On Shifting The Tax on Land Values
Lancaster M. Greene
[Reprinted from The Freeman, October, 1942]
Though economists, real and alleged, agree that a tax on land values
cannot be shifted, it is difficult for the average man to see wherein
such a tax differs from others, most of which, as he well knows from
painful experience, finally come to rest on him.
Put abstractly a real estate man may not see this proposition and may
argue that the rent can be passed on or shifted. He may prove to you
that the tax must come out of income, from land and 'buildings at any
site or out of other, earnings by the landlord. You may admit this. He
may then argue that therefore the tax on land values can be shifted, a
conclusion which does not follow if the landlord digs up from other
earnings or if the building is being milked to pay the tax on the site
Ask the real estate man "Will a higher real estate levy in your
city lower or raise land prices?" His answer will be
unequivocally, "It will lower the price of lots."
On the other hand, ask your landlord, "Will lower real estate
levies raise the price of lots?" The answer will be "Naturally."
A Mr. Arnold was widely publicized for his successful campaign to cut
the cost of public services in Nebraska by eliminating profit. He
organized tax payers' groups whose accountants checked myriad
possibilities and cut the cost of municipal, county and state
operation by millions. Mr. Arnold did this as a public service, and to
build up the demand for his own farm land, and for his services as a
broker and dealer in farm lands. Mr. Arnold's plan succeeded so well
that every state saw taxpayers' federations by landlords who hoped to
raise the price of land through government economy. The catch is that
rising land prices call for more governmental charity to those who are
deprived of natural opportunity by its being" withheld from
production. A higher charity budget takes the place of graft, but the
budget tends to go up, not down.
Further evidence is shown in the following experience. One of my
clients agreed to read Progress and Poverty, which I gave him
to take to Philadelphia. On his next visit, he said, "That book
is a remarkable piece of literature, and thinking, but we have found
out how to solve our problems in our Main Line suburb without Henry
George. We threw out all the rascals and the business men are running
the town with the lowest tax rate in the country."
"Fine," I said, "tell me more about this. I suppose
the end of graft brought apartment and house rentals down."
"Oh, no, they went up, for everyone wants to live where there
are no crooks and there is good municipal service."
"Have you any vacant land?" I asked.
"Oh, yes. With the big estates, I'd say 80 per cent vacant land."
"Then," I suggested, "with all the crooks and rascals
out, this vacant land is cheap, I suppose, and you can buy a lot and
put up your own house at a much lower outlay than before."
"Oh, you have it figured out wrong. Everyone is willing to pay
more for land in a town where the taxes are low for here they can hold
for speculation for a long period without being eaten up by the taxes.
In our town land prices have doubled and quadrupled since we turned
the rascals out."
"Well," said I, and remained silent.
Finally my client said, "I guess we just exchanged crooks and
rascals as extractors from our pockets for landowners who did as well."
Another experience which has been valuable to me in this problem was
a lunch with three real estate men who had heard much of the Henry
George School of Social Science, and who had heard just enough of land
values taxation to establish an important point, namely, whether they
could shift a land values tax.
I went through the basic reasoning but they felt that I was choosing
examples especially suited for a pro-conclusion.
"Pick your own facts as example," I suggested, "and
make it difficult for this theory."
"Well, then, we'll pick a building site in the 30's on Sixth
Avenue, before the demolition of the 'elevated.' The rent is $1,200
for the site and the city is now taking $600. When the 'el' comes down
the city proposes to pay the cost of razing by taking more of the
rent, say another $600.
"But our firm fully expects to charge $2,400 for the site after
the ' 'el' is down. Aren't we going to pass on the land values tax?"
"Are you sure this is hard enough and unfair enough to the
proposition to be conclusive?" I asked.
"That's what we tried for," they said.
"The question hangs on whether the city will have improved this
Sixth Avenue site out of proportion to other values, say on Fifth,
Madison, or Third Avenues," I said. "Does this prospective
higher rent come because this land is improved, or made more desirable
by community action?"
"By the improvement," they agreed.
"Then imagine my having the power to rescind the action to raze
the elevated structure on Sixth Avenue. If I did this could your plan
to raise the ground rent from $1,200 to $2,400 succeed even though the
city should take a $600 increase in tax of $1,200 annually on the
"No indeed, for the other sites have not increased, and we could
not raise our demands unless there were a big relative improvement on
Sixth Avenue. We have no doubts whatever now that we could not shift a
land values tax."
They appeared quite depressed at the thought of the ending of all
land brokerage commissions as soon as a sufficient number of others
realize the implications of a site rent tax for equality of
To lift their thoughts to a brighter prospect, I asked, "Would
there be more buildings to manage, without taxes on buildings and
"Oh, yes," they agreed.
"And how much of the real estate business is management?" "About
90%," they said, brightening, "but of course, the annual
rent of building would be lower as more buildings are constructed, and
there would be a lot."
I hope these illustrations may be helpful to those who would
understand, "Why the landowner cannot shift the tax on land