What Does It Mean?
Joseph Thompson
[Reprinted from an undated pamphlet, Simple Talks
on Taxation, published by the author]
...The people ought to collect the
land rental value and put an end to all taxes --
...You're
always talking about "land rental values." People
don't want to rent land, they want to own some.
... Have in mind buying some?
...Sure.
Sometime.
You'll naturally want to know whether its worth what you pay,
won't you?
...I sure
will.
...How'll you figure out what it's
worth?
...The real
estate man will tell me.
... How'll he know?
...Because
he's in that business.
... But he must have some way of
figuring?
... Well,
I'll leave that to him. If I like his proposition, I'll buy. If
not -- no soap!
...Going to build a house for
yourself?
... Nope.
I've got a home now. Just as an investment.
...To sell at a profit? Or to get
an income?
... Both,
maybe. I'll sell if the land goes high enough.
... But I s'pose you're figuring
that it will always be high enough to bring you an income. Or
don't you care because you'll make so much money, selling it?
... Oh, I
have to have my money bring me some return!
...So you might rent it out for a
parking lot or something.
... Yeah.
... So you'd likely get your real
estate man to give you some idea what it would bring?
... That'd
be part of the deal.
... He wouldn't have to figure any
construction cost of the land, or transportation cost of the
land, or raw material cost of - -
... Whadda
you talkin' about? Construction! Transportation! Raw material!
Are you crazy? The land is right there!
... Some people think I'm crazy,
yes. But with all those things out, what is it that you pay for?
... Why --
the land, the place, the area, the location!
...Or, in other words, the right
of being the sole occupant
... Now you
get me!
...But I s'pose you haven't so
much money you could just let it stay idle? You'd have to get
some income?
... Wouldn't
you?
... I sure would. I'd have to have
my piece of land bring a return on what I paid for it.
... You and
me, both. It should, too.
... And if you bought some land
and couldn't use it yourself, you'd get your return in the form
of rent?
... I sure
would!
...And knowing how rents were
running, thereabouts, and that the land couldn't pay you a
return, except by rent - -
...I might
put a building on it.
... You'd have to clear enough to
pay interest on the building and the land rent too.
... I
s'pose that's right.
... So the quickest way to find
the value would be to "capitalize" the rent.
...Wha-d
you mean?
... Why, to figure out how much
capital it would take to earn interest at, say six per cent, to
equal the rent.
... I don't
quite get you?
... Well, let's say you could
expect Five hundred dollars a month, rent That's Six thousand a
year. That's Six per cent on One hundred thousand dollars. So
you wouldn't want to pay more than that for it, would you?
... Certainly
not!
... Well then, as land, let's say
downtown, can't yield anything but ...rent,
the rent fixes the selling value or price, doesn't it?
...Oh, I
s'pose so.
...In short, then, the rental
value is the only value, and that's why I'm always talking about
the "rental value of the land."
...We've
been talking so long now, I forgot what you were saying about
it.
...I was saying that the people,
who make the rental value, ought to take the rental value, and "the
people" means all of us. And if we took it, there wouldn't
be any need of Income Tax or Sales Tax or Property Tax or any
tax. You could keep what you earn.
... Yeah.
But suppose my piece of land was in the country. It'd yield
potatoes or grain. Not rent.
... How many potatoes would your
land yield, just lying there? None at all. Raising potatoes
means a hell of a lot of work. And as to rent, in the country,
did you ever hear the term "tenant fanner"? I could
give you a good talk on that, too!
... Gee!
Bob. Not now. We've wasted a hell of a lot of time already.
Right now I'm going to be way late getting down to the bowling
alley!
... OK boy. Meantime, "rental
value" means "What people will pay to occupy land,"
there isn't any other measure.
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