A Better Way
Since time began, the control of civilizations were achieved
through systems of land tenures which required the performance of
some service in return for the allocation of land, to that
establishment in power. The Roman precarium was a temporary grant of
land made by an owner to a tenant in return for service. Land
granted in this way was called a "fief". The provinces
outside Italy were ruled by a Roman Governor who collected the taxes
as recounted in the Bible by St. Luke, "and it came to pass in
those days; that there went out a decree from Caesar Augustus, that
all the world should be taxed."
The Roman Empire's demise can be directly attributed to the masses
of the people at the bottom of the pyramid who received little
benefits for the wealth that they created, ultimately revolting by
withdrawing their labor and support to its continued existence. As
recounted in the most recent July 1997 issue of National Geographic
Magazine, commenting on the Roman Empire and the causes for its
downfall: "In Rome tax evasion became such an art form among
the rich that the farmers and peasants, particularly in Italy, were
bled white to maintain the revenue flow." Nevertheless, even
after the Roman downfall, those successors in power, paradoxically,
adopted the same system for their own survival and in order to
insure their continued control of the land they conquered, set up a
system of primitive feudal land tenures.
Brevity will not permit me to tell you of the step by step
development of the feudal system as we understand it today. Suffice
it to say, that in its refinement, the continued "ace in the
hole", was the control and distribution of the land. When
William was crowned King of England in 1066, he immediately
distributed the land of the conquered, rewarding his friends, and
punishing his foes. The land of those who fought against the
conqueror was seized and divided among his followers and himself. No
land was to be held in absolute ownership. Every landlord would hold
directly or indirectly to the king. It is for this reason that
feudalism involved not only proprietorship of the soil but also of
the inhabitants living on it. Political power could only be
maintained by control of the population and by attaching the
population to the soil and thus making them part and parcel of the
land on which they resided. This created a species of slavery as a
means for sustaining the political power of the sovereign. In this
way the people in the various lands could be controlled by the lords
While a person was merely a tenant to those above him, he was lord
to those below him and accordingly was termed "meanse" or "middle
lord". Thus, land held by one tenant of a superior was known as
a "feud", "fief", or a "fee" -- the
term being derived from "feudum', and was contra-distinguished
from "allodial" land (land which was possessed by a man in
his own right, not incident of another and without any obligation of
rent or services.)
King William had to solve the problem of holding the English in
subjugation while keeping a check on his Norman followers. In the
case of the English, he continued the practice of seizing the lands
of those who resisted his authority and turning them over to Norman
lords, each of whom had to furnish a contingent of soldiers in
proportion to the size of his land grant. Secondly, William secured
every district he conquered with a castle garrisoned with his own
From that date to this time, there has been no change in the land
ownership system except by its surreptitious refinement. Any reforms
that were made were the result of a constant whittling away of the
obligation of tenure to the government.
While it is still true today that there is no absolute ownership
of land, the amount of the tenure, or as we call it land rent or
land value taxation, due the government has been considerably
To my knowledge there is no "allodial" land in the
United States and when this country was founded it was created by
charters granted to certain persons and organizations for the
development of the new land. The first colonial charters for the
settlements of North America were granted to the Plymouth Company
and to the Virginia Company. They were joint stock companies
composed of "knights, gentlemen, merchants and other adventures
as stockholders". They were in effect colonizing companies, and
the ownership of or profit from the sale of the land was one of the
purposes of their organization.
The charters provided that the king was to grant land to any
person recommended by the council of each colony on its petition.
The only reservation as to the land use was the usual provision, in
those days that five percent of the gold and silver recovered from
the land be reserved to the king. Although the colony land system
was essentially English, attempts to introduce the feudal system of
land tenure to the American colonies largely resulted in failure and
quit rents demanded of settlers were ignored.
Nevertheless, as finally determined by the states, land was
granted to holders from the state and upon the owner's demise or
failure to pay taxes to the lord escheated to the government. The
law which applied to the ownership of land remained essentially the
same as that evolved from the common law, which was based on the
An estate in fee simple is the entire interest and property in
land by the tenant to himself and his heirs forever. The word "fee"
was originally used in the sense of "feud", referring to
land which was held of a feudal superior in contra-distinction to
land held "allodially".
The grants to the colonial proprietors were in free and common
socage, the services reserved consisting either of a nominal rent,
inferior services or only of the incident of fealty marking the
feudal relation. After the revolution, the feudal position of
paramount lord passed to the state with the other sovereign rights.
There is really not much difference today.
In a number of the states all tenures are abolished either by
constitutional provision by statute or by judicial decision, with
the abolition of tenures the "Statute of Qilia Emptores" ("because
the purchasers") is impliedly repealed. The effect of this
statute was twofold: (1) To facilitate the alienation of fee-simple
estates; and (2) to put an end to the creation of any new manors,
i.e., tenancies in fee simple of a subject. The abolition of tenures
would make such a statute meaningless.
In other states, however, where tenure exists this statute is
probably in force, with the possible exception of Pennsylvania and
South Carolina, but all tenure must be directly of the state.
With that historical background let us apply the economics of
today in an attempt to "kill two birds with one stone".
What are the two birds? One would be the elimination of most poverty
and at the same time the implementation of a better property tax
system. What I am suggesting is Land Value Taxation, or putting it
in economic terms, appropriating to a larger degree the rent for the
use of land.
Webster's dictionary defines economics as "the science that
deals with the production, distribution, and consumption of wealth".
This article is not to be a lesson on the different economic
systems; for that I refer you to the book entitled "The Basic
Teachings of the Great Economists" by J.W. McConnell. This is
one of the best treatises on the subject. I will, however, attempt
to explain in the most simple terms the basis for all of the
ramifications of the production and distribution of wealth.
Put in its simplest terms, the three factors of production of
wealth are land, labor and capital. The return for the use of land
is rent. The return for the use of labor is wages. The return for
the use of capital is interest. Of those three, only one is unearned
and that is the return for the use of land, or as most economists
refer to it as the "unearned increment". If it is
unearned, and it is, rent derived from land, nature's legacy,
defined as all of the material universe exclusive of man and his
products; why not use it for the operation of government?
Many have criticized the idea as theory when it is not. It is
already made a part of the property tax used by municipalities
throughout the United States. Others have said it is wonderful but
not practical or impossible to be applied today.
Yet, in the State of Pennsylvania over eighteen cities have
adopted a two-rate tax system whereby land is taxed at a greater
rate than buildings. While in the Michigan Legislature, I led a
study committee to Pittsburgh, where the Golden Triangle is located,
as an example of its practical application. Incidentally, when I
became Mayor of Southfield, I named the Southeast corner of the city
the "Golden Triangle". While the Committee recommended
legislation enabling cities in Michigan to adopt a two rate system,
to knowledge, it is yet to be adopted.
Why not use the rent for the use of land? You do not have to do
any thing for it while you have to work for wages and you have to
save your wages for capital to get interest. Why then do we justify
a system that permits the land owner to keep the increase in the
value of land, or the rent for its use, created by nature and
society. This article will attempt to answer that question.
Land tenures were abolished and in substitute therefore other
forms of revenue for the government were invented, such as the
income tax which fell on all three factors of production. Its
onerous provisions against labor are accepted by some upon the
spurious argument of ability to pay based upon how much one earns
without consideration of its source.
While Henry George was primarily known for his so-called "Single
Tax", the taking of all of the unearned increment (land rent)
for the operation of all of the government, the merit for its
partial use is valid today.
We have some Land Value Taxation today in the form of our property
tax. Unfortunately, because it is combined with the improvements on
the land, the average taxpayer cannot easily distinguish between the
two except where he owns land only. In Southfield, however, the tax
bills carry the assessed value on buildings and land separately, for
the taxpayer's edification.
It comes to me as no great surprise to find many of those
so-called pundit economists who advocate the income tax, to be
sizable landowners themselves. No treatise on the subject of wealth
misses making the point that it is real estate that gets millions
and makes millionaires.
I cannot quarrel with this, nor with the precepts of those who
take advantage of this counter-productive system. I would be
hypocritical and much worse, if I did not admit that I have invested
in land in Southfield and as a result thereof profited, to a small
degree, from those investments. For instance, a house came up for
sale on Southfield Road just north of Ten Mile Road, and I convinced
my law partners to join with me in its purchase. I knew that
Southfield Road would be widened to four lanes and increase its
value. We purchased the property with $3,000 down on a land contract
for $18,000. Just over six months later we sold it for $32,000. All
of the profit was from the increase in the value of the land.
It took some courage to practice what I preached, but once after
the first experiment in this adventure, I was forever hooked and
consequently found myself rationalizing my action by espousing the
merit of Land Value Taxation and thereby justifying my investment in
land as a means to prove my point. The practical aspect of this is
easily understood when in the talks that I give, and have given,
across the nation and in Canada, I could more easily ford the
question that implied that my advocating of land value taxation was
but "sour grapes" for my failure to have benefitted from
This argument has now been abated, as I said before, by my own
participation in the system, a system that is so entrenched that we
look at our politicians with grandeur as they make magnanimous
overtures of helping the minorities and the poverty stricken, with
other peoples' tax money. Oh, how ironic, that they have missed the
first who spoke of "Progress and Poverty", but in his
answer, Henry George so eloquently championed individual capitalism
and a system of free enterprise, without poverty!
President Johnson's charitable advice and the Kennedys' good
intentions and all others of those prominent national politicians
with landed estates, living off the lands and returns of their
property, at the expense of the impoverished, cannot cure this
counter-productive system by federal subsidies! Of all of the
examples of the exploitation of land is the oil industry. President
Bush, while an Easterner, came to Midland, Texas and formed an
independent oil company named Zapata. After making sufficient money
he went into politics, and you know the rest of the story. His
relationship with the Persian Gulf oil countries and their
importance to the oil industries made it no surprise when he acted
with alacrity in sending our troops to defend Kuwait when Iraq
invaded this rich oil country. Oil was the name of the game, not a
war for democracy. Since 1985 Iraq has been the largest purchaser of
arms, much of it from the United States, to be later used against
The Pulitizer Price winning book, by Daniel Yergin,"The Prize",
spelled out the epic quest for oil, money, and power, chapter and
verse better than any book I have ever read on this subject. He
cited David Ricardo, who pointed out that "rents" were
something different from normal profits, which set the ground work
for the nationalization of the oil by Mexico, Venezuela, and the
Persian Gulf countries. Oil was one of nature's legacies derived
from the land. Its geological presence had nothing to do with the
character or doings of the people who happened to reside above it,
or the nature of the particular political regime that held sway over
the region in which it was found. Rent was the difference between
what it cost to bring it out of the ground, refine it, and market
At this point one must keep in mind that the law recognizes two
diametrically and opposite bases for title to land and personal
property. Title to personal property is traced back to creation,
while title to land is based on force. It is preposterous to
reconcile the two, yet we do. If you have a big enough army, it is "OK"
to take title to land by force, as was done by the British, French,
Dutch, and Spanish in this country. Since time began, and right up
until today, wars are being fought over title to land.
The guaranteed annual income and other nostrums so prolific today
will not, and cannot, cure the plight of the cities. True, they are
accomplishing the upgrading of some of the minority races by
affirmative action laws so that they can be part of the system. The
economic level of the minorities will, undoubtedly, be benefitted,
but the bottom percentage of the impoverished will still remain the
To say that we have solved our problems by the creation of a
system necessitating a guaranteed annual income for all of those
unable to work or unable to find jobs, is but an hallucinatory
device dreamed up by those liberal politicians financed into office
by their, and their supporters, ownership of land created by God for
all, but reserved to themselves under the system. They play their
role of magnanimity in spreading around wealth obtained by an income
tax with deductions not available to laborers.
At the last United States Conference of Mayors I attended in
Chicago in 1968, almost the last visages of local home rule was lost
to federal dominance. Almost all were federally related resolutions
and one, in particular, went so far as to openly advocate the
passage of all necessary income tax legislation to support the
socialistic programs that the good-intentioned mayors passed as the
solutions for the urban crisis now upon us.
It is hoped by this former mayor and now retired judge, that
Southfield can remain a glimmer of light in the blackness of federal
dominance. While Southfield's tax bills still carry separately the
assessments on land and buildings, subsequent administrations have
done nothing further to change to a two-rate tax system. I hope that
future administrations will adopt the two-rate tax system which will
not destroy the individual or the products of his initiative and
labor. We need a better property tax system that will not penalize a
person for building abetter building or home.
Now, some of you will say to yourselves, "What is Land Value
Taxation"? Is this a semantic circumvention for what we already
now know as our property tax in the State of Michigan? Yes, I
suppose that you could say that what we tried to do in Southfield,
when I was Mayor, was to follow the law as it was already written.
What we did was to place the same appraised value on the land that
had been placed on improvements. This corrected the inequality that
existed before where land had been under-appraised for as much as
one thousand percent. As a result, ninety percent of the home
owners' taxes were reduced. The definition of anything today is a
matter of degree. In Southfield, we did not have one hundred per
cent land value taxation, but we did have a lot more than any other
community in Michigan. Because of the efforts of the former Assessor
and my policies, while then Mayor, we emphasized the appraisal of
land values and its taxation rather than the emphasizing of taxation
on buildings. Whether that is true today is doubtful.
I would then perhaps, in a sense, describe Southfield as but one
drop of intellectual and experimental rain. True, the economic
pedants refused to recognize the validity of the tax reform
practiced by Southfield as a form of Land Value Taxation but only
compliance with the existing law, then why was it not followed until
"What is in it for me?" I have often been asked this
question by people after explaining my reasons for supporting land
value taxation. In fact, I have had more problems answering this
question than any other.
To say that Land Value Taxation would help to make a better world
in which to live, that it would give my children an opportunity to
enjoy a better life, or that it would bring about the ultimate goal
of all people of a lasting peace and prosperity, is all too simple.
Nevertheless, it is just these simple answers that altruistically
motivate man. To deny this is to deny the nature of man. It is the
simplicity of Land Value Taxation itself that causes so many people
to question the validity of its application. This is especially true
of those economists who desire to make simple solutions esoteric.
Perhaps more practical reasons can be understood better,
especially by those of us who have finally reached a point in our
lives where we are earning substantial incomes and are faced with
the income tax conundrum. It seems to me that in searching for the
solution of the taxation problem, we are faced with a selection of
alternatives. Trial and error alone would lead a person to pick
anything other than a tax based on income with its demagoguery, its
bureaucracy, its inquisitorial procedures and, last but not least,
its monumental cost of collection.
It is now more a rule, rather than an exception, for those with
earning power above the poverty level, to find themselves paying
exorbitant sums to have their income tax return prepared for filing.
Those with earning power above that level, in the middle class
bracket, could pay hundreds of dollars for this service, and others
who are in an even higher bracket, could pay thousands of dollars
for the preparation of their income tax forms. The recent proposed
flat rate tax would help in this regard depending on what deductions
would be permitted. Bear in mind, that in order for an income tax to
be successful for operating the government, it must collect
sufficient funds from our major wage earning population. This means,
much to the humiliation of the people who advocate its cause, that,
primarily, the income tax must fall on the people in the lower
income brackets. While each individual tax is small in amount,
enough numbers in this bracket would generate the necessary income.
Some people in the high income brackets must pay astronomical
amounts in income taxes, but most of them have learned how to avoid
the income tax by properly investing their money which enables them
to take write-offs against profits, while at the same time allowing
themselves the benefit of a tidy cash flow.
In the July 21, 1997 issue of Newsweek, an article describing the
proposed new tax reform bill pointed out that the tax loopholes,
about 300 provisions, are so complex that it will force ordinary
folks to line up outside H&R Block offices to receive meager tax
benefits they barely understand. There has to be a better way!
Remember that the name of the game is cash flow --not how much
profit you are making!
Let me give you an example. I purchased a cement block building
that was at least 20 years old and which was about 20' by 40' in
size. The building had no basement, only rudimentary gas heat and
well water. This property I knew would become very, very valuable
land and from which there would ultimately be realized a very high
speculative profit. While this property was ripening in value, the
building was being rented for $250 per month, net. In other words,
all that I furnished was the building. The tenants, in addition to
their rent, would have to provide their own heat and electricity
incidental to the operation of their business at their own cost. I
determined the value of the building to be approximately $40,000 and
for income tax purposes, I would take a fast write-off. In other
words, the building would be depreciated to a value of zero over a
period of ten years. By way of simplification, if I took off $4,000
per year, I would have the privilege of subtracting that from any
profits from the rental of the building that I might make.
This, incidentally, amounted to a sizable loss every year so that
while I actually gained in dollars in my pocket, for income tax
purposes I would write off a loss against other income that I
received during the year. This example is a very limited explanation
of the advantages of the income tax structure that real estate
investment can have that is not available to the wage earner. By the
way, that same property became what is now known as Applegate Square
shopping Center which made for me a sizable profit. Almost every day
one can pick up the newspaper and read where either a corporation or
an individual made millions but paid little or no income taxes.
Now, may I made it clear that I, for one, do not object to anyone
who makes his fortune as a result of the application of labor and
capital, increasing the sum total of the wealth produced so that all
of us can live a better life. I do, however, object to those who
through the monopolization of and ownership of the land are allowed
to retain this unearned increment at the expense and deprivation of
Let's ask ourselves what are the other alternatives. If we were to
analyze this we would find there are only two. First, the tax on
labor and its derivatives such as the income tax as already
mentioned, sales tax, franchise taxes, and taxes on capital which
after all is nothing but stored up wages, or secondly a taxon land
My choice, notwithstanding my own personal investment in
speculative land from which I will derive some unearned increment,
is Land Value Taxation.
How could this be achieved when the entire history of mankind has
been steeped in the traditional concept? If we are to rule at all by
any form of government, it would have to based on a system that
would protect or insure property rights in land to individuals?
Modernization of the property tax could be a beginning. Ownership
of the land would not be disturbed. For starters, a two-rate tax
system could be employed by taxing land at a higher rate than
improvements. This was done in Pittsburgh and some thirteen other
cities in Pennsylvania. States that have adopted two-rate tax
enabling legislation are New York, Maryland, and Washington, D.C.
Other countries adopting this system have been Australia, New
Zealand, the Republic of South Africa, and Denmark.
Obviously, the Jubilee as related in the Bible for the
redistribution of the land was not the answer, nor is the answer
today. I categorically and unequivocally renounce the position that
the answer lies with Karl Marx's solution, the government ownership
of all three factors of production -- land, labor, and capital. It's
simpler than that! As Henry George pointed out so eloquently and so
much better than any of the classical economists, the solution is to
simply reserve to the government the unearned increment for the
benefit of the community which created it.
This article is an attempt to explain the application of Land
Value Taxation in the City of Southfield. In order to understand
Southfield, I have tried the semantic approach by explaining each
word by referents. For too long a time I have felt that in the field
of economics, the so-called "experts" have been playing a
game of words without explanation of meaning. Today, more than ever
before, because we think with words, it is important that we
understand their meaning and do not become mired down in the morass
of technical jargon to the point where we cannot adopt fresh ideas
regarding solutions for the betterment of our cities. I have tried
to keep it simple; tax the unearned increment.
Why, then, do you ask if Land Value Taxation is such a good idea
has it not been adopted? Is it some kind of territorial imperative
syndrome resting in greed? From the dawn of humans the quest for
land has been the salient theme of recorded history. Nations and
empires have fought to expand their domains. The Chinese created a
huge land empire in the East in the centuries before Christ. Then
came The Great Khans from Mongolia followed by Alexander the Great
who did the same thing. The Middle East with the Israelites in
claiming the promised land, the Canaanite, Hittite, Babylonians,
Egyptians, Assyrians and the Persians, the Gauls, the Vikings, and
the Roman empire, to name a few more, all fought to obtain more land
than they could use.
Then came the colonial empires of the British, French, Spanish,
and Dutch, basing their title to the land in India, Africa, and
America based on discovery and force. In more modern times the
Germans under Hitler, the Russians under Stalin, and the Japanese
went to war seeking to conquer other nations to obtain more and more
Today the method is more insidious. It is called market economy
where land is included as the same as capital and so there is no
longer any unearned rent. Calling land "capital" does not
make it so, even if you invest in stock of a corporation if the
profits are wholly or in part obtained from land. No matter what you
pay for anything from an entity that it is not entitled to own, it
should not legitimize its ownership, although I realize that the
present law and practice today makes it lawful. I am convinced that
to change the present system will take more time than I can imagine
or estimate or else the happening of a miracle similar to the
destruction of the Berlin wall.
Take, for example, while still Mayor, I gave a speech in front of
the Northwestern Reality Association in which I alluded to certain
land in Southfield where enormous profits could be made from the
unearned increment by their purchase and resale. My comments were an
attempt to prove the wisdom of changing the tax system. After the
speech several brokers who I hoped would applaud the idea of Land
Value Taxation came up to me; instead they asked me where could they
find the land so that they could benefit by its speculative
Will this innate desire in humans to get something for nothing
rather than working for it perpetuate the justification for the
private appropriation of the unearned increment? I agree with Ayn
Rand that the profit motive makes a better world by the resultant
increase in wealth and that it is not wrong to be selfish. But wait
a minute; that does not mean we should condone the right to steal
what nature and society created.
Take this analogy. Bill is living on Mars; the planet is drying
up. He looks through his telescope and sees Earth, a green lush
planet. So he gets in his rocket ship and flies to Earth where he
and his family decides to land in Manhattan, a fertile piece of land
with a good seaport. Jack, still on Mars, decides to do the same
thing except he lands in New Jersey, a garden spot across from New
York. Bill meets him when he lands and welcomes him to the new
world. "You and your family will end our loneliness; however,
you will have to pay me for New Jersey, as I took title to all of
Earth by right of discovery." Jack was dumbfounded and said to
Bill, "Until I came here it was not worth anything to you."
Bill replied, "That's right, but I took title to this property
and while you created its value it is now mine."
This narrative, while fiction, actually took place in the founding
of America under the colonial system. The Dutch took New York and
England took New Jersey. The rest of America was divided between
them, Spain, and France.
I am not an idealist. If we have lived under the present system
since the beginning of recorded history, to change it can only be
done by one step at a time. That first step must be through
municipal property tax modernization. Any change more radical than
that will be met with resistance too difficult to overcome. I only
hope that as I have been, that I will continue to be, a part of this
"Great Adventure" in trying to explain to others the
justification for the partial application of Land Value Taxation,
not only in Southfield, but in all cities and governmental entities
through the world.
In conclusion, our choices are to keep the status quo or adopt a
two-rate tax systems as renaissance to the ultimate implementation
of total Land Value Taxation for a BETTER WAY.
The above paper was prepared in July 1997 by James Clarkson to use
in the educational effort of Southfield mayoral candidate Barbara
Talley, with whom he met personally in August. Attorney James
Clarkson served in the Michigan state legislature and as Southfield,
Mich. Mayor in the late 1960s, after which he was elected a Judge.
He is now in semi-retirement in Naples, Florida and Port Carling,
Judge Clarkson writes that Ms. Talley narrowly lost her mayoral
bid. (The Assessor in Southfield during Mayor Clarkson's term was
Ted Gwartney, who now is the director of the Robert Schalkenbach
Foundation in New York, NY. Gwartney authored a 1968 paper entitled,
"The Southfield Story: A Lesson in Creative Taxation."
(Southfield, Mich. and then Mayor Clarkson are featured in
Schalkenbach Foundation's film (circa 1970),"One Way to Better
Cities, The Case for Site-Value Taxation.")