The Brilliance of Henry George

Harry Pollard

[Reprinted from a Land-Theory online discussion, 8 May 2000]

The brilliance of George was not confirmed by his espousal of land-value taxation (an old idea stretching into the dim past) but by the way he thought. The "breathing tax" kiddingly presented by Karl, picked up and analyzed by Mark, would certainly have been dismissed by George as a silly notion.

He tended to look at things and see them as they are, rather than as an emotionally colored construct of his prejudices. Few people like someone who tells it like it is, which perhaps is why this brilliant man was often heartily disliked -- as well as loved. I call myself -- with tongue well closeted in cheek -- a neo-sophist. I think it's fair so to label George that way.

(Sophists aren't liked as they tend to trample over sacred beliefs with their hob-nailed boots.)

Nevertheless, he was often wrong and intemperate - perhaps an inevitability when one heads a political reform movement intent on ending flagrant injustice and desperate conditions for a large portion of the populace. I wish he had spent less time politicking, and more time thinking and arguing with his peers.

GEORGE'S ERRORS

He was wrong when he said "we must make land common property . . . by at one stroke abolishing all private titles, declaring all land public property, and letting it out to the highest bidders . . ."

This ought to make our hair stand on end. It confirms the critiques of friendly libertarian types - even as it places us in the court of the socialists. What George was saying, whether he realized it or not, was that we must nationalize the land, thereby placing it under the control of the State.

(I know, I know!)

I'm sure he didn't mean to say that, but he would better have said that no-one has more right to natural resources than another. And this doesn't alter no matter how much politicians wield their privilege legislation to obscure this basic expression of rights. Yet, if politicians have bestowed privilege on some at the expense of others, so can those same politicians remove the privileges.

LAND VALUE -- WE NEVER SEEM TO GET IT RIGHT

Two kinds of value attach to natural resources. As did George, we are inclined, at times, to mix these two values together -- a grievous error.

There is a value intrinsic to a location. This can be fertility (one of the two sources of Rent in the lexicon of the early classical economists - the other, of course, being location). Or it can be anything else that is intrinsic to that location - oil, minerals, and so on. Using such locations diminishes their value, as fertility is leached from the soil, oil is pumped away, minerals are extracted.

It seems proper that, given a common ownership right to natural resources, after the costs of extraction the rest would belong to us all -- in common. Philosophically, this notion could be said to have a global significance, but practically we must keep the argument within political boundaries.

THE COMMONS

Ed Opitz of FEE in a delightful letter of criticism I've held since 1957, said "Common property amounts to a contradiction of terms." Yet, the source of the term -- the English village commons -- was a fact. They worked very well, contrary to Garret Hardin's view in "The Tragedy of the Commons". The common land was a valuable resource to which each villager held a common and equal right.

Nevertheless, Hardin was right about the problems that accompany modern unrecognized "commons" situations. These range from despoiling the rain forests, to whale slaughter and over-fishing. If there is no ownership of the oceans and the forests, they may face destruction. Or they will if we fail to assert our common ownership and lay down conditions for use of our property.

ECONOMIC RENT

The other value that attaches to land has little or no global significance. This is what we call Economic Rent -- or Rent. This is a purely local value created by the community surrounding it. Though we are likely to insist that a community is a collection of individuals -- it is the individuals' activities as a community that produces Rent. Rent attaches to locations and is easily measured. It can be recovered from the owners of these locations cheaply and effectively.

So, should it be collected and distributed to the community that created it -- either directly, or to pay for city services, thus avoiding taxation?

Seems fair. And it meets the ideal of a 'self-supporting city'.

In no way is this a tax. It is a user charge, for benefits received, to be accepted or refused as one wishes. One may always go to another site carrying a lower Rent -- or no Rent at all. However, able people will always prefer to move to the highest Rent locations they can use. Further they will hope and expect the Rent to rise, for this means more business.

Yet, we insist on telling them we want to tax them -- which impost they obviously seek to avoid. So, they are likely to oppose land taxes as just another way to tax them.

THE INVISIBLE RENT FUND

Rents are unlikely to provide much more revenue than will handle the local needs of the city. Our friends calculate a "rent fund" that will be sufficient to take over much, or all, of the present revenue demands. I suggest that none of these calculations are real. They are based on present speculative land prices. I suggest that finding a relationship between speculative land price and Rent is at best -- speculative.

In any event speculative prices will disappear with a full (or nearly so) Rent collection. Central city Rents will increase because all the land will be productively used to its fullest. The areas covered by parking lots and dilapidated structures will support high buildings. Elsewhere, the present high land prices will wither away. The speculative prices that now reach 40-50 miles out from a city center will drop, or disappear.

We are told by our expert assessors that residential land-values are 75% of the total land-value. What will happen when cities no longer sprawl, but are concentrated? Those sprawling country subdivisions, expensive to service, and creators of millions of commuter miles every day, will be gone. And with them will go all these wonderful speculative values we rely on to make our Rent revenue figures.

There again, if George's theory is correct and I believe it is, wages will rise considerably. This will reduce Rent and by a large margin. An LA Times article told of the black man who was the sole supplier of black-eyed peas to the inner city. My immediate thought was that if close-in land was freely available, there might be a dozen entrepreneurs supplying the inner city with cheaper black-eyed peas. Similar openings, raising wages, would occur everywhere in the new economy. But as wages went up - so would Rent decrease.

However, we are tied to the huge taxation of the present and declare Rent collection will replace any losses resulting from abolishing some of it. The revenue from collecting Rent is not very important - at best a bonus that will pay for local services. The economic effects of collecting Rent are its raison d'etre. Hence my: "Better to collect Rent and throw it in the sea, than not collect it at all."

THE TITLE DEED IS EVIDENCE OF LAND OWNERSHIP

A Rent payment is not a way to exclude others from the location - as Dan suggested. Your title deed declaring you own the location does that. Subject of course to the four restrictions that come with the title and which are pretty sensible (though revision will be necessary in a geocracy).

As far as I know, the four restrictions are part of every land sale contract in the country - and one of them is the right of the community to tax land. So, collecting Rent is not breaking an existing contract -- something unfair to the present owners. It is already part of the contract.

Title deed? This is proof of ownership of the location. It allows you to do what you wish with this location and take the full profit that arises from your efforts. Of course, in a geocracy, none of the returns to Labor and Capital will be taxed. In fact, ultimately there will be no taxation. Only a Rent payment which recaptures for the community a value it has have created and helps the city to continue running smoothly.

You'll note that the Rent payment is not a cost - unless you place on the other side of the ledger an equivalent amount of benefit to you. Whereas a tax is a cost and that is where we make an horrendous mistake.

Everybody tries to avoid taxes. They are an imposition to escape from at all costs. Yet, we insist on telling everyone that we want to tax them -- but with a better tax than the ones they now pay. Further we are going to replace today's onerous burden with the equally onerous burden of the land-tax.

This really is a non-starter -- unless we are trying to get a little bit of two-rate on the board.

POLLUTION TAXES

And now we want to tax pollution!

If no-one has more right to natural resources than another, then someone wishing to make extra use of a natural resource should compensate the rest of us for this extra use. This is already a policy for public property (public, not common). If you drive your tractor along a couple of miles of country roads, you'll have to pay for any damage you do to the road surface.

If someone wants to exceed his equal right to the air by filling it with emissions and pollution, he should compensate us. We must be grateful to Dan for explaining the difference between an emission and a pollution.

HOW MUCH POLLUTION DO WE WANT?

But this compensation is hardly a tax. It is a charge for extra use of a common resource. It is up to the community affected to decide how hard they will hit the polluter. If it is appropriate to the conditions, the perpetrator will search for the cheapest and most effective way to end the pollution and the charge. As I have said before, Chemical Engineering reported that when pollution entering rivers was metered and a fee applied - the effluent pretty quickly became cleaner than the river.

If the charge is too low, the polluter will eat it and continue to pollute. If the charge is too high, business and its jobs will leave the community. However, this trade-off becomes a matter of decision by the community. They will have to choose how much pollution they want.

So, we might charge for extra use of the common resource -- but we will never tax.