Stop Social Suffering by Sharing the Soil

Les Hemingway

[A pamphlet published by the author, 1998, Norlane, Victoria, Australia]

The modern world is a marvellous place. Its inhabitants live and travel in air conditioned comfort, communicate with one another across thousands of kilometres and produce food, clothes and housing with ease so ample resources are left for spending on health, education, entertainment, etcetera.

Savings and Capitalism

This desirable situation is achieved through "capitalism". Capitalist societies do not use everything they produce immediately. Instead they "save" some of their earnings and spend it on tools and machinery. These "capital" goods offer scope for further savings which can be be spent in the same way. The result is a progressive improvement in productivity and in standards of living -- as the amount of labour needed to produce any given article declines and the quantity of goods and services available increases proportionately.

Unemployment and Poverty

Despite its productivity the modern world contains millions of people who are poor, unemployed or both. This is sometimes due to takeovers and mergers or to the replacement of labour by machines, but it also occurs because not everyone shares in the ownership of the earth.

Uneven Earth Ownership

The earth is unevenly owned. Some people own huge amounts of land and natural resources -- far in excess of anything they could occupy or utilize themselves. Others own land on which to live and work, while still others are completely landless.

Net Incomes

Land owners have higher net incomes than non-owners, even when both groups are equally talented and industrious. This occurs because landless people either rent or buy sites from those with land to spare, so some of their gross income is consumed as rent or as a purchase price to which interest is often added.

The Rich and Poor

The higher net incomes possessed by land owners provide a starting point for the ever-widening gap between the rich and poor. This income differential allows owners to sell goods or Services at prices below those equivalent tenants or purchasers need in order to survive. So when goods and services are plentiful and there is intense competition for customers or jobs, owners are more likely than non-owners to secure a share of the available work. In this way the initial gap between the wealth of the two groups begins to open up.

Money Makes Money

Landowners with well-paid jobs often acquire more than enough money for their own immediate needs. They may use the surplus to secure additional wealth as interest, rent or dividends -- through lending money to others or spending it on real estate or shares.

Money obtained as rent comes from people who lack sufficient property for their own needs. Interest may also come from buyers who are paying out a mortgage, or from tenants or purchasers who borrow to acquire capital items or to cover urgent needs.

Finally a significant proportion of company dividends also comes from landless people. Individuals who cannot afford land on which to work for themselves must work for others, for whatever wages below the full market value of whatever they produce. The victims include unskilled and semi-skilled workers all over the world, as their bargaining power and employment prospects weaken whenever people who are desperate for work are plentiful.

The Poor Transfuse the Rich with Wealth!

Through paying rent or interest and contributing to dividends non- owners provide landowners with a continuous transfusion of wealth. But the evil does not end there because other mechanisms send money in the same direction. These include the ownership of better land by the rich, the stronger bargaining power they possess and their ability to secure the goodwill of governments.

Location, Location, Location!

The value of land depends on its location in relation to jobs, shops, schools, markets, transport, raw materials, potential employees, etcetera -- all of which make life easier or more profitable for the occupants. Hence the occupants of valuable land prosper more easily than those on cheaper sites and competition for valuable sites is always fierce.

This competition is seriously one-sided. Poorer bidders usually borrow heavily to finance the purchase of property so the price they pay is swollen by interest. Richer buyers provide larger deposits or pay cash. They pay little or no interest and can offer substantially more than other bidders for any given site. Having secured prestigious properties they may boost their personal fortunes through running successful businesseses on the land, or contribute to the maldistribution of wealth by letting sites to losing bidders and collecting rent from them!

The real estate market is less generous with people in middle and lower income groups. Land is a useful investment and there is competition for nearly every site offered for sale. This pushes prices to the limit the market can bear and:

  • (a) forces average buyers to borrow heavily to pay for land, buildings or both and saddles them with mortgages that take years to repay,
  • (b) puts the ownership of good or medium land beyond the reach of anyone whose talents and abilities are below average, to leave them with a choice between tenancy or the purchase of cheap and relatively useless land and;
  • (c) ensures that anyone who chooses tenancy or is forced into it will either live in premises no one else wants, pay substantial quantities of rent, or both.

Bargaining Power and the "Level Playing Field"

Much is made of the supposed level playing field where all compete on equal terms. But terms are hardly equal when one party to a transaction is paying rent or interest while the other is comfortably established on debt-free property, and they are even less equal when one party is wealthy and the other is poor.

A poor person's life, health or financial security may depend upon a sale or a purchase which has only a minuscule effect on the fortunes of a richer trading partner. For instance when poor people (or nations) sell to richer ones the advantage lies with the buyer and sellers are unlikely to receive a fair price for their produce. By contrast when people who are paying rent or interest need food, clothes or medical attention and all vendors of these items are financially secure the reverse applies and buyers pay more than would apply under more equitable circumstances. And in both cases richer people profit at the expense of poorer ones.

Governments Help the Rich

The final piece in this jigsaw is government action. People with lots of money can provide generous support to political parties or withhold that support. Multinational companies can choose to set up plants which provide jobs in one country or another. Media barons can praise politicians for whatever good they do or condemn them roundly for their faults.

All of this tempts governments to overlook their obligation to govern for the benefit of everyone. It also leads to loopholes in taxation legislation which clever lawyers and accountants exploit for the benefit of wealthy clients. So while ordinary workers make their full contribution to taxation revenue, many wealthy firms and individuals shirk that responsibility, with the connivance of incompetent governments.

Tax avoiders possess a marked advantage over their competitors. If one firm avoids paying tax while another pays 30% of its gross profits as company tax, the first firm will easily capture the second firm's suppliers and customers and ensure that it struggles to survive. In this way government negligence helps widen the gap between rich and poor.

The Aggregation of Wealth

People who collect rent, interest or dividends can re-invest it to collect still more rent, interest or dividends. In this way small fortunes grow into larger ones and the larger any fortune the more rapidly it can grow.

The more money anyone has the easier it is for them to buy up the best land in any vicinity, to boost profits by coaxing prices up or down for their personal benefit and to obtain valuable concessions from governments.

Over time these various factors allow some individuals and firms to acquire prodigious amounts of land and wealth. If they are not reversed then a relatively small number of people will eventually own much of the world and millions of their fellow humans will become little better than slaves.

The Juggernaut Rolls On -- But it CAN BE STOPPED

These days money floats around the world on electromagnetic waves and passes from one country to another in the twinkling of an eye. Fortunes made in one country are augmented through investing in other countries and there seems no way to stop some people getting richer and richer while others remain poor.

However there is no need for pessimism. Other factors enter the equation but the basic reason for the co-existence of opulence and poverty is that some people own huge amounts of land while others own little or none of it.

Wealth and landownership go hand in hand. If landownership was more evenly distributed wealth would do the same and involuntary poverty and unemployment could virtually disappear. This means in practice that any nation with the will to do so can STOP SOCIAL SUFFERING BY SHARING ITS SOIL!

Share the Earth by Taxing Land

The earth will be shared in an automatic fashion, without riots, revolutions or a change of government, if nations stop taxing incomes, sales and other commercial activities and assess taxation against the value of land instead.

Taxes assessed against the value of land discourage everyone from buying or holding land for which they have no immediate use. Such taxes reduce the price of real estate by increasing the supply of land on the market and limiting the demand for it. In this way land tax differs from taxes on sales, consumption etcetera as these add to the price of the object being taxed.

As land tax brings prices down the higher the tax rate the lower the price of land. For instance if a given site cost $100,000 in the absence of land tax it could cost:

$84,000 with a tax at 1 % of its capital price,
$50,000 with a tax at 5% of its capital price,
$20,000 with a tax at 20% of its capital price and:
$5,000 with a tax at 100% of its capital price.


If all land was taxed at 100% of its market price, buyers would pay a small sum in return for any site and pay the same amount annually as tax. This level of land tax offers the following benefits to society.

Putting Tenants and Owners Onto an Equal Footing

If all land was taxed as described above land owners and tenants would pay similar amounts annually in return for the use of equivalent land. They would compete on equal terms and tenants would have as much chance of succeeding in business or securing work as owners.

Less Net Income For Landlords, More for Tenants

A definitive land tax would reduce the transfer of wealth from poorer people to richer ones. For instance rent paid for the use of farm, home or commercial sites would pass to the government as land tax, so the incomes of landlords would be significantly lower than they are today.

At the same time the land tax would push the net income of tenants upwards, by replacing some or all of the current income tax.

Fair Property Rentals

A 100% land tax would burn holes in the pockets of landowners who held land for which they had neither tenants nor immediate personal use. To limit the damage to their bank accounts owners would either sell such land or let it to anyone whose rent would cover the tax, so this way the tax would keep property rentals at fair levels without the need for landlord-tenant acts.

Lower Mortgage Costs

Land tax can remove almost ninety per cent of the price of land. In this way it can cut thousands of dollars from the price of average homes and business premises, take tens or even hundreds of thousands of dollars from net mortgage costs and vastly reduce the flow of interest from property buyers to those with wealth to spare.

Fairer Dividends

People who can afford land oh which to run a business of their own will not work for low wages. Land tax can put freehold within everyone's reach. In this way it can bring wages up to the market value of each worker's production, keep dividends at reasonable levels and ensure that workers' legitimate earnings are not transferred to the pockets of the well- to-do.

Location, Location, Location

People who own the best land: in any given vicinity can run a successful business more easily than those on poorer land. This gives the owners of better locations an advantage over competitors, even when they are all equally talented and industrious. This is unfair since no one made land and no one has a stronger natural entitlement to good land than anyone else.

A tax at 100% of the value of all land would correct this anomaly by taking more from the owners of good land than from the owners of poor land and more from the owners of large holdings than from those with smaller plots. The tax would ensure that big supermarkets with wide aisles and large parking lots paid more than the owners of corner stores. This would make competition between small shops and supermarkets more even and arrest the continuing disappearance of the smaller enterprises.

Helping Rural Dwellers

Land tax can also foster decentralization. The owners of stores in small country towns would ply only a small amount of tax -- perhaps 5% of their incomes instead of the much higher percentage they pay today. This would allow them to offer goods at prices comparable to those pertaining in nearby cities and instead of disappearing gradually, country shops would flourish. Everyone in rural areas would be better off as they would all pay low rates of tax. 'This is reasonable since country people have access to fewer amenities than their city counterparts. The haemorrhage of people and services from country areas might cease and the decline of rural population could even be reversed.

NoTax Avoldance With Land Tax

Finally land tax cannot be avoided by anyone. Land cannot be hidden or transferred overseas. Multinational companies and media magnates pay their share of it like everyone else and the result is fair to all concerned.

An End to Involuntary Unemployment

Most people seem to think that wealth is produced through a combination of labour and capital and that infusions of capital are required for the creation of jobs. However this is incorrect. The basic factors of production are LABOUR and LAND. Capital items such as buildings and machinery are produced through the use of labour upon land -- with the term "land" usually being extended to include natural resources as well as home, office, farm and factory sites.

Hence jobs are not created by giving labour access to capital but through giving labour access to land!

Unemployment occurs because labourers are locked out from land by its current capital price. Would-be labourers (or those who could employ them) lack work because land they can afford is too infertile or too far from populated areas to be of any use to them, while land on which they could be gainfully employed is priced beyond their reach.

A full discussion of this matter is given in Chapters 8 and 14 of Sharing the Earth. Here it suffices to say that land tax will eradicate involuntary unemployment by giving all able-bodied persons access to useful land at prices they can afford. In this way it will eliminate the need for costly and ineffective job-creation schemes.

Compensation Packages

Every change to a tax system has winners and losers -- at least in its initial stages. However anyone who loses through a steep increase in land tax can be identified and compensated directly -- a feature that is not possible with things like GST.

Correcting a Shocking Injustice

A land tax such as that proposed here will remove an injustice which escapes the notice of most people, even though it is responsible for vast amounts of human misery.

No one made the earth or any part of it, so there is something incongruous about people making money from land they did not make themselves. Likewise, everyone needs land on which to live and work -- since human beings cannot fly about like birds and nest in trees. Consequently tenants who pay rent because they cannot afford land of their own are paying another human being for the privilege of living on earth, while people who spend heavily in order to acquire necessary land are doing much the same.

These are forms of economic slavery since the non-owners' only alternative is a precarious existence on the fringes of society. Furthermore because their options are limited non-owners are easily coerced into paying exorbitant amounts to owners either as rent or as the purchase price of land plus interest.

This injustice underlies many social evils which could be corrected through a proper tax on land.