The Effects of Taxation
on the Commercial Progress
of Vancouver, Houston and Little Rock
[An address delivered before the Little Rock Science
Club, at Chamber of Commerce Parlors, 26 January 1915. Reprinted from
the Single Tax Review, July-August 1915]
Political economy embraces no feature of greater importance to
mankind than consideration of the equitableness, as well as the best
method, of deriving for public purposes the necessary revenue commonly
termed taxation. The prosperity, the happiness, the welfare, and even
the future safety of the nation, require that methods of taxation be
considered by the highest standard of ethics as well as being mere
fiscal measures for obtaining public revenue.
It is certainly manifest that only that which is fundamentally just
to every man can permanently endure. Unfair advantage, or special
privilege without due remuneration therefor, however attractive they
may for the present seem, can be but temporary. They exist in time
bring reactionary results unfavorable to those who, either with purely
selfish intent practice them, or, through ignorance or apathy permit
It is claimed for the land value tax that it is natural taxation,
that it is the only form of taxation which, the more heavily it may be
imposed, the more it frees the natural opportunities for wealth
production, with co-incident least disturbance of the natural laws
governing the equitable distribution of earned wealth; that every
other kind of taxation, including the income tax, penalizes
enterprise, encourages both sloth and craftiness, is ethically wrong,
and is inimical to the best interests of every member of society. If
this is true, it is of the utmost significance.
Taxation should neither repress the production nor restrict the
equitable distribution of wealth. It should be incapable of being
shifted. It should bear most lightly on enterprise, on producers and
consumers, and if burdensome to any it should be only to non-producers
of wealth. It should stimulate the highest use by penalizing the
non-use and inadequate use of land. It should most sacredly respect
the moral right of privately- produced property, primarily by not
unnecessarily permitting public-produced values to go to private hands
without equitable return for such transfer. It should be capable of
being collected most simply and economically, and evaded with the
If conformity to natural law is a correct premise on which to
provisionally consider a just and equitable system of taxation, it
appears to follow necessarily that, to such degree as public
revenue-production is assessed in non- conformity to natural law, to
that extent do we prevent maximum individual productiveness, create
inequalities of opportunity, and invite ultimate social disaster.
Definitions of the principal terms employed in considering scientific
taxation, as held by probably a large majority of the deeper students
of the most currently accepted political economy, are as follows:
LAND is the source of all wealth and includes nothing
made by man. It is, in its natural state, solely the product of the
Creator. It includes the surface and all under the surface of the
earth, embracing all natural materials and opportunities for
LABOR is all physical or mental exertion employed in the production
of wealth. Its reward is wages, or that which unaided it produces.
CAPITAL is that portion of wealth employed in producing more
wealth. It is wealth in process of creation and adds to the
productive power of labor. Its return is interest, the equitable
earnings for its use.
WEALTH is exclusively the product of labor, or the joint product of
labor and capital, applied to land or the elements of land, "the
better fitting them for the gratification of human desires." It
includes nothing not made, moved or modified by man.
WAGES depend primarily upon such margin of production as is not
absorbed by interest and ground rent; interest depends upon such
margin of production as is not absorbed by wages and ground rent. As
land, labor and capital constitute the sole factors of
wealth-production, it therefore follows that, on land or in a
location of given productivity, wages and interest can rise, and
business increase, only as public-created land values are taken by
the community for public uses.
EQUITABLE TAXATION should be based on such conmmunal value as is
possessed, or used to the exclusion of others, rather than on the
basis of ability to pay it, as is universally true in every other
business transaction involving exchange of values. Every other basis
of taxation tends to discourage and penalize industry, and repress
enterprise and population.
ECONOMIC RENT, or ground rent, the annual rental value of land, is
the measure of communal or people-made value accruing to land. It is
the annual sum that the exclusive use or possession of a piece of
land in its natural state, exclusive of improvements or of the
application of any labor on or under it, will bring. It is the exact
equivalent of the public- created use or location-value it
possesses. It is the value which arises and increases with accretion
of population and enterprise, and decreases as population and
enterprise disappear. Payment to the community of economic rent is
merely and solely pa3dng the producer of a value for the use of a
value the producer has previously rendered to the user.
THE INJUSTICE OP TAXATION ON IMPROVEMENTS
Neither in economics nor in practice is it possible for land to
possess taxable value, aside from the value given it by population and
Neither by the general property tax, by the land value tax, nor by
any other system of taxation, is it possible for even the strongest
government on earth to extract from land, exclusively as land, a
dollar of tax not first produced by the public. Land, as land, pays no
Land value possesses a peculiar favor in its accumulation of public-
created value, being by nature specially exempted from the burden of
ultimate total dissipation, which is the lot of virtually every
product of man.
Virtually all products of man begin to depreciate from the moment of
production, and their value is by nature ultimately wholly dissipated.
Virtually all land, due to accretion of population, to public
enterprise and to expenditure of a tax fund levied on both
improvements and land, constantly increases in value.
To tax equally an investment of a given sum in land value and a
similar sum in the products of man, on account of the tremendous
potential value of land and of the inevitable contraction and ultimate
total loss of the products of man, would seem beyond question to be at
variance with a strict construction of all State Constitutions.
For, the two purchases would possess latent value as divergently
different in permanent worth as two investments of unlike character
could well be. The Statistical Abstract of the United States, page
142, shows that bare farm lands, exclusive of improvements, from 1900
to 1910 increased in value from $13,000,000,000. to $28,000,000,000.
All land values constitute a privilege whose value would be
extinguished by cessation of expenditure of public funds, and they
should, therefore, properly be taxed as a privilege, at a higher rate
than products of man that do not enjoy the favor of such special
These deductions seem to be in accord with Art. 16, Sec. 5 of our
Constitution, reading, "All property subject to taxation shall be
taxed according to its value. No species of property shall be taxed
higher than another of equal value. The General Assembly shall have
power to tax privileges in such manner as may be deemed proper."
Webster defines "privilege" as "A peculiar benefit or
favor; special exemption from burden."
The public, by its collective presence and activity, and by its
expenditure of public funds, gives a lot a certain use-value. The
public, therefore, has an indefeasible right to demand an equal or an
adequate compensation for the use of the land value, the public value,
thus produced; this, regardless of whether the possessor of the lot
has upon it a palace, a hovel or nothing. But the public has no
economic right to take any part of the value of the house or the
palace, this value being of private production, because representing
The purchase price or capitalized value of land equals its annual
use- value multiplied by as many times as the percentage of the
current rate of interest is contained in 100, minus the annual tax
imposed and any incumbrances. The annual economic rent or ground rent,
which is always equivalent to the use-value of land, equals the
interest on purchase price plus taxes or other charges. As an example;
when money is commanding 5% interest, a lot sold at the capitalized
value of $1,000 would be worth in use-value 5% of $1,000, or $50. per
year, minus such tax as may be imposed. This is the full annual rental
value the public gives the lot. Should population increase or
decrease, the use-value will proportionately increase or decrease.
The basic fundamentals of natural taxation are very uniquely and
tersely described in the following extracts from Chas. T. Root's
little pamphlet entitled "Not a Single Tax," which is issued
by C. B. Fillebrown of Boston:
"Every community, whatever its political name and
extent, whether village, state or nation, has its own normal,
unfailing income, growing with the growth of the community and
always adequate to meet necessary governmental expenditure. This
income is known as land value, or economic rent."
"Had economic rent always been retained by the community,
taxation would never have been heard of. When economic rent is
reclaimed by the community, the need of taxation will disappear. At
present a tempting premium is placed upon keeping land unimproved or
inadequately improved, while a heavy penalty is imposed upon
improvement. Most land appreciates constantly. All buildings
depreciate from the moment of completion. Yet the building is taxed
equally with the land."
"The amount of economic rent which is taken by the community
for public purposes is not a tax paid by the landholder, but
whatever amount of such rent as is left in his hands is a gift to
him by the community, or else is the compensation which the
community allows him for acting as its agent and collector in the
matter of economic rent."
Thomas G. Shearman, in his highly valuable work on Natural
Taxation, published by Doubleday, Page & Company, says, "If
we find a species of taxation which automatically collects from every
citizen an amount almost exactly proportioned to the fair and full
market value of the benefits which he derives from the government
under which he lives and the society which surrounds him, may we not
safely infer that this is natural taxation, and capable of being
reduced to a science?"
Henry George, the noted author of Progress and Poverty, the
originator of the Single Tax plan of taxation, has said, "It is a
violation of justice to tax labor, or the things produced by labor,
and it is also a violation of justice not to tax land values. When we
tax houses, capital or wealth, we take from individuals what
rightfully belongs to them. But when we tax ground values, we take
from individuals what does not belong to them, but belongs to the
community." Taxing land values does not decrease area, but taxing
wealth tends to make it dearer or scarcer. Mr. George did not advocate
land nationalization. He was opposed to disturbing land titles. He
only insisted that the community take its own earnings, and leave
inviolate to individuals their earnings.
Actual results, concretely demonstrated, are to many people more
conclusive than the most logically arranged abstract theory. Happily,
the land-value tax, or Single Tax limited, is not dependent on logic
alone to prove either its ethical justness or its fiscal value. As
practical business men, we are rightly inclined to critically examine
the dollars-and-cents value of any proposition that is a departure
from long established methods. In this instance the closest possible
analyzation is invited.
The land-value tax, wherein improvements are exempted from 25% up to
75% of their assessed valuation, and in some instances beyond 75%, has
been in operation in various cities, and in a number of Canadian
Provinces and in New Zealand, from three to eighteen years. It is
quite significant that no city that has adopted this tax system has
ever returned to the general property tax.
Among the towns, cities and provinces above referred to are
Vancouver, Victoria, the provincial capital, and over twenty-five
other towns in British Columbia; Medicine Hat, and Edmonton, the
capital of the Province and fifty other municipalities in the Province
of Alberta; Auckland, Wellington, and over eighty-five boroughs in New
Zealand; twenty villages in the Province of Saskatchewan; Queensland,
Australia; Houston, Texas, and I understand recently Pueblo, Colorado;
and Pittsburgh, Penna. The Province of Alberta recently adopted what
is known as the "Wild Lands Tax Act," which imposes a tax of
ten mills, or about 64 cents per acre on unimproved land held for
speculation; this to force improvement and induce population. It will
apply to about 15,000,000 acres. The valuation will be made by the
government and is expected to average $10.00 per acre. It was
considered that vacant cut-over lands, by being forced open to
settlement and cultivation, would become a very valuable asset to the
province, especially to her mercantile and agricultural interests.
Beginning in 1914 the legislature of Saskatchewan, in order to tax
into use or to open to settlement, imposed a sur-tax of $10.00 per
acre on certain lands held by speculators.
The boundary line between the province of Alberta and Saskatchewan
runs through the center of the main business street of the town of
Leominster. One side of the town has the advantage of the land-value
tax, while the other side continues to penalize enterprise. Strangers
visiting this town are perplexed at seeing all the evidences of thrift
and prosperity on one side, and a dead village on the other side of
Edmonton, Alberta Province, was 25 years ago a small village. She has
always taxed land-values, exempting improvements and buildings. Her
population of 18,836 in 1908 had in 1912 increased to 53,611; in the
same years her building permits increased from $1,086,864. to
$10,250,562. and her assessed valuation of land increased from
$22,535,210. to $123,902,592. Subsequent figures were not obtained. I
understand her population now is about 75,000.
In the year 1912 the Minnesota Tax Commission visited Western Canada
to study her tax systems. I quote from chapter 12 of their Third
"The most striking feature in a study of tax reform
in Western Canada is the strong trend throughout the entire country
in the direction of the Single Tax principle." "From
present indications it is safe to predict that within the next ten
to twenty years the Single Tax principle will be adopted by every
taxing district in Western Canada."
In their 1914 Biennial Report they recommend for Minnesota, home rule
in taxation, exemption of personal property, and assessing all other
property at full value.
In some of the Canadian Provinces the farmers favor the land-value
tax as strongly as the city populations, for it seldom increases their
tax, and, the greatly increasing city populations make a better market
for their products. Also it is believed "that cultivated farms
would be assessed at less than 40% of their whole value, improvements
included." Improved farms to a great extent produce and use their
own communal values.
The Manitoba Grain Growers Convention, in session at Brandon,
Manitoba Province, January 16th, 1915, passed a resolution urging the
Dominion Government to "frame a fiscal system of taxation, on
land values, both rural and urban, including all the natural resources
of the Nation; with a stir-tax on such resources as are held out of
use by private interests for speculative purposes."
The vote on this resolution was 499 for and one against it. The
Manitoba Grain Growers Association corresponds with the Farmers Union
of our Southern States. This remarkable vote indicates the Canadian
farmers' idea of the advantage to them of the land value tax.
Houston, Texas, during the first two years after exempting
improvements 75% and wholly exempting household furniture and cash in
banks, increased her population 25,000; increased her building permits
55%, and increased her bank deposits $7,000,000. After nearly three
years' experience with partial exemption of improvements, over 90% of
her tax payers favor her advanced S3rstem.
Money and enterprise now naturally gravitate from the surrounding
inland towns to Houston. Her system of taxation acts as a perpetual
bonus in inviting enterprise and money to Houston. The president of
her clearing house recently informed me that "The Houston Plan of
Taxation has brought about substantial increases in the deposits of
her banks and trust companies, and the majority of the business and
mercantile interests of the city think well of the plan."
We will now contrast the results in cities having the Single Tax
Limited, and Little Rock which continues to tax improvements.
Vancouver: - This city exempted improvements 50% from 1895 to the
year 1905; 75% to the year 1909, and since then 100%. Her population
increased from 26,133 in 1901 to 122,100 in 1912 and decreased to
106,110 in 1914. The annual valuation of her building permits advanced
from $1,720,411 in 1901 to $13,150,365 in 1910, to $19,388,322 in
1913, and decreased to $4,484,476 in 1914. Reductions of population
and building were due to abnormally great impetus in building
operations and in 1914 also to the European war. The assessed
valuation of land advanced from $12,792,530 in 1901 to $144,974,525 in
1913 and to $150,456,660 in 1914. Mayor T. S. Baxter states that the "assessed
value of land within the city is not more than 55% of its actual
selling value." The city council each year decides what its
system of taxation will be. This year's decision was made in two and
one-half minutes to continue the land-value tax! Her annual building
valuation per capita has varied from the enormous sum of $158.79 to
$42.26. Little Rock's showing for 1914 was $20.16.
Houston: - This city used the general property tax until the year
1911, then exempted improvements 66%%, and since 1912 has exempted
improvements 75%, and has not since the year 1912 taxed moneys and
personal effects. Her population in 1901 was 45,000; in 1910 was
78,000; in 1913 was 129,570. Her building permits in 1901 amounted to
$958,858; in 1913 they were $5,732,208. Assessed valuation of land in
1905 was $20,588,940; in 1911 it was $46,916,176, and in 1914 it was
Little Rock: - No exemptions of improvements. Our population in the
year 1901 was 38,307, and in 1913 was 51,224. Building permits in 1905
were $1,011,101; in 1913 were $1,833,323, and in 1914 were $1,003,172.
The assessed valuation of land in 1905 was approximately $5,840,000,
and in 1913 was $10,014,000. The data on building permits includes
$1,000,000 for the State Capitol in 1905, and $500,000 for our new
County Court House in 1913.
It is contended that the great natural resources of the State of
Arkansas, of which Little Rock is the capital, the metropolis, the
center and the natural focus for manufacturing and jobbing, are
sufficient to enable us to easily become a city of twice or three
times the population of Houston or Vancouver, if it will quit
strangling enterprise by repressive taxation.
The most important fact demonstrated is that, with each additional
per cent, of exemption on improvements, there followed in Vancouver
and Houston a corresponding impetus in growth of population, in
building operations, and consequently in volume of business. More
business is what we, as business men, are after. Our ratio of overhead
expense to business done is entirely too great.
Little Rock, in my opinion, cannot within a reasonable length of time
grow to the size and commercial importance that is easily possible,
nor can the deplorable condition of the State's finances be improved,
until we are ungrudgingly willing to have all taxable values equitably
assessed and justly equalized. No fair-minded citizen can reasonably
object to paying his fair share of the necessary revenue required for
public purposes. But all citizens strenuously object, and are fully
justified in complaining of gross under- valuation and inequalities of
assessment of property.
While no legislative measure for reform can successfully precede
public demand, it is to be hoped that Little Rock will at no distant
day begin to discontinue a system of taxation, the uneconomic effect
of which is to discourage and penalize industry, exchange, enterprise
and manufacturing, and home-owning, thus preventing normal increase in
our population. This can be accomplished within three years without a
jar to business conditions by yearly taking for public purposes a
gradually increasing percentage of public-produced value.
A change from the general property tax to a gradually increasing
land-value tax, would result first in greater demand for building
sites. This would stimulate real estate transfers on a market rising
from the real use-value of land and prove of much advantage to our
real estate agents and banks. New money would be drawn to Little Rock
banks from our interior towns, due to no danger of its being taxed.
Manifest advantages would follow to our architects, our skilled
mechanics and laborers, our contractors and builders, brick
manufacturers, saw mills, planning mills, coal mines, quarries,
jobbers and general merchants, our farmers and market gardeners, and
our non-speculative land owners. In fact, every class of legitimate
industry and enterprise would soon begin to feel the beneficial
results of this natural taxation. Within a few years the large
electric 200,000 population sign at the foot of Main street would
indicate a reality.
The goods of our jobbers, merchants and manufacturers cannot be
purchased either by idle acres or vacant lots. We need in the State of
Arkansas an additional million and in Little Rock 100,000 greater
population, and a quarter-thousand more smoke stacks. Smoke stacks
will increase with higher taxes on unused lands and by untaxing
manufactures and buildings.
By legislative enactment, or if necessary by means of the Initiative
and Referendum, there should be passed an amendment to our State
Constitution to legally permit local option in taxation in Arkansas.
To this end, I would suggest a Constitutional Amendment such as was
recently voted on in California, which was:
"Any county, city and county, city or town, may in
its discretion raise all or part of its taxes for local purposes, by
taxing communally- produced land-values only, exempting, or
partially exempting from taxation, any or all other property, except