It Is A Location Value Charge

Stanley A. Frederiksen

[ GroundSwell, July-August 2005]

Stanley Frederiksen, J.D., is the Executive Director Emeritus of the Public Revenue Education Council of St. Louis, MO. He disagrees with calling our Georgist proposal a land value tax or a 2-rate tax. He prefers to call it a Location Value Charge.

Consider these reasons why location values are the only right and just source for public revenue. (For occasional brevity, we'll call the location value charge (LVC):

1. All government services (roads, streets, sidewalks, sewers, schools, police and fire protection, tornado warning systems, trash collection, to name just a few) apply ultimately to locations. The more and better government services available to any location, the more valuable is that location. The surrounding public (not the location owner) creates that value!
2. No location, or its value, was created by those who hold title thereto. The value of any location arises solely from the presence, character and activity of the people around and near it. Therefore, no one can claim good title to a location or its value, except wrongfully, by conquest, stealth or fraud (or by purchase from someone with a defective title acquired from such person) -- or, rightfully, by paying its economic value to those whose presence and activity around the location created its value.
3. Humans can't live except on and/or from the earth's locations and the products derived therefrom. That's basic natural law.
4. All earth's locations are permanent. There were here, where they are now, when the earth was created. They cannot be moved, hidden, replaced, nor increased or decreased in number or size.
5. Ownership of any location is valid and just, provided only that its owner pays its value to those who create it (the community around it) via an annual charge for the value that owner receives. The charge will be very high (perhaps $millions per acre per year) for a location in a densely populated metro area, and very low or nothing at all for a remote location where few or no government services are available or needed. When one purchases a car, one pays an agreed upon price, which is not a "tax", to the one with good title to convey. When one rents or leases an apartment one pays an agreed upon rental or lease (again, not a "tax") to the lessor. So, too, location titleholders should pay an annual location charge, and no one penalized with "taxes".
6. The LVC is just and equitable because the payer gets precisely what he or she pays for -- the exclusive possession and use of a valuable location. And please note, the payment is voluntary! No one is forced to own a location or to pay for one to which he or she does not get good title. Contrast this with a punitive "tax", for which the payer not only does not get what he or she pays for, but is additionally forced to pay punitive "taxes" from legitimate earnings, under penalty or a fine or imprisonment or both.
7. As said above, no one need "own" a location. Any person may live in a rented apartment, and conduct business from a rented office or other facility, and pay no LVC directly -- and no direct "tax", either. However, the apartment or building owner, if he or she owns the location beneath it, will include the amount of the location value charge in the building rental or lease. Thus the lessee pays his or her "fair share" of the public revenue indirectly!
8. Remember, also, that the LVC is "instead of" -- not "in addition to" -- taxes. Taxes, as such, will eventually be abolished!
9. LVC satisfies both the "ability to pay" principle and the "value received" principle. For, who is better able to pay than those who "own" the storehouse that is earth, from which all people must obtain all wealth? And certainly the one who pays does get full "value received" in return for the payment he or she makes.
10. LVC is the easiest of all sources from which to derive public revenue.
    
    

    It is easiest to assess, as it need be the only thing assessed. A location need not even be visited. Its economic value can be readily determined by a study of its position on a map, as it relates to the surrounding community, its people, their industry and their character.
    
    It is the easiest thing on which to levy a just charge. If the charge is too low, potential owners will try to outbid each other to get title. If the charge is too high, the location will "go begging". Its value is determined almost automatically.
    
    Collecting the charge is easiest of all. As the location can't be moved, enlarged, diminished in size, nor hidden, the title-holder must pay up, or be evicted, releasing it to someone who will.
    

11. Under LVC, no one is robbed of a penny of what he or she produces and/or earns. Each person keeps not only "more" of what he or she ears, but all of it.
12. The LVC system produces far more than enough to fund all needed public revenue and all social services opted for, with plenty left over for the titleholder still to reap substantial wealth without lifting a finger to earn it. This is a proven fact. (Check out Arden, DE and Fairhope, AL)
13. Jurisdictions world-wide already using the LVC public revenue source are, in the main, experiencing growth, success and prosperity.
14. Heavy LVC in metro-centers brings people into those centers, and thus greatly reduces the urban sprawl that's eating away our precious open green space!
15. No sensible person, under LVC, will hold vacant a lot or operate a ground level parking facility in a mid-town metro area, next to a same-sized plot on which stands a 50-story building, because the vacant lot will draw the same LVC as the location under the adjoining building. The vacant lot owner either creates wealth from it (erects a profit-generating building or produces in some other fashion), or he will relinquish it to someone who will. Why levy the same charge for the vacant lot as for the one beneath the adjoining building? Because both lots get exactly the same government services (streets, sidewalks, police and fire protection, sewers, etc. etc.) The LVC is levied to pay for the government services render to the location, no matter what is on, or not on, the location.
16. LVC means "tax abatement" on buildings and improvements for all time and for (everyone, not just for a few years for wealthy developers who, under our present real property taxing system, get ever wealthier at the expense of others who get no abatement "tax breaks". And, as of now, those whose buildings aren't tax-abated, must pay higher "taxes" to make up for the loss of tax payments avoided by owners of abated building.
17. In most states, buildings and improvements already are assessed separately, although usually at the same "real property" tax rate. Gradually decreasing the taxes on buildings and improvements, while simultaneously raising the charge on the locations, until the locations alone bear the entire real property revenue burden, is simplicity itself.
18. LVC strongly encourages personal industry and wealth production, because wealth producers may keep all they produce. In contrast, punitive taxes on buildings and improvements discourage -- actually stifle -- not only new construction, but also the proper maintenance of older structures, on which renovations and improvements are promptly the target of higher taxes. In fact, real property owners routinely tear down old and dilapidated buildings in order to "save taxes".
19. Since there will be no "taxes", there can be no "tax exemptions". And as no location can be moved nor hidden, there can be no such thing as "tax loopholes" or "charge loopholes" or other "gimmicks" to enable one to avoid paying one's just share of the public revenue. The location is in plain view of anyone who looks. Simply levy the legitimate charge for it on the one who has title.
20. LVC will operate to eliminate eventually the budget deficit and insure a balanced budget at all times. The public revenue authority designs the total expected revenue from the location value charges to equal exactly the budgeted expenditures. It's a pay-as-you-go system. If next year's budget is set at ten percent above this year's, all location value charges will simply be increased ten percent for next year, and the budget again will be in balance.
21. Huge areas of valuable locations presently are held by absentee landlords, many of them foreign land speculators. That's O.K. Simply charge the absentee owners the legitimate rate commensurate with their location values. Not only will much of our public revenue then be paid by speculators (many of them aliens) living away from their locations, but their penchant for buying up U.S. locations will disappear promptly. They won't buy choice locations whose increasing values will go not into their own pockets, but into the treasuries of the communities which create them. Or, such absentee location owners will produce from their parcels (to more than offset the charges), thus creating jobs, generating wealth and alleviating poverty and its attendant economic ills.
22. The levies against location values cannot be "charged off against the cost of production" or "passed on to the consumer". Of course, if the site owner erects buildings on his plot, and rents them to others for homes, stores, offices, factories, etc., he'll include, in his rents for them, an amount to more than offset his location value charge. However, if he leaves his location vacant (planning to pocket the escalating values the surrounding community will create in his location), he can't charge anything off to his "cost of production" because he isn't producing anything! Nor is there anything he can pass on to the consumer, as there is no "consumer" of a vacant lot.