no taxes to pay directly. They would, however, absorb, in the price of the goods and services they buy, that share of production costs that represents the ground rent of the producing enterprise. But two changes would have taken place: first, the ground rent would have become public revenue instead of landowners' income, and would, accordingly, be utilized to pay for the costs of government; second, the price of goods and services would no longer be burdened with the multitude of taxes upon production that were hitherto passed on to consumers.
D. THE GROUP OF LARGE LANDOWNERS WHOSE INCOMES ARE DERIVED SOLELY OR PREDOMINANTLY FROM THEIR HOLDINGS OF LAND AND SUCH NATURAL RESOURCES AS MINERAL OR PETROLEUM DEPOSITS: would thus bear the major loss resulting from the transition. Their deprivation would be measured roughly by the extent to which their rent income is a greater share than the other elements of their total income. The capital value of their landed investments would be wholly, or almost wholly, forfeited. However, as George contends, all landowners, great and small, would benefit directly from the abolition of taxes on improvements, personal income, investments in productive enterprise, and the like. He asserts that even the largest landowners, though they will suffer immediate loss of ground rent, will profit in common with all other groups in the long-run advantages of the reform.
