Land Speculation Gets a Better Tax Break
Than Any Other Kind of Business Activity

Perry Prentice

[Reprinted from a special 84-page booklet on land,
House & Home Magazine, August, 1960]

Ours is a tax-activated, tax-accelerated, tax-directed, tax-dominated economy. Every business decision must be checked and rechecked against its tax consequences. Tax exemption is the No. 1 reason 5% % FHA mortgages cannot compete with 4% municipal bonds; 52% tax-deductibility is why corporations can afford 8% interest easier than homebuyers can afford 4%. Tax allowances for depreciation make apartments a tempting investment even if they lose money. And many builders, alas!, find it much more important to get a good tax adviser than to get a good architect!

Almost everything is overtaxed. Incomes are overtaxed beyond the point of diminishing return. Corporation profits are so overtaxed that small business is in big trouble and many a big business must depend on accelerated depreciation. Good homes are overtaxed. Homebuilding is overtaxed; nearly 600 hidden taxes inflate construction costs, and some tax experts say all these taxes add up to one-third the cost of building!

But land as land is hardly taxed at all.

Under our tax system, said FORTUNE ten years ago, it is no longer possible for anyone to get rich by hard work. The income tax has killed that great American dream that brought millions of eager workers to our shores and inspired the conquest of a continent. The harder a man works today the more of his earnings the Government takes. From the hardest and smartest workers the Government takes up to 91% of what they earn.

But our tax system -- local, state, and national -- gives land speculation so many special breaks that land speculation has been by far the easiest way to get rich.* So since World War 2 land speculation has made more millionaires than any other form of business or investment.

Said the first Marshall Field, who made most of his $100 million fortune in land speculation: "Land is not just a good way to make money; it is not just the best way to make money; it is the only way to make money." If that was true before today's big taxes on ordinary income, it is twice as true today.


* The extraordinary tax treatment allowed the oil wildcatter may be justified by the chance he takes of drilling nine dry holes before he strikes a gusher. But land speculation in the suburbs involves no such risk. If the speculator picks his time and picks his land wisely, the double prospect of continuing urban expansion and continuing inflation almost guarantees him a good' capital gain.