Land and Rent

Taxes on Land and Houses
The Single-Tax Doctrine: Its Basis
The Single-Tax Doctrine: Objections

Fabian Franklin

[Chapters from the book, Plain Talks On Economics,
published in 1924 by G.P. Putnam's Sons, New York]

Fabian Franklin was born in Hungary in 1853. His family immigrated to the United States in 1855 and settled in Philadelphia, moving in 1861 to Washington, D.C. He first trained to become a civil engineer but later entered Johns Hopkins University and earned a Ph.D. in mathematics (1880). He remained at Johns Hopkis teaching mathematics until 1895, when he left to become associate editor of the New York Evening Post. Franklin developed a firm opposition to radical politics and to socialism, in particular. During the First World War he founded a new periodical, called The Review, which merged in 1922 with another paper called The Independent. He wrote a number of books in addtiion to Plain Talks On Economics. He died suddenly in January of 1939.


Land and Rent

In Chapter III we saw that the supplying of the wants of mankind depends on four great factors-natural resources, labor, capital, and enterprise. The person who furnishes any one of these things in compensated by a share of the product. We have now to try to get some idea of how the share 9f these four classes of participants in production is determined.[1]

The Landowner's Share: Rent

In the present chapter we shall consider the compensation that goes to the landowner for the use of his land. This subject was touched upon in Chapter II, as an illustration of the importance of the idea of the margin; and indeed the essence of the matter was there given. But we shall now go into it a little more fully.

What is paid to the landowner for the use of his land is called rent, both in common talk and in the language of economists. In common talk, however, the word rent is applied likewise to what is paid for the use of a building, or a typewriter, or a piano, or what not; but in dealing with essentials economists usually mean by rent not the price paid for the use of things like these, which have to be produced by human effort, but the price paid for access to natural resources, or, as they usually put it, the use of land. And the reason is, that the rent of land is governed by a specific principle of the first importance, while the price paid for the use of houses, or anything else that is produced by human effort, involves no peculiar principle at all.

Rent of Land and Value of Land

If you ask "the man in the street" why the owner of a piece of land gets a thousand dollars a year as rent from the user of it, the chances are that he will say that it is because the land is worth ten thousand dollars. But the fact is precisely the reverse. The land does not rent for a thousand dollars a year because it takes ten thousand dollars to buy it; on the contrary, it takes ten thousand dollars to buy it because it is worth a thousand dollars a year to somebody to have the use of it. What you pay for the use of a piano (apart from compensation for wear and tear) depends on how much the piano is worth to sell, and that in turn depends on the cost of production of the piano; but in the case of land there is no cost of production. A plot of land 25 x 100 feet in the financial district of New York City may be worth a million dollars while a plot of the same size in an adjoining county is worth only a hundred, solely because the advantages to be derived from the use of the one are worth ten thousand times as much as those to be derived from the use of the other. It is not the selling price of the land that determines the rental value, but the rental value that determines the selling price.

What Makes Rental Value

But what is it that determines the rental value of land? The essence of the answer to this question was briefly given in Chapter II, where Ricardo's doctrine of rent was cited as a signal example of the importance of the idea of the margin in economic theory; but there will be no harm in repeating here, with a little expansion, what was there said. Land exists of all degrees of fertility and all degrees of advantage in point of nearness to markets, etc. At any given time the demand for agricultural products is such that it will pay extremely well to cultivate certain grades of land, less well to cultivate certain other grades, and so on down until we come to a grade which (on account either of its low fertility or its disadvantage of situation) it will just pay to cultivate if nothing has to be given for the use of the land. At this margin the land will command no rent, or practically no rent; arid the amount of rent that any other land commands is determined by its superiority to the land at the margin. If one piece of land will yield just barely enough to pay, at the customary rates, for the labor and capital devoted to its cultivation, and another yields a thousand dollars a year more than this, the rental value of the first piece will be nothing, and the rental value of the second will be a thousand dollars a year.

Nor is the case of urban land-building lots in cities-essentially different, though it presents itself in a somewhat different way. There is a limited amount of land of such character as to present the greatest advantage for the uses of urban life, whether residential or business uses; and the same is true of land of every lesser degree of desirability, until we get down to land which is practically of no advantage at all for city uses-land such that nobody would pay anything whatever for the privilege of building on it. Such land as this has no rental value at all as city land (though it may possibly have some value as country or farming land); and the rental value of the city land varies all the way from nothing or next to nothing at this margin to the enormous rates commanded by the most advantageously situated city property. Just as in the case of agricultural land, these rates are a differential matter; they measure the superiority of the particular land in question over land at the margin. Speculative Value of Land

At this point it will be well to go back for a moment to the question of the selling value of land. It was stated above that "it is not the selling price of the land that determines the rental value, but the rental value that determines the selling price." This is quite true; yet it is necessary to take into account a factor which, for the sake of simplicity, was left out of account; and this factor, while present in all cases, plays a far greater part in the case of city land than in that of agricultural land. When a man buys a piece of land he is influenced not only by an estimate of the uses to which it can immediately be put, but also by the price for which he thinks it likely it may be sold in the future-or, as it is usually expressed, by its speculative value. If a piece of land, either agricultural or urban, can be used now with a profit of $1,000 a year over and above the normal return upon the capital and labor expended by the user, the land will command a rent of $1,000 a year; and if (after allowance for taxes, etc.), the possession of a piece of land commanding this rent is supposed to be worth $10,ooo the selling price of the land will naturally be $1o,ooo. But if there is reason to believe that the rental value of the land will be much higher twenty years from now, buyers may be glad to pay $15,000 or $20,000 for it, even though at first the income from the land will not justify that price. In the case of a growing city, this is one of the chief factors in the selling price of land; and on the outskirts of the solidly built-up sections that is especially the case. There are large areas of vacant land which it would be folly to build upon today, because tenants could not possibly be found who would pay enough rent (for house and lot together) to compensate the builder, even if the builder paid nothing whatever for the land; yet this land commands a selling price, and sometimes even a high selling price. But this fact does not contradict the principle stated above; the selling price is still based on the rental value-only it takes into account the probable future rental value as well as the present rental value, which in some instances is nothing at all. It is a case of speculation; a word frequently used as though it were necessarily an odious and anti-social thing, whereas it is often not only a legitimate but a highly useful phase of business. The "speculator "in land takes chances of loss as well as gain; if he holds on to the vacant land until he thinks the right time has come to build on it or to sell it, he has in the meanwhile (often for ten, twenty, or fifty years) to pay taxes on it, besides forgoing all interest on his purchase money. That the process is by no means sure to result in a net gain is sufficiently proved by the fact that great quantities of vacant land are always in the market at almost insignificant prices. Anybody with money to invest can buy them, and yet they are not gobbled up by shrewd investors, as of course they would be if the game were as profitable as some writers seem to think.

Land and Improvements

One more point, and a very important one, must be briefly touched upon before we leave the subject of the rent of land. We have been considering land purely as a natural resource and as though nothing had been done to it by the application of human effort. Let us now briefly consider how the question is affected by the existence of improvements which have become permanently attached to the land. In the case of agricultural land, these may be largely in the shape of drainage, clearing, fencing, etc., which have made the land more available for agricultural uses, as well as in the shape of buildings. In the case of city land, the permanent improvements are chiefly houses, though there may also have been grading, etc. Now the Ricardian law of rent-that differential law which we have been discussing -- does not, on its face, apply to things that are the result of human effort; the price normally paid for the use of these things, though it is also called rent, is governed by their cost of production. Nevertheless when the improvements have once been made and have become permanently attached to the land, the rent of the whole thing, land and improvements together, is governed solely by that law of rent which we have been talking about. If, for example, you have built a fine private residence upon a lot in a good section of the city which has since gone down in the world and become a slum, the rent you can get for house and lot together, and likewise the price you can sell it for, depends solely on the value of the uses to which in the new circumstances it can be put, which may be very little indeed; and it won't make a particle of difference whether the house cost a thousand dollars to build or a hundred thousand And of course the same thing is true of agricultural improvements permanently sunk in the land.

In the case of city houses, however -- at least in growing cities-the cost of production does usually enter decisively into the determination of rent in spite of this. The building of houses for the accommodation of great multitudes of people is a regular business; and if the rents of those already built are not high enough to encourage the building of new houses, such building will decline in quantity pr stop altogether, and the shortage of houses thus resulting will drive rents up until they again somewhat correspond to cost of production. The rent of any particular house is unaffected by what may have happened to be its cost of production; but the general level of house rents is decisively affected by the prevailing cost of production of houses.


  1. As was pointed out in the chapter referred to, all four of the factors may be furnished by one and the same person, as in the case of the small farmer who owns his land, cultivates it solely with his own labor, owns the implements with which it is worked, and conducts the business at his own risk. But in our discussion it will be supposed throughout that the landowner, the workman, the man who furnishes the capital, and the man who undertakes and controls the enterprise are separate and distinct persons. If a person combines in himself any two or three, or all four, of these characters, his share of the product may be expected to comprise the share that would have fallen to each of them if he had been a separate person.


Taxation: Its Various Forms

Taxes on Land and Houses

But there is one part of the general property tax which is on quite a different footing -- the tax on real estate, on land and houses. This was always the most important part of the general property tax, and it continues to be the chief source of revenue for our local governments-cities, towns and counties. Let us now consider a tax levied at a uniform rate on the value of all the land and houses in a given city[1], and examine how it operates -- who really pays the tax? Most people answer this question very simply by saying that the tenant pays the tax; that the landlord is sure to pass it on to him. But the case is not quite so simple as that.

The rent that is paid for a house must be regarded as consisting of two parts -- one part being a return to the owner of the house upon the capital invested in the building of the house and the other a payment made on account of the desirability of the site on which the house is built.[2] Now these two parts are governed by wholly different principles. A tax levied on the site-value cannot be shifted to the tenant, because the amount he pays for that turns not on cost of production at all, but simply on desirability, and the desirability is neither increased nor diminished by the tax. But, an objector may say, the desirability is what determines the rent of the house too; nobody is any more willing to pay a high rent for the house than he is for the site just because a tax has been clapped on it. This is true enough, as far as it goes; but it overlooks an essential point. The site is there, of itself; the house won't be there unless somebody builds it. And if a tax is put on the house, it won't pay anybody to build it unless, in addition to the normal return on the capital he puts into it he gets enough to enable him to pay the tax. The house tax is like a commodity tax, a tax on production; it operates as an increase of cost, and raises~ rent just as a tax on cigars or whiskey or stockings raises the price of these things. But the lot is there; it doesn't have to be produced; the supply of lots is not diminished by taxation nor increased by the absence of taxation. Thus we may say that, broadly speaking, the land tax falls upon the land owner, the house tax upon the tenant.[3]

I say "broadly speaking," because it must always be remembered that economic generalizations of this kind do apply only "broadly speaking," and not to every particular case. All that we mean is that the general level of rents, the general course of rents, is determined in this way. The rent of a particular house, or a particular class of houses, may be affected very differently, or may not be affected at all, by taxation. Take, for example, a section of a city, once fine and prosperous, which has been thrown out of its original character by changes in business or fashion, and which is quite out of the current of building enterprise; in such a situation the owner has to take what he can get people to pay, and neither taxes nor any other element of cost has anything to do with the case. And there are many other peculiar situations or circumstances which may alter the result above indicated. But it is folly to let this stand in the way of our appreciation of the general principle; to ignore it because it does not take account of every case is as though one should refuse to think of the earth as a sphere because of the irregularities of its surface.[4]


  1. For the sake of brevity, our discussion will be confined to city real estate, but evidently the same considerations apply to non-urban property.
  2. There is of course a third part, namely the amount necessary to cover repairs, superintendence, etc., and in the case of modern apartments the expense of running elevators, etc.; but it is best to regard this third part as an addition to what may be called the net rent -- the return the landlord gets after these expenses are covered.
  3. Of course the owner of house and land may himself be the occupant of it; in that case the whole tax falls upon him; but while the land pant falls upon him as owner, the house part falls upon him not as owner but as occupant -- he could shift it to a tenant if he did not occupy the house himself.
  4. In connection with the single-tax doctrine, however, we shall take up some extremely important general considerations which bring out other aspects of the taxation of land and houses.


The Single-Tax Doctrine: Its Basis

Nearly fifty years ago, there appeared in our country a very remarkable book, which proposed what its author regarded as a remedy for all of the gravest economic ills under which the world suffers. Its title was Progress and Poverty. The subtitle indicated two purposes: first, to inquire into the cause of "the increase of want with the increase of wealth," and secondly to point out "the remedy." Its author, Henry George; had qualifications not usually possessed by persons who undertake ambitious projects of this kind; he was a writer of extraordinary lucidity as well as eloquence, and he had got a firm gnp on a fundamental economic principle which furnished the backbone of his book. Add to this a genuine moral fervor which animates the most impressive passages of his book, and we have a combination not often met with. The book made a profound impression not only in this country, but throughout the world; and for a time many thought that its doctrine would steadily advance everywhere and would, before very long, find general acceptance.

This has not happened; but the doctrine still commands a devoted following, and from time to time comes into prominence as a public issue. Since this is so, and especially since there are few economic doctrines that it is more interesting or more instructive to examine, it seems desirable to devote a considerable amount of space to its discussion.

Progress and Poverty

Before entering upon that discussion, it will be well to say just a word about "the increase of want with the increase of wealth," to which Henry George devoted a large part of the space and of the eloquence of his book. He was firmly convinced that with the increase of wealth there went an actual "increase of want"; that as the rich grew richer the poor grew poorer, not only relatively but absolutely; that in spite of all the wonderful advances of modern science, invention, and industry, there was constantly more and more poverty and wretchedness. That he was wrong in this, hardly anybody today would dispute; and so, too, he was clearly wrong in some other things even more fundamental. But we are not examining the merits and defects of the book as a whole. We must limit ourselves to an attempt to understand the essentials of his doctrine, and of the arguments for and against it.

Henry George was not a Socialist; on the contrary, he was an ardent individualist and a thorough believer in the right of private property in general. But he held that private ownership of land is robbery; that the land justly belongs to all the people; and that by resuming possession of the land, the community would rid itself of the whole burden of taxation and would throw open to everybody such opportunities, now denied them, as would put an end, or almost put an end, to poverty.

Property in Land Unlike Property in the Products of Labor

Of course Henry George was not the first to point out the difference between property in land and property in other things. A house, a ship, a machine, a bale of cotton, a bushel of wheat, a barrel of flour, a coat, a table, a piano, is the result of human effort. Land, on the other hand, is provided by nature; the man who owns it cannot say that he made it.[1] All he can say is that he has got possession of it; nor can he, by taking thought, add a square yard to its area. Its value depends not upon its cost of production, for it cost nothing to produce,2 but upon its desirability -- the advantage that its use offers to the user. And this desirability, this advantage to the user, depends in turn upon the gradual development of the community. An acre of rocky land on what is now Fifth Avenue, New York, was worth exactly nothing two hundred years ago, while today it is worth perhaps ten million dollars; and this increase of value has been quite independent of anything the owner has done to the land.[2] So far we can all go, so much as this the standard economists have always recognized. But Henry George goes a step farther. Human effort, he says, is the only just basis of the right of private property; no man is entitled to claim as his own what was a free gift of nature to all mankind. Accordingly, since land is not produced by human effort, and since its value is created by the development of the community as a whole, the private ownership of land is a robbery of the community as a whole; and, no matter how long that robbery has passed unchallenged, the rightful owner, the community, should assert its claim and resume that ownership which it never ought to have relinquished. If this were done the revenue derived from the land would be, he unhesitatingly assumed, sufficient to pay the expenses of government, not only as they existed in his time but as they would become if the functions. of government were vastly enlarged.[3]

Holding Land out of Use

In addition to thus relieving the community of the entire burden of taxation, Henry George and his followers have claimed another enormous benefit as sure to result from abolishing the private ownership. of land. Under private ownership, they assert, vast quantities of land are held out of use, the owners speculating on the prospective rise of value; under public ownership, they say, this land would be thrown open to use and any person out of employment, or unable otherwise to earn his living, would have an opportunity to extract his living out of the soil. What with the extinction of taxes, and what with the benefits of this enlarged access to the land, poverty, they hold, would be almost completely abolished; for, according to their view, the main cause of the continuance of poverty -- or, as Henry George put it, of the increase of poverty -- with the increase of wealth is to be found in the enormous tribute which the community as a whole pays to the landowners.

The Single Tax Equivalent to Confiscation

So much for the idea underlying Henry George's book, and the general argument by which it is supported; but it remains to mention one more cardinal point in his actual proposal. While he himself declared that confiscation of the land would be not only expedient but entirely just, he recognized that the idea of confiscation would be so shocking to most people that there would be little prospect of its obtaining general approval. Accordingly, he proposed to avoid confiscation in form while accomplishing it in substance. Abolish all taxes except a tax on land, he said; raise all public revenues by a single tax, namely a tax on land values. If that tax was so large as to absorb the entire rental value of the land -- if, upon a piece of land that was worth to the occupant $1,000 a year was levied a tax of $1,ooo a year -- the land would be virtually confiscated, for it would be worth nothing to the 6wner; and if a tax of very nearly $1,ooo was levied, the land would be worth almost nothing to the owner, and yet enough to cause him to hold on to it. Moreover, said Henry George in substance, it is not necessary to declare that the tax will take up the entire, or nearly the entire, rental value; all that we need do is to abolish all other taxes, and the rest will soon take care of itself. It is interesting to quote his own words on this subject:

Let the individuals who now hold it still retain, if they want to, possession of what they are pleased to call their land. Let them continue to call it their land. Let them buy and sell, and bequeath and devise it. We may safely leave them the shell, if we take the kernel. It is not necessary to confiscate land; it is only necessary to confiscate rent. . . [The italics are Henry George's.]

By leaving to land owners a percentage of rent which would probably be much less than the cost and loss involved in attempting to rent lands through State agency, and by making use of this existing machinery, we may, without jar or shock, assert the common right to land by taking rent for public uses. We already take some rent in taxation. We have only to make some changes in our modes of taxation to take it all.

It will be necessary, where rent exceeds the present governmental revenues, to commensurately increase the amount demanded in taxation, and to continue this increase as society progresses and rent advances. But this is so natural and easy a matter, that it may be considered as involved, or at least understood, in the proposition to put all taxes on the value of land. That is the first step, upon which the practical struggle must be made. When the hare is once caught and killed, cooking him will follow as a matter of course. When the common right to land is so far appreciated that all taxes are abolished save those which fall upon rent, there is no danger of much more than is necessary to induce them to collect the public revenues being left to individual landholders.

Having now got a general view of the nature of Henry George's doctrine, and of the grounds upon which it rests, we shall, in the next chapter, consider some of the chief objections to it, both ethical and economic.


The Single-Tax Doctrine: Objections

In the foregoing chapter, it was stated that the profound impression made by Henry George's famous book was due to a combination of two elements-the fervent eloquence with which he presented the moral or ethical aspect of his proposal and the firm grip that he had on the economic principle which furnished the backbone of his work.

It is frequently the case with any great proposal of change, whether meritorious or not, that its advocates are likely to know a great deal more about the subject than its opponents, since it is with them a central subject of thought while with others it is merely a matter occasionally thrust upon their attention. In the case of the single tax this is peculiarly true, because of the lucidity and the definiteness of Henry George's teaching. His disciples hold fast two central ideas. First, that the right to property in land rests upon no such basis as the right to other property, because land is not the product of human labor, but is a free gift of nature: whence they conclude that private ownership of land is robbery, and that it would be just to recover that property for the community, without compensation to those who now wrongfully possess it. Second, that if all taxes except those on land values are abolished, this single tax would be sure to attain, before very long, the height of the full rental value of the land, and would be equivalent to outright confiscation. And, having these things so clearly in mind, the single-taxers feel a sense of great superiority over "the man in the street" who brushes the whole thing aside by simply saying, as to its ethics, that all confiscation is robbery, and as to its economics, that all taxation is shifted.

But, plausible as is the single-tax doctrine, and resting, as it does, upon considerations that are entitled to weight, a fuller consideration shows it to be utterly wrong from the standpoint of ethics, and open to objections of the gravest kind from the standpoint of economics. We will take it up from these two standpoints successively.

The Ethics of Land Confiscation

First, then, as to the rightfulness of the confiscation of land. Let us consider who are the owners of land in a country like ours,[4] and how they have come into possession of it. The persons who own land do not form a distinct class in the community; they are persons who (or perhaps their fathers or grandfathers; it seldom goes further back than that) have thought fit to invest their savings in the purchase of land, rather than in the purchase of ships, or houses) or railroad shares, or what not. It is true that the owner of land did not create the land; but there is every bit as much reason for supposing that the ownership of the land represents the fruit of his labor as there is in the case of the ownership of any other form of property. He made use of no special privilege to get possession of it; the purchase was equally open, and open on the same terms, to millions of other people who deliberately chose to invest their means in other ways. Before Progress and Poverty appeared, it never entered anybody's head in the United States to suppose, when he took the earnings of his labor, or of his professional skill, or of his business ability, and exchanged them for the title to a piece of land, that anybody would question that title; in his own mind, in that of the man who transferred it to him, and in that of the community at large, it stood upon precisely the same footing as any other form of property.

Granting for the sake of argument that it is both necessary and just that the community as a whole shall acquire possession of all the land, it is perfectly clear that in whatever loss may be entailed upon individuals in this process the owners of all forms of Property should share alike. Granting for the sake of argument that the early settlers who took up the land which now forms our farms and villages, our towns and cities, were robbers, it is still evident that no moral distinction can be drawn between the individuals who today own city lots or farms and those who happen to have put their possessions into the shape of stocks or bonds or railroads or warehouses or manufacturing plants. It seems hardly possible that anything but wilful blindness could shut the eyes of anyone to the fact that if the private ownership of land is a great evil, the cost of remedying this evil cannot, without the grossest violation of equity, be assessed exclusively upon particular individuals unless they can be shown to have been guilty of some wrong in which the community at large did not share. Whatever may be the actual merits of the institution of private property in land, it is quite certain that the community as a whole is responsible for the existence of that institution. If the ethics of land confiscation be admitted to be sound, there is no security for any property right; and, what is even more important, the very idea of good faith dissolves into thin air. Suppose some brilliant successor of the author of Progress and Poverty should call the attention of the people of any country burdened with a great national debt to the startling fact that this vast indebtedness never would have been incurred but for the recognition of war, the greatest of all crimes, as a legitimate object of national expenditure. Would he not have every bit as good a reason for advocating repudiation of the debt as did Mr. George for justifying land confiscation? I do not assert positively that he would. What I say is that the answer to the question would depend, like the spelling of Sam Weller's name, on the taste and fancy of the answerer. If the preservation of good faith is to rest not on considerations either of equity or of honor, but on the view that people happen to take of the abstract justice of transactions in the remote past, good faith will cease to be a corner-stone of human society, and in its place will be substituted a mere juggling of academic subtleties. Mr. George has a great deal to say about justice, but I do not remember to have found the word "equity" anywhere in his discussion. And that sort of justice which ignores equity is either too high or too low-and really the two things come to the same thing-for the uses of man.

Having given to this question of the ethics of confiscation so much space because of the very great desirability of a thorough understanding of it, the remaining points, although highly important and interesting, must be discussed more briefly.

The "Unearned Increment"

A case much stronger ethically than that for outright confiscation can be made out for taking up by taxation not the entire value of the land, but only what has been called the unearned increment of that value. Indeed, long before Henry George's time, this was advocated by John Stuart Mill, not only a great economist but one of the greatest and noblest minds of the Nineteenth Century. Mill emphatically condemned confiscation as utterly indefensible; but he held it to be both just and expedient for the community to take possession of any future increase in the value of the land. This increase is caused, generally speaking, not by anything the owner of the land does, but by the general development of the community; let the owner, then, said Mill, be left in full possession of what he has now, but let any future addition to its value go to the people at large. Much can be said for this proposal, but the matter is by no means so clear as may at first sight appear. Everybody is familiar with striking cases of enormous increase of values in land specially favored by developments; but the cases in which no such increase takes place -- cases in which the owner would be far better off if he had invested in something else instead of land -- are incomparably more numerous than these brilliant examples of enormous gain. As nobody proposes to make good the losses of those whose investment in land turns out ill, it becomes at least questionable whether it is either right or wise to cut off the gains of those whose investment turns out well. But I cannot enter further into this question, though a great deal might profitably be said about it.

Land "Held out of Use"

Next to their fundamental doctrine that private ownership of land is robbery, what the single-taxers make most ado about is the injury that is done to the community by private owners "holding land out of use." This injury, though it looms into gigantic proportions in the minds of single-taxers, is almost entirely imaginary. Great quantities of rural land are, indeed, uncultivated; but the price that it would take to buy such land plays an extremely small part in the matter. It is left uncultivated not because it is in private ownership, but because even if it could be had for nothing, or next to nothing, it would not pay anybody, all things considered-remoteness, unfertility, expense of putting it into shape for use and of building the necessary houses, etc. -- to cultivate it. But it is chiefly of city land that most people think who talk of "holding land out of use" as a terrible deprivation to the community.

And yet this is almost absolutely a pure delusion. These people talk as though, if the land in and around a great city like New York were not "held out of use" for speculative purposes, it would all be covered with houses; and yet a very little thought should suffice to show the absurdity of such a view. The land that is now occupied by houses in New York City, for example, was all there a hundred years ago, and hardly any of it was occupied. All of this unoccupied land was, if you please to say so, "held out of use" by its owners-that is, they would not give it away for nothing. But throughout nearly all of this area, a building lot could have been bought a hundred years ago for so little money that the purchase price would have been practically nothing in comparison with the cost of building a house on it; the real reason the houses weren't built was that even if the land had cost nothing, nobody could have been found to buy or rent the houses. During this hundred years the population of what is now Greater New York has been growing from about 150,000 to more than 6,000,000; and, whether the land had been owned by private individuals or by the community, its occupation would have had to be a gradual process, corresponding to the growth of the population. Throughout all this time, too, the owners of all the land have been paying taxes-the amount of which, at compound interest, is a tidy sum. The land was sure to be out of use, whether "held out of use" or not; and it is by no means clear that the community as a whole has suffered from its gradual occupation having been determined by the conditions of private ownership instead of by those of public ownership. Into this question, however, we cannot enter more particularly.

Single Tax and Building Enterprise

But there is one point about the practical operation of the single-tax plan in cities, which, though it has received little attention, is so vital that I shall endeavor to make it as clear as I can, though it will require some space to do so.

It is perfectly true, as the single-taxers charge, that the owner of vacant land in an urban area-that is, vacant land within a city or in its immediate neighborhood -- does hold it as a "speculation." That is, he calculates that it will be to his advantage to wait until this land is in better demand, until it can be put to more profitable use; and in the meanwhile he pays taxes and loses interest on his investment, without getting any income from it. The ordinary real-estate tax does operate as an incentive to him to put his land to some use, but it does not subject him to the absolute necessity of. doing so. He is not compelled to build at once; he balances the prospects of the future against the conditions of the present.

But under the single-tax system he could gain nothing by holding on to the land, since however much its value might increase the increase would be taken away from him by taxation. In the meanwhile he would be paying out in taxes every year the full rental value of the land, whether the land was occupied or not; and all of this would be a dead loss. Accordingly, he would find himself compelled to do one of two things-either throw up his ownership altogether, or build immediately the kind of house which fits the immediate situation, whatever the future uses of the land might be expected to be. And here comes in the point to which I have referred.

When a house has once been built on a lot, the whole thing-house and lot -- becomes a unit; and the whole thing, lot and improvements, may increase or decrease in value. When the land becomes less valuable the whole thing is almost sure to fall in value, and the owner suffers the loss.

When the land becomes more valuable, the whole thing generally rises in value, and sometimes rises enormously in value; and, under the existing system, the owner gets the benefit of the gain. But under the single-tax system all the increase in the value of the land would be taken from him; and, so far from being compensated by any gain from the ownership of the house, he would actually, as a general rule, be a heavy loser whenever a great advance took place in the value of the land. If, for example, a man has built a modest residence, at a cost of $1o,ooo, on a lot worth $5,000, and the site becomes worth $50,000 (either because the street becomes an important business street or because it becomes a splendid residential street), the house and lot together are worth no more than the lot alone, since the house is quite unsuited to the location; and therefore, as the whole of the value of the lot is, under the single-tax system, taken up by the tax-gatherer, the owner's investment of $1o,ooo in the house is a dead loss. It would be interesting to enter more fully into this matter; but if you will think it out, you will see clearly that under the single-tax system the only case in which (speaking generally) ownership of a house and lot would not mean a loss to the owner would be the case in which the character of the land, the uses to which it is best fitted, underwent no marked change, either up or down -- or, for that matter, sideways, since a great change in the kind of building wanted on it would be as disastrous as a change in the value of the land. As soon as the building became a misfit, the owner would lose, so far as regards the building; and he would get no compensating advantage from any increase in the value of the land, since that would all be cancelled by the tax, which would be just as heavy as if the house were a perfect fit. In the case of a great rise in the value of the land, he would have to tear down the house and build another out of which he could get enough revenue to pay the tax, unless he threw up the investment altogether; and whichever he did, he would suffer a dead loss of the entire value of the house.

In view of this situation, the building of houses would evidently be an extra-hazardous business; there would be no chance of the investment increasing in value,[5] and a very great probability of its diminishing in value. As things are now, everybody knows that the house on a given lot is likely to be a misfit in the course of time, and may have even to be torn down; but the investor sets off against the prospect of this loss the probability of a compensating, and more than compensating, increase in the value of the land. Were this prospect taken away, one of two things would happen: either building enterprise would be paralyzed, or rents would have to be set high enough to cover not only a proper annual return on the capital invested in the house, but a very substantial additional sum to cover the great risk of the whole or a large part of the capital being lost in the course of time. And it is not at all unlikely-indeed I think it is highly probable -- that the net result would be that rents would be higher under the single tax than under the existing system.

The Farmer and His Land

The case of agricultural land is in many respects different from that of city land; but I must dismiss it with a few brief remarks. First, as to the question of "robbery." Whatever may be said about city lots, hardly anybody can say with a straight face that the settlers who opened up the land were "robbers"; everybody must see that it was to the advantage of the whole community that it should be opened up, and certainly nobody had thought of any way of inducing men to do so except by making them feel that they owned the land and that any advance which might take place in its value would be to their individual benefit. Secondly, as to the use made of the land afterwards. Unlike city l6ts, the personal care and interest of the farmer is of constant importance to the proper utilization of the land; and this care and interest are inseparably connected with ownership. Thirdly, the distinction between what the land is by nature and what it has been made by the labor and expense bestowed upon it by those who have owned or occupied it-a difficulty which because of its comparative unimportance I have ignored in the case of city land -- is a matter of first-rate importance in the case of farming land.

Finally, destruction of the sense of ownership would, in the case of the farmer, be profoundly injurious in its human, as distinguished from its merely economic, effects.[6]

Thus our conclusion is, that in spite qf the strong prima facie case that can be made for it, the single-tax scheme is wrong from the standpoint of ethics and open to what it is hardly too much to call fatal objections from the standpoint of economics. Of the economic objections, I have confined myself to only a few-those which seemed to me most important. One more objection, however, should not be passed over without mention. Under the single tax, at least up to the time that it had actually absorbed the full rental value of the land, the great body of the population would feel no interest whatever in keeping taxes down; and therefore no interest in keeping government economical. When Henry George was candidate for Mayor of New York, one of the cries in his campaign was "No taxes at all, and a pension for everybody." With taxes levied on land-values only, that would be the feeling of the masses; they wouldn't be a bit afraid, as they are now, of any part of the heavy taxation falling upon their own shoulders. That this would be anything but a healthy condition for government and politics seems plain enough to require no argument.


  1. It is true, as was pointed out in an early chapter of this book, that nothing is absolutely "made" by man; all he does is to take what nature provides, and, applying various processes to it, cause it to supply his uses. And it is also true that in a large proportion of cases the land, as used by man, is not simply the land as nature furnished it; there has been perhaps stumping and draining, perhaps road-building to make it accessible, perhaps cutting or filling to fit it for building; and it may be that the owner has paid for these things. But, after duly considering these points, the difference between property in land and other property remains essentially unimpaired.
    ... Again the reader is reminded that there may have been a great deal of cost in bringing the land to its present condition; some allowance must always be made mentally for this consideration, but it should not be allowed to interfere with our recognition of the fundamental fact in the case. Moreover, it should be noted that the value of the land, even when there has been such cost of improvement, is determined not by that cost but simply by the desirability of the land in its actual condition, as stated in the text.
  2. He has paid taxes, of course, and in the aggregate these (with interest) have amounted to more than most people realize; but after deducting what he has thus contributed to the public treasury, all the rest of the value has been created by the development of the community at large.
  3. This estimate of the magnitude of the proceeds of land ownership has been sharply and, I think, successfully challenged; and very great difficulties are obviously connected with the question of a proper apportionment of those proceeds between the nation and its various subdivisions. But it is impossible here to go into these questions; for the sake of the argument we may admit Henry George's view of the amount, and overlook the difficulties of apportionment.
  4. In such a country as the Russia of the time of the Tsars, or France before the great Revolution, the question of confiscating the land held by a privileged aristocracy merges with the general question of the abolition of hereditary privileges. Such a situation may justify revolution, and the confiscation of the land as a necessary part of the revolution. But the case is wholly different in a country like ours, or any country where land has for many generations been the subject of ordinary purchase and sale in which the whole people have freely participated.
  5. I am ignoring here the changes in the general level of prices, which of course may affect houses as well as anything else; but this is a consideration which is irrelevant to the present question, since changes in the price-level may go down as well as up, and do not affect houses in any distinctive way as compared with other property.
  6. Into the case of mining land, though it is very important, I cannot enter. The single-tax idea is, in the nature of things, far more properly applicable to mining land than to either city land or farming land; but the subject is too special to permit of its satisfactory discussion here.