What Does It Mean?

Joseph Thompson

[Reprinted from an undated pamphlet, Simple Talks on Taxation, published by the author]

...The people ought to collect the land rental value and put an end to all taxes --
...You're always talking about "land rental values." People don't want to rent land, they want to own some.
... Have in mind buying some?
...Sure. Sometime.
You'll naturally want to know whether its worth what you pay, won't you?
...I sure will.
...How'll you figure out what it's worth?
...The real estate man will tell me.
... How'll he know?
...Because he's in that business.
... But he must have some way of figuring?
... Well, I'll leave that to him. If I like his proposition, I'll buy. If not -- no soap!
...Going to build a house for yourself?
... Nope. I've got a home now. Just as an investment.
...To sell at a profit? Or to get an income?
... Both, maybe. I'll sell if the land goes high enough.
... But I s'pose you're figuring that it will always be high enough to bring you an income. Or don't you care because you'll make so much money, selling it?
... Oh, I have to have my money bring me some return!
...So you might rent it out for a parking lot or something.
... Yeah.
... So you'd likely get your real estate man to give you some idea what it would bring?
... That'd be part of the deal.
... He wouldn't have to figure any construction cost of the land, or transportation cost of the land, or raw material cost of - -
... Whadda you talkin' about? Construction! Transportation! Raw material! Are you crazy? The land is right there!
... Some people think I'm crazy, yes. But with all those things out, what is it that you pay for?
... Why -- the land, the place, the area, the location!
...Or, in other words, the right of being the sole occupant
... Now you get me!
...But I s'pose you haven't so much money you could just let it stay idle? You'd have to get some income?
... Wouldn't you?
... I sure would. I'd have to have my piece of land bring a return on what I paid for it.
... You and me, both. It should, too.
... And if you bought some land and couldn't use it yourself, you'd get your return in the form of rent?
... I sure would!
...And knowing how rents were running, thereabouts, and that the land couldn't pay you a return, except by rent - -
...I might put a building on it.
... You'd have to clear enough to pay interest on the building and the land rent too.
... I s'pose that's right.
... So the quickest way to find the value would be to "capitalize" the rent.
...Wha-d you mean?
... Why, to figure out how much capital it would take to earn interest at, say six per cent, to equal the rent.
... I don't quite get you?
... Well, let's say you could expect Five hundred dollars a month, rent That's Six thousand a year. That's Six per cent on One hundred thousand dollars. So you wouldn't want to pay more than that for it, would you?
... Certainly not!
... Well then, as land, let's say downtown, can't yield anything but ...rent, the rent fixes the selling value or price, doesn't it?
...Oh, I s'pose so.
...In short, then, the rental value is the only value, and that's why I'm always talking about the "rental value of the land."
...We've been talking so long now, I forgot what you were saying about it.
...I was saying that the people, who make the rental value, ought to take the rental value, and "the people" means all of us. And if we took it, there wouldn't be any need of Income Tax or Sales Tax or Property Tax or any tax. You could keep what you earn.
... Yeah. But suppose my piece of land was in the country. It'd yield potatoes or grain. Not rent.
... How many potatoes would your land yield, just lying there? None at all. Raising potatoes means a hell of a lot of work. And as to rent, in the country, did you ever hear the term "tenant fanner"? I could give you a good talk on that, too!
... Gee! Bob. Not now. We've wasted a hell of a lot of time already. Right now I'm going to be way late getting down to the bowling alley!
... OK boy. Meantime, "rental value" means "What people will pay to occupy land," there isn't any other measure.