Donald G. Hagman
[Chapter 17 of the book Windfalls For Wipeouts:
Land Value Capture and Compensationedited by Donald G. Hagman and
Dean J. Misczynski (Washington, DC: American Planning Association),
This chapter is nondefinitive, as distinguished from some other
chapters in this book which are intended to be exhaustive. This
approach was taken for three reasons: (1) I have previously considered
the subject at length; (2) it has its own definitive literature,
some of which will be cited herein; and (3) regardless of its merits,
the idea has been influential since the 1880s, and the apogee of the
movement has long since passed. Convene a thousand reviews by neutral
observers and almost all would likely conclude, as did the California
Assembly Committee on Revenue and Taxation, that "site-value
taxation is not a viable alternative to the current property tax."
But it is a windfall recapture device. Support comes from the belief
that increases in land value belong to the community -- not to the
There are a number of varieties of land-value taxation, which had
best be described for the uninitiated. In its purest form land-value
taxation is a single tax. A single tax system is one in which there
are no taxes on income, sales, or any other kind of tax, only a
property tax, with land as the only property in the base. A land-value
tax system is one in which there are other taxes, but the property tax
is only on land, and comes in two varieties, an unimproved land-value
(sometimes called an unimproved capital-value) tax and a land-value
tax. The first is a "purer" form, because the base of the
tax is the land untouched by humans, that is, the land's value in its
raw state surrounded by its milieu. For example, land located in the
center of New York City and fenced off since time immemorial with
nothing done to it would still have considerable value accrued over
time as the city developed. A land-value (sometimes known as a site
value) tax, on the other hand, is a tax on unimproved land plus
invisible improvements. The least pure form of land-value taxation is
known as the graded tax, where land is assessed at a higher ratio to
market value than is used in assessing structures.
For convenience this chapter first reviews the major arguments for
and against land-value taxation (using the term land-value taxation in
its generic sense). Similarly included for convenience are short
discussions of the experience in Australia and New Zealand, which do
use land-value taxation in its purest form, namely, as an unimproved
land-value tax. The Canadian experience is also discussed, the graded
tax being popular in the western provinces. The English, basically,
never adopted the idea.
Finally, the American applications are discussed, including a
description of land-value taxation by some special districts in
California. The discussion of special districts comprises the only
original research in this chapter. Henry George, the leading apostle
of land-value taxation, markedly raised the consciousness about the
need to recapture unearned increments. That idea is the intellectual
underpinning for much of the windfall-recapture concept contained in
THE PROS AND CONS OF LAND-VALUE TAXATION
The arguments of both the opponents and proponents of land-value
taxation are clustered around four basic issues -- equity,
administrative feasibility, practicality, and the effects of the tax.
The basic equity consideration advanced by the proponents is that
since a large share of land-value increases are a result of population
growth and public and private improvements by others than the
landowner, the community has the right to recapture the unearned
Opponents, while not disputing the basic premise of the origin of
land-value in-creases, raise several objections. First, they note that
society is replete with unearned increments. Paintings become more
valuable, for example. There is no reason to tax unearned increments
only in land values. Second, they note that some unearned
in-creases are taxed by the income and capital gains taxes. Third,
the land tax bears in-equitably among industries. Those that are land
intensive such as farming and lumbering would be penalized.
Proponents answer that failure to recapture some unearned increments
is no reason not to recapture others and that many increases are
not recaptured by income or capital gains taxes unless property is
transferred. Land is particularly likely to be held for long
periods of time and transferred only at death, at which time there is
no tax on the increase. Moreover, most other property is valuable
because of the expenditure of labor. Land is a product of nature in a
peculiar way and individuals rather than the community should not be
put in a position of capturing these increases. The proponents do not
consider the alleged inequities between industries to be serious
be-cause higher tax costs are either passed on to consumers or because
the higher taxes on land are capitalized to lower land costs so that
total costs do not change.
Opponents observe that because of capitalization there will be
serious equity effects in changing to land-value taxation. Consider
an example of capitalization. Mr. X buys vacant land on the assumption
of certain future property tax liability. Based on those expectations,
the land has a market value of $10,000. If the tax is then taken off
buildings and applied only to the land, the market value of X's land
decreases because the future tax burden is increased. Meanwhile,
someone with property intensively improved with a building enjoys an
increase in value because the taxes on the building have been removed.
Proponents of land-value taxation suggest the problem can be minimized
by staging the shift to land-value taxation over a period of time.
Moreover, many changes in tax or other public policies cause
windfalls and wipe-outs.
Opponents doubt administrative feasibility: Can the site actually be
assessed independently of its improvements? Some opponents contend
the demand for urban land is derived from the intensity
and character of the demand for structures in general and that the
character of improvements on particular sites shapes the demand for
the sites themselves.
Therefore, it is impossible to assess as if buildings were not on
land. Proponents contend that the opponents' position
rests on a rather elementary fallacy, a failure to
distinguish between the value of land in general, which is surely
derived from the demand for improvements, and the value of one
These proponents note that values are now separately assigned to
buildings and land in American property-tax systems, so it must be
possible and it is necessary to allocate between land and building
values to determine how much of the asset can be depreciated for
income tax purposes, with only improvements being depreciable.
Those favoring the land-value tax also suggest it will tend to cure
the problem of underassessment of real property. The reply,
well-taken by the opponents of the tax, is that underassessment has
less to do with the form of the property tax than with the will to
assess properly and to spend the money necessary to attain quality
Some doubt that adequate revenues could be generated by a land-value
tax. The closer the proposal to the direction of the single tax, the
greater the doubt. Heilbrun suggests that the revenues generated by
such a tax would have to be greater than the entire land rent in order
to equal those produced by all other taxes. A Brookings Institute
study, while critical of Heilbrun's findings, concurred that at least
as a single tax the resulting revenues would not be adequate to
replace all other taxes. However, Mason Gaffney, a leading
advocate of the tax, demonstrates that untaxing improvements
capitalizes their value into land and that all economic entities are
tied to the use of land and, even as a single tax, land would be an
adequate base. Neither side can marshall much empirical evidence
to support the arguments because no land-value tax system with
significant rates exists anywhere. The single tax exists nowhere.
The most strident proponents believe that the tax will solve, in one
clean sweep, many if not all modern urban problems. The basic
scenario is that the most efficient use of land is to have it devoted
to its highest and best use from an economic point of view. The high
land tax would cause efficient allocation because landowners would
have to make the highest and best use of each building site in order
to have sufficient income to pay the tax. Economic forces plus the tax
would automatically provide good, that is, efficient, land
Proponents of land-value taxation argue that the tax cost of holding
land under the existing system is relatively low, permitting the
withholding of land from development. Under land-value taxation, "purely
speculative land holding will decrease and competition in land
development will increase." Even nonspeculators will be
encouraged to sell for development which will lead to less
hoarding and the release of more land for development. The tax
would thus encourage both the development and redevelopment of vacant
Proponents also argue that a greater amount and better quality of
development will flow from the greater availability of land at a lower
cost while the "aggregate land value base will increase."
The tax will foster a reduction in building rents as a result of the
increase in the supply of buildings. Proponents argue that in the
long run the rise of land prices will stabilize because of the
anti-speculation effects of the tax.
Meanwhile, as the tax-triggered economic forces compel utilization of
land, the untaxing of buildings and improvements would remove
disincentives that discourage or penalize wealth-creating effort. The
laborer could enjoy the full fruits of labor.
If one views the proponents' arguments as reflecting a belief that
growth is good and that the free market aided by land-value taxation
can best plan and allocate land use and minimize the need for
government in many other areas of human concern, one would not be far
from the mark. Naturally, such a philosophy runs counter to the
managed-growth ideology so prevalent today and is not likely to appeal
to those who believe in a planned society.
But even when America was more growth oriented and more suspicious of
government and planning than at present, a major concern of land-value
tax opponents was that such taxation may be undesirable from a policy
standpoint. The tax could stimulate overdevelopment, which would lead
to the overcongestion of urban areas, creating in turn a host of other
problems. Social amenities such as open spaces and recreational
land, theatre districts, shopping areas, and hotel
districts may be forced out of the central areas if sites are
pushed to a higher use. Opponents maintain that it is not important
simply to stimulate development but to direct it in socially desirable
channels. Opponents also charge that "taxation can never take
the place of wise and efficient land-use planning." Some of
the desirable goals, such as the recapture of socially created values
and the control of urban sprawl, could be realized in more direct,
effective, and efficient ways by a better use both of available
land-use planning and taxation systems.
In addition to cautioning about the negative side effects, opponents
of land-value taxes question whether land speculation, one of the
effects of the present system most disliked by land-value tax
proponents, is really so anti-social. They suggest that, in holding
land and assuming some of the risks of land development, speculators
perform a socially useful function. Opponents also question whether in
any event land speculation can be eradicated by taxation and they
therefore believe that it would be preferable to deal with the problem
directly by using existing planning and other control mechanisms.
When pressed, land-value taxers add other arguments to their
formidable arsenal. They state, for example, that compared with the
present property tax, land-value taxation is neutral, progressive, and
will better tax income. The neutrality argument is that since land
is fixed in supply, taxing it cannot change the supply, whereas the
supply of non-natural goods is affected by taxing them. Critics
question the neutrality argument by noting that the supply of land can
be affected, for example, by filling in the ocean and that supply
refers not only to quantity but to quality. The quality of land in
terms of its accessibility, its useability, its developability, its
productivity is affected by taxing it. Moreover, many question whether
neutrality in taxation is desirable. Income taxes, for example, are
specifically designed not to be neutral.
As to how progressive such a tax might be, proponents argue that
unlike the present tax, which can easily be shifted to the occupier,
the site-value tax would be more progressive since "it would not
be shifted to tenants who are generally in lower tax brackets."
Some opponents think tenants should pay taxes, for if they do not they
will not take an interest in local government. Opponents also
argue that a land-value tax may adversely affect the desirability and
availability of centrally located low-income housing. Low-income areas
tend to be nearer central areas where higher-value development would
be most encouraged by the tax. In order to compete for sites,
low-income housing would have to be very dense or it would be
displaced by more intensive nonresidential uses or by buildings
serving a more expensive rental market.
Those lower-income tenants and homeowners who are not physically
squeezed out would be adversely affected by the tax to the extent
their properties are relatively land intensive. A land tax will shift
the burden away from the occupants of capital intensive properties to
land intensive users. According to the opponents, then, the
site-value tax may be regressive rather than progressive.
The opponents point to several examples to support their position.
With Hawaii's graded tax it was necessary to pass "legislation
relieving the pressure on taxpayers 'living in older homes and those
less financially able to make substantial improvements in their
property'." Also, in New Zealand and Australia where
land-value taxation is used, it was found necessary to pass further
legislation to protect lower-income homeowners. Of course, these
might well be political rather than equitable necessities.
With respect to recapturing unearned income, opponents maintain that
income and capital-gains taxes can be reformed to reach many of these
increases in value eventually without changing the property tax
system. Indeed, some of the major loopholes that once permitted
the owners of rental property to show no taxable income have been
There is a plethora of other social side effects that are predicted
to follow land-value taxation. These complete and supply more fuel for
the point of view. The more avid advocates maintain that, besides
reviving mass transit, decreasing unemployment, lessening poverty,
fighting inflation, and increasing the income-tax yield, site value
taxation is sufficiently adaptable to solve nearly any problem that
can be imagined.
At the extremes, the land-value taxers tend to be zealots. They may
even be right. But the ranks of the unfaithful are large. Too few will
hear the message to warrant any belief that windfall recapture through
land-value taxation is a real prospect in the forseeable future.
AUSTRALIA, NEW ZEALAND, CANADA, AND ENGLAND
Few Americans have enjoyed a welcome from Australians as warm as that
accorded Henry George. Accounts are that he mesmerized them. Beginning
with the State of Victoria in 1877, all Australian states had adopted
a land tax to break up the large estates and to recapture the unearned
increment by 1915. The national government had its own land tax,
enacted in 1910 and repealed in 1952. Local governments also did
and do now make use of land-only based property taxes.
NATIONAL AND STATE LAND TAX
A basic difference between the national and state taxes and the local
taxes is that the former are progressive. The more property owned, the
higher the tax. In the case of very large landholdings, state and
federal land taxes absorbed as much as 50 percent of the rents on land
during the time when land-value taxation rates and coverage was the
greatest. The national rate reached a high of 5 percent of unimproved
values. State rates reached a maximum of 4 percent. In 1973-74,
state land taxes produced $122 million or 4.4 percent out of a total
of $2,766 billion in total state and local tax collections, down from
7.9 percent in 1964-65.
Being rather pure Georgists, the Australians have traditionally used
unimproved land values, but there has been some shift to land values.
For example, the State of Tasmania Land Valuation Act 1971 introduced
the land-value concept for that state. It describes land value as
capital value of all real estate, minus buildings, structures,
fixtures, roads, standing, dams, drains, channels, artificially
established trees, artificially established pastures, and other like
improvements that are visible or tangible.
Included in land value, however, are public works (not paid for by "direct
contribution," for example, special assessment) exactions for
draining, excavation, filling or reclamation of the land, the building
of retaining walls, grading or levelling, removing rocks, stone, sand,
or soil therefrom, removal or destruction or changing the nature of
the vegetation, alteration of soil fertility or structure of the soil,
arresting or elimination of erosion or flooding. Unimproved land
value in the pure sense would not include even those things, because
all were values added by the works of persons and not part of the land
in its natural state.
As in Tasmania, there have been other shifts to land value from
unimproved land values, because the latter are very difficult to
appraise. But the dominant system is still unimproved land values,
making the tax base less than it would be if based on land values.
LOCAL GOVERNMENT LAND TAX
Local governments in Australia use one of three property tax
assessment bases: (1) capital values (as in the U.S.), (2) land values
or unimproved land values and (3) annual assessed values (land and
buildings assessed on rental rather than capital values). Table 17-1
shows the breakdown as of 1962.
There has been a shift toward the land-value system in New South
Wales. Be-ginning in 1973, capital values were no longer used for any
purpose there, and annual assessed values beginning in 1975 were used
only by the water board with respect to commercial properties,
industrial properties, and vacant land. But there is no general shift
in other states to land-value taxation.
Even where unimproved land or land values are used, however, it is
difficult to determine whether the tax has any significant effect on
land development. The tax is not high enough to have the demonstrable
effects proponents of land-value taxes suggest will occur. For
example, state, metropolitan and local property taxes in Australia in
1973-74 were only 5 percent of total tax revenues for all governments,
down from 7.7 percent in 1963. In the U.S., property taxes were 16
percent of total tax revenues. In short, that part of the property tax
in the U.S. which is a burden on land is likely to be greater than the
taxes on land value only in Australia. As a result, the difference in
effects of a tax on land and improvements as compared with one on land
only is most difficult to discern.
And despite its use, an Australian study concluded: "The
committee is unable to recommend unimproved capital value rating as
the most appropriate system for local government purposes."
The national tax is called the land tax. It was initially imposed in
1878, the year before Henry George published
Progress and Poverty. While there have been some changes from
time to time, the base has usually been unimproved land value as it is
today. Exemptions for the small landowner have always been part of the
law, and during some periods the law provided that any debt on the
property was subtracted from its value for the land tax, the mortgage
then being taxed to the holder of the mortgage. Neither is the case at
present, but exemptions have been increased to cover the first $60,000
of value. The land tax has been levied as a fiat rate, but it has been
used mostly as a progressive tax, the rate of tax increasing as the
value of the property increases. Land used principally for farming has
been totally exempt since 1970. And where land is used in the
production of income taxable under the income tax, the land taxis
deductible from income.
The primary purpose of adopting the land tax was to increase the
holding costs of companies and individuals who owned large tracts of
land, thus forcing them to divide the tracts and make the land
available for others. The yield of the tax was of secondary
importance, although in 1891, when New Zealand adopted an income tax
and reenacted the land tax as the Land and Income Tax Assessment Act,
the land-tax yield was far greater than the income-tax yield. For
example, the land tax in 1895 produced 75.7 percent of the combined
land and income tax yield. By 1965 the land tax was only .5 percent of
the total and in 1970-71 amounted to only .3 percent ($3.1 million
compared with $989.5 million for income taxes and $455.6 million in
indirect taxes such as sales and excise taxes).
Primarily because of its low yield, the 1967 report of the Taxation
Review Committee recommended the land tax be abolished.
The use of land-value taxation by local governments in New Zealand is
important and growing. As in Australia, local governments in New
Zealand have their choice of three property-taxation systems. They can
use a capital value, a land value (unimproved value prior to 1970), or
an annual-value system.
Historically, the annual-value system, imported from England, was
used first. However, compared with England, there was little rental
property, so the capital system was authorized as an alternative.
About the same time as the national land tax was being adopted, local
governments were empowered to use the same (unimproved value) base.
The motive, as with the national tax, was to break up large
In the early 1960s, 207 local governments used land-value taxation,
66 used capital values, and 15 used annual values. In 1969-70,
land-value taxes produced $72.6 million in revenues, the capital
system $10.7 million, and the annual system $13.9 million. From 1945
to the early 1970s, some 54 local authorities shifted to the
Much of the development-forcing nature of the land-value and
capital-value systems was removed in 1965 by adding sections to the
basic Valuation of Land Act, 1951, requiring that single-family
residential and agricultural uses in commercial, industrial, and
multi-unit areas be valued at existing use rather than at market
values. Such valuation tends to permit the continuance of these
Except in St. John's, Newfoundland, which uses annual value, all
Canadian property taxes are currently levied on capital values. The
western provinces have used land-value taxes and still used graded
taxes. In Manitoba in the late 1940s, buildings were exempt on farms
exceeding 40 acres and on gardens exceeding four acres. Other
buildings were assessed at a ratio of two-thirds that of land. In the
same period, Alberta exempted farm buildings, and local authorities
were empowered to exempt other buildings. Only four of 194 cities,
villages, and towns exempted all improvements; 94 exempted no
improvements at all. The rest fell in between.
In Saskatchewan, in the late 1940s, improvements in Regina were
assessed at 30 percent of their value, other cities and villages
assessed them at 60 percent, and towns could assess improvements at up
to 60 percent. Rural municipalities assessed improvements in
percentages ranging from 0 to 100. Buildings used for agricultural
purposes were wholly exempt.
In British Columbia, the taxing of land values began in 1874 when one
city was permitted to exempt improvements entirely. That option was'
extended to all municipalities in 1891. In 1914, 39 of 61
municipalities exempted improvements entirely. Since then there has
been a decline in the number of local governments exempting
improvements entirely. As of 1947, Vancouver was required to exempt at
least 50 percent of the value of improvements and other municipalities
were required to exempt a minimum of 25 percent. The uniform exemption
of improvements in villages was 50 percent, with 25 percent uniformly
exempted for school taxes. Three local authorities exempted
The eastern Canadian provinces generally did not use land-value
taxation. Instead they used and still use a property-tax system
similar to that of the U.S. The province of Nova Scotia has a land
tax, which might be Georgist in origin since it applies only to
holdings in excess of 1,000 acres. The rate is 1 percent of assessed
These basic patterns remain today, except that it appears that there
are few if any land-value taxes. Only the graded tax remains. In
the Northwest Territory, land is assessed at 100 percent of current
market value and improvements are assessed at two-thirds of their 1963
replacement value. In Alberta, generally speaking, improvements are
assessed by local governments at about one-half of the ratio used for
land assessment. Alberta has a provincial land-property tax in
unorganized areas and in improvement districts. Land is assessed at
fair actual value, and improvements are assessed at 60 percent of
that. Saskatchewan land is assessed at 100 percent, and buildings are
assessed at 60 percent except in Regina and Moose Jaw which use 45
percent assessment of buildings. Manitoba assesses lands at their
value and buildings at two-thirds of their value. The province of
British Columbia and its localities now generally assess buildings at
75 percent of what lands are assessed.
Accordingly, the graded tax must be considered alive, well, and
permanent in the western Canadian provinces.
Elsewhere in Canada, it is not likely to be adopted. The Ontario
Committee on Taxation, for example, has concluded as follows:
Summarizing, we think it obvious that for residential
properties site value taxation would, by narrowing the tax base,
depart from the existing and accepted relationship of taxation to
the value of the accommodation provided. It would increase the
weight of taxes on farming operations, compress urban construction
on to more crowded sites, and would not eliminate the land
speculator. Site value taxation is designed to be appropriate to the
state increments in value of land. II it succeeds in this purpose,
it is a discriminatory levy so long as other forms of capital gain
are not taxed. For all of these reasons, the concept finds no
support among our recommendations.
The English had the first chance to implement site-value taxation.
Based on principles enunciated by the physiocrats -- Adam Smith,
Ricardo, and John Stuart Mill -- site-value taxation was first
officially referred to in England in 1885 in the Report of the Royal
Commission on the Housing of the Working Classes. By that time the
work of "the most notorious name linked with land value taxation"
was well known in England. Henry George, the American, published
Progress and Poverty in 1879.
Over the intervening years, there were a number of proposals and
reports made, and the Liberal Party kept urging the adoption of
land value taxation, a position still taken by the Liberal Party
today. In The Finance Act, 1910, a number of new taxes were
adopted, bearing on land or on part of it, and fueled by notions that
unearned increments belonged partly to the public.
One of the taxes, the undeveloped-land duty, most closely
approximated a land-value tax. The undeveloped-land duty was an annual
tax of one halfpenny for every 20 shillings (1/480th) of site value on
undeveloped land. Undeveloped land included all land which was not
improved by dwellings or buildings for the purposes of any business,
trade, or industry. If buildings became derelict or unused, the
undeveloped-land duty could be applied. If land was improved with road
and sewer infrastructure it could be considered developed land for a
period of 10 years. Exemptions were provided where site value did not
exceed £50 per acre. Agricultural land was subject to the duty if
its value exceeded £50 per acre to the extent the amount of £50
per acre represented value other than agricultural-use value, except
in the case of small farms.
The undeveloped-land duty was not charged on parks, gardens, or open
spaces available to the public, land being kept open pursuant to a
planning scheme, or land being used for games or recreation where it
was likely to be so used for five years. A dwelling site of up to one
acre was exempted and, if it had gardens or pleasure grounds, up to
After its passage, the land-value taxers kept pushing for a purer
version of this form of taxation than was represented by the 1910 Act.
But the Act itself was not working well, although it is not clear that
the undeveloped-land duty was the main culprit. In any event, total
receipts of the various taxes (increment-value duty, reversion duty,
undeveloped land-value duty, and increment-value duty on minerals) was
£1,180,290 including £460,481 for the increment-value duty.
These figures for the period 1910-1919 compared poorly with the total
cost of valuation, administration, and collection, which the
Chancellor of the Exchequer estimated at £5 million. The duties,
except the mineral-rights duties, were repealed by the Finance Act,
Land-value taxation was adopted in England by the Finance Act, 1931.
It provided for a land-value tax of 1/240th of site value but which
was reduceable by an amount equal to four years annual value or 7/8 of
land value, whichever was less. Cultivated land was reduced by its
cultivated-land value or the amount calculated as above, whichever was
greater. Property which is typically exempted from the property tax in
America and other property, such as that of public utilities, was
exempt. The Act never took effect, being suspended in 1932 when the
The Liberals still persisted, but the thorough review by the Simes
Committee concluded, partly because development rights in land were
nationalized at the time under the Town and Country Planning Act,
1947, that a "rate on site values. . . is neither practicable nor
More recently the Conservative Government reviewed the evidence for
site-value rating and concluded that it was not to be recommended for
The Labor Government in 1975 invoked a Committee of Inquiry into
Local Government Finance (Layfield Committee). It did not support
In 1973, Price Waterhouse & Co. completed a study for the U.S.
Department of Housing and Urban Development. Entitled "A
Study of the Effects of Real Estate Property Tax Incentive Programs
Upon Property Rehabilitation and New Construction," (herein
called the Tax Incentive Study) it included a review of the two
general-purpose governments in America that made use of a form of
land-value taxation, namely, Pittsburgh, Pennsylvania, and Honolulu,
Hawaii. The study also reviewed a simulated land-value tax system used
in Fairhope, Alabama.
The Hawaii property tax is as complicated as any in the U.S. The
state Democratic Party had called for a graded real property tax since
1952 and such a scheme was adopted in 1963, effective 1965.
The rationale for the tax reflected Georgist ideas:
The objective is to reduce the inequitable burden of
taxes now placed upon the owner who seeks to improve his land. It is
to the best interest to both the individuals and the State that, to
the extent possible for a sound and workable system, property
taxation should encourage rather than discourage expanding the use
and productivity of our land resources.
Stripped of its complications, the Hawaii tax works as follows.
Property is divided into seven classes and then assessed. The property
tax burden allocated to each class is in the ratio that the amount of
assessed value in each class bears to the total assessed value.
Property classified as unimproved residential, apartment (three or
more family units), hotel-resort, and industrial and commercial is
subject to the graded tax. In Hawaii's case, the law provided that
buildings be taxed at 90 percent of land in 1966, 80 percent in 1968.
The governor must approve further reductions, and reductions below 70
percent require approval of the Honolulu Board of Supervisors. The law
would permit decreases down to 40 percent in biannual 10 percent
steps. As of 1970-71, the grading was still at the 80 percent level.
Thus, for example, for property classified as hotel apartment-resort,
the property tax rate used to calculate the taxes was $21.99 per
$1,000 assessed value of land and $17.59 per $1,000 assessed value of
buildings. ($21.99 x .80 $17.59). The effect in fiscal 1970 was to
shift some $3,000,000 of tax burden (out of $65.5 million) from
buildings to land.
While the graded tax originally applied to residential properties
(single family and one and two units), the grading was repealed for
fiscal 1971 for residential properties because of the tendency to
burden the owners of older residential properties disproportionately.
Land is usually a higher proportion of total land and building values
for older residences than for newer ones. Property classified
agricultural and conservation has not been subject to the graded tax.
The Tax Incentive Study concluded that there were no significant
administrative problems resulting from the grading scheme. A removal
of the grading feature would not reduce the assessor's staff. The
impact of the grading was not measurable due to its newness and to the
small differential, although most property owners interviewed
indicated that even at the 40 percent level they might not be
influenced concerning real estate decisions. While adoption of the
graded tax accompanied a construction boom, it was generally agreed
that the graded tax was not a cause. Some felt that the graded tax had
somewhat stimulated the scarcity and high cost of land with resultant
overdevelopment. No owners of multi-unit developments indicated any
change or expected change in rental rates due to grading.
Administrators and public officials generally agreed that the graded
tax had not met its objective of making more land available for
development. Developable land was still scarce due to zoning
restrictions and to the fact that there is a shift of tax burdens only
within a class, not among classes. For example, the owner of
under-utilized industrial land is burdened relatively more under the
graded tax only vis a' vis the owner of intensively developed
industrial land; there is no shift to that owner from intensively
developed residential property.
As with new construction, rehabilitation has not been stimulated by
the graded tax, again in part due to its nominal difference. Even, if
reduced to 40 percent, the tax as a total proportion of operating
costs may not be regarded as high enough to have a significant
influence on construction and rehabilitation.
The Henry George Foundation of America is located in Pittsburgh,
Pennsylvania, which is the site of the most significant land-value tax
experiment in America. Originally established in 1913, the tax on
buildings was gradually reduced and since 1925 has applied to
buildings in Pittsburgh at 50 percent of the rate applied to land. As
distinguished from Honolulu, therefore, the impacts of the grading
should by now be evident. Moreover, the Pittsburgh grading plan is "purer"
than in Honolulu because it applies to all land and buildings. The
grading, however, applies only to city, not to school and county
property taxes, so that in 1970 the combined property-tax rate on
buildings was only about 30 percent less than on land, $6.725 on
buildings, $9.475 on land. The grading shifts some $6.4 of $39.3
million in property taxes off of buildings and onto land.
As in Hawaii, the graded tax does not cause any significant
administrative problems or change staff requirements. But the Tax
Incentive Study indicates that whether Pittsburgh would have developed
faster or slower under alternative forms of property taxes is pure
conjecture. While the tax might have forced some unimproved land onto
the market in earlier years, it does not seem to be doing so today and
there is no correlation between building permits and reduction in the
taxes on buildings. The graded tax has not precluded blight and slum
areas, although this could be due to the nominal difference or to
assessment irregularities. Because of irregularities, the
land-to-building assessment ratio in 1948 was 11 to 7 whereas in 1965
it was 1 to 2, suggesting recent emphasis on increasing assessments on
buildings and further suggesting that prior to 1948 the effective rate
on land was far greater than it was after 1965.
Calling him "an authority on Pittsburgh's taxation practices,"
the Tax Incentive Study gives Raymond L. Richman's views prominence.
According to him, redevelopment is no more evident in Pittsburgh than
in other cities and the graded tax has had no important economic
effects. This is due to the nominal rate difference and to the
capitalization of taxes which lowers land values (thus a prospective
owner may have to pay higher land taxes but can afford them just as
easily because the initial price is lower). Economic effects are also
minor because taxes on buildings in cities are shifted back to
to the restrictions on buildings imposed by zoning and
building ordinances, the fact that real estate tax rates in suburban
communities are often lower than city rates on buildings and the
absence of marginal land in cities.
Richman also indicated that taxes tend to diminish in run-down
neighborhoods as property values fall, therefore losing their
incentive effect. Finally, a graded tax is likely to have more effect
in areas with undeveloped land, whereas Pittsburgh is fully developed.
Richman, as well as some property owners, indicated the graded tax
might have had some effect in encouraging modernization of existing
buildings. Most public officials felt that the graded tax was
stimulating neither new construction nor rehabilitation but that it
might have forced unimproved land into the market early in its
history. Many interviewees in Pittsburgh were not even aware of the
graded tax. Those who were generally concluded it was unimportant in
making real estate investment decisions because real property taxes
are a small part of the total cost of a project.
The use of land-value taxation in Fairhope, Alabama, is also
described in the Tax Incentive Study. Rather than restate this
description. it is quoted here in edited form:
In 1894... [a] group purchased some acreage in Alabama
and established the settlement which was later incorporated as the
City of Fairhope. The organization became the Fairhope Single Tax
Corporation, an Alabama nonprofit corporation, in 1904... both land
and improvements are taxed in Baldwin County, but the Single Tax
Corporation attempts to simulate the effect of site-value taxation
by means of a site-value leasing system which operates as
1. Land owned by the corporation is leased (99 year term) to users.
2. Improvements on the leased land are owned by and can be sold by
3. The lease agreement provides that the annual lease rental shall
be based upon the value of the land... redetermined annually....
4. The corporation pay [s] the property taxes upon the lessee's
personal property. ...
Today the Fairhope Single Tax Corporation has 75 members. The
corporation owns some 4,000 acres of land, of which 400 acres are
within the city limits of Fairhope. . . . There are 1,088 leases
with 943 lessees (55 of whom are members of the corporation).
In 1970 the corporation collected $150,928 in rentals from these
leases; disbursed $80,981 in payment of real and personal property
taxes; spent $31,928 for public improvements (streets, school,
cemetery, etc.) and ad-ministration; and reserved $20 ,000 for
Fairhope Single Tax Corporation real estate has been more extensively
developed than other Fairhope land.... this was probably due to the
fact that a smaller initial cash outlay was required under the
To discourage speculation in site-value changes, the Fairhope Single
Tax Corporation in its leases has incorporated certain restrictions on
the transfer of improvements. Factors of this kind tend to obscure any
site-valuation/development cause effect relationship. (They also
prevent... a complete simulation of site-value property taxation.)
There appears to be little doubt that the site-value rental system of
the Fairhope Single Tax Corporation has provided significantly greater
incentive for the improvement of property than existed for surrounding
property. However, since all of the property improvements made on
leased lands were subject to additional property taxes just like all
other improvements on other lands, the incentive is probably more
closely related to cost of capital considerations rather than property
tax treatment. While the lessee pays no property taxes the aggregate
rentals paid to the Corporation which must covet property taxes are
almost double the property taxes paid by the Corporation.
When asked to evaluate the success or failure of the site-value
rental system, the nonmembers did not reply or indicated that they
felt improvements were greater on deeded land due to pride of
ownership, which seems to be a misconception since even on leased land
the improvements are owned by the tenant. The members generally felt
that the system was a success and limited only to its ability to
acquire more land.
Only one respondent indicated that he felt rentals charged by FSTC
were too high, while six indicated they were too low. Eighty percent
felt that the established rentals were fair as to one leased property
versus the other leased property. This might be considered significant
since the FSTC is passing the taxes paid on all properties and
improvements through to the lessee -- based upon the value of the land
only and certain lessees could become disgruntled as they would be
paying for the taxes on the improvement of more improved land. However
it is not considered significant since the majority of the respondents
felt the rentals were either too low or about right. In essence, it
appears that the lessees recognize the apparent side benefit they
receive by virtue of the fact that the Corporation is not receiving a
fair return on its land investment. ...
Based upon the evidence collected it appears that the Fairhope Single
Tax Corporation's practice of site-value rental has been effective in
that it has encouraged more intensive development of its property.
However, it must be remembered that site rental is not the same as
site-value taxation and that it appears that capital considerations
have been the most significant consideration in the development of the
The respondents involved were satisfied with the FSTC operations and
they felt it was an equitable system. It also appeared that the
success of the FSTC and its operations was due in part to the fact
that the system is on a small scale. There would probably be
significant problems in implementing an actual tax system based on
this concept in any large city due to the administrative difficulties
that would be encountered and the fact that most taxpayers are not
familiar with such a system. Another factor that has probably
contributed to the success of FSTC is the relatively small spread of
land values in Fairhope. Consequently there is not any really
significant shifting of the property tax cost from one lessee to
another through the rent payment as would result in a major
metropolitan area under an actual real property site value tax system
Is Henry George Alive and Well in the Special Districts of
Frequently lurking in the literature is the notion that land-value
taxation is extensively used in rural California by special
districts. And so it is-in 1972-73, special districts in
California raised $40,910,293 in taxes based solely on land. Not a
graded tax, these taxes are (or at least most of them are) property
taxes on land values only.
The special districts in California are not the only ones to use
land-value taxation. Henley reports its use by special districts in at
least 16 other Western states.
California special districts are as good as any to study. There are
more of them than in any state except lllinois, and rather
complete statistical information is available. Further, but for
his residence in California, Henry George may never have written
Progress and Poverty.  In beginning this exercise, it is
important to review three basic terms: special assessments, land-value
taxation, and general-property taxation. A special assessment is a
levy, usually used in conjunction with the provision of public
improvements, and usually apportioned on the basis of the benefit
received by land. A general-property tax, on the other hand, is levied
annually to provide general revenues. It is apportioned on the basis
of the assessed value of all property --land, buildings, and personal.
Land-value taxation is a property tax which excludes all property
except land from the tax base.
What, then, of California special district taxes?
In 1972-73 there were 4,516 special districts in California. Data on
3,829 of those districts is contained in the report of the California
controller, "Annual Report of Financial Transactions Concerning
Special Districts of California (Other than Water Utility) 1972-73."
Data on 913 districts is in the "Annual Report of Financial
Transactions Concerning Water Utility Operations of Special Districts
of California 1972-73." Since 3,829 plus 913 is 226 districts
more than 4,516, 226 districts engage in water utility operations as
well as other kinds of activities.
These districts are authorized under 193 separate statutory
authorizations, but the controller classifies the districts into 54
types, and into 23 nonenterprise activities and 7 enterprise
activities. Twenty-two types of districts provide water utility
Special districts are big business in California. The water utility
operations, for example, involved total annual taxes of $153,991,127
in 1972-73. The nonwater utility tax revenues were $464,265,006. Thus
total tax revenues for special districts in California in 1972-73 were
$618,256,133. The total taxes collected by special districts amounted
to roughly one-tenth of the $6,819,000,000 revenues raised by all
property taxes in California.
The controller's reports contain data indicating whether the tax base
for each special district is all property (AP), which is roughly the
same as the property-tax base for other property taxes in California,
or is land and improvements, excluding personal property (LI), or is
land only (LO). The focus of this analysis is on those districts which
use a LO base. Sixteen of the 54 types of districts in California do
so, at least in part.
These LO-based taxes produced $40,910,293 for special districts in
California in 1972-73, which was 6.6 percent of all special district
taxes and .59 of a percent of all property taxes in California for
While not very significant in amount, these land-value taxes were
used to finance a variety of services, including water utility,
drainage and drainage maintenance, flood control and water
conservation, reclamation, streets, levee management and maintenance,
soil conservation, water conservation, waste disposal, recreation and
park, electric utility, and pest control.
LO-based taxes use one of three different kinds of rates: so many
dollars per acre, so many dollars per $100 assessed value, and
variable rates based on neither. Most of the LO-based taxes use a rate
of dollars per $100 assessed value, $30,139,871 being thus raised. The
revenues raised by use of dollars per acre and variable rates were
about the same, $5,578,008 and $5,192,414, respectively.
The rates of dollars per acre and variable rates, obviously, are not
based on values and accordingly cannot strictly be classified as
property taxes based only on land values. And, again strictly
speaking, the $30,139,871 might not all be classified as property
taxes based only on land value because many of such taxes are rather
in the nature of special assessments based on benefit received where
the measure of the benefit received is the assessed value of the
For example, Robert Durbrow, consultant, Association of California
Water Agencies states:
We have consistently denied that the irrigation district
assessment is a... [land value only tax] as most supporters of the
land only tax for general purposes would have you believe.... [it
is] a benefit tax for a single purpose, presumably paid by the
beneficiaries in proportion to benefits received. . . . it may be
assessed against beneficiaries such as school or state property
which cannot be required to pay general taxes.
But the irrigation district law uses an ad valorem (value) assessment
on land. It is therefore not as clearly benefit-based as some
other special district taxes are. For example, the California attorney
Assessment in accordance with benefits is a common
feature of many California street improvement acts, the Reclamation
District Law, and some other special district acts. It is not the
type of assessment required by the state laws governing either
irrigation districts or county water districts. Both these types of
districts collect their assessments or taxes on an ad valorem
More recently, in determining whether or not the Property Tax Relief
Act of 1972 brought relief from a reclamation district tax, the
attorney general concluded that while a special district tax had been
"levied per unit of assessed value," which ordinarily would
make it a property tax rate for purposes of the Property Tax Relief
Act, the levy could have been levied on some other basis, e.g., per
acre, and there-fore, there was no relief from the levy.
Some examples of a benefit-based tax with the amount of benefit based
on an ad valorem assessment are rather clearer: The San Benito Flood
Control and Water Conservation District has the power "to levy
taxes upon all land ... according to the benefits derived . . . [s]aid
taxes shall be based upon the assessment rolls used by the county for
general tax purposes." Operation and maintenance assessments
of reclamation districts are based on a "valuation per acre for
each parcel which is in proportion to the benefits to be derived from
the continuance in operation." A county water district levies
a tax "in proportion to the assessed valuation of the land
It makes a big difference to governments whether the tax is in the
nature of a property tax or in the nature of a special assessment
because, as Mr. Durbrow indicates, governments are exempt from
property taxes. So are many other kinds of properties in California.
But special districts can ''tax'' these properties if the "tax is
more in the nature of a special assessment. And it can make a
difference in other ways -- a tax is deductible from income taxes; a
special assessment generally is not. A tax must be uniform; a special
assessment need not be uniform.
Table 17-2 [table not reproduced here]
indicates the use that special districts in California make of LO
taxes based on assessed value. A neutral observer between the
Georgists and the Mr. Durbrows would probably classify some of those
taxes as "real" Henry George taxes and some of them as
special assessments because they are based on benefit. It is a fine
line n6t worth pursuing.
Worth pursuing, however, is the notion that the economic effects of
an ad valorem tax on land only is the same as a special assessment
where the benefit is measured by the value of the property. In other
words, whatever is good (or bad) about land-value taxation in economic
effect should be good (or bad) about special assessments using
assessed values to measure benefit.
Henley claims that because irrigation district land is assessed where
water is available whether used or not, the assessment makes it
expensive to hold land in idleness and for speculation. There is
evidence that large farmers opposed irrigation, particularly that paid
for by taxes on land only. Who could doubt that such taxes encouraged
the reported breakup of large estates. The landowner is also
encouraged to improve the land as he is
nudged from behind by the assessment on his land that
will permit him to pay [the tax]. At the same time he is beckoned by
the promise that his effort and investment to make the land produce
will not be penalized, since such improvements are not taxed.
Henley's prose is Georgist, and one can believe that the irrigation
district taxes constituted a good chance to experiment. As one of my
favorite economists, Mason Gaffney, says:
the level of taxation was the critical question, and
nowhere in recent times was the level as high as it was in ...
southeastern San Joaquin Valley... the heavy irrigation district
land tax came pretty close to a pure Georgist experiment during the
1920's... during the period of heavy taxation, subdivision and
improvement were like nothing I've ever seen elsewhere. ...
It may not be too late to do a definitive study on land value
taxation via the land-value taxes of California special districts.
Perhaps Dr. Gaffney would donate some of his "half a filing
drawer full of information,'' and the Controller's reports could
identify some likely places to look.
For example, is the Hacienda California Water District in Kings
County real, with its reported $52.440 per $100 assessed value tax
rate on land only? One of the complaints of Georgists is that the
virtues of land-value taxes have not been demonstrable because taxes
have either not been high enough on land values to have much impact or
they have been diluted by general property taxes of overlapping
governments. But a rate of $52.440 would overwhelm any county or
school district general property tax rate in the Hacienda area.
For example, the average combined property tax rate for all
governments in Kings County was $11.13 in 1972-73.
Zone No.1 of County Waterworks District No.40 in Fresno County, with
its $27.888 rate, might be compared with similar districts in Fresno
County whose rates go as low as $ .115. Unfortunately, all of the
County Waterworks districts in Fresno County use a LO base, but they
use an AP base in other counties. In some counties, some districts use
AP and some LO, which might be contrasted. Even the $14.776 rate of
the Circle Oaks County Water District in Napa County should be high
enough to be the basis for a good experiment.
The Estero Municipal Improvement District in San Mateo County might
be the most interesting place to study. It has a combined waste
disposal general, fire station, and park AP rate of $2.925 but a
combined LO rate of $6.23 for reclamation and roads. County and
school rates would probably raise the AP burden considerably, but the
place might be de facto as interesting and as significantly graded as
Finally, one should recall, special districts overlap. One might be
able to find some areas in California where the combined rates of two
or even several LO-based districts might be sufficiently high to do an
effective study of land value taxes.
We leave that study to others.
NOTES AND REFERENCES
- D. Hagman, The Single Tax and
Land-Use Planning: Henry George Updated, 12 UCLA L. Rev.
- A Final Report of the Assembly
Committee on Revenue and Taxation, Interim Activities: 1971, at
Introduction. The Report of the National Commission on Urban
Problems to the Congress and to the President of the United States
394-95 (1968) recommended a treasury study of "land value
taxation" but had in mind devices described in Chapters 19
and 20. It also recommended that the states "vigorously
explore the desirability and feasibility of placing new or
differentially higher taxes upon land values or land value
increments." Supplementary views of four commissioners
expressed "regret. . . that the Commission . . . did not see
fit to endorse some wider applications of the Pittsburgh plan.. .
. "Ibid., 395. The Pittsburgh plan is described infra text at
- D. Netzer, Economics of the
Property Tax, 208 (1966); A. Becker, Arguments for Changing the
Real Estate Tax to a Land Value Tax, 37 Tax Policy 15,19(1970).
- The Future Shape of Local
Government, Cmnd. 4741, at 27 (1971), [hereinafter cited as Future
- M. Walker, Some Observations
on Land Value Taxation, 38 Tax Policy 6, 23 (1971).
- Letter Polly Roberts to Donald
Hagman, Sept.19, 1975.
- This is true in the United
States; it is not true in all countries.
- M. Gottlieb, Differential
Taxation of Urban Site Values, 37 Tax Policy 43, 50 (1970).
- Netzer, 209. In Pittsburgh
there was a 12-year period of gradual implementation.
- Ibid., 198.
- Ibid., 199.
- Ibid., 202.
- Becker, 23.
- Walker, 3-4.
- J. Heilbrun, The Effects of
Alternative Real Estate Taxes, 234-5, as cited in Netzer, 210. If
taxes were greater than rent, land would theoretically have a
- Netzer, 212.
- See M. Gaffney, Adequacy of
Land as a Tax Base, in The Assessment of Land Value 157 (D.
Holland, ed. 1970); P. Roberts, Property Taxes and Land Value
Taxes, The Real Estate Appraiser, Sept.-Oct. 1975, at 12.
- Ibid., 16.
- Ibid., 18.
- Senate Comm. on Government
Operations, Property Taxation: Effects on Land Use and Local
Government Revenues, 92nd Congress, 1st Sess. (1971).
- T. Jones, The Case for Land
Value Taxation, Liberal Focus, No.5 (1973).
- Becker, 28; 22; 17.
- Jones, 11.
- Socialists sometimes urge the
use of the tax to force the breaking up of large estates. See,
e.g. marxist R. Dumont, Cuba: Socialism and Development (1970),
who criticizes Castro for not making use of land value taxation in
- Senate Comm., 38.
- Jones, 13.
- Walker, 15.
- Gottlieb, 53.
- Future Shape, 27.
- Walker, 5.
- These observations are from
- Senate Comm., 39.
- Walker, 5.
- Senate Comm., 39.
- Future Shape, 27.
- Senate Comm., 42. Believers in
the "trickle-down" theory would argue that the cost of
housing is dependent on its supply so that anything increasing
supply of higher income housing will rebound to the benefit of the
poor. See, e.g., Roberts, 21.
- Walker, 22.
- Ibid., 23.
- D. Hagman, Urban Planning and
Land Development Control Law, §§201, 203(1971).
- A. Woodruff and L. Ecker-Racz,
Property Taxes and Land-Use Patterns in Australia and New Zealand,
in Land and Building Taxes 147 (A. Becker, ed. 1969). Cantor,
Preliminary Draft on Australian Land Taxes, Tax Reform Research
- In 1974 the State of Victoria
increased the land tax to four percent on unimproved land values.
State Land Tax and Land Price, Progress, August, 1974, at 7.
- Australian Bureau of
Statistics, Public Authority Finance, Taxation, 1973- 74, Table 8,
[hereinafter cited as Public Authority Finance].
- Report of the (New South
Wales) Royal Commission of Inquiry into Rating, Valuation and
Local Government Finance, 34-42, 162(1967).
- R. Watch, The Statutory
Definition of Unimproved Capital Value in New South Wales, The
Valuer, April 1972, at 101.
- Memo R. Collier to D.
Misczynski, Oct.24, 1974; letter R. Archer to D. Hagman, Oct. 2,
- Public Authority Finance,
- Local Government Act Revision
Committee, Local Government in South Australia Report 4798(1970).
- This discussion is mostly
based on J. Mahoney, Urban Land Economics 163- 73 (2nd ed. 1974)
and on Taxation Review Committee, Taxation in New Zealand, at
410-15 (Gov't Printer, Wellington, Oct.1967).
- Mahoney. Reporting for 1964,
Woodruff and Ecker-Racz, Property Taxes and Land-Use Patterns in
Australia and New Zealand, in Land and Building Taxes 147, at 170.
(A. Becker, ed. 1969) report the figures as 214, 58, and 13
- Most of the information
reported in this discussion of the later l940s appears to relate
to 1946 or 1947. The information is based on a short description
of Canadian land value and graded tax systems contained in the
(English) Ministry of Housing and Local Government, Report of the
Committee of Enquiry, the Rating of Site Values 116 (1952).
- The following is based on
Boreal Institute for Northern Studies, University of Alberta, 1
Northwest Territories Municipal Finance and Services Study 49
(1974); Canadian Tax Foundation, Provincial and Municipal Finances
1973, at 95-100.
- Vol.11, cap. 11, par. 15
(Toronto, 1967). Other kinds of capital gains are now taxed in
Canada. See Chapter 20.
- P. Clarke, Site Value Rating
and the Recovery of Betterment, in Land Values 73,77 (P. Hall ed.,
- These reports and proposals
are summarized in what may be the world's most complete and
objective study of land value taxation ever made. It is (English)
Ministry of Housing and Local Government, Report of the Committee
of Enquiry, The Rating of Site Values (1952) [hereinafter cited as
the Simes Report]. This discussion of English land value taxation
is largely based on the Simes Report.
- "For over 60 years, since
Lloyd George's 1909 Budget, Liberals have advocated a policy of
land-value taxation." Jones, The Case for Land-Value
Taxation, Liberal Focus, Nov.1973, 3, at 7, (emphasis in
- 10 Edw. 7, c. 8, §§16-20.
"They comprised: (i) an increment value on land sold
or subject to long (14 years or over) leases, payable on the
transfer of the land or the death of the owner (but not payable
twice in respect of the same increment); the first 10 per cent of
increment was exempt as was also any increment in the value of
agricultural land or of small owner-occupied property; (ii) a
reversion duty of l0 per cent on the termination of a lease of 21
years or over except on land with a purely agricultural value;
(iii) an annual levy of 1 /2d. in the £ of capital value
on undeveloped land other than house gardens, land with a
purely agricultural value or land worth not more than £50 an
acre; (iv) a 5 per cent levy on mineral rights, excluding
rights in brick clay, chalk, limestone or gravel, capital
expenditure in full being allowed as a cost. The legislation was
thus extremely complicated; it should be especially noted,
however, that there was no attempt at a general levy on the site
value of land." Simes Report, 37, (emphasis in original). The
increment value duty is discussed in Chapter 20.
- §57. The duty to report
sales imposed on vendors and lessors, which information was
necessary for the assessment, continued until its repeal by the
Finance Act, 1923, §38. The paragraph is based on R. Yardley,
Land Value Taxation and Rating, 260-73(1929).
- Simes Report, 217.
- The Future Shape of Local
Government Finance, Cmnd. 4741, 2.71-2.78 (1971). Land value tax
proponents take issue with the Government's conclusions in the
Land Institute, Site Value Rating (1973).
- Letter from Frank Layfield to
Donald Hagman, Sept.11, 1975. The report of the committee rejects
site value taxation. Report of the Committee of Enquiry, Local
Government Finance, 170, 437-40, Cmnd. 6453, H.M.S.O. (May 1976).
It was rejected in part because the Community Land Act and the
Development Land Tax, see Chapter 20, recaptured unearned
increments. But the Report rejects it for other reasons as well.
- Reference HUD Contract H-1300,
- Stats. 1963, Act 142. The
scheme was repealed in 1977.
- Standing Committee Report
No.78, Committee on Agriculture House of Representatives, Second
State of Hawaii Legislature, General Session, March 19, 1963.
- Tax Incentive Study, Ch. VII,
- Tax Incentive Study, Ch. X,
- See, e.g., (English) Ministry
of Housing and Local Government, The Rating of Site Values,
- This study did not examine
whether land values or unimproved land values are used. The
statutes do not distinguish the two. Since unimproved land value
is a more artificial concept, it is likely that land value rather
than unimproved land value is used.
- A. Henley, Land Value Taxation
by California Irrigation Districts, in Land and Building Taxes
137, 140 (A. Becker, ed., 1969). Henley indicates that these other
states copied California's irrigation district law which uses a
land value only based tax.
- Statistical Abstract of the
United States 244(1974).
- See California State
Controller Reports cited infra.
- "George was deeply
impressed and horrified by the profits being made by land
speculators in the California gold boom of the 1 870s. Out of this
experience arose his idea of a single tax on land values that
would be sufficient to finance the entire needs of government."
U. Hicks, Can Land be Assessed for Purposes of Site Value
Taxation? in The Assessment of Land Value 9, 13 (D. Holland, ed.,
- The Controller's Report (Other
than Water Utility) indicates 234 districts engage in both.
- State Board of Equalization,
Annual Report 1972-73, Table 14. The table includes $427,080,000
of property taxes levied by special districts but indicates it
excludes over $165,000,000 of "special assessments levied on
limited categories of property to finance activities from which
owners of such property derive special benefits."
- Letter from Mr. Durbrow to
Donald G. Hagman, Feb.28, 1975.
- There are 105 irrigation
districts in California, 15 of which engage in activities in
addition to water utility, such as drainage and drainage
maintenance, recreation and park, electric and waste disposal. All
of the districts which en-gage in other than water utility use LO
as a tax base, but only one actually levies any tax, amounting to
$18,522, and based on land values, with a rate of $.990.
- Fifteen of the 105 districts
use a LO base on acreage, seven use a variable rate, and eight use
a rate per acre varying from $.378 to $6.000. The variable rate
taxes yield $1,625,416, and the rate per acre taxes yield
$368,889. The remaining 90 districts use assessed values with
rates varying from $.100 to $16.000, producing $14,181,874. Total
water utility taxes of irrigation districts therefore were
$16,176,179. And total irrigation district taxes using a land only
basis were $16,194,701 ($16,176,179 + $18,522).
.... Irrigation districts use "ad
valorem assessment," see, e.g., Water C. §23532, but
only on land, Water C. §25502, which excludes improvements
such as "trees, vines, alfalfa, all growing crops and all
buildings and structures." Water C. §§25500, 25501.
While the assessments are very much like the assessment of land
for property tax purposes, land included in irrigation district
assessments may not be included in the property tax base. The
reason is that an assessment is not the same as a tax and hence
the exclusion of govern-mentally owned lands from the property tax
does not mean that they are excluded from an irrigation district
assessment. City of San Diego v. Linda Vista Irr. Dist., 108 Cal.
189, 41 P.291 (1895); Faust v. City of San Diego, 115 Cal. App.
277, 1 P.2d 543 (1931); City of Fresno v. Fresno Irr. Dist., 72
Cal. App. 503, 237 P.772 (1925). Thus, a statute which provides
for county collection of irrigation district assessments provides
that "if any land subject to assessment for the purposes of
the district does not appear upon a county assessment roll [for
property taxes] the land omitted shall be forthwith assessed
and a description of the property omitted shall be written in the
roll prepared for the district assessments." Water C. §26502.
.... But all land included in the
base is assessed as it would be under a property tax. Water C. §25503.
.... Irrigation districts are
authorized to enter into contracts with the federal government
under the Federal Reclamation Act, 43 U.S.C. §372 et seq.
When they do so, and payments are required to be made to the
United States, the assessment "may be apportioned in
accordance with the benefits." Water C. §23242.
.... In improvement districts of
irrigation districts, assessments are apportioned to the land
according to benefits. Water C. §23667(d).
- 14 Opns. Cal. Atty. Gen.
- 58 Opns. Cal. Atty. Gen.
- Cal. Laws 1953, Ch. 1598, 17.
- Water C. §51323.
- Water C. §31703.1.
- Henley, 142-145.
- Ibid., 144. Henley must be
assuming an unimproved land value rather than land value
assessment. See discussion at 404 and at note 75, supra.
- Letter Mason Gaffney to
Donald G. Hagman, June 13, 1975.
- The high rate could be
explained on the ground that it is not a long-term rate or that
the ratio of assessed value to market value is low. Since many
special districts make their own assessments, they do not
necessarily use a 25 percent assessed market value ratio now
required for regular property taxes in California. West's Cal. Rev
& Tax Code §401.
.... One could well expect that the
situation now is little changed from the late 1950s when in
irrigation districts, "despite the legal stipulation that
district assessment shall be levied upon the unimproved land
valued at its full cash value. . . valuation procedures used
include the following:
1. Flat rate
obtaining to all land assessed within the district.
2. Sets of valuation rates, applied according to land and water
3. Sets of valuation rates, applied according to the location
of a particular parcel of land with respect to certain center
4. Sets of valuation rates, applied according to relative
elevation of separate land parcels.
5. Sets of valuation rates, applied according to relative soil
characteristics of individual land parcels.
.... Earlier practices frequently
adopted either a flat value rate for all land or used some
fraction of the value assigned for purposes of county taxes."
.... M. Brewer, Water Pricing and
Allocation with Particular Reference to California, Mimeo Rpt.
No.235, California Agricultural Experimental Station, Giannini
Foundation of Agricultural Economics 50 (1960).
.... See also letter P. Roberts to
D. Hagman, Sept.19, 1975: "I believe that assessment
districts do often practice deep underassessments, as regular
assessors did until recent years. In the case of Hacienda you
provide the evidence yourself. A rate of $52.44 per $100 yields
$55,586 from a 15,332 acre district. That means the district is
assessed at an average of $6.92 an acre. Now I understand that
irrigated land goes for $1000 an acre upwards. So you've probably
got an effective rate on the order of 'A% of market value."
- State Board of Equalization,
Annual Report 1972-73, at A-19. $11.13 +4 = $2.78 as an effective
- LI is used for waste