Land-Value Taxation

Donald G. Hagman

[Chapter 17 of the book Windfalls For Wipeouts: Land Value Capture and Compensationedited by Donald G. Hagman and Dean J. Misczynski (Washington, DC: American Planning Association), 1978]


This chapter is nondefinitive, as distinguished from some other chapters in this book which are intended to be exhaustive. This approach was taken for three reasons: (1) I have previously considered the subject at length;[1] (2) it has its own definitive literature, some of which will be cited herein; and (3) regardless of its merits, the idea has been influential since the 1880s, and the apogee of the movement has long since passed. Convene a thousand reviews by neutral observers and almost all would likely conclude, as did the California Assembly Committee on Revenue and Taxation, that "site-value taxation is not a viable alternative to the current property tax."[2] But it is a windfall recapture device. Support comes from the belief that increases in land value belong to the community -- not to the landowner.

There are a number of varieties of land-value taxation, which had best be described for the uninitiated. In its purest form land-value taxation is a single tax. A single tax system is one in which there are no taxes on income, sales, or any other kind of tax, only a property tax, with land as the only property in the base. A land-value tax system is one in which there are other taxes, but the property tax is only on land, and comes in two varieties, an unimproved land-value (sometimes called an unimproved capital-value) tax and a land-value tax. The first is a "purer" form, because the base of the tax is the land untouched by humans, that is, the land's value in its raw state surrounded by its milieu. For example, land located in the center of New York City and fenced off since time immemorial with nothing done to it would still have considerable value accrued over time as the city developed. A land-value (sometimes known as a site value) tax, on the other hand, is a tax on unimproved land plus invisible improvements. The least pure form of land-value taxation is known as the graded tax, where land is assessed at a higher ratio to market value than is used in assessing structures.

For convenience this chapter first reviews the major arguments for and against land-value taxation (using the term land-value taxation in its generic sense). Similarly included for convenience are short discussions of the experience in Australia and New Zealand, which do use land-value taxation in its purest form, namely, as an unimproved land-value tax. The Canadian experience is also discussed, the graded tax being popular in the western provinces. The English, basically, never adopted the idea.

Finally, the American applications are discussed, including a description of land-value taxation by some special districts in California. The discussion of special districts comprises the only original research in this chapter. Henry George, the leading apostle of land-value taxation, markedly raised the consciousness about the need to recapture unearned increments. That idea is the intellectual underpinning for much of the windfall-recapture concept contained in this book.


The arguments of both the opponents and proponents of land-value taxation are clustered around four basic issues -- equity, administrative feasibility, practicality, and the effects of the tax.


The basic equity consideration advanced by the proponents is that since a large share of land-value increases are a result of population growth and public and private improvements by others than the landowner, the community has the right to recapture the unearned increment.

Opponents, while not disputing the basic premise of the origin of land-value in-creases, raise several objections. First, they note that society is replete with unearned increments. Paintings become more valuable, for example. There is no reason to tax unearned increments only in land values.[3] Second, they note that some unearned in-creases are taxed by the income and capital gains taxes.[4] Third, the land tax bears in-equitably among industries. Those that are land intensive such as farming and lumbering would be penalized.[5]

Proponents answer that failure to recapture some unearned increments is no reason not to recapture others[6] and that many increases are not recaptured by income or capital gains taxes unless property is transferred.[7] Land is particularly likely to be held for long periods of time and transferred only at death, at which time there is no tax on the increase.[8] Moreover, most other property is valuable because of the expenditure of labor. Land is a product of nature in a peculiar way and individuals rather than the community should not be put in a position of capturing these increases. The proponents do not consider the alleged inequities between industries to be serious be-cause higher tax costs are either passed on to consumers or because the higher taxes on land are capitalized to lower land costs so that total costs do not change.

Opponents observe that because of capitalization there will be serious equity effects in changing to land-value taxation.[9] Consider an example of capitalization. Mr. X buys vacant land on the assumption of certain future property tax liability. Based on those expectations, the land has a market value of $10,000. If the tax is then taken off buildings and applied only to the land, the market value of X's land decreases because the future tax burden is increased. Meanwhile, someone with property intensively improved with a building enjoys an increase in value because the taxes on the building have been removed. Proponents of land-value taxation suggest the problem can be minimized by staging the shift to land-value taxation over a period of time.[10]

Moreover, many changes in tax or other public policies cause windfalls and wipe-outs.

Administrative Feasibility

Opponents doubt administrative feasibility: Can the site actually be assessed independently of its improvements? Some opponents contend that:

the demand for urban land is derived from the intensity and character of the demand for structures in general and that the character of improvements on particular sites shapes the demand for the sites themselves.[11]

Therefore, it is impossible to assess as if buildings were not on land. Proponents contend that the opponents' position

rests on a rather elementary fallacy, a failure to distinguish between the value of land in general, which is surely derived from the demand for improvements, and the value of one specific site.[12]

These proponents note that values are now separately assigned to buildings and land in American property-tax systems, so it must be possible and it is necessary to allocate between land and building values to determine how much of the asset can be depreciated for income tax purposes, with only improvements being depreciable.[13]

Those favoring the land-value tax also suggest it will tend to cure the problem of underassessment of real property.[14] The reply, well-taken by the opponents of the tax, is that underassessment has less to do with the form of the property tax than with the will to assess properly and to spend the money necessary to attain quality assessment.[15]


Some doubt that adequate revenues could be generated by a land-value tax. The closer the proposal to the direction of the single tax, the greater the doubt. Heilbrun suggests that the revenues generated by such a tax would have to be greater than the entire land rent in order to equal those produced by all other taxes.[16] A Brookings Institute study, while critical of Heilbrun's findings, concurred that at least as a single tax the resulting revenues would not be adequate to replace all other taxes.[17] However, Mason Gaffney, a leading advocate of the tax, demonstrates that untaxing improvements capitalizes their value into land and that all economic entities are tied to the use of land and, even as a single tax, land would be an adequate base.[18] Neither side can marshall much empirical evidence to support the arguments because no land-value tax system with significant rates exists anywhere. The single tax exists nowhere.


The most strident proponents believe that the tax will solve, in one clean sweep, many if not all modern urban problems.[19] The basic scenario is that the most efficient use of land is to have it devoted to its highest and best use from an economic point of view. The high land tax would cause efficient allocation because landowners would have to make the highest and best use of each building site in order to have sufficient income to pay the tax. Economic forces plus the tax would automatically provide good, that is, efficient, land planning.[20]

Proponents of land-value taxation argue that the tax cost of holding land under the existing system is relatively low, permitting the withholding of land from development. Under land-value taxation, "purely speculative land holding will decrease and competition in land development will increase."[21] Even nonspeculators will be encouraged to sell for development[22] which will lead to less hoarding and the release of more land for development.[23] The tax would thus encourage both the development and redevelopment of vacant urban land.

Proponents also argue that a greater amount and better quality of development will flow from the greater availability of land at a lower cost while the "aggregate land value base will increase." The tax will foster a reduction in building rents as a result of the increase in the supply of buildings.[24] Proponents argue that in the long run the rise of land prices will stabilize because of the anti-speculation effects of the tax.[25]

Meanwhile, as the tax-triggered economic forces compel utilization of land, the untaxing of buildings and improvements would remove disincentives that discourage or penalize wealth-creating effort. The laborer could enjoy the full fruits of labor.

If one views the proponents' arguments as reflecting a belief that growth is good and that the free market aided by land-value taxation can best plan and allocate land use and minimize the need for government in many other areas of human concern, one would not be far from the mark.[26] Naturally, such a philosophy runs counter to the managed-growth ideology so prevalent today and is not likely to appeal to those who believe in a planned society.

But even when America was more growth oriented and more suspicious of government and planning than at present, a major concern of land-value tax opponents was that such taxation may be undesirable from a policy standpoint. The tax could stimulate overdevelopment, which would lead to the overcongestion of urban areas, creating in turn a host of other problems.[27] Social amenities such as open spaces and recreational land,[28] theatre districts, shopping areas,[29] and hotel districts[30] may be forced out of the central areas if sites are pushed to a higher use. Opponents maintain that it is not important simply to stimulate development but to direct it in socially desirable channels.[31] Opponents also charge that "taxation can never take the place of wise and efficient land-use planning."[32] Some of the desirable goals, such as the recapture of socially created values and the control of urban sprawl, could be realized in more direct, effective, and efficient ways by a better use both of available land-use planning and taxation systems.

In addition to cautioning about the negative side effects, opponents of land-value taxes question whether land speculation, one of the effects of the present system most disliked by land-value tax proponents, is really so anti-social. They suggest that, in holding land and assuming some of the risks of land development, speculators perform a socially useful function. Opponents also question whether in any event land speculation can be eradicated by taxation and they therefore believe that it would be preferable to deal with the problem directly by using existing planning and other control mechanisms.[33]

When pressed, land-value taxers add other arguments to their formidable arsenal. They state, for example, that compared with the present property tax, land-value taxation is neutral, progressive, and will better tax income.[34] The neutrality argument is that since land is fixed in supply, taxing it cannot change the supply, whereas the supply of non-natural goods is affected by taxing them. Critics question the neutrality argument by noting that the supply of land can be affected, for example, by filling in the ocean and that supply refers not only to quantity but to quality. The quality of land in terms of its accessibility, its useability, its developability, its productivity is affected by taxing it. Moreover, many question whether neutrality in taxation is desirable. Income taxes, for example, are specifically designed not to be neutral.[35]

As to how progressive such a tax might be, proponents argue that unlike the present tax, which can easily be shifted to the occupier, the site-value tax would be more progressive since "it would not be shifted to tenants who are generally in lower tax brackets."[36] Some opponents think tenants should pay taxes, for if they do not they will not take an interest in local government.[37] Opponents also argue that a land-value tax may adversely affect the desirability and availability of centrally located low-income housing. Low-income areas tend to be nearer central areas where higher-value development would be most encouraged by the tax. In order to compete for sites, low-income housing would have to be very dense or it would be displaced by more intensive nonresidential uses or by buildings serving a more expensive rental market.[38]

Those lower-income tenants and homeowners who are not physically squeezed out would be adversely affected by the tax to the extent their properties are relatively land intensive. A land tax will shift the burden away from the occupants of capital intensive properties to land intensive users.[39] According to the opponents, then, the site-value tax may be regressive rather than progressive.

The opponents point to several examples to support their position. With Hawaii's graded tax it was necessary to pass "legislation relieving the pressure on taxpayers 'living in older homes and those less financially able to make substantial improvements in their property'."[40] Also, in New Zealand and Australia where land-value taxation is used, it was found necessary to pass further legislation to protect lower-income homeowners.[41] Of course, these might well be political rather than equitable necessities.

With respect to recapturing unearned income, opponents maintain that income and capital-gains taxes can be reformed to reach many of these increases in value eventually without changing the property tax system.[42] Indeed, some of the major loopholes that once permitted the owners of rental property to show no taxable income have been closed.[43]

There is a plethora of other social side effects that are predicted to follow land-value taxation. These complete and supply more fuel for the point of view. The more avid advocates maintain that, besides reviving mass transit, decreasing unemployment, lessening poverty, fighting inflation, and increasing the income-tax yield, site value taxation is sufficiently adaptable to solve nearly any problem that can be imagined.[44]

At the extremes, the land-value taxers tend to be zealots. They may even be right. But the ranks of the unfaithful are large. Too few will hear the message to warrant any belief that windfall recapture through land-value taxation is a real prospect in the forseeable future.



Few Americans have enjoyed a welcome from Australians as warm as that accorded Henry George. Accounts are that he mesmerized them. Beginning with the State of Victoria in 1877, all Australian states had adopted a land tax to break up the large estates and to recapture the unearned increment by 1915. The national government had its own land tax, enacted in 1910 and repealed in 1952.[45] Local governments also did and do now make use of land-only based property taxes.


A basic difference between the national and state taxes and the local taxes is that the former are progressive. The more property owned, the higher the tax. In the case of very large landholdings, state and federal land taxes absorbed as much as 50 percent of the rents on land during the time when land-value taxation rates and coverage was the greatest. The national rate reached a high of 5 percent of unimproved values. State rates reached a maximum of 4 percent.[46] In 1973-74, state land taxes produced $122 million or 4.4 percent out of a total of $2,766 billion in total state and local tax collections, down from 7.9 percent in 1964-65.[47]

Being rather pure Georgists, the Australians have traditionally used unimproved land values, but there has been some shift to land values. For example, the State of Tasmania Land Valuation Act 1971 introduced the land-value concept for that state. It describes land value as capital value of all real estate, minus buildings, structures, fixtures, roads, standing, dams, drains, channels, artificially established trees, artificially established pastures, and other like improvements that are visible or tangible.[48]

Included in land value, however, are public works (not paid for by "direct contribution," for example, special assessment) exactions for draining, excavation, filling or reclamation of the land, the building of retaining walls, grading or levelling, removing rocks, stone, sand, or soil therefrom, removal or destruction or changing the nature of the vegetation, alteration of soil fertility or structure of the soil, arresting or elimination of erosion or flooding.[49] Unimproved land value in the pure sense would not include even those things, because all were values added by the works of persons and not part of the land in its natural state.

As in Tasmania, there have been other shifts to land value[50] from unimproved land values, because the latter are very difficult to appraise.[51] But the dominant system is still unimproved land values, making the tax base less than it would be if based on land values.


Local governments in Australia use one of three property tax assessment bases: (1) capital values (as in the U.S.), (2) land values or unimproved land values and (3) annual assessed values (land and buildings assessed on rental rather than capital values). Table 17-1 shows the breakdown as of 1962.

There has been a shift toward the land-value system in New South Wales. Be-ginning in 1973, capital values were no longer used for any purpose there, and annual assessed values beginning in 1975 were used only by the water board with respect to commercial properties, industrial properties, and vacant land. But there is no general shift in other states to land-value taxation.[52]

Even where unimproved land or land values are used, however, it is difficult to determine whether the tax has any significant effect on land development. The tax is not high enough to have the demonstrable effects proponents of land-value taxes suggest will occur. For example, state, metropolitan and local property taxes in Australia in 1973-74 were only 5 percent of total tax revenues for all governments, down from 7.7 percent in 1963.[53] In the U.S., property taxes were 16 percent of total tax revenues. In short, that part of the property tax in the U.S. which is a burden on land is likely to be greater than the taxes on land value only in Australia. As a result, the difference in effects of a tax on land and improvements as compared with one on land only is most difficult to discern.

And despite its use, an Australian study concluded: "The committee is unable to recommend unimproved capital value rating as the most appropriate system for local government purposes."[54]

New Zealand



The national tax is called the land tax. It was initially imposed in 1878, the year before Henry George published Progress and Poverty. While there have been some changes from time to time, the base has usually been unimproved land value as it is today. Exemptions for the small landowner have always been part of the law, and during some periods the law provided that any debt on the property was subtracted from its value for the land tax, the mortgage then being taxed to the holder of the mortgage. Neither is the case at present, but exemptions have been increased to cover the first $60,000 of value. The land tax has been levied as a fiat rate, but it has been used mostly as a progressive tax, the rate of tax increasing as the value of the property increases. Land used principally for farming has been totally exempt since 1970. And where land is used in the production of income taxable under the income tax, the land taxis deductible from income.

The primary purpose of adopting the land tax was to increase the holding costs of companies and individuals who owned large tracts of land, thus forcing them to divide the tracts and make the land available for others. The yield of the tax was of secondary importance, although in 1891, when New Zealand adopted an income tax and reenacted the land tax as the Land and Income Tax Assessment Act, the land-tax yield was far greater than the income-tax yield. For example, the land tax in 1895 produced 75.7 percent of the combined land and income tax yield. By 1965 the land tax was only .5 percent of the total and in 1970-71 amounted to only .3 percent ($3.1 million compared with $989.5 million for income taxes and $455.6 million in indirect taxes such as sales and excise taxes).

Primarily because of its low yield, the 1967 report of the Taxation Review Committee recommended the land tax be abolished.


The use of land-value taxation by local governments in New Zealand is important and growing. As in Australia, local governments in New Zealand have their choice of three property-taxation systems. They can use a capital value, a land value (unimproved value prior to 1970), or an annual-value system.

Historically, the annual-value system, imported from England, was used first. However, compared with England, there was little rental property, so the capital system was authorized as an alternative. About the same time as the national land tax was being adopted, local governments were empowered to use the same (unimproved value) base. The motive, as with the national tax, was to break up large landholdings.

In the early 1960s, 207 local governments used land-value taxation, 66 used capital values, and 15 used annual values.[56] In 1969-70, land-value taxes produced $72.6 million in revenues, the capital system $10.7 million, and the annual system $13.9 million. From 1945 to the early 1970s, some 54 local authorities shifted to the land-value system.

Much of the development-forcing nature of the land-value and capital-value systems was removed in 1965 by adding sections to the basic Valuation of Land Act, 1951, requiring that single-family residential and agricultural uses in commercial, industrial, and multi-unit areas be valued at existing use rather than at market values. Such valuation tends to permit the continuance of these unintensive uses.


Except in St. John's, Newfoundland, which uses annual value, all Canadian property taxes are currently levied on capital values. The western provinces have used land-value taxes and still used graded taxes. In Manitoba in the late 1940s, buildings were exempt on farms exceeding 40 acres and on gardens exceeding four acres.[57] Other buildings were assessed at a ratio of two-thirds that of land. In the same period, Alberta exempted farm buildings, and local authorities were empowered to exempt other buildings. Only four of 194 cities, villages, and towns exempted all improvements; 94 exempted no improvements at all. The rest fell in between.

In Saskatchewan, in the late 1940s, improvements in Regina were assessed at 30 percent of their value, other cities and villages assessed them at 60 percent, and towns could assess improvements at up to 60 percent. Rural municipalities assessed improvements in percentages ranging from 0 to 100. Buildings used for agricultural purposes were wholly exempt.

In British Columbia, the taxing of land values began in 1874 when one city was permitted to exempt improvements entirely. That option was' extended to all municipalities in 1891. In 1914, 39 of 61 municipalities exempted improvements entirely. Since then there has been a decline in the number of local governments exempting improvements entirely. As of 1947, Vancouver was required to exempt at least 50 percent of the value of improvements and other municipalities were required to exempt a minimum of 25 percent. The uniform exemption of improvements in villages was 50 percent, with 25 percent uniformly exempted for school taxes. Three local authorities exempted improvements entirely.

The eastern Canadian provinces generally did not use land-value taxation. Instead they used and still use a property-tax system similar to that of the U.S. The province of Nova Scotia has a land tax, which might be Georgist in origin since it applies only to holdings in excess of 1,000 acres. The rate is 1 percent of assessed value.

These basic patterns remain today, except that it appears that there are few if any land-value taxes. Only the graded tax remains.[58] In the Northwest Territory, land is assessed at 100 percent of current market value and improvements are assessed at two-thirds of their 1963 replacement value. In Alberta, generally speaking, improvements are assessed by local governments at about one-half of the ratio used for land assessment. Alberta has a provincial land-property tax in unorganized areas and in improvement districts. Land is assessed at fair actual value, and improvements are assessed at 60 percent of that. Saskatchewan land is assessed at 100 percent, and buildings are assessed at 60 percent except in Regina and Moose Jaw which use 45 percent assessment of buildings. Manitoba assesses lands at their value and buildings at two-thirds of their value. The province of British Columbia and its localities now generally assess buildings at 75 percent of what lands are assessed.

Accordingly, the graded tax must be considered alive, well, and permanent in the western Canadian provinces.

Elsewhere in Canada, it is not likely to be adopted. The Ontario Committee on Taxation, for example, has concluded as follows:

Summarizing, we think it obvious that for residential properties site value taxation would, by narrowing the tax base, depart from the existing and accepted relationship of taxation to the value of the accommodation provided. It would increase the weight of taxes on farming operations, compress urban construction on to more crowded sites, and would not eliminate the land speculator. Site value taxation is designed to be appropriate to the state increments in value of land. II it succeeds in this purpose, it is a discriminatory levy so long as other forms of capital gain are not taxed. For all of these reasons, the concept finds no support among our recommendations.[59]


The English had the first chance to implement site-value taxation. Based on principles enunciated by the physiocrats -- Adam Smith, Ricardo, and John Stuart Mill -- site-value taxation was first officially referred to in England in 1885 in the Report of the Royal Commission on the Housing of the Working Classes.[60] By that time the work of "the most notorious name linked with land value taxation"[61] was well known in England. Henry George, the American, published Progress and Poverty in 1879.

Over the intervening years, there were a number of proposals and reports made,[62] and the Liberal Party kept urging the adoption of land value taxation, a position still taken by the Liberal Party today.[63] In The Finance Act, 1910, a number of new taxes were adopted, bearing on land or on part of it, and fueled by notions that unearned increments belonged partly to the public.[64]

One of the taxes, the undeveloped-land duty, most closely approximated a land-value tax. The undeveloped-land duty was an annual tax of one halfpenny for every 20 shillings (1/480th) of site value on undeveloped land. Undeveloped land included all land which was not improved by dwellings or buildings for the purposes of any business, trade, or industry. If buildings became derelict or unused, the undeveloped-land duty could be applied. If land was improved with road and sewer infrastructure it could be considered developed land for a period of 10 years. Exemptions were provided where site value did not exceed £50 per acre. Agricultural land was subject to the duty if its value exceeded £50 per acre to the extent the amount of £50 per acre represented value other than agricultural-use value, except in the case of small farms.

The undeveloped-land duty was not charged on parks, gardens, or open spaces available to the public, land being kept open pursuant to a planning scheme, or land being used for games or recreation where it was likely to be so used for five years. A dwelling site of up to one acre was exempted and, if it had gardens or pleasure grounds, up to five acres.

After its passage, the land-value taxers kept pushing for a purer version of this form of taxation than was represented by the 1910 Act. But the Act itself was not working well, although it is not clear that the undeveloped-land duty was the main culprit. In any event, total receipts of the various taxes (increment-value duty, reversion duty, undeveloped land-value duty, and increment-value duty on minerals) was £1,180,290 including £460,481 for the increment-value duty. These figures for the period 1910-1919 compared poorly with the total cost of valuation, administration, and collection, which the Chancellor of the Exchequer estimated at £5 million. The duties, except the mineral-rights duties, were repealed by the Finance Act, 1920.[65]

Land-value taxation was adopted in England by the Finance Act, 1931. It provided for a land-value tax of 1/240th of site value but which was reduceable by an amount equal to four years annual value or 7/8 of land value, whichever was less. Cultivated land was reduced by its cultivated-land value or the amount calculated as above, whichever was greater. Property which is typically exempted from the property tax in America and other property, such as that of public utilities, was exempt. The Act never took effect, being suspended in 1932 when the government changed.

The Liberals still persisted, but the thorough review by the Simes Committee concluded, partly because development rights in land were nationalized at the time under the Town and Country Planning Act, 1947, that a "rate on site values. . . is neither practicable nor desirable."[66]

More recently the Conservative Government reviewed the evidence for site-value rating and concluded that it was not to be recommended for England.[67]

The Labor Government in 1975 invoked a Committee of Inquiry into Local Government Finance (Layfield Committee). It did not support land-value taxation.[68]


In 1973, Price Waterhouse & Co. completed a study for the U.S. Department of Housing and Urban Development.[69] Entitled "A Study of the Effects of Real Estate Property Tax Incentive Programs Upon Property Rehabilitation and New Construction," (herein called the Tax Incentive Study) it included a review of the two general-purpose governments in America that made use of a form of land-value taxation, namely, Pittsburgh, Pennsylvania, and Honolulu, Hawaii. The study also reviewed a simulated land-value tax system used in Fairhope, Alabama.

Honolulu, Hawaii

The Hawaii property tax is as complicated as any in the U.S. The state Democratic Party had called for a graded real property tax since 1952 and such a scheme was adopted in 1963,[70] effective 1965.

The rationale for the tax reflected Georgist ideas:

The objective is to reduce the inequitable burden of taxes now placed upon the owner who seeks to improve his land. It is to the best interest to both the individuals and the State that, to the extent possible for a sound and workable system, property taxation should encourage rather than discourage expanding the use and productivity of our land resources.[71]

Stripped of its complications, the Hawaii tax works as follows. Property is divided into seven classes and then assessed. The property tax burden allocated to each class is in the ratio that the amount of assessed value in each class bears to the total assessed value. Property classified as unimproved residential, apartment (three or more family units), hotel-resort, and industrial and commercial is subject to the graded tax. In Hawaii's case, the law provided that buildings be taxed at 90 percent of land in 1966, 80 percent in 1968. The governor must approve further reductions, and reductions below 70 percent require approval of the Honolulu Board of Supervisors. The law would permit decreases down to 40 percent in biannual 10 percent steps. As of 1970-71, the grading was still at the 80 percent level. Thus, for example, for property classified as hotel apartment-resort, the property tax rate used to calculate the taxes was $21.99 per $1,000 assessed value of land and $17.59 per $1,000 assessed value of buildings. ($21.99 x .80 $17.59). The effect in fiscal 1970 was to shift some $3,000,000 of tax burden (out of $65.5 million) from buildings to land.

While the graded tax originally applied to residential properties (single family and one and two units), the grading was repealed for fiscal 1971 for residential properties because of the tendency to burden the owners of older residential properties disproportionately. Land is usually a higher proportion of total land and building values for older residences than for newer ones. Property classified agricultural and conservation has not been subject to the graded tax.

The Tax Incentive Study concluded that there were no significant administrative problems resulting from the grading scheme. A removal of the grading feature would not reduce the assessor's staff. The impact of the grading was not measurable due to its newness and to the small differential, although most property owners interviewed indicated that even at the 40 percent level they might not be influenced concerning real estate decisions. While adoption of the graded tax accompanied a construction boom, it was generally agreed that the graded tax was not a cause. Some felt that the graded tax had somewhat stimulated the scarcity and high cost of land with resultant overdevelopment. No owners of multi-unit developments indicated any change or expected change in rental rates due to grading.

Administrators and public officials generally agreed that the graded tax had not met its objective of making more land available for development. Developable land was still scarce due to zoning restrictions and to the fact that there is a shift of tax burdens only within a class, not among classes. For example, the owner of under-utilized industrial land is burdened relatively more under the graded tax only vis a' vis the owner of intensively developed industrial land; there is no shift to that owner from intensively developed residential property.

As with new construction, rehabilitation has not been stimulated by the graded tax, again in part due to its nominal difference. Even, if reduced to 40 percent, the tax as a total proportion of operating costs may not be regarded as high enough to have a significant influence on construction and rehabilitation.

Pittsburgh, Pennsylvania

The Henry George Foundation of America is located in Pittsburgh, Pennsylvania, which is the site of the most significant land-value tax experiment in America. Originally established in 1913, the tax on buildings was gradually reduced and since 1925 has applied to buildings in Pittsburgh at 50 percent of the rate applied to land. As distinguished from Honolulu, therefore, the impacts of the grading should by now be evident. Moreover, the Pittsburgh grading plan is "purer" than in Honolulu because it applies to all land and buildings. The grading, however, applies only to city, not to school and county property taxes, so that in 1970 the combined property-tax rate on buildings was only about 30 percent less than on land, $6.725 on buildings, $9.475 on land. The grading shifts some $6.4 of $39.3 million in property taxes off of buildings and onto land.

As in Hawaii, the graded tax does not cause any significant administrative problems or change staff requirements. But the Tax Incentive Study indicates that whether Pittsburgh would have developed faster or slower under alternative forms of property taxes is pure conjecture. While the tax might have forced some unimproved land onto the market in earlier years, it does not seem to be doing so today and there is no correlation between building permits and reduction in the taxes on buildings. The graded tax has not precluded blight and slum areas, although this could be due to the nominal difference or to assessment irregularities. Because of irregularities, the land-to-building assessment ratio in 1948 was 11 to 7 whereas in 1965 it was 1 to 2, suggesting recent emphasis on increasing assessments on buildings and further suggesting that prior to 1948 the effective rate on land was far greater than it was after 1965.

Calling him "an authority on Pittsburgh's taxation practices," the Tax Incentive Study gives Raymond L. Richman's views prominence. According to him, redevelopment is no more evident in Pittsburgh than in other cities and the graded tax has had no important economic effects. This is due to the nominal rate difference and to the capitalization of taxes which lowers land values (thus a prospective owner may have to pay higher land taxes but can afford them just as easily because the initial price is lower). Economic effects are also minor because taxes on buildings in cities are shifted back to landowners due

to the restrictions on buildings imposed by zoning and building ordinances, the fact that real estate tax rates in suburban communities are often lower than city rates on buildings and the absence of marginal land in cities.[72]

Richman also indicated that taxes tend to diminish in run-down neighborhoods as property values fall, therefore losing their incentive effect. Finally, a graded tax is likely to have more effect in areas with undeveloped land, whereas Pittsburgh is fully developed.

Richman, as well as some property owners, indicated the graded tax might have had some effect in encouraging modernization of existing buildings. Most public officials felt that the graded tax was stimulating neither new construction nor rehabilitation but that it might have forced unimproved land into the market early in its history. Many interviewees in Pittsburgh were not even aware of the graded tax. Those who were generally concluded it was unimportant in making real estate investment decisions because real property taxes are a small part of the total cost of a project.

Fairhope, Alabama

The use of land-value taxation in Fairhope, Alabama, is also described in the Tax Incentive Study. Rather than restate this description. it is quoted here in edited form:

In 1894... [a] group purchased some acreage in Alabama and established the settlement which was later incorporated as the City of Fairhope. The organization became the Fairhope Single Tax Corporation, an Alabama nonprofit corporation, in 1904... both land and improvements are taxed in Baldwin County, but the Single Tax Corporation attempts to simulate the effect of site-value taxation by means of a site-value leasing system which operates as follows:

1. Land owned by the corporation is leased (99 year term) to users.
2. Improvements on the leased land are owned by and can be sold by the lessee....
3. The lease agreement provides that the annual lease rental shall be based upon the value of the land... redetermined annually....
4. The corporation pay [s] the property taxes upon the lessee's personal property. ...
Today the Fairhope Single Tax Corporation has 75 members. The corporation owns some 4,000 acres of land, of which 400 acres are within the city limits of Fairhope. . . . There are 1,088 leases with 943 lessees (55 of whom are members of the corporation).

In 1970 the corporation collected $150,928 in rentals from these leases; disbursed $80,981 in payment of real and personal property taxes; spent $31,928 for public improvements (streets, school, cemetery, etc.) and ad-ministration; and reserved $20 ,000 for contingencies....

Survey Results

Fairhope Single Tax Corporation real estate has been more extensively developed than other Fairhope land.... this was probably due to the fact that a smaller initial cash outlay was required under the leasehold arrangement. …

To discourage speculation in site-value changes, the Fairhope Single Tax Corporation in its leases has incorporated certain restrictions on the transfer of improvements. Factors of this kind tend to obscure any site-valuation/development cause effect relationship. (They also prevent... a complete simulation of site-value property taxation.) There appears to be little doubt that the site-value rental system of the Fairhope Single Tax Corporation has provided significantly greater incentive for the improvement of property than existed for surrounding property. However, since all of the property improvements made on leased lands were subject to additional property taxes just like all other improvements on other lands, the incentive is probably more closely related to cost of capital considerations rather than property tax treatment. While the lessee pays no property taxes the aggregate rentals paid to the Corporation which must covet property taxes are almost double the property taxes paid by the Corporation. …

When asked to evaluate the success or failure of the site-value rental system, the nonmembers did not reply or indicated that they felt improvements were greater on deeded land due to pride of ownership, which seems to be a misconception since even on leased land the improvements are owned by the tenant. The members generally felt that the system was a success and limited only to its ability to acquire more land.

Only one respondent indicated that he felt rentals charged by FSTC were too high, while six indicated they were too low. Eighty percent felt that the established rentals were fair as to one leased property versus the other leased property. This might be considered significant since the FSTC is passing the taxes paid on all properties and improvements through to the lessee -- based upon the value of the land only and certain lessees could become disgruntled as they would be paying for the taxes on the improvement of more improved land. However it is not considered significant since the majority of the respondents felt the rentals were either too low or about right. In essence, it appears that the lessees recognize the apparent side benefit they receive by virtue of the fact that the Corporation is not receiving a fair return on its land investment. ...

Based upon the evidence collected it appears that the Fairhope Single Tax Corporation's practice of site-value rental has been effective in that it has encouraged more intensive development of its property. However, it must be remembered that site rental is not the same as site-value taxation and that it appears that capital considerations have been the most significant consideration in the development of the Corporation's land.

The respondents involved were satisfied with the FSTC operations and they felt it was an equitable system. It also appeared that the success of the FSTC and its operations was due in part to the fact that the system is on a small scale. There would probably be significant problems in implementing an actual tax system based on this concept in any large city due to the administrative difficulties that would be encountered and the fact that most taxpayers are not familiar with such a system. Another factor that has probably contributed to the success of FSTC is the relatively small spread of land values in Fairhope. Consequently there is not any really significant shifting of the property tax cost from one lessee to another through the rent payment as would result in a major metropolitan area under an actual real property site value tax system .[73]

Is Henry George Alive and Well in the Special Districts of California?

Frequently lurking in the literature is the notion that land-value taxation is extensively used in rural California by special districts.[74] And so it is-in 1972-73, special districts in California raised $40,910,293 in taxes based solely on land. Not a graded tax, these taxes are (or at least most of them are) property taxes on land values only.[75]

The special districts in California are not the only ones to use land-value taxation. Henley reports its use by special districts in at least 16 other Western states.[76]

California special districts are as good as any to study. There are more of them than in any state except lllinois,[77] and rather complete statistical information is available.[78] Further, but for his residence in California, Henry George may never have written Progress and Poverty. [79] In beginning this exercise, it is important to review three basic terms: special assessments, land-value taxation, and general-property taxation. A special assessment is a levy, usually used in conjunction with the provision of public improvements, and usually apportioned on the basis of the benefit received by land. A general-property tax, on the other hand, is levied annually to provide general revenues. It is apportioned on the basis of the assessed value of all property --land, buildings, and personal. Land-value taxation is a property tax which excludes all property except land from the tax base.

What, then, of California special district taxes?

In 1972-73 there were 4,516 special districts in California. Data on 3,829 of those districts is contained in the report of the California controller, "Annual Report of Financial Transactions Concerning Special Districts of California (Other than Water Utility) 1972-73." Data on 913 districts is in the "Annual Report of Financial Transactions Concerning Water Utility Operations of Special Districts of California 1972-73." Since 3,829 plus 913 is 226 districts more than 4,516, 226 districts engage in water utility operations as well as other kinds of activities.[80]

These districts are authorized under 193 separate statutory authorizations, but the controller classifies the districts into 54 types, and into 23 nonenterprise activities and 7 enterprise activities. Twenty-two types of districts provide water utility services.

Special districts are big business in California. The water utility operations, for example, involved total annual taxes of $153,991,127 in 1972-73. The nonwater utility tax revenues were $464,265,006. Thus total tax revenues for special districts in California in 1972-73 were $618,256,133. The total taxes collected by special districts amounted to roughly one-tenth of the $6,819,000,000 revenues raised by all property taxes in California.[81]

The controller's reports contain data indicating whether the tax base for each special district is all property (AP), which is roughly the same as the property-tax base for other property taxes in California, or is land and improvements, excluding personal property (LI), or is land only (LO). The focus of this analysis is on those districts which use a LO base. Sixteen of the 54 types of districts in California do so, at least in part.

These LO-based taxes produced $40,910,293 for special districts in California in 1972-73, which was 6.6 percent of all special district taxes and .59 of a percent of all property taxes in California for that year.

While not very significant in amount, these land-value taxes were used to finance a variety of services, including water utility, drainage and drainage maintenance, flood control and water conservation, reclamation, streets, levee management and maintenance, soil conservation, water conservation, waste disposal, recreation and park, electric utility, and pest control.

LO-based taxes use one of three different kinds of rates: so many dollars per acre, so many dollars per $100 assessed value, and variable rates based on neither. Most of the LO-based taxes use a rate of dollars per $100 assessed value, $30,139,871 being thus raised. The revenues raised by use of dollars per acre and variable rates were about the same, $5,578,008 and $5,192,414, respectively.

The rates of dollars per acre and variable rates, obviously, are not based on values and accordingly cannot strictly be classified as property taxes based only on land values. And, again strictly speaking, the $30,139,871 might not all be classified as property taxes based only on land value because many of such taxes are rather in the nature of special assessments based on benefit received where the measure of the benefit received is the assessed value of the property.

For example, Robert Durbrow, consultant, Association of California Water Agencies states:

We have consistently denied that the irrigation district assessment is a... [land value only tax] as most supporters of the land only tax for general purposes would have you believe.... [it is] a benefit tax for a single purpose, presumably paid by the beneficiaries in proportion to benefits received. . . . it may be assessed against beneficiaries such as school or state property which cannot be required to pay general taxes.[82]

But the irrigation district law uses an ad valorem (value) assessment on land.[83] It is therefore not as clearly benefit-based as some other special district taxes are. For example, the California attorney general opines:

Assessment in accordance with benefits is a common feature of many California street improvement acts, the Reclamation District Law, and some other special district acts. It is not the type of assessment required by the state laws governing either irrigation districts or county water districts. Both these types of districts collect their assessments or taxes on an ad valorem basis.[84]

More recently, in determining whether or not the Property Tax Relief Act of 1972 brought relief from a reclamation district tax, the attorney general concluded that while a special district tax had been "levied per unit of assessed value," which ordinarily would make it a property tax rate for purposes of the Property Tax Relief Act, the levy could have been levied on some other basis, e.g., per acre, and there-fore, there was no relief from the levy.[85]

Some examples of a benefit-based tax with the amount of benefit based on an ad valorem assessment are rather clearer: The San Benito Flood Control and Water Conservation District has the power "to levy taxes upon all land ... according to the benefits derived . . . [s]aid taxes shall be based upon the assessment rolls used by the county for general tax purposes."[86] Operation and maintenance assessments of reclamation districts are based on a "valuation per acre for each parcel which is in proportion to the benefits to be derived from the continuance in operation."[87] A county water district levies a tax "in proportion to the assessed valuation of the land benefited. ..."[88]

It makes a big difference to governments whether the tax is in the nature of a property tax or in the nature of a special assessment because, as Mr. Durbrow indicates, governments are exempt from property taxes. So are many other kinds of properties in California. But special districts can ''tax'' these properties if the "tax is more in the nature of a special assessment. And it can make a difference in other ways -- a tax is deductible from income taxes; a special assessment generally is not. A tax must be uniform; a special assessment need not be uniform.

Table 17-2 [table not reproduced here] indicates the use that special districts in California make of LO taxes based on assessed value. A neutral observer between the Georgists and the Mr. Durbrows would probably classify some of those taxes as "real" Henry George taxes and some of them as special assessments because they are based on benefit. It is a fine line n6t worth pursuing.

Worth pursuing, however, is the notion that the economic effects of an ad valorem tax on land only is the same as a special assessment where the benefit is measured by the value of the property. In other words, whatever is good (or bad) about land-value taxation in economic effect should be good (or bad) about special assessments using assessed values to measure benefit.

Henley claims that because irrigation district land is assessed where water is available whether used or not, the assessment makes it expensive to hold land in idleness and for speculation.[89] There is evidence that large farmers opposed irrigation, particularly that paid for by taxes on land only. Who could doubt that such taxes encouraged the reported breakup of large estates. The landowner is also encouraged to improve the land as he is

nudged from behind by the assessment on his land that will permit him to pay [the tax]. At the same time he is beckoned by the promise that his effort and investment to make the land produce will not be penalized, since such improvements are not taxed.[90]

Henley's prose is Georgist, and one can believe that the irrigation district taxes constituted a good chance to experiment. As one of my favorite economists, Mason Gaffney, says:
the level of taxation was the critical question, and nowhere in recent times was the level as high as it was in ... southeastern San Joaquin Valley... the heavy irrigation district land tax came pretty close to a pure Georgist experiment during the 1920's... during the period of heavy taxation, subdivision and improvement were like nothing I've ever seen elsewhere. ...[91]

It may not be too late to do a definitive study on land value taxation via the land-value taxes of California special districts. Perhaps Dr. Gaffney would donate some of his "half a filing drawer full of information,'' and the Controller's reports could identify some likely places to look.

For example, is the Hacienda California Water District in Kings County real, with its reported $52.440 per $100 assessed value tax rate on land only? One of the complaints of Georgists is that the virtues of land-value taxes have not been demonstrable because taxes have either not been high enough on land values to have much impact or they have been diluted by general property taxes of overlapping governments. But a rate of $52.440 would overwhelm any county or school district general property tax rate in the Hacienda area.[92] For example, the average combined property tax rate for all governments in Kings County was $11.13 in 1972-73.[93]

Zone No.1 of County Waterworks District No.40 in Fresno County, with its $27.888 rate, might be compared with similar districts in Fresno County whose rates go as low as $ .115. Unfortunately, all of the County Waterworks districts in Fresno County use a LO base, but they use an AP base in other counties. In some counties, some districts use AP and some LO, which might be contrasted. Even the $14.776 rate of the Circle Oaks County Water District in Napa County should be high enough to be the basis for a good experiment.

The Estero Municipal Improvement District in San Mateo County might be the most interesting place to study. It has a combined waste disposal general, fire station, and park AP rate of $2.925 but a combined LO rate of $6.23 for reclamation and roads.[94] County and school rates would probably raise the AP burden considerably, but the place might be de facto as interesting and as significantly graded as over-studied Pittsburgh.

Finally, one should recall, special districts overlap. One might be able to find some areas in California where the combined rates of two or even several LO-based districts might be sufficiently high to do an effective study of land value taxes.

We leave that study to others.


  1. D. Hagman, The Single Tax and Land-Use Planning: Henry George Updated, 12 UCLA L. Rev. 762(1965).
  2. A Final Report of the Assembly Committee on Revenue and Taxation, Interim Activities: 1971, at Introduction. The Report of the National Commission on Urban Problems to the Congress and to the President of the United States 394-95 (1968) recommended a treasury study of "land value taxation" but had in mind devices described in Chapters 19 and 20. It also recommended that the states "vigorously explore the desirability and feasibility of placing new or differentially higher taxes upon land values or land value increments." Supplementary views of four commissioners expressed "regret. . . that the Commission . . . did not see fit to endorse some wider applications of the Pittsburgh plan.. . . "Ibid., 395. The Pittsburgh plan is described infra text at note 72.
  3. D. Netzer, Economics of the Property Tax, 208 (1966); A. Becker, Arguments for Changing the Real Estate Tax to a Land Value Tax, 37 Tax Policy 15,19(1970).
  4. The Future Shape of Local Government, Cmnd. 4741, at 27 (1971), [hereinafter cited as Future Shape].
  5. M. Walker, Some Observations on Land Value Taxation, 38 Tax Policy 6, 23 (1971).
  6. Letter Polly Roberts to Donald Hagman, Sept.19, 1975.
  7. Netzer.
  8. This is true in the United States; it is not true in all countries.
  9. M. Gottlieb, Differential Taxation of Urban Site Values, 37 Tax Policy 43, 50 (1970).
  10. Netzer, 209. In Pittsburgh there was a 12-year period of gradual implementation.
  11. Ibid., 198.
  12. Ibid., 199.
  13. Ibid., 202.
  14. Becker, 23.
  15. Walker, 3-4.
  16. J. Heilbrun, The Effects of Alternative Real Estate Taxes, 234-5, as cited in Netzer, 210. If taxes were greater than rent, land would theoretically have a negative value.
  17. Netzer, 212.
  18. See M. Gaffney, Adequacy of Land as a Tax Base, in The Assessment of Land Value 157 (D. Holland, ed. 1970); P. Roberts, Property Taxes and Land Value Taxes, The Real Estate Appraiser, Sept.-Oct. 1975, at 12.
  19. Becker.
  20. Ibid., 16.
  21. Ibid., 18.
  22. Senate Comm. on Government Operations, Property Taxation: Effects on Land Use and Local Government Revenues, 92nd Congress, 1st Sess. (1971).
  23. T. Jones, The Case for Land Value Taxation, Liberal Focus, No.5 (1973).
  24. Becker, 28; 22; 17.
  25. Jones, 11.
  26. Socialists sometimes urge the use of the tax to force the breaking up of large estates. See, e.g. marxist R. Dumont, Cuba: Socialism and Development (1970), who criticizes Castro for not making use of land value taxation in Cuba.
  27. Senate Comm., 38.
  28. Jones, 13.
  29. Walker, 15.
  30. Gottlieb, 53.
  31. Future Shape, 27.
  32. Walker, 5.
  33. These observations are from Walker.
  34. Senate Comm., 39.
  35. Walker, 5.
  36. Senate Comm., 39.
  37. Future Shape, 27.
  38. Senate Comm., 42. Believers in the "trickle-down" theory would argue that the cost of housing is dependent on its supply so that anything increasing supply of higher income housing will rebound to the benefit of the poor. See, e.g., Roberts, 21.
  39. Walker, 22.
  40. Ibid., 23.
  41. Ibid.
  42. Ibid.
  43. D. Hagman, Urban Planning and Land Development Control Law, §§201, 203(1971).
  44. Becker.
  45. A. Woodruff and L. Ecker-Racz, Property Taxes and Land-Use Patterns in Australia and New Zealand, in Land and Building Taxes 147 (A. Becker, ed. 1969). Cantor, Preliminary Draft on Australian Land Taxes, Tax Reform Research Group (undated).
  46. In 1974 the State of Victoria increased the land tax to four percent on unimproved land values. State Land Tax and Land Price, Progress, August, 1974, at 7.
  47. Australian Bureau of Statistics, Public Authority Finance, Taxation, 1973- 74, Table 8, [hereinafter cited as Public Authority Finance].
  48. §12(5)(b).
  49. §12(5)(c).
  50. Report of the (New South Wales) Royal Commission of Inquiry into Rating, Valuation and Local Government Finance, 34-42, 162(1967).
  51. R. Watch, The Statutory Definition of Unimproved Capital Value in New South Wales, The Valuer, April 1972, at 101.
  52. Memo R. Collier to D. Misczynski, Oct.24, 1974; letter R. Archer to D. Hagman, Oct. 2, 1975.
  53. Public Authority Finance, Table 1.
  54. Local Government Act Revision Committee, Local Government in South Australia Report 4798(1970).
  55. This discussion is mostly based on J. Mahoney, Urban Land Economics 163- 73 (2nd ed. 1974) and on Taxation Review Committee, Taxation in New Zealand, at 410-15 (Gov't Printer, Wellington, Oct.1967).
  56. Mahoney. Reporting for 1964, Woodruff and Ecker-Racz, Property Taxes and Land-Use Patterns in Australia and New Zealand, in Land and Building Taxes 147, at 170. (A. Becker, ed. 1969) report the figures as 214, 58, and 13 respectively.
  57. Most of the information reported in this discussion of the later l940s appears to relate to 1946 or 1947. The information is based on a short description of Canadian land value and graded tax systems contained in the (English) Ministry of Housing and Local Government, Report of the Committee of Enquiry, the Rating of Site Values 116 (1952).
  58. The following is based on Boreal Institute for Northern Studies, University of Alberta, 1 Northwest Territories Municipal Finance and Services Study 49 (1974); Canadian Tax Foundation, Provincial and Municipal Finances 1973, at 95-100.
  59. Vol.11, cap. 11, par. 15 (Toronto, 1967). Other kinds of capital gains are now taxed in Canada. See Chapter 20.
  60. Cd.4402.
  61. P. Clarke, Site Value Rating and the Recovery of Betterment, in Land Values 73,77 (P. Hall ed., 1965).
  62. These reports and proposals are summarized in what may be the world's most complete and objective study of land value taxation ever made. It is (English) Ministry of Housing and Local Government, Report of the Committee of Enquiry, The Rating of Site Values (1952) [hereinafter cited as the Simes Report]. This discussion of English land value taxation is largely based on the Simes Report.
  63. "For over 60 years, since Lloyd George's 1909 Budget, Liberals have advocated a policy of land-value taxation." Jones, The Case for Land-Value Taxation, Liberal Focus, Nov.1973, 3, at 7, (emphasis in original).
  64. 10 Edw. 7, c. 8, §§16-20. "They comprised: (i) an increment value on land sold or subject to long (14 years or over) leases, payable on the transfer of the land or the death of the owner (but not payable twice in respect of the same increment); the first 10 per cent of increment was exempt as was also any increment in the value of agricultural land or of small owner-occupied property; (ii) a reversion duty of l0 per cent on the termination of a lease of 21 years or over except on land with a purely agricultural value; (iii) an annual levy of 1 /2d. in the £ of capital value on undeveloped land other than house gardens, land with a purely agricultural value or land worth not more than £50 an acre; (iv) a 5 per cent levy on mineral rights, excluding rights in brick clay, chalk, limestone or gravel, capital expenditure in full being allowed as a cost. The legislation was thus extremely complicated; it should be especially noted, however, that there was no attempt at a general levy on the site value of land." Simes Report, 37, (emphasis in original). The increment value duty is discussed in Chapter 20.
  65. §57. The duty to report sales imposed on vendors and lessors, which information was necessary for the assessment, continued until its repeal by the Finance Act, 1923, §38. The paragraph is based on R. Yardley, Land Value Taxation and Rating, 260-73(1929).
  66. Simes Report, 217.
  67. The Future Shape of Local Government Finance, Cmnd. 4741, 2.71-2.78 (1971). Land value tax proponents take issue with the Government's conclusions in the Land Institute, Site Value Rating (1973).
  68. Letter from Frank Layfield to Donald Hagman, Sept.11, 1975. The report of the committee rejects site value taxation. Report of the Committee of Enquiry, Local Government Finance, 170, 437-40, Cmnd. 6453, H.M.S.O. (May 1976). It was rejected in part because the Community Land Act and the Development Land Tax, see Chapter 20, recaptured unearned increments. But the Report rejects it for other reasons as well.
  69. Reference HUD Contract H-1300, Feb.19, 1973.
  70. Stats. 1963, Act 142. The scheme was repealed in 1977.
  71. Standing Committee Report No.78, Committee on Agriculture House of Representatives, Second State of Hawaii Legislature, General Session, March 19, 1963.
  72. Tax Incentive Study, Ch. VII, 6.
  73. Tax Incentive Study, Ch. X, 3-4, 8-9.
  74. See, e.g., (English) Ministry of Housing and Local Government, The Rating of Site Values, 120(1952).
  75. This study did not examine whether land values or unimproved land values are used. The statutes do not distinguish the two. Since unimproved land value is a more artificial concept, it is likely that land value rather than unimproved land value is used.
  76. A. Henley, Land Value Taxation by California Irrigation Districts, in Land and Building Taxes 137, 140 (A. Becker, ed., 1969). Henley indicates that these other states copied California's irrigation district law which uses a land value only based tax.
  77. Statistical Abstract of the United States 244(1974).
  78. See California State Controller Reports cited infra.
  79. "George was deeply impressed and horrified by the profits being made by land speculators in the California gold boom of the 1 870s. Out of this experience arose his idea of a single tax on land values that would be sufficient to finance the entire needs of government." U. Hicks, Can Land be Assessed for Purposes of Site Value Taxation? in The Assessment of Land Value 9, 13 (D. Holland, ed., 1970).
  80. The Controller's Report (Other than Water Utility) indicates 234 districts engage in both.
  81. State Board of Equalization, Annual Report 1972-73, Table 14. The table includes $427,080,000 of property taxes levied by special districts but indicates it excludes over $165,000,000 of "special assessments levied on limited categories of property to finance activities from which owners of such property derive special benefits."
  82. Letter from Mr. Durbrow to Donald G. Hagman, Feb.28, 1975.
  83. There are 105 irrigation districts in California, 15 of which engage in activities in addition to water utility, such as drainage and drainage maintenance, recreation and park, electric and waste disposal. All of the districts which en-gage in other than water utility use LO as a tax base, but only one actually levies any tax, amounting to $18,522, and based on land values, with a rate of $.990.
  84. Fifteen of the 105 districts use a LO base on acreage, seven use a variable rate, and eight use a rate per acre varying from $.378 to $6.000. The variable rate taxes yield $1,625,416, and the rate per acre taxes yield $368,889. The remaining 90 districts use assessed values with rates varying from $.100 to $16.000, producing $14,181,874. Total water utility taxes of irrigation districts therefore were $16,176,179. And total irrigation district taxes using a land only basis were $16,194,701 ($16,176,179 + $18,522).
    .... Irrigation districts use "ad valorem assessment," see, e.g., Water C. §23532, but only on land, Water C. §25502, which excludes improvements such as "trees, vines, alfalfa, all growing crops and all buildings and structures." Water C. §§25500, 25501. While the assessments are very much like the assessment of land for property tax purposes, land included in irrigation district assessments may not be included in the property tax base. The reason is that an assessment is not the same as a tax and hence the exclusion of govern-mentally owned lands from the property tax does not mean that they are excluded from an irrigation district assessment. City of San Diego v. Linda Vista Irr. Dist., 108 Cal. 189, 41 P.291 (1895); Faust v. City of San Diego, 115 Cal. App. 277, 1 P.2d 543 (1931); City of Fresno v. Fresno Irr. Dist., 72 Cal. App. 503, 237 P.772 (1925). Thus, a statute which provides for county collection of irrigation district assessments provides that "if any land subject to assessment for the purposes of the district does not appear upon a county assessment roll [for property taxes] the land omitted shall be forthwith assessed … and a description of the property omitted shall be written in the roll prepared for the district assessments." Water C. §26502.
    .... But all land included in the base is assessed as it would be under a property tax. Water C. §25503.
    .... Irrigation districts are authorized to enter into contracts with the federal government under the Federal Reclamation Act, 43 U.S.C. §372 et seq. When they do so, and payments are required to be made to the United States, the assessment "may be apportioned in accordance with the benefits." Water C. §23242.
    .... In improvement districts of irrigation districts, assessments are apportioned to the land according to benefits. Water C. §23667(d).
  85. 14 Opns. Cal. Atty. Gen. 120(1949).
  86. 58 Opns. Cal. Atty. Gen. 200(1975).
  87. Cal. Laws 1953, Ch. 1598, 17.
  88. Water C. §51323.
  89. Water C. §31703.1.
  90. Henley, 142-145.
  91. Ibid., 144. Henley must be assuming an unimproved land value rather than land value assessment. See discussion at 404 and at note 75, supra.
  92. Letter Mason Gaffney to Donald G. Hagman, June 13, 1975.
  93. The high rate could be explained on the ground that it is not a long-term rate or that the ratio of assessed value to market value is low. Since many special districts make their own assessments, they do not necessarily use a 25 percent assessed market value ratio now required for regular property taxes in California. West's Cal. Rev & Tax Code §401.
    .... One could well expect that the situation now is little changed from the late 1950s when in irrigation districts, "despite the legal stipulation that district assessment shall be levied upon the unimproved land valued at its full cash value. . . valuation procedures used include the following:
    1. Flat rate obtaining to all land assessed within the district.
    2. Sets of valuation rates, applied according to land and water use.
    3. Sets of valuation rates, applied according to the location of a particular parcel of land with respect to certain center points.
    4. Sets of valuation rates, applied according to relative elevation of separate land parcels.
    5. Sets of valuation rates, applied according to relative soil characteristics of individual land parcels.

    .... Earlier practices frequently adopted either a flat value rate for all land or used some fraction of the value assigned for purposes of county taxes."
    .... M. Brewer, Water Pricing and Allocation with Particular Reference to California, Mimeo Rpt. No.235, California Agricultural Experimental Station, Giannini Foundation of Agricultural Economics 50 (1960).
    .... See also letter P. Roberts to D. Hagman, Sept.19, 1975: "I believe that assessment districts do often practice deep underassessments, as regular assessors did until recent years. In the case of Hacienda you provide the evidence yourself. A rate of $52.44 per $100 yields $55,586 from a 15,332 acre district. That means the district is assessed at an average of $6.92 an acre. Now I understand that irrigated land goes for $1000 an acre upwards. So you've probably got an effective rate on the order of 'A% of market value."
  94. State Board of Equalization, Annual Report 1972-73, at A-19. $11.13 +4 = $2.78 as an effective tax rate.
  95. LI is used for waste disposal.