The Taxation of Land Values:
A Proposal for Economic and Social Reform
Frederic C. Howe
[A pamphlet published by The Joseph Fels Fund of
America, Cincinnati, Ohio, undated]
January, 1909, Joseph
Fels, of Philadelphia and London, member of the Fels Naptha Soap
Company, contributed $25,000 a year for five years to promote
Land-Value Taxation in America. The control of this fund, with the
subscriptions obtained in America, has been placed in the hands of
the undersigned committee. It is known as The Joseph Fels Fund of
This Fund is a propaganda fund. It is endowed to promote the
adoption of the Taxation of Land Values in our states and cities.
Already this has become a political issue of commanding importance
in the Empire of Germany and Great Britain, while the cities of the
former country as well as of New Zealand, New South Wales and
Northwest Canada have ushered in its partial application by the
levying of a special tax on "unearned increment" or by the
exemption of all improvement values from taxation.
THE FELS FUND COMMISSION
- Lincoln Steffens, Riverside,
- Jackson H. Ralston,
- Frederic C. Howe, Cleveland,
- George A. Briggs, Elkhart,
- C.H. Ingersoll, New Jersey
- Daniel Kiefer, Chairman,
- A.B duPont, Treasurer
The Conditions that Confront Us
It is not necessary to portray the industrial conditions that have
made their appearance in America within the past few years. Two
generations ago there was opportunity for all. In so far as poverty
existed, it was accidental or temporary. During the intervening years
the public domain has been enclosed, the resources of the nation have
been appropriated, and the difficulties of making a living have
greatly increased. Opportunities for employment have not kept pace
with the demand for employment. Recurring industrial crises and
irregularity of employment have created a residuum of unemployment
resulting in an army of vagrants, tramps and semi-criminals. Poverty
has become a permanent condition to an increasing number, if not to an
increasing percentage, of our people. Poverty has become a National
The expenditures of Nation, States and cities have grown with great
rapidity. The ordinary revenues of the Federal government approximate
$600,000,000. Those of the States, cities and local divisions
aggregated $1,038,347,023 more in 1904. The burden of taxation to-day
amounts to nearly two billion dollars, or twenty dollars per capita.
This does not include the indirect cost of the tariff.
The Remedy Suggested
The remedy proposed is the abolition of all taxes levied on personal
property, on houses, buildings, farm animals and improvements,
machinery, tools and goods of all kinds, as well all State and Federal
taxes on consumption by means of excise or tariff duties. In lieu of
the taxes abandoned, we propose a tax levied upon that value which
attaches to land alone; on that value which exists because of the
growth of population, the development of industry and the necessities
of humanity. We do not propose to tax land, but the
value irrespective of improvements of urban, suburban and
rural lands; of mines, of railways, and mineral resources, which is
conservatively estimated at from two to four thousand million dollars
a year. It is not proposed to tax land as land, but
the value of land that comes with social growth.
The remedy proposed is within the realm of practical politics in our
cities and States at least. It can be accomplished by abandoning the
taxes now levied on personal property and improvements, and by
shifting all State and local taxes onto land values. Then the revenues
of the cities and the State would be collected from economic rent.
Here they would rest, for it is admitted by economists that land-value
taxes cannot be shifted to tenants in higher rent. They remain where
they originally fall.
Feasibility of the Proposal
The separate assessment of land values and improvements is already an
accomplished fact. New York City has separated its assessments since
1903. It-values its land with ease and scientific accuracy. Boston has
done the same thing for many years. Cleveland, Detroit, San Francisco
and many other cities separate valuations in the same way. Certain
provinces of Northwest Canada do not tax improvements at all. New
South Wales, New Zealand and other Australasian colonies have relieved
improvements from local taxes altogether. The British Budget of 1909
proposes the valuation of city and agricultural land and mineral sites
for the purpose of levying a special "unearned increment"
tax, while the German cities have been collecting an average of 9.5
per cent, of the profit of the land speculator since 1904. There is no
longer any question of the simplicity of land valuation, nor of the
feasibility of levying a tax on "unearned increment."
The Growth of Land Values
The assessments of certain cities enable us to ascertain the colossal
growth in urban land values. The land values of New York City amounted
to $3,057,161,290 in 1904. Two years later the valuation increased to
$3,391,771,526. By 1907, the value had increased again to
$3,557,591,504, while in 1908, it had still further grown to
In four years' time, land values alone had increased by
$786,004,307, or nearly $200,000,000 a year. The total ordinary
expenditures of the city during these years were about $600,000,000,
all of which could have been met from the speculative increase alone,
leaving nearly two hundred millions for the landlords. The land
underlying the metropolis was originally bought from the Indians for
$24. Today it is worth 166,000,000 times its original cost.
Everywhere land increases in value and at much the same rate. Nowhere
is the rise in value due to the enterprise or thrift of the owner.
Land values are a social growth, an "unearned increment,"
contributed by society to the owners of the land.
The land values of New York City carry an annual ground-rent of
nearly. $200,000,000 to their few thousand possessors. The ground-rent
of all America is not far from $4,000,000,000. This exceeds by two
thousand million dollars all of the revenues of the Federal Government
as well as of the States, counties and municipalities. The progress of
civilization has produced an annual fund far in excess of the present
or prospective needs of society.
The Fels Fund Commission contends that taxes as now levied discourage
enterprise. They tax thrift. They obstruct business. They check
employment. Taxes on land values, on the other hand, encourage
enterprise and thrift, they stimulate employment and reduce the cost
of living. They are a natural form of taxation.
Taxation of Land Values Will --
First, Put an End to Idle Land Holding.
It will destroy speculation. It will make it impossible to hold land
out of use. As the British Chancellor of the Exchequer said: "It
will make the dog in the manger pay for his manger." The owner
will have to use his land, and use it in the most productive way, in
order to pay the taxes. That increasing land-value taxes check
speculation and stimulate use is a commonplace of experience. Surely
society has a right to insist that those who own the land, on which
all life depends, should either use the land or turn it over to some
one who will.
Second, Cheapen Land.
First. Many owners will sell their unused land in order to be
relieved of the burden of taxation.
Second. The taxation of rent will lessen the value of land, for
economists' agree that the selling value of land is its untaxed value.
For taxes levied on land values reduce rent. They fall on the landlord
and cannot be shifted to tenants in higher rent. Thus, the competition
of sellers and the reduction of rent will cheapen land and throw upon
the market idle holdings that will be available for industry,
agriculture and home-building.
Third, Solve the Housing Problem.
The Housing Question is a land question, not a house question. It
exists only where land values are prohibitive. If we cheapen land we
open it up to use; if we tax it heavily enough we compel it to be
built upon. Idle land holding is only possible where the tax rate is
low. Increase the rate and the land is put to productive use. Moreover
the removal of taxes on improvements will encourage improvements just
as the present taxation of improvements discourages them. Under the
Land-Value Tax he who builds would be rewarded, while he who refused
to do so would be fined. The house tax is like the old French window
tax, which caused the peasant to close his cottage to the sunlight.
The taxation of land values would cut like a surgeon's knife at the
root of city land monopoly. Shacks and tenements would be improved,
while new structures would increase the housing capacity of the city.
The tenement and the slum would disappear. No longer would thrift be
penalized and the idle speculator be rewarded.
Rents would fall in consequence of the increased supply of houses.
Building materials in transition from the mine, the forest and the
factory would be free from taxes, as would houses, office buildings,
machinery and factories. All of these forces together would solve the
housing question in a few years' time. They would solve it by the law
Fourth, Destroy all Monopolies Bottomed on Land
The United States Steel Corporation has capitalized its iron ore and
coal fields at $800,000,000. Twenty-five years ago they were farming
lands of little value. The anthracite coal combination is capitalized
at hundreds of millions by virtue of its ownership of all the
anthracite coal in the East. The Standard Oil Company is a monopoly
because of its railway and land privileges. Direct land-value taxes
upon these resources could not be shifted to consumers. They would be
deducted from monopoly profits. More than this, idle mineral resources
would be forced into use, while labor would be given new opportunities
for employment. With the tax sufficiently high, the nation would
regain the splendid resources that have been in large measure filched
from it by stealth and illegal means. The rent, which now goes to
monopoly, would be converted in taxes to the state.
Fifth, Improve the Condition of Capital and Labor
What would labor gain in the new dispensation? Obviously, cheap land
means high wages. The history of all new countries proves this. And if
the city, suburban and agricultural landowners were taxed on the
opportunities held out of use, they would use their land or sell it. A
demand for labor would arise: a demand for miners, and agricultural
workers, for masons, carpenters and builders. All other industries
would be awakened into life in the process. All business would be
stimulated. In a short time - a very short time - there would be more
jobs than men seeking them. Now, the entire continent is appropriated,
yet it peoples but twenty-three persons to the square mile. America
could home ten times its present population were the natural resources
opened to use. This the taxation of land values would do. It would
increase opportunity, as did the discovery of the continent four
hundred years ago.
Sixth, Effect a "Just Distribution of Wealth
Even a slight increase in land-value taxes would stimulate the use of
land. A doubling of the present rate would usher in an era of
industrial prosperity. Were the land value tax fully applied social
justice would ensue, the landlord fulfilling the useful function of
tax collector, while labor and capital would each get the full value
of its product. There would be plenty of alternatives for employment
in this country. Wages would rise to the full product of men's toil.
The opening up of new opportunities all about us, and the increase in
wages, would awaken other industry. It would flood mills, factories,
mines and railways with business: for the wants of mankind know no
Industry would reflect the changed conditions. For prosperity means
increased demands for all those goods which labor and capital produce.
Were the incomes of the salaried, professional and working classes
doubled to-morrow there would arise an era of prosperity the like of
which the world has never known. For the purchasing power of America
would be doubled in consequence.
And in the last analysis, prosperity depends not on the cheapness
of labor but on the amount of money which the consuming classes have
to spend. Industrial prosperity depends on the well-being of the
great mass of the people rather than of the few. Through the same
influences child labor would disappear; vagrancy would be reduced to a
minimum and crime would be checked at its source. For child labor,
vagrancy and crime are not to be found among those who are well-to-do.
They are the costs of poverty.
Seventh, Reduce the Cost of Living Despite Increased Wages
The Federal revenues, amounting to $700,000,000 a year, are collected
from consumers. They increase the cost of living. It has" been
estimated by Professor William G. Sumner of Yale and John A. Hobson of
England, that the indirect cost of the tariff, due to the monopoly
prices it makes -possible, is approximately a billion and a half
dollars a year. This is equivalent to $100 a family. The abolition of
indirect taxes alone would reduce the cost of living to that extent,
while the abolition of the taxes now levied on houses, improvements,
tools, machinery and all other labor products would reduce it still
Land-Value Taxation is a Social Philosophy
Land-value taxation requires no new machinery and but little new
legislation; no State control of industry is necessary. The throwing
of taxes onto land values would open up the resources of America to
those best fitted and having a natural .right to use them. It would
eliminate the speculator and the land monopolist as toll-takers in
distribution. It would destroy private monopoly. It would create
opportunities for tens of millions of workers, and would stimulate the
production of wealth beyond our present dreams. It would equitably
distribute the wealth produced and would increase many-fold the amount
available for distribution. We believe it would usher in industrial
conditions in which want and the fear of want, poverty and its
attendant evils of vice, disease and crime would rapidly disappear.
That these results are desirable all agree. Would they follow from
the reform suggested? Is the logic in harmony with experience and the
teachings of political economy? We ask your comments and criticisms.
The Fels Fund has been created in the belief that the taxation of
land values is not only a natural and just method of raising all
public revenues, but an adequate cure for the social and industrial
evils which confront us. This conviction has united hundreds of
thousands of persons in this country, in England, Germany,
Switzerland, Denmark, Sweden, Norway and Australasia, for carrying it
- Land-value taxes are different from other taxes in this, they
cannot be passed on to some one else as can taxes on
houses, goods and other wealth that is used or consumed. '' A tax
on rent,'' says the British economist Ricardo, "would affect
rent only; it would fall wholly on landlords, and could not be
shifted to any class of consumers. The landlord could not raise
rent." John Stuart Mill says : "A tax on rent falls
wholly on the landlord. There are no means by which he can shift
the burden upon any one else. A tax on rent, therefore,
has no other effect than its obvious one. It merely takes so
much from the landlord and transfers it to the state.'' In any
growing community such a tax would do little if any more than tax
the speculative increase of the future. It would take for public
uses that which does not yet exist. It would appropriate the ''
unearned increment'' of the future.
- All growing cities show a similar condition. The land values of
Boston increased $168,240,145 from 1892 to 1900, or $42,060,036 a
year. The speculative increase in land values in San Francisco
averaged $9,218,254 a year from 1885 to 1904, while a study of the
City of Washington showed an increase in land values of ten per
cent, per annum, or upwards of $10,000,000 a year. Cleveland,
Ohio, made a scientific valuation of its real estate in 1910.
I/and values were separated from improvements. The assessment
shows that in ten years the land alone of the city had increased
in value by $177,000,000, while the population had increased by
172,000. Every man, woman and child coming to the city had added
$1,000 to the value of the land. In each case, the speculative
increase exceeded the total budget of the cities.
... The census valuation of the
entire United States for the year 1904 shows the land values of
the country to be approximately forty billion dollars.
Statisticians have placed this land valuation at from sixty to
eighty billion dollars. In town and country, land values mirror
the birth rate. Every man, woman and child adds from $500 to
$1,000 to the value of land. ... The
Secretary of Agriculture has stated that agricultural land values
increased from fifty to one hundred per cent, during the period
from 1900 to 1905, due to the "exhaustion" of land and "the
consequent pressure of new demand." ...
The Census Department shows that the value of a little less than
one-half the acre property of the country increased by one and
one-half billion dollars from 1900 to 1904. Other American cities
and foreign countries confirm New York's experience. In Berlin the
value of the land increased by $875,000,000 from 1870 to 1890. The
examples cited by the Chancellor of. the Exchequer, during the
recent Budget debate in Great Britain, show similar conditions in