Arden and the Single Tax:
Our Special System

Mike Curtis

[2008]

Arden leaseholders know this about the Single Tax: You pay land rent and you don't own your land. Exactly what difference that makes to our community is not really clear to most and debated by the rest. Just about everyone agrees that Arden is special. It has a Town Assembly form of self-government with many remarkable volunteers. It's home to the Arden Club and amateur theater, music and art, and has an abundance of parkland and open space. Different-sized lots and houses are scattered about the village in a kaleidoscope of aesthetic value. However, with this variety of lot and house sizes, there are big questions of fairness that relate to the Single Tax.

Large House on Small Lot

There are several large and expensive homes on relatively small lots. Their owners pay no more than other people who have nothing but a bungalow on a lot of equal size and value. In other words, they pay a smaller percentage of their wealth than other people with less wealth, and often less income - i.e. "regressive taxation."

Large Lot with One House

There are also some very large lots, three or four times the minimum size of 10,000 sq. ft., but they are only allowed one house. They get no more benefits in terms of the roads and sewer or garbage collection than the other lots, yet their owners pay, in some cases, over twice as much in land rent - whether they can afford it or not. Since the lot comes with the house, they either have to give up the house, that is now their home or suffer the disproportionate rents. To them, it does not seem fair. Alternately, if everyone in Arden paid their own real estate taxes based on New Castle County assessments, those with big houses would pay more, and those with small houses and big lots would pay less. This would ameliorate the burden, and that is exactly why every five or ten years there is a movement for everyone in Arden to pay their own real estate taxes.

Benefits Received

However, besides "Ability to Pay," which is the idea of taxation we all take for granted, there is a concept where you pay the government in reference to the value of the "Benefits Received." It's just like a trip to the grocery store-you pay for the value of the things you get, not a percentage of your wealth or your income.

Because the real estate tax is levied on land and buildings, it incorporates both of these ideas and it's really like two different taxes. One penalizes you for building a fine house and garden; while the tax on the value of land is simply a charge for the value of your exclusive use of a natural resource or opportunity.

The land cost nothing to produce-its value equals all the advantages that come with it. That is to say: the quality of the soil, access to the roads, pipes and wires that bring in utilities, the aesthetic qualities of the neighborhood, proximity to stores, jobs, and the highway system, public transportation, parks and recreational amenities, the quality of public schools, the level of safety and even the sense of community, all add to the value of residential land. A tax on the value of land is simply a payment for all those benefits received from society.

The Arden Trust

The Arden Trust converts the real estate tax, which is levied on the value of land and buildings, into a payment for the value of land alone. The selling value of land, which is assessed by the county, is a speculative price based on expectations of future potential incomes. It is converted into a rental that measures only its current value for 1 year. And, by collecting land rents, the trust provides ample revenue for the Village itself.

We are proud to say there are no confiscatory taxes on buildings; they result from human labor, and they are 100% private property. At the same time, the public collection of rent discourages unused land, and promotes an efficient utilization of the infrastructure. It costs as much to build and maintain the streets, pipes, and wires in front of a vacant lot or an empty house as one where people live. You're encouraged to use the land or transfer it to someone who will.

It was intended, as expressed in the Deed of Trust and the leases, that the "full rental value" of the land would be collected. If it had, no one would have owned or otherwise benefited, as an individual, from the monopoly of land; and no one would have bought a lease. As Rodney Jester says, whether the rent is collected by the Trust or capitalized into a selling price, people are going to pay whatever the land is worth. If they had paid the full rental value of the land to the trust, they would not have paid any more for the improvements than it would have cost to replace them, minus their wear and tear.

However, The Deed of Trust also says that rents in excess of taxes shall be put to such common uses as desired by a majority of the residents. Couple that with the provisions that the Assessors are to be elected, that the budget is to be approved by the residents, that any leaseholder can propose an alternate assessment, and there is no possibility that the full rental value of Arden leaseholds will ever be collected. With these powerful checks on the land rent, no more money will be collected in total than would have been collected if the land was deeded and revenue came from taxes. That is why, even if your house burns down and the lot is cleared, your lease will sell for just as much as an equally desirable lot would sell for anywhere else in New Castle County.

It's not the full proposal of Henry George; it won't raise wages or lower land rent. It's not even the complete goal of Frank Stephens, but it is a system of rent for revenue. And to the extent that the Assessors accurately construct their formula which assigns a value to each and every lot, our Single Tax is fair. It promotes an efficient use of revenue and provides an increasing fund for the increasing needs of community.

I believe it is the job of the Trustees to clarify these concepts of equity and efficiency for our leaseholders and the community. For without an appreciation of Arden's special system, it will not merely fail to be replicated, it will eventually be destroyed from within.