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SCI LIBRARY

Answers to Certain Objections Raised
Against the Taxation of Location Rent

Mitchell S. Lurio



[Reprinted from the Henry George News,
August 1957, with the original title "Answers to Certain Objections"]


It is good for us to examine the validity of all objections to Henry George's reasoning, for we are seeking to follow truth wherever it may lead us, rather than blindly upholding a faith.

Murray Rothbard, of the Foundation for Economic Education at Irvington-on-Hudson, New York, strongly influenced by Professor Ludwig Von Mises, has written an essay on George in which he defines capital so as to include land.

Both Von Mises and Rothbard ignore the fact that land is a source, and capital, as we define it, is a labor product. The difference is the same as that between a natural spring of water in a desert and a can of water. They ignore the cardinal fact that command over land is command over access to the source of existence, and that rent must first be paid for permission to use desirable land. They further ignore the historical record that ownership of large tracts of desirable land makes the owner a gentleman and a lord, and not the other way round. Finally, they ignore present-day landlordism which is disguised in the form of mortgages, which are prior liens, as well as the practical accounting procedure in which land is carried at its original value and improvements are depreciated.

Professor Rothbard's criticism that there may be difficulty in separating site value from improvement value is an old one which George anticipated and answered so effectively that it is hard to see how anyone can raise this as an objection. His statement that assessment is an arbitrary act is apparently unknown to the lawmakers who have written the statutes. He contradicts himself by writing that 'value can only be determined in exchange." Then he adds, "it cannot be determined by outside non-observers. It is only by observation and inquiry that traders in the market place can make their decisions as to prices, and that is where assessors can and do obtain their information as to real estate values."

The author of this critique acknowledges that "most economists" agree that "taxing the earnings from a site could not restrict production as do other taxes." With this he disagrees. In effect his reason is that the owner of land performs a valuable productive service, brings sites into use and allocates them to the most productive user. He maintains that the landowner would not perform these services if he had no incentive for doing so. It is difficult to understand how this economist, who is certainly familiar with the record of great estates in all lands, can possibly believe that the enormous revenues received by feudal lords are payment for services, rather than the emoluments of privilege.

Another objection made in "Murray Rothbard's Paper on the Single Tax" is that if the rental value is collected by the community, not only will the selling price disappear, but rents themselves will disappear. I pointed out that rent is not a function of the selling price. The author concurred, but still held to his position that if landowners were not paid for their services they would not allocate sites, chaos would result and rents would disappear.

The many actual instances to the contrary are ignored. Isn't it obvious that as long as there are people and activity and production, the users of land are the ones who will offer to pay in proportion to the superiority of the land they wish to use, and the market place will do its own allocating, and rental values will continue and be determined in the market place?

As a quaint example of inconsistency, Dr. Rothbard states, "everyone will rush to grab the best locations." This shows that rents will continue to be based on the relative advantages of each location. There cannot be any wild stampede because the existing owners and users will continue as they are, so long as a reasonable rental value is paid to the community.

When the author states that idle land means that it "is still too poor to be used by current labor and capital goods," he is merely saying that the land is either worthless today, or that the owner will not accept what he can get for it today. The statement that "it is not yet clear which use of a site is best," actually means, in practice, that the owner has not found a user who will pay him what he wants. There seems to be an inference here that speculation in land is desirable, whereas it is common knowledge that this leads to hysteria and a bust.

Another objection raised is that there is no rent on idle land -- that is true. But if it has rental value that means that people would like to use it to produce both wages and rent. The ownership of a single valuable site gives the owner the legal right to collect a toll from the user of that site, and in that sense the site owner has a privilege for which he does not pay.

We can agree with the author when he says that he accepts the premise that land is God-given and that it is given for the use of individual persons. We can agree that society is made up of individual persons, but we cannot agree with him in the belief that land is given for the use of some and not for others.

This essay denies the fact that liberty and justice are violated when the fruits of the labor of one are collected by another.