The Single Tax

Paul Douglas

[Excerpted from In the Fullness of Time: The Memoirs of Paul H. Douglas. New York: Harcourt Brace Jovanovich. 1971]

Pages 445-446

Single Tax

As Gore and I made our onslaughts on the tax truckholes, I occasionally received letters accusing me of merely "showing off" while ignoring the worst abuse of all-namely, the failure to tax the "unearned increments" on bare-land values. I was not ignorant of this problem. As a student I had read Henry George's Progress and Poverty. He, and Ricardo before him, had convinced me that the economic rent on bare land, exclusive of improvements in and on the soil, had been largely created by society, by the increase in population and the heightened productivity per capita, At Harvard, the highly conservative Thomas Nixon Carver had once divided incomes into three classes: "earnings, findings, and stealings." Economic rent was not a stealing, but neither was it an earning. It was a finding almost pure and simple. Although the owners did not create the increases in land values, they appropriated them.

I was not a "single" taxer, since I did not believe that such a tax would yield enough revenue to meet all the expenses of the modern state and since there were other forms of unearned income. However, I accepted the general proposition that the community should at least share in the increased values it created. On the walls of my study at home, in fact, I had hung a photograph of Henry George, alongside those of Ricardo, John Stuart Mill, W, S, Jevons, J. H. von Thünen, and Alfred Marshall.

By the time I was in the Senate, the single-tax movement had slumped since the days of its great advocates, Tom Johnson, Samuel M ("Golden Rule") Jones, and Brand Whitlock. Many economists, by their captious criticisms, had contributed to this debacle. Because of this, and the fact the issue involved local and state governments, rather than national, I did not take up this reform. I could not set the whole world aright, and in trying to do too much I might imperil what I could do. At any rate, this was my justification for keeping silent on this question while in the Senate. But I am grateful that as chairman of the Commission on Urban Problems, I later had the chance to draft a supplementary statement on the subject and was supported by three of my colleagues. Perhaps the most impressive statement was the estimate by Allen Manvel, of the commission's staff, that in the decade between 1956 and 1966, the value of bare land in the country increased from $270 to $520 billions. This was a doubling, and if a share of the increase had been used for the improvement of our cities, we would now be a better society in every way; perhaps not so much blood would have run in the streets.

When I pass before the Great Judgment seat, I hope Saint Peter may forgive my silence as a senator on the increase in land values and accept my later efforts as at least partial atonement.

Pages 603-604

Revenue Sharing

THANKS TO the able studies of Allen Manvel, the commission also recommended a form of revenue-sharing of the national income with local governments of 50,000 people or more. This was to be doubled on a per-capita basis when the local governments exceeded 100,000 in population. It would not only bypass the anti-big-city legislatures dominated by the rural regions and the bedroom suburbs, but also help to consolidate the multitudinous small suburban units, reducing them to a manageable number. On the basis of the 1960 population, there were only 700 cities and counties of over 50,000, but they included 122 million people, or two-thirds of the nation's population.

Furthermore, we recommended a reform of the general property tax, which is the chief source of local revenues. The common practice is to tax improvements in the form of buildings at a higher proportion of their market value than is followed in the case of vacant land. This discourages improvements and encourages the withdrawal of land from development. We reached an almost unanimous agreement that both land and buildings should be assessed at their market value.

I went further. Land and natural resources were the gifts of nature and in themselves did not increase. Their owners could and did levy tribute upon what was produced. As population and capital increased, the nearly fixed amount of land became relatively more scarce, and its value accordingly rose. As I have mentioned, I asked Manvel to find the difference between the bare-land values of the nation in 1966 and what they had been ten years previous. Manvel, an able former section chief in the Census Bureau, was very careful about his conclusions. In the summer of 1968, in addition to magnificent work in many areas, he submitted the first draft of his study of bare-land values, which were independent of improvements on or in the soil. He found that they had increased from about $270 billion in 1956 to $520 billion in 1966. This was an increase of $250 billion over the ten years, and an average yearly increase of $25 billion.

We took the results both to private students of America's wealth and to the research staff of the Treasury, which had been making the same type of studies. They pronounced Manvel's results "not unreasonable." The more I examined them, the more I was convinced that they were not only reasonable, but suggested the best source for the added revenues needed by urban areas for housing, recreation, and anti-pollution campaigns.

The increase in land values had occurred independently of any effort by the owners. The price of land had gone up because the supply of it was relatively fixed at a time when there had been an increase in population and in the real national product. The increase had therefore been a "finding." I believed that at least a slice of this increase, say one-fifth, should go to those who had created it. This $50 billion could have accomplished great improvements in the society that had multiplied these values. If the taxes came to two-fifths of the increment, the amount accruing to society would have been $100 billion.

Furthermore, this increase in values had been obtained by a population growth of only 28 million. It has been estimated that by 1985 the population may increase by slightly over 50 million. Production per capita will also rise. A large share of future progress should rightfully go to the general public.

I proposed that the community should take at least a fifth of this "unearned increment," but the commission turned this down by a two-to-one vote. With three colleagues - Coleman Woodbury, Jeh Johnson, and Ezra Ehrenkrantz-I prepared, not a minority report, but a supplementary opinion, which was published in the report.

Perhaps it is too much to hope that this proposal will soon be adopted. Yet land income should certainly be taxed more fully. The American public has avoided this decision in the past by labeling all such proposals as "Henry George's single tax." But to classify a position does not refute it.