Property Tax Reform:
More Progress, Less Poverty
C. Lowell Harriss
[A lecture delivered at DePauw University,
Greencastle, Indiana, 1970, as the Dr. Paul L. Morrison Lecture In
"The best of taxes, the worst of taxes." True, or very
nearly so, of America's property tax today. In its best aspects it
deserves a larger role, more intensive use. In its worst, the property
tax works needless harm. The sharp contrast grows to a large extent
out of the economic difference between a tax on land and one on other
forms of property, chiefly buildings, machinery, and the inventories
Economically, "the" tax is two. A long evolution has
blended significantly different elements. A challenge to economic
analysis, to statesmanship, to citizen leadership, and to public
administration, this challenge consists of two parts. One offers a
positive opportunity for strengthening the finances of local
government. The other promises relief from adverse non-revenue effects
which load us with "excess burdens," quite unnecessary
losses of well-being.
The property tax is not a tax on net wealth in any meaningful sense.
With the disallowance of debt as a deduction and the (inevitably
necessary) exclusion of most securities and deposits in financial
institutions, American property taxation does not begin to approach a
tax on personal net worth.
Nor is property taxation income taxation. Although payment comes out
of income from some source, the tax base, properly conceived and
applied, is capital value, not actual income. Generally, capital value
relates closely to income; but when land is underutilized, the income
that ought to be used for determining assessment is not the actual,
but the potential, income. Attempts to base assessments on actual
income can pervert the tax when land use is not the best possible.
The property tax in 1970 will yield nearly $34,000 million. In
several cities and suburbs the tax will exceed $250 per capita ($1,250
for a family of five). The average for the whole country must be close
to $160 per person, up by almost $35 since 1966. Two years ago when
the average was around $140, three states (California, Massachusetts,
and Wyoming) averaged more than $200 per capita.
Any tax that brings in large revenues will have substantial
non-revenue effects. Behavior will change, not just because people
have less to spend and save. Individuals and businesses alter the ways
they carry on their affairs. When rates of tax are high, and when
differences in tax burdens are large (e.g., from one area, type of
property, or activity to another), the nonrevenue results can be
substantial. Those today from the property tax, I am sadly certain,
influence American life profoundly. And they are needlessly bad. The
same revenue could be raised with much better results. The fundamental
basis for reform was formulated long before Henry George asserted its
Progress and Poverty.
Effective Rates Sometimes High
Although property tax rates when expressed as percentages are usually
small numbers, they apply to capital values. In parts of the country -
but not all - rates are "high" and rising. Comparison with
income or sales tax rates will often be deceiving. For example, a 3
per cent property tax equals 33 per cent of the pre-tax net income -
and 50 per cent of that after tax - from a property which yields 6 per
cent to the owner. An increase of % percentage point would reduce the
amount remaining after tax in such a case by around 8 per cent. The
tax frequently exceeds 25 per cent when expressed on the same basis as
a retail sales tax (perhaps even after full allowance for amounts
Nonrevenue results ought to command much more attention than in the
past when rates were lower. To do so correctly, we must distinguish
clearly the two elements - land and reproducible capital (buildings or
Merits and Strengths
Those of you who keep in touch with the local press need no reminding
of the frequency, sincerity, and determination, mixed with despair, of
the condemnation of property taxation. Most complaints stem from the
dollar amounts. These result largely from decisions about spending on
schools and other functions. For the present let us put aside some of
the complaints to deal with strengths of property taxation.
Viability of Local Government. The tax now finances local
government, not fully and not to the relative extent of the past, but
enough to make local government meaningful and viable. Heavens forbid
that I romanticize the virtues of "government close to the
people," of home rule, of the real-life operations of local
government. All of us have read about weaknesses of school, municipal,
county, and special district government. More than one person in any
college group will have seen things in local government to which he
will not point with pride. Anything that humans do must be affected by
the fallibility of men - and even women. Local government too often
fails to meet our aspirations. State and national government are also
less than perfect; so is the world of business and even that of
Be reality as it may, the use of localities, as distinguished from
state and nation, to get some of the things we expect from collective
(governmental, political) action, has great merit. Recent visits to
three dozen or so countries have convinced me that we are fortunate to
have as much decentralization, as contrasted with centralization, of
government as we do.
Property taxation offers people in different localities an instrument
by which they can make some truly local choices significant. Local
sales and income taxes, and fees and charges, also aid financial
independence. They do so more than in the past and can serve more
extensively. Property taxation, however, stands out as a source of
strength for local independence.
2. Benefit and Justice. A significant benefit basis exists,
especially that related to paying for different quantities of services
from one community to another. Some localities do contain
concentrations of property which permit a substantial shifting to
nonresidents, but such cases are exceptions. Generally, the localities
in which burdens are highest are those providing residents the most
services. Here is an element of justice, a quid pro quo.
Within communities the relation of benefits received per family to tax
paid will often be crude, even perverse. Yet the inter-community
aspect alone commands respect. Differential and discriminatory
benefits tend to be largest where taxes are heaviest.
3. Good Results of Age. "An old tax is a good tax,"
not completely so, of course yet in some respects true. Being old,
property taxation has worked its way through the economy, especially
the portion represented by rates other than the most recent increases.
Some elements have been capitalized and other adjustments made so that
conditions are better than they may seem. Inequalities and crudities
lose some of their sting as men adjust over the years.
4. No Real Burden of Some of the Tax. Most significant,
however, is the fact that in a meaningful sense part of the tax is no
Property Tax Reform | 5 current burden on the present owner or user.
In most communities probably 20 per cent - but frequently more, I
think - property taxation represents (a) tax on land values, (b) at
rates which have existed for such a long time that most present owners
allowed for it in the price they paid. The annual payment of this
portion constitutes no true burden on the user. You would not have an
easy time convincing the homeowner. Yet part of what he pays over to
his local treasury each year does not really leave him worse off,
compared with what would have been his situation if the tax had not
applied when he bought the property.
5. Administration. Through much of the country property tax
assessment continues to be shamefully bad. Yet, good administration
and easy compliance are possible. In combination they probably cost
less per dollar of yield than any alternative source of large revenue
for state-local government. The dismally poor administration in
many localities can be replaced by good, given the determination to
apply the methods successful elsewhere and to press ahead in
refinement and improvement. Moreover, removal of some of the worst "stingers"-burdens
on aged homeowners (or renters) with low incomes, for example-can free
the tax from some elements which make it vulnerable to persuasive
6. Taxpayer Awareness. To a large extent property taxes are
sufficiently out in the open to assure considerable taxpayer
consciousness - and in a way related to the services to be paid for.
Presumably this tie will contribute somewhat to rational balancing of
cost and benefit in local government.
Building for Permanence
Here, then, is a big revenue source. Although its demise by around
1975 was predicted by a leading scholar fifteen years ago, each year
has seen a rise. Perhaps I shall seem just as wrong in predicting that
property taxation on a large scale will be with us as long as we live,
even the youngest here, and with our descendants. But my confidence
rests on a conviction of basic merit and continuing need. The issues
which justify attention are not only the effects of the tax today,
some needlessly bad, but also strengths on which to build.
Who Really Bears the Ultimate Burden of the Two Elements of
Who really pays this tax? The answer requires sharp distinction
between the two elements of the tax. In both cases, however, the
person who is truly worse off because of the tax may be very different
from the one who writes the check. Sometimes when taxes are shifted -
from building owner to tenant - the process works rather clearly.
Often, however, the process is both slow and obscure (though perhaps
less obscure than in the case of the slightly larger tax on
corporation earnings) .
A change in tax will initially fall on the owner or, depending upon
contract and market conditions, upon the user if he is someone else.
With the passage of time, more of the burden on structures will be
borne by the ultimate user, the residential occupant or the customer
of a business; tax on utility and other business structures will in
general be shifted to consumers. The process involves the flow of
capital; after-tax returns (taking account of benefits of government
services) tend toward equilibrium. (For public utilities, regulatory
processes can delay adjustment. Railroads, traditionally subject to
heavy property taxes, have for decades not in fact earned after-tax
profit that indicates effective shifting to customers.)
The tax on land values is capitalised into land prices. In effect,
the owner at the time of each jump in tax rate will have suffered a
loss of capital value - except as the spending of the funds adds
offsetting benefits which enhance the demand for the property. Present
users of land as they pay tax are not in fact truly worse off by the
amount they pay. If the tax had been lower, they would have paid a
higher purchase price (or rental rate). The "saving" in tax
would then be offset by other costs of acquisition or lease. Much of
what owners feel as burden of tax on land does not in fact deprive
them of something they would otherwise receive. This basic fact of
economics underlies the assertion that tax on pure land values is a
tax on an "economic surplus," with results markedly
different from those of other levies - a "burdensomeless tax."
As ultimately shifted, is the tax (or are the taxes, for I insist
that economically "the" property tax is two levies) fair?
The search for tax equity rests upon the best of instincts. Taxation
represents government's use of coercion. And all use of compulsion
should be just, fair, equitable. But what constitutes fairness in
sharing the costs of government? Would further increases in property
taxation be a fair way to finance the rising cost of local
government? "Fairness" has more than one aspect.
Regressivity: Burdens on Low Income Groups
Critics say that the property tax runs counter to one concept of
fairness by burdening low-income groups more heavily in relation to
income than those with larger incomes. (Families with higher incomes,
of course, do pay very much more than those with less. The issue is
whether the difference is "large enough.") A regressive
element does exist, but the fact that property holdings tend to be
slight in the low end of the income scale and large higher up does
complicate analysis. Assumptions about shifting make quite a
difference, especially the portion of tax capitalized in lower land
prices. Yet there is regressivity, and it is generally believed to
conflict with "vertical equity." Men of goodwill can
disagree in the vigor of their condemnation. A little is not so bad as
a lot - a range of 5 per cent to 3 per cent would call for evaluation
different from 7 per cent to 1 per cent. The numbers of families at
various income levels will also make a difference. For the families
with incomes covering most of the population in a community, the
property tax seems to be roughly proportional with income.
Regressivity exists at the upper and lower tails of the income
distribution. Rather few people are affected materially at the upper
end (and some may bear heavy burdens as owners of large amounts of
property). Where the tax does burden persons with low incomes more
heavily than may seem fair and wise, there is a "pro-low-income"
bias of the benefits paid for by the tax - schools, welfare, hospital
service. Some of the most deplorable results can be partially offset
by special features of relief.
Still another source of criticism lies in "horizontal inequity":
Taxpayers in about the same circumstances do not receive essentially
similar tax treatment. Where this criticism is valid - and it often is
- the chief culprit is poor quality assessment. In some communities
properties of about the same type (new as against older houses) are
assessed unequally, and assessments vary from one type of property to
another (housing versus commercial). Assessment inequalities are much
too great in most communities. But such defects can be reduced by
improvements in assessing, with enough success to inspire confidence
that good standards can be achieved.
Perversive Character in Relation to Costs of Government
An annual tax of 3 per cent, or even when "only" 2 per
cent, a year on full current worth of buildings distorts resource
allocation perversely. New, well-constructed, high-quality buildings
are taxed more heavily per unit of space than are slums and "junk."
Can justification for such burden discrimination be found in the cost
differences which the two types of property and their occupancy impose
on local government (per unit of occupancy space)? Most probably, no;
just the contrary. The badly run-down and less heavily taxed buildings
are more likely to be associated with the greater costs per unit of
usable interior space.
A property tax represents to some extent a cost to the private owner
for which there is no comparable cost to society. When the tax is "greater"
because the building is better, the private owner (user) does not get
correspondingly more or better governmental services. He pays more,
but not because he puts the community to greater expense. The buyer of
a high priced consumer (or producer) good pays largely because that
item costs more to produce (say, a Cadillac) than one with a lower
price tag (Ford, Rambler, or Plymouth). Not so, in general, is the
relation (per unit of space) between the cost of property tax for the
private owner and the cost to government of the differential services
for the new and fine building, contrasted with the old and decrepit.
Moreover, as compared with the slum and low-tax property, the high
quality and high-tax building brings the general public some "neighborhood
benefits." The owners and users of dilapidated structures - the
residential and industrial slums - will be freer from one type of
economic pressure to replace with something better. The user's payment
for the services of local government goes down, relatively, as the
building gets worse, even though public expenses attributable to the
property are unchanged or may even increase.
The person who wishes to shift from poorer to better quality housing,
or business property, cannot do so without also paying more toward the
costs of government - $1 of taxes for each $3 or $4 (or in cases as
little as $2) of pure occupancy expense. Ordinarily, however, such a
shift to better facilities will not add to the services received from,
or the expense imposed upon, government.
New for Obsolete: Obstacles to Urban Renewal
Heavy taxation of new buildings must stand as a tragically apt
example of mankind creating needless obstacles for itself. Cities
which urgently need to replace obsolete, decayed, degrading buildings
nevertheless put powerful tax impediments in the way of progress.
Nobody "planned" to set up a tax system with such influence.
No one tried deliberately to base local finance on a tax that would
favor holding on to the decrepit structures, many of which spread evil
influence through a larger section, while penalizing the new and the
good, the source of benefit to the larger neighborhood.
Let us assume that a new building will have a life of 60 years. Its
construction involves the owner in a commitment to pay property tax
for each of 60 years. The magnitude of these future tax obligations
can be expressed in terms of today's dollars. For doing so, each of
the 60 annual tax bills must be discounted at some rate of interest to
compute the present worth. If one assumes an interest rate for
discount of 5 per cent (too low today, of course) and a tax rate of 3
per cent a year on capital value as measured by construction cost, and
if one makes some rough allowance for reductions in assessments as the
building ages, then the present value of the taxes due over the life
of the building will equal about 50 per cent of the construction
The higher the rate of property tax, the less the desirability of
putting capital funds into new buildings. The tax on structures
creates an incentive against -upgrading of quality of cities and
suburbs by new construction, even in just those parts of older cities
where need seems greatest but tax rates are so high.
Maintenance versus Deterioration
The tax on buildings discourages maintenance and modernization.
Partly because of the realities of assessments as made, and partly
because of what people believe the assessor will do, maintenance and
improvement of existing structures lag somewhat.
Most Americans must live most of their lives in "not new"
housing. Much will have been built before their birth. Housing will
gradually lose its ability to provide satisfactory shelter unless
labor and materials are devoted to offsetting the effects of time and
use. The quality of the residential space actually available will
depend greatly upon the maintenance of the stock of housing.
Undermaintenance forms one way by which an owner can reduce his net
investment in a building. His actions affect others. The maintenance
done, or not done, on even a minority of properties can materially
affect a larger neighborhood - for ill or good. Outlays for
maintenance can be combined with spending for improvement. Over time,
the owners (and occupants) of housing may do more than merely preserve
earlier quality. Good effects due to betterment will "spill over"
into the neighborhood. Any reasonably complete social system for
making the best of the huge stock of existing structures will assign
key roles to the prevention of new deterioration and the avoidance of
discouragement of improvement.
Property tax payments reduce the net return from property and thus
its attractiveness as an investment. Moreover, the owner may believe
that maintenance expenditures will lead to higher assessments. So he
may spend less. An owner seeking to act in a logical way would not be
deterred by real estate tax in maintaining his property if such
investment offered the best after-tax return. In fact, however,
misconceptions can exert influence. The owner may fear that a "repair
and maintenance" job having visible results (or one reported for
getting a building permit) will result in an assessment increase.
Inducement to Smaller Structures: Sacrifice of Potential Benefit
The property tax on buildings produces a rarely recognized effect
which imposes what economists call "excess burden." The tax
deprives the consumer of more real benefit than the dollars which are
paid for the government.
Property Tax Reform | 11 The expense per cubic foot of construction
declines as the size of the house, office, display area, apartment, or
other unit increases.8 In terms of one of the major things generally
desired - cubic contents -unit cost drops as room size increases. One
estimate, for example, finds that if the cost per cubic foot of a more
or less typical, good quality, single family residence of 1,000 square
feet is 100, the cost per cubic foot for the same type of construction
goes up to 115 if the unit has only 700 square feet and drops to 86 if
the size is 1,600. For another type of construction, with 1,000 square
feet size as 100, the cubic foot cost is 23 per cent higher for a 700
foot unit, and 20 per cent less for one of 1,400 square feet.
The decline in construction expense per unit of enclosed space
reflects the fact that cubic content rises more than proportionately
to floor, wall, and ceiling area. Moreover, much the same plumbing,
wiring, kitchen, heating, and other facilities can serve larger as
well as smaller rooms and buildings through a range of sizes. The
general public welfare can be served best (within a range) by the
construction of rooms, houses, and buildings, of larger, as opposed to
smaller, size. Resource allocation in the economic sense will be more
efficient when labor and raw material go into more commodious or less
cramped housing, office, and other use. The property tax on buildings,
by adding to occupancy costs creates pressure for building smaller
units; in doing so, the tax makes for poorer resource allocation.
Not observably from one year to the next but unobtrusively and mixed
with many changes which occur slowly, the property tax on buildings
will lead to the construction of rooms, apartments, and buildings
somewhat smaller than would be built in the absence of tax. The
smaller units are not so good and yield less utility per unit of
input. The public unknowingly deprives itself of opportunity to
exploit fully the potential benefits from the "law of the cube."
Thus, the public bears a hidden burden by sacrificing the benefits of
greater economies in construction, per unit of space and quality.
Tax Islands and Central City Difficulties
Among localities, differences in effective tax rates on buildings
have other nonrevenue results. Rates much above average in one
locality will reinforce opportunities and incentives for creating "islands"
of relatively low tax rates nearby. Among the independent governments
in a general area, a few with, tax bases which are much above average
in relation to service obligations can get by with lower rates. They
can attract capital for new structures and become low-tax enclaves.
Per unit of output or sales, companies operating there incur
below-average property taxes. They get something of a competitive
advantage while (with their customers) bearing relatively little of
the cost of local government elsewhere.
Some communities, perhaps by the use of zoning power and building
codes, are able to exclude types of property associated with high
governmental expense. They may, for example, prohibit high-density
housing which brings many children and heavy school costs. The kinds
of housing used by claimants on welfare can be largely (or for a time
in new communities, entirely) excluded. Some independent jurisdictions
of a metropolitan area can hope to finance relatively high-quality
local service with property taxation which is less burdensome than
nearby. Personally, I put great value on those aspects of our system
which embody and support the advantages of freedom and opportunity for
differences in ways of living; but less welcome consequences do
result, stemming in part from local autonomy in taxation.
As regards buildings, not land, lower tax rates here and there on the
fringes of an urban area encourage dispersal and the development "far
out" of activities, including housing, which in a full economic
sense "ought" not to be so distant. Property nearer to the
center will be subject to high tax rates; and unless the services
provided improve, each increase in tax rate will reduce the value of
the property and the tax base. The land cannot leave. Improvements
can, and will, shift location. Many buildings will already have
deteriorated but yet have some years of useful life, but of depressing
decline, before replacement becomes economical. As the tax base goes
down, the decline in itself adds to the need for still higher tax
rates. In many cities the forces of the modern economy have made
central city business properties vulnerable to competition from
outlying neighborhoods. Tax differences can aggravate the troubles as
(effective) city rates rise, due in some cases to lag in downward
revaluations for tax purposes. Unless the users of property believe
that the benefits of local government go up with the tax obligations
as just described - not a likely result - the repelling forces gain
strength. Yet the destructive process, one somewhat self-reinforcing,
may be scarcely perceptible from one election to another.
The existence of enclaves where tax rates on structures are
relatively low, "tax islands," will do more than add to the
fiscal imbalance Property Tax Reform | 13 of neighboring localities
and accentuate the difficulties of older areas. The region as a whole
may also suffer. As applied to structures (not to land) this pattern
of taxation arbitrarily - and the arbitrariness must be emphasized -
favors horizontal over vertical growth in metropolitan areas.
Others in the area - businesses, commercial establishments,
professional persons, and residents-may wish to escape the urban
center. Almost all must then "leapfrog" over the enclaves
with their policies of exclusion. The movers must go further out than
would be "normal" if taxes were not distorting. The
resulting land use then imposes higher costs on the whole society - in
time and money of traveling greater distances from home to work, and
for recreation and perhaps schooling; higher expense of supplying
water, sewer, and utility services farther from central locations; and
reduction in the economic and social benefits which population
The total of these tax-originating tendencies cannot be measured; nor
can their future force in the economy be quantified. But they ought
not to be ignored, especially in view of the feasibility of
counteracting them by shifting burden from structures to land.
Property Tax as a Business Tax
As the property tax falls on business, affecting both prices and the
processes of production, it influences not only the quantities of
productive property. Property taxation also affects business decisions
about when, where, how much, and in what forms to operate and to
invest in productive facilities.
The influences which grow out of tax considerations will rarely be
constructive in the sense of helping companies to produce more
efficiently. In general, tax-created additions to business operating
expense are undesirable. Businesses are overwhelmingly the source
of income. In taxes, however, they encounter costs for which there are
usually no identifiable aids to production. Unlike wages, for example,
most tax payments do not go for services received by the business firm
and thus helping it to create income.
The significance of property tax for business will depend in part
upon the relation between the tax and the governmental services
provided. Most services rendered by local governments - education,
welfare, sanitation, protection - are more for the consumer than for
business as such. The expenses of city government are not of a type to
be, in large measure, of direct benefit to business firms.
Managers must take account of property taxes in making decisions,
such as where to locate. Other business decisions affected by property
tax are by no means individually dramatic - perhaps scarcely
identifiable. Some companies, of course, are firmly attached to a
location, e.g., those providing a local service. They will not leave
if the tax rate goes up, but their growth or decline will be affected.
Firms which deal in highly competitive markets cannot afford to incur
avoidable costs which do not, in return, either yield a salable output
or reduce other costs.
Each rise in property tax on structures unless matched by
improvements in local services to business as such will tend to reduce
the business use of structures. The amount of production in the
locality will fall below what would otherwise be the case, perhaps not
observably, or grow more slowly rather than record any absolute
The competition among communities for industry grows. Some takes the
form of property tax favors. Community leaders can be acting sensibly
in trying to include within their boundaries companies which would pay
"high" property taxes while selling outside. As a result,
people elsewhere would then pay some of the costs of local government
where the plant is located. The localities which do impose high
property taxes on buildings, machinery, and inventory (not land) used
by business are less able to maintain and build their economic
Pressures for "Socialisation" and Exemptions
If time permitted, other effects of property taxation (on buildings)
would warrant comment. One I call "inducements to socialization,"
This imprecise expression refers to attempts to lower the cost of
something by providing it through government instead of private
ownership. High property tax rates stimulate somewhat the expansion of
the scope of governmental activity by giving misleading signals of the
relative desirability of governmental, as compared with private,
ownership - for example, "public housing" and governmental
ownership of utilities.
Property tax exemptions have properly been getting more attention.
The higher the tax rates, the greater the incentives for some groups
to press for exemption.
A Note to Get Perspective
The cumulative effects of my remarks may have an imbalance that
misleads. For one thing, effective rates high enough to exert truly
serious results do not apply in much of the country. In fifteen
states, 1968 property tax per $1,000 of personal income was less than
$30 against a nationwide average of $45 and over $55 in twelve. Much
of the country would seem clearly to have unused scope for getting
substantially more property tax without approaching the rates which I
believe must cause great concern in some areas.
Where tax is high, perspective is desirable. Any account of only one
side of a set of large money transactions - the benefits (of spending
on schools or furniture) or the costs (taxes or payments for food) -
will give an unbalanced view. Proposals for more government spending
frequently fail to accord reasonably equal attention to the (marginal)
effects of the (added) taxes needed to pay, including nonrevenue
A happier aspect, however, has made me anxious to deal with
unpleasant realities. The brighter side is a conviction that in this
case of taxation a feasible alternative would raise the revenue with
substantially fewer bad results and some good ones.
A feasible change in the framework of the economy can alter the
environment in which men carry on their activities. The incentive
system being altered, the results of the myriads of private decisions
will conform to a better - probably very much better - pattern of
resource allocation. Let us look at the tempting possibilities.
BENEFITS FROM SHIFTING MORE TAX BURDEN TO LAND
Three distinguishable prospects support proposals for substantially
greater reliance on land as a tax base - site-value taxation -
justice, progress, and efficiency.
Justice in Sharing Costs of Government. Much of what people
pay for the use of land ("the original and indestructible"
qualities) will reflect socially created demand. Much of the cost is
not a payment to bring land into existence. The community can capture
in taxes some of the values which it has created - including values
resulting from local government spending on streets, schools, and
other facilities. In this "most just" manner the community
can get funds to pay for local government.
(2) Progress. Relief of taxes on structures would result from
the enlarged revenue from land.
(3) Efficiency in Land Use. Higher land taxes would put
greater pressure for the fuller and better use of (urban) land. A more
efficient market in land would facilitate more productive use of this
immensely important resource.
Land (the use of land by an owner or a renter) would be the base for
much more of the property tax than it is today, while the use of
improvements would occasion much less tax. The relations of rate on
land to that on buildings might be 3 to 1 or 5 to 1.
Greater use of special assessments would also be wise although
absence of deducibility for income tax purposes exerts a bias against
them. A somewhat new form of tax on (urban) land might well appear. It
would use such objective elements as plot area (size) and location to
determine tax due. One result would be to reduce the weight placed on
value alone. Another would be to relate tax more to the cost of
providing certain services - streets, sewers, sanitation, fire
protection - especially those at different distances from centers.
Increment taxes on land values, even those limited types known (in
the United Kingdom and South Africa) as development levies or charges,
offer less promise than once seemed to me likely. Fortunately, an
annual tax on capital values will differentiate burdens over a period
of years according to changes in value.
One Thing Not Changed by High Tax on Land - The Quantity of Land:
The Economic Functions of Price
A high tax which is in force for long will do one thing, reduce the
quantity of that thing - with one exception, a high tax on land. God
made land (in its natural state). He made lots of it and has not
charged us for it. Land, for the most part, especially as space, has
not come into existence because someone paid to get it produced. Yet
for some land we pay a very high price. When we do so, the Creator
does not receive the generous payment. Perhaps the person who gets it,
and prior owners through history, will have invested money and effort
in the parcel and in the neighborhood. In such cases, something of
what present users pay will represent compensation for such investment
of capital. Most urban land, however, brings prices which are vastly
greater than the worth of inputs of owners (including what they have
paid in land tax for local development, as distinguished from
maintenance and current services).
The amount paid now, whether capital value or annual rental,
generally exceeds, by a large amount, whatever was needed to get the
land in its present state. What city today has more land (within the
same boundaries) because the average price which people must pay is
three or four more times that of a generation ago? If more of the
payments for land, beginning before or with Henry George or a
generation ago, had been channeled into the local government treasury,
the land as space would still be with us.
Price, however, does have an important economic function other than
getting things produced. That other function consists of guiding the
use, of preventing waste in consumption, of allocating resources
according to their relative productivities and scarcities. A "high"
price for some land is essential for guiding it to the best available
uses. A good market in land, one built around prices, is of the
greatest importance in getting the most productive use of something we
must all have, space.
What we pay out as more for some plots than for other, plays a role
unlike that for differences in other prices. For other things, "higher"
price not only restricts use - guiding, allocating, apportioning.
Price also encourages and pays for more (or less) new output. Not so
for land. To assure efficient allocation, the user must pay; but the
owner need not receive all that is paid. Therefore, government can
step in and take quite a chunk of what the user pays, with no harm to
the supply (output) nor to the pressures and incentives for efficiency
in use. But not take all, not by any means. An owner must feel
confidence that his cunning and effort in finding a use yielding more
return will bring him benefit.
By substantially increasing the land tax, government would make a
change in the conditions of land ownership. The total gross income
collected from users would not change. But private owners would get
less, the public treasury more. The price system would still
allocate land use. The effective supply of land would go up in the
sense that more would be offered on the market.
More Investment in New Structures
A reduction of half to two thirds in the tax rate on buildings would
reduce the ill effects which I discussed earlier. The 25 per cent to
30 per cent sales tax equivalent for housing would drop, if not to the
4 per cent or 5 per cent so now often imposed on most consumer goods,
at least nearer to such a level. The tax relief for junky, shimmy,
obsolete buildings would be slight; where assessments are truly
accurate, no reduction at all would result for properties where the
structures are very inappropriate. For fine, new structures, the tax
reduction could be large (in relation to return on investment). For a
time the owner (or, depending upon rental contracts, the user) would
enjoy a windfall of higher after-tax income. Market forces, however,
would respond to alter matters. How? More buildings, new and better
ones, would be supplied.
Lowering the tax on (new) buildings would increase the attractiveness
of such investment. The competitive position of new structures in the
demand for i capital funds, would rise. Some rise in the demand
for land would act to offset the forces adversely affecting land
, The greater the tax on structures, the fewer the number of
investment projects - and the smaller the number of dollars on the
average put into each - which will yield a satisfactory after-tax
return. Lowering the tax rate would raise the legitimate expectations
of benefitting from more investment (in quantity and average quality)
in housing and other types of buildings.
Market processes would work to replace the old buildings with new,
because the cost of using the new (as compared with old) would not
include as large an element for government expense as now required by
the property tax. The user of the building would get more in the
benefits of occupancy for his dollar. The mighty forces of private
enterprise-decentralized, partially obscure, dispersed-would work with
fewer impediments, with more vigor, in channeling capital funds into
Slums - the legacy of generations - would not all be replaced by
modern structures before the next election. But the process of
replacement would be accelerated. Let me assure you that I see, with
discouraging clarity, obstacles to rapid and massive rebuilding of
older cities and the construction of new. All the more reason,
therefore, to reduce obstacles!
Modernization and maintenance of existing buildings would become
somewhat more attractive as a use of capital, helping to raise the
average quality of the community's stock of buildings.
Owner-occupants and renters would get better accommodation per dollar
of cost. Less of what they would pay for the use of the building would
go to support government, but much more of the payment for the use of
land would finance governmental services. The construction of somewhat
larger units would permit society to benefit from the "law of the
cube," getting more usable space per unit of labor and material
Indirect Easing of Financing: Better Market
A tax increase on land reduces its price but not, we assume, the
total costs of ownership. Let us look at an interesting aspect. A
purchaser will pay less in price after land tax has been raised. But
he will then pay more each year as tax.
It might seem that the position of the new buyer will not really be
any different - less interest but more tax to pay each year. In
another respect, however, the position of some (potential) buyers will
be different and better.
The change would favor the person with less capital. It would do so
without making things harder for the person more amply supplied with
funds. Because price is lower a buyer could acquire land with a
smaller outlay; he would need less of his own resources and less
borrowing. More buyers, especially those with below-average capital
and access to borrowing, would have a chance to acquire land. The
annual charges for interest plus loan amortization would be less, but
the owner would have to pay more to government out of each year's
Individuals or real estate enterprises, such as builders of apartment
houses, who are "short" of capital relative to opportunities
for good use of investment funds for buildings would find conditions
of financing easier. Builders could proceed more rapidly, not only
because the prospective net return from investment in new buildings
would go up because of the decline in tax but also because land cost
would absorb less of the available capital, including borrowing power.
More people would be effectively in the market for supplying
The Element of Justice: Socially Created Values
Raising taxes on the existing capital value of land would generally
work against present owners of land; building values, however, would
tend to rise with the drop in tax rate on improvements. Many
landowners have unrealized capital gain accrued since the land was
purchased, but some legitimate expectations for which owners had
sacrificed other alternatives would be destroyed. Nevertheless, for
the great majority of cases in short run, much of the effect on land
Property Tax Reform | 21 prices would be offset by higher building
values. The "average" owner's position would not change by
enough to warrant concern in a world with constant change.
For owners of land having little in the way of improvements (little
in value though perhaps quite a bit of space in an obsolete building),
changes would sometimes be more than nominal. Yet some owners of
vacant land might come off surprisingly well because they would be in
a position to take quick advantage of the new conditions and build
(tall) structures to make intensive use of land. Where losses do
result, the justice of such change would be anything but obvious. It
can properly be argued, however, that society owes nothing to the
owner who has kept land in a use much below its potential. Withholding
of a resource scarcely seems to justify compensation. Still, changing
the "rules of the game" must not be done without regard for
implied as well as explicit commitments.
For the immediate transition let us assume that some adjustment will
ease the more extreme cases. Chief emphasis will be prospective,
applying to future value increases. In a society with large population
increase and rising income, land prices seem certain to go up over
time (even without general inflation).
Investments by owner (or tenant) in improving land ought to be
treated as the input of capital. To the extent practicable, such
inputs deserve the same tax consideration as investment in structures.
Certainly, public policy ought not to discourage real investment in
clearing, draining, landscaping, and other forms involving land as
compared with buildings or machinery.
Over the longer run, present and future landowners would get less of
the increment in land values. The general public would get more. On
this score, the equity results commend themselves very strongly
indeed. Socially created values would go for governmental rather than
private uses - and locally. The absorption of increments for local,
rather than state or national, governmental use would relate
government financing to a benefit basis geographically. The localities
doing most to make themselves attractive would have most of this
revenue source. In major cities $10,000 to $15,000 of governmental
outlay (even more) is often needed for each new dwelling unit -
schools, streets, fire and police, sanitation and health, park and
prison, facilities. Under present arrangements much benefit from such
outlays in developing areas accrues to the owner of land being ripened
for more lucrative use; his payment toward the cost will generally be
only a modest portion of the total.
As for the future, the tax on land values above their present levels
would be almost burdensomeless, except as owners of land and their
heirs get less "unearned increment" from rising values.
Where land values drop, the annual tax would decline. Then, because
tax rates on land would be higher, local government would share more
fully than now in the loss of worth. The proposal would be not a
No other revenue source can possibly compare on this score of
fairness. Future taxpayers would be no worse off for the much heavier
tax they would pay on land. The purchase price of land would be
correspondingly lower. Who would be less well off? The landowners (and
their heirs) who would have gotten the (unearned) increments !
No complete ending of private title to increases in land values would
be consistent with economic efficiency in land use. No such goal could
be achieved without destroying the potential benefits from owner
search for the best use of land. Going too far would work damage for
which no remedy would be available, more or less automatically, within
the general framework proposed.
More of the rise in land values which results from (1) governmental
investment in community facilities and (2) the general rise in demand
due to the growth of population and income would go to pay for the
costs of local government. Such a tax on a pure economic surplus seems
to me about as fair as any imaginable source of funds for financing
community services. The National (Douglas) Commission on Urban
Problems estimated that in the ten years to 1966, and despite rising
interest and tax rates, land prices rose by over $5,000 per American
family - $250 billion. Even a modest fraction of this amount if used
for local government would have permitted quite a reduction of burden
Finally among the points bearing upon fairness, I quote from Mason
Gaffney: "... unearned enrichment discredits wealth and property.
Instead of being a mark of distinction, a symbol of productivity and
service, such unearned wealth symbolizes predation, dependency, and
corruption. Unearned wealth makes hypocrisy and a mockery of efforts
to legitimize property and rationalize capitalism. Parasitic wealth
stigmatizes all wealth. The latent sense of civic community and
polity, now so frustrated in American cities, is lost between the
avarice of some and the disgust of others. Not to tax Property Tax
Reform I 23 rent, therefore, is to alienate those outside a small
circle, and lose a valuable resource of community spirit."
"Highest and Best" (or "Higher and Better")
Use of Land
The necessity of paying tax, in cash, at "high" rates, on
full current market value would intensify pressure on the owner to get
the best income possible. Heavier tax would sometimes force owners to
make more effective use of land. The "speculator" would face
new conditions, generally increasing the inducements to put land -
space - to a use more nearly up to that which market demand suggests
as most productive.
Today, keeping urban and suburban land idle, or nearly so, while
waiting for the price to go up may cost the owner rather little. His
ability to deduct property tax in computing taxable income reduces the
net cost to him, but not to society, of holding land largely idle
waiting for the price to rise. If, as seems to be the case, the
assessor "cooperates" by putting lower figures (relative to
full value) than for developed property, the public official works
against the public interest. He probably does so without realizing the
deeper implications of the underassessment. Users of other land must
pay more when underassessment and undertaxation of some land help to
keep it underutilized.
Where land is held out of the "highest and best" potential
use for whatever reason - ignorance, lethargy, or desire for future
capital gain from community development - a heavy tax payable in cash
will add inducement to find and adopt a type of use which will bring
more income, now rather than later.
At present an owner can keep a resource created by nature (plus
governmental outlays for community facilities) from being used, or
used to best advantage. The higher land tax would reduce such
possibilities. The economics of slum properties and seriously
deteriorated structures - all aspects of the economics of land use in
rundown areas of cities - would need reexamination.
With reduction of the tax on buildings, especially new ones,
conditions for putting land to better use would improve. Both the "negative"
aspect of higher land tax and the "positive" element of
lower burdens on new buildings would aid replacement. Over the long
run one effect of lower taxes on improvements would be to encourage
As a result of the higher tax on land, the withholding of land from "better"
use - commonly called "speculation" - would become more
One man's use of land has "spillover" effects on neighbors.
Better use, especially forms involving more capital, will spread
benefits beyond the specific parcel. Cumulative benefits extend
broadly and build upon themselves. Much good will appear in the
neighborhood effects. Speculation is not by any means to be condemned
out of hand. It can be socially constructive as risktaking of a
pioneering type. Withholding land from "better" use may be a
form of "private conservation" (of green and open space),
bringing benefits to neighbors. The goal we should seek is to make all
the costs and all the benefits - the full social costs and benefits -
open and effective.
The market in land would tend to be more active with more units
available for sale. Assembly of larger units and greater opportunity
for subdivision and use of parcels of different size should both be
accomplished more readily. (Recall the easing of financing noted
above.) In a dynamic society, one with endless forces of flux and
change, the public welfare will be served more effectively the greater
the freedom to change land use, to adapt as conditions change.
What Patterns of Use of Land?
The change in any area would depend upon the prior amount of "speculative"
underuse, consumer desires, the changes in tax rates, and other
factors which will differ from one place to another. The speeding of
urban change expected from the reduction of tax on buildings and
increasing the tax on land would add to the need for modern and
up-to-date urban planning and zoning.
Heavier taxation of land coupled with lower taxes on improvements
would reduce what is so aptly called "urban sprawl." The
effective supply of land, the amount in fact usable, would rise,
especially in areas which have higher land values (as contrasted with
places farther out). New possibilities of, and incentives for,
compactness would appear over an urban area. The new tax relations
would weaken the power of some landowners to "force" people
in a growing community to settle farther out than otherwise.
More intensive, more solid use of the central areas of cities, of "close
in" rather than "farther out" sections, would result.
The costs and the benefits associated with land would be closer to
market values and tax liabilities. Social accounting would be more
nearly accurate. Keeping as largely idle many parcels more or less
close in would be, not only uneconomic but for the owner more
The filling in of idle spots would be accompanied by more vertical
development. Horizontal expansion would be somewhat less attractive
compared with more intensive use of land. The changes would result
from more adequate recognition of all costs and alternatives. More
capital would be economical per plot of land because the tax element
of the use of capital would be less.
Real economies would result from more compact building of urban
areas. Considerable saving in transportation would result - the time
each week spent in travel, to say nothing of the cost of vehicles and
roadways required for the shorter rather than the longer trips to and
from work. And let us note certain real economies of compactness.
Extension of streets, sewers, utility, and other facilities will
generally involve rising costs per unit of service received as the
distance reaches out. Compactness reduces the need for extension of
pipes and other capital facilities whose cost per unit of eventual
service rises with distance. (A larger diameter carries more per unit
of surface than the smaller pipe stretching into more remote areas.)
Compactness permits fuller utilization of any existing set of capital
facilities. Elevators as a means of transport can often serve more
efficiently than autos or buses!
The public as a whole would need to devote less capital per family to
provide a given quantity of streets, utility, and other facilities
when the area covered is X rather than 2X. The total capital saving in
itself ought to be great enough to constitute a significant
reenforcement of other reasons for relying more heavily on land taxes.
A Note of Urgency
A reason for urgency in shifting to greater emphasis on land as the
tax base stems from a feeling that emerging public concern with urban
problems will lead to programs of special aid for cities. Some aids
will be outright subsidies, some may be tax concessions. Programs of
urban aid which direct funds into particular areas will tend to raise
land prices there. Will not much of the intended benefit then be
incorporated into gains for landowners? Experience indicates a "yes"
America's farm programs have seen subsidies capitalized into higher
land prices to the benefit of owners of land at the time the plans
became effective. Future users of farm land must pay more and to this
extent get no benefit from the subsidy. The same sort of thing must be
expected in urban aid unless special precautions are taken. Future
residents and other users will get less advantage from urban subsidies
and aids than is intended to the extent that land prices absorb the
worth of special aid. And one project's success by raising nearby
property values will add to the cost of other projects in the
Note of Caution
To "sell" a program in which one believes, enthusiasm leads
to exaggeration unless caution asserts itself. So let me be clear. The
changes proposed would not pour huge sums into city treasuries without
pain to worthy voters. Nor would a change in the tax law build new
structures or put all land to its best use before the next election,
or many elections. But the tax reform would help.
In an economy of elaborate interdependence, a change in one place has
some effect at many others. Moreover, some movements feed or build on
themselves - cumulate or snowball. How natural for an advocate of a
change, such as a shift to site-value taxation, to combine
interrelation and cumulation and then envisage huge, pervasive,
self-sustaining results of his proposal. Fortunately, the economy and
the society are more stable; they are not so susceptible that large,
multiplied responses follow from all the many changes which impinge on
an economy from various sources. In presenting the case for site-value
taxation, I do so expecting "much" in response. Yet my
vision remains more mundane than miraculous, more for the decades than
for the years ahead.
Property tax administration in most communities needs sweeping
reform. Move toward site-value taxation could be integrated with some
elements of basic revision of assessment, appeal, and collection.
Without appearing to depreciate the need for difficult reform of
administration, I believe that the task lies within, not only the
technical abilities of man but also the realities of politics (in some
states at least). Provisions to deal with aspects of equity call for
more consideration than my discussion has permitted. Though some would
be troublesome, let us not spare the effort needed to deal with them
effectively and humanely.
No change of such a human creation as property taxation will go quite
as forecast. Shift to greater reliance on land taxation, along with
relief for buildings, would present more problems, and probably more
opportunities, than I have discussed. They can, I feel, be handled
well enough to leave an overwhelmingly large balance in favor of the
1. Obviously, the text statement
lacks precision. What is "good" administration? Data on
comparative costs of tax enforcement-governmental plus taxpayer - are
incomplete. Income taxes at high rates bring in large amounts at low
per-dollar cost to. government. We do not know the compliance costs
for taxpayers-keeping records, filling out returns, etc. - except that
for income tax they will likely be very much greater than for property
2. For a more complete analysis see W. J. Shultz and C. Lowell
Harriss, American Public Finance, 8th ed. (Englewood Cliffs,
N.J., 1965), Chapters XVIII and XIX The effects of deducibility for
purposes of income taxation are too diverse to try to examine here. I
neglect the tax on personal property; generally, the tax on machinery,
inventory, and other personal property of business will be shifted
about as the tax on buildings used by businesses.
3. I use the term "land" to mean the original condition.
Expenditures of time and effort by past and present owners in
clearing, grading, etc., should be classed along with investment in
structures for purposes here. Difficult and complex issues of
measurement, and even of concept, arise.
4. The answer should depend in part upon the reasons for growth of
spending. For some discussion see C. Lowell Harriss, Handbook of
State and Local Government Finance (New York: Tax Foundation,
5. Not all taxpayers have equal opportunity to get a property-tax
assessment reviewed for possible correction. Although "on paper"
every owner has the same access to facilities for appeal, the
real-life difficulties vary greatly. Another source of inequality
affects the low income groups of some cities. Families who live in
private housing will pay more property tax than those who live in "public"
housing. In New York rent control also distorts.
6. Property taxation burdens some (businesses and) types of
consumption more than others. For example, families which choose to
use above-average portions of their income for housing tend to pay
relatively more of the cost of local government. Retail sales taxes
exempt rentals, but building materials for construction and
maintenance are taxed. Even after allowing for all effects, one finds
housing taxed less heavily under the sales tax than most other types
of consumption. The income tax treats owner occupants favorably.
7. M. Mason Gaffney, "Property Taxes and the Frequency of Urban
Renewal," Proceedings . . . National Tax Association . .
. 1964 (Harrisburg: National Tax Association, 1965), pp. 272-285.
8. W. A. Morton, Housing Taxation (Madison, 1955). The higher
the price of housing, the smaller the quantity of space purchased.
Similarly, the quality, the amenities, enjoyed will be less as their
cost goes up. The property tax by adding to price will reduce both the
quantity and quality demanded. Averaging over the years, it seems, the
dollar amounts spent on housing by a family of given income will be
about the same whether property tax is somewhat higher or lower. To
make up for a higher price due to tax, the amount and quality of space
obtained will be curtailed. Dick Netzer, Economics of the Property
Tax (Washington, 1966), 63ff.
9. For more complete discussion see Committee on Federal Tax Policy, "Taxing
Business Enterprises: Some Principles," Tax Review, Vol.
XXX, No. 7, July, 1969, Tax Foundation, Inc.
10. Differences in quality of local education will be significant for
employers. Yet will riot wage rates be higher where schooling turns
out more productive workers? Yes. Will wages be enough higher to
offset all potential benefits which businesses may have expected from
higher property taxes for better schools? The answer does not seem
clear in theory, and empirical evidence is not available. Businesses
do not, of course, have the right to vote. Managers, owners,
employees, and consumers will have diverse interests. Many in this
land of "one man one vote" have no vote in some localities
which seek to tax them.
11. Competition, however, limits the possibility of one locality's
getting much revenue from non-resident consumers. Each of the
communities granting property tax favors, in a sense, "tells"
the potential consumer elsewhere, "You can buy products created
by factories, or services rendered, within our borders without paying
(much) toward the cost of our local government." The tax
treatment of the machinery and inventory of business can influence
12. Fundamentally, man cannot escape the problems of scarcity by any
magic or any pushing of problems to government. Yet the individual or
small group may hope to benefit considerably on balance because its
payments will not equal its benefits. And taxpayers have incentives to
alter affairs to escape tax so that the secondary and tertiary effects
can include costs greater than those payments of a quid pro quo
in the market.
13. Personal property, public utilities where now taxed on other than
an ad valorem basis, and other special forms would each need
examination in the context of the conditions of the state and
locality. Moreover, the relative roles of state and local governments
in reliance upon, and administration -of, property tax can certainly
14. There would, of course, be difficulties. Results not adequately
foreseen are to be expected. Allowance must be made for surprises, in
nature or kind and in degree. No one can expect to identify in advance
all of the consequences, welcome and disappointing, of a major
modification of a major tax having major and direct bearing on a major
industry and a major element of the economy.
15. Moreover, as a practical matter ample room should be left for
rewarding investment in land and the development of location.
Assessment will not always be able to separate out such elements of
16. The argument challenging the propriety of destroying existing
rights in private property in land has force and strengthens the case
for emphasis on prospective application. Giving "windfalls"
to owners of fine buildings may also be criticized; for the tax
reduction would do so. For most owners, the net change would be
slight. The other cases unquestionably justify concern. The analysis
would be much more complex than appears on the surface. Federal income
tax considerations, the length of prior discussion and "notice,"
the effect of rising demand due to an increase in building, the nature
of the outstanding lease and rental agreements, and other elements,
all these bear upon the problem.
17. The first communities to shift to site-value taxation would have
an impressive advantage over those coming later. As more and more
localities offer the better attractions, less capital would be
potentially available, on the average, to each. Compared with the
present, all would be in better position but not so strikingly as for
those leading the parade. No economist may be confident whether the
supply of new saving out of income, especially saving for investment
in real estate, would rise appreciably in response to higher after-tax
yields. The United States would become somewhat more attractive
compared with other countries in competing for capital in world
18. Empirical evidence, it is said, provides little concrete support
for the conclusion reached deductively here. The whole history of
enterprise economy testifies to the effectiveness of profit
incentives. The fact that Pittsburgh was a long time in rebuilding
what has become the Golden Triangle does not prove that a big property
tax differential has no great influence. Pittsburgh's tax rate
differentials were never more than a modest fraction of those
envisaged in my plan. For more discussion of the economic forces
governing the flow of capital see C. Lowell Harriss, The American
Economy, 6th ed. (Homewood, 111.; The Irwin Corp., 1968).
19. Even this latter sort of burden, a disappointment, can be largely
eliminated. How? By building a society in which such expectations get
no support. Land prices now include some element of expectation of
future increases. My proposal, by destroying such hopes, no matter how
small, would impose some "unearned decrement" on present
owners. How large? I have no way of knowing.
20. Income tax considerations complicate any general analysis such as
this or an analysis made for any particular piece of land. Such tax
factors differ from one case to another, depending in part upon
whether ownership is by an individual, corporation, or nonprofit
organization; the owner's other income and deductions; capital gains
and the possibility of avoiding tax by holding till death; and so on.
The term "highest and best" implies a degree of knowledge
which is more nearly one we would like to have than the one we do have
about best potential use. Possible ambiguities may be avoided by using
"higher" and "better."
21. Is it consistent with the principles of free enterprise
capitalism to exert such pressure on the owner of property ? Whatever
one may feel about government pressures on property use in general,
land does differ in vital respects. For one thing, the owner did not
create the land. His moral claim to any reward (net after tax) for
just owning the land he did nothing to bring into existence, such
claim seems to me less than impressive. Decisions about land use will
affect not only the owner and his tenants. The decisions also affect
people around and those who may have to "leapfrog" or use
more of their life travelling farther for each day's work if he keeps
the land at a use which is below optimum for the community. Does one
individual really have a "right" to impose such higher costs
22. The implication that "up" may sometimes be preferable
to "out" for living and working may seem the antithesis of
the American dream. Some families will prefer "out," but the
costs of alternatives, including the effects on others, must be
realistic. Dreams cannot always become realities - certainly not in
housing, especially not until for travel we can rely on a magic carpet
moving at a high speed and needing no parking space. Apartment life
may not be ideal; neither is the life of the single family in a house
in the suburbs. Apartment life will be with us permanently; the
relevant issue for present purposes is to get it, along with all other
aspects of our life, to be as good as possible. Easing the
availability of both capital and land must certainly be an impressive
method of encouraging use which conforms more closely with the
relative costs of local government services.