Is the Taxation of Rent Compulsion?

John T. Tetley

[Reprinted from The Gargoyle, April 1973]

Permissive vs compulsory provision for removing taxes from improvements and increasing taxes on land values poses a serious question. In principle we may object to compulsion yet all taxation is compulsion.

Henry George proposed, in effect, collection of full annual rental value of land by the community for the support of government, in lieu of taxes. However, he also in effect, stated this might be done using the machinery already in existence, by removing taxes from improvements and placing them on land values.

The theory, simply stated, would be a change in land tenure system whereby those holding title to land would make payment for the privilege -- payment to those who voluntarily surrender their equal right to such land. The amount paid into a community rent fund by landholders, in theory, would be paid (less cost of administering) pro rata to all members of the community.

It would then be necessary to collect pro rata from all members of the community, funds to cover the cost of government. Since this would be awkward and expensive, it would be better to first provide for the cost of government from this fund.

At this point there are some matters to be considered. Should the amount provided by this fund constitute the total amount which government be permitted to spend? In other words, should the local government be required to operate on a budget no higher than the amount which could be covered by the annual rental value of land?

If the local government budget exceeded the "rent fund" then any additional funds required would necessitate taxes of some sort being imposed.

In the event the "rent fund" exceeded the cost of local government services, excess could be turned over to the State and or Federal government, or distributed pro-rata to members of the community.

Personally, I would favor a severance payment on natural resources to be used to support State and Federal governments. This based upon the fact that nature has not equally distributed such items as oil, minerals, trees among "States", thus ownership or right to ownership of them goes beyond state lines, among all people of the nation.

What is being presented here is: (1) land tenure will be such that those holding title pay for so doing and pay to those surrendering their equal right to hold title to specific land. Thus selling price of land would tend to zero and speculation in land would be abolished. (2) All members of a nation would share via State and Federal governmental services their equal right of ownership in all natural resources.

Probably not too important at the moment is the use of a possible excess of funds - local, State and National (yes, even local) which ought not be used for "social programs" but should be distributed pro rata to all members of a nation. Now what about the question of permissive vs compulsory? If changes are made which would provide permission to undertake the program suggested there would still need to be much education and other effort and expenditure to have advantage taken of the permission.

Might it not be better to devote all such effort to compel these changes? There, of course, would be great opposition. However, instead of overcoming this opposition once to obtain permission and again to take advantage of such permission, the opposition might be quelled with a one time effort.

This means then, devoting effort to compel rather than to permit.

Views have been expressed that after permission has been granted, communities have not taken advantage of the opportunity because: "local government is controlled by the central business district landowners and they blindly oppose land value tax because it will increase their short-run tax bill. Their control is not invidious -- they are usually able, active people who do a competent governing job." Nevertheless they present a great obstacle preventing cities from taking advantage of permissive change.

The situation may be summarized -- if advantage of "permissive" is not taken, should effort be made to induce cities to do so, or should "permissive" be changed to "compel"? And, should future effort be directed to "compulsory" rather than "permissive"? It must be decided - Permit or Compel.