Property Taxes and Single Tax
versus Other City Taxes
[Transcript of a presentation by Robert Tideman, with
responses and discussion, at a meeting of the Commonwealth Club.
Reprinted from The Commonwealth, Vol.XXVIII, 21 January, 1952]
PROPERTY TAXES are the traditional source of revenue for California
cities. For a long time they raised most of our city budgets. But in
the last twenty years, under pressure of property owners, sales taxes,
license taxes, gross receipts taxes, etc. have been imposed, and
property taxes reduced.
Only by culling facts can one argue that property taxes have been
rising. Those who do this point with alarm to the rise of city
budgets, tax rates, and tax dollars paid, but carefully avoid mention
of the enormous rise in property values resulting from population
growth and dollar devaluation. They never compare assessed values with
Tax Rate Seldom Measures Burden
You may recall a few months ago that one of our San Francisco dailies
screamingly headlined the tax of several hundred dollars that might
fall on our homes. The reader was led to believe assessed value was
market value. However, my own home, bought at a bargain for $8500, is
assessed at $1780. The Donahue corner, sold recently for $1,750,000,
was assessed at $425,000. The vacant sites, west of Stockton Street,
running from Ellis through to O'Farrell, recently sold for about
$1,250,000, but were valued by the assessor at $347,000. The vast King
Estate in Alameda County is assessed as agricultural land, far below
what home seekers have paid for sites no different at its rim. The
assessment pattern is generally the same throughout the State.
Assessments are so low, the tax rate seldom measures the burden. The
subject of this report is: How
should cities raise there revenue? Some of us have tried to
meet this question squarely. We answer that a direct, annual, ad
valorem property tax, even if increased, is preferable to a sales tax,
a sewer tax, a receipts tax, or any other new taxes. We even hazard
arguments in favor of the property tax. But those who favor
the numberless new taxes do not come out and say so. Instead, their
whole position is against the property tax. They seek to slip
these pesky new taxes in through the back door while we are shaking
our heads over the property owner's complaint.
Growing Population a Calamity?
It is claimed our growing population is a calamity to the property
owner; that newcomers bring little property with them to swell
assessment rolls but demand more city services, so the poor property
owner gets the ax in his tax bill. But if greater population means
only higher tax rates, why does the Bay Area Council point to
population growth as an attraction of real estate here? Because they
know increasing population boosts real estate values. Does it matter
then if the newcomers bring little property? Their very arrival adds
to the annual value in the property under our feet. No one claims this
value is created by the landholders. Then why not call on it to
support the services the newcomers need?
On page 34 advocates of new taxes say ability to pay depends on
income, and when increase in land value is not accompanied by
increased income from land, an increased tax may be confiscatory.
Consider the Donahue corner. It has increased enormously in value, but
with its one-story wooden building down, does not yield even the
income from that ancient structure. Does anyone think if we raised its
taxes - or did not acquiesce in the new sewer tax to relieve that site
-Metropolitan would relinquish title? Of course not. They would come
to terms with some prospective user to get some rent to pay the taxes.
Why Land Increases in Value
Land increases in value because people are willing to pay more for
permission to use it. When a landholder's income does not go up
correspondingly, it is only because he has not come to terms with
those who would like to use it. He is speculating he can get a better
deal by holding out. To argue that land values should not be taxed
when no income is received, is to say that the holding of valuable
land idle should be fostered.
The "sewer-use tax," now under debate by the Supervisors of
San Francisco, is typical of new taxes. Each home owner would pay
$4.20 a year. If all the revenue - about one million dollars - went to
reduce the property tax, the rate could be lowered one-tenth of one
percent. Thus, owners of homes assessed at more than $4200 might save
more on the property tax than they would pay in the sewer tax. Many
homes are worth more than $4200 but not five percent are assessed that
high, so 95 percent of the home owners would lose through the sewer
tax. But the holder of the Donahue corner, for instance, would save
about $425 a year. Thus, the sewer tax, like other new taxes, would
shift more of the burden from holders of valuable real estate to home
owners and consumers.
Its sponsors say the sewer tax is needed to run the new sewage
disposal plants. But if these plants had not been built, and
population growth had been checked, and the pedestrian count on Market
Street had begun to fall off, wouldn't the downtown property owners
have raised a howl? These plants maintain and increase the value of
their land. The property owners get the financial benefit of these
plants, but don't want to pay for what they get. Here is the "welfare
What is true of sewage plants is true of libraries, schools, streets,
parks, firemen, police. All city services and improvements figure in
the sales talk for city real estate. All go to maintain and increase
the rental value of land. Why then should we submit to a sewer tax or
other new taxes while the landholders get something for nothing?
"They Like These New Sales Taxes . . ."
On page 35, above paragraph (a), the proponents of more and more
taxes say that "proposals to limit sources of revenue to taxes on
are objectionable." That is to say, they like
these new sales taxes, license taxes, etc., and don't want to go back
to the traditional system by which cities raised their revenue in the
pre-New Deal days. And the inference is that to wipe out these new
taxes and to rely on the property tax again would amount to land
nationalization. I guess we didn't realize our precarious state in the
old days before we got the many fine taxes we now enjoy!
Why didn't the author of paragraph (a) tell us about the "nationalization,"
"bureaucracy," "waste," "inefficiency," "loss
of incentive" and "stagnation" in Wellington, Sydney,
Copenhagen, Johannesburg, or the cities of New Zealand which derive
all their revenue from land value taxes? - or in Pittsburgh and
Scranton, which tax land values at twice the rate on improvements? No
such evidence is cited because there is none. These cities are
Not Landholders, but Labor and Capital Overtaxed
Anyone honestly troubled about nationalization should attend to the
plight of labor and capital, the active producers of wealth. Federal
taxes fall with full weight on them, and our states and cities in the
last twenty years have been favoring landholders at their expense.
Labor and capital, commerce and industry, are in great danger of
nationalization by taxation.
No one has ever seriously proposed that all taxes be levied on sales
or sewers or any other product or activity or earned reward. For such
taxes all have bad effects. It is because land values are particularly
suitable for taxation that so many wise men from Quesnay to Winston
Churchill, have proposed taxing them especially. Is it not strange,
then, that anyone should point to the "single tax" proposal
as a reason for substituting new taxes for our traditional tax on
The advocates of new taxes do not deny the superiority of land value
taxes over sales or sewer taxes. They know they will get scorched if
they try. To evade the issue they trundle out the label "Single
Tax." From the end of this handle they coolly talk of
nationalization, bureaucracy and waste,
while proposing more taxes and tax collectors; they talk of
incentives and of stagnation, while proposing a tax policy that
penalizes production and makes it easier to hold land idle; they
talk of confiscating earnings, while favoring an income tax!
What's at End of This Road?
Not even those who are working hardest to reduce their land value
taxes will like what lies at the end of the road they are taking. What
is the way of life in countries where taxes have been loaded entirely
on the producers of wealth, where land rent is treated as absolute
private property, unqualified by any responsibility for public
revenue? Look at Mexico, India, Iran, Spain, Brazil, or the Russia of
1917. You see countries where land is held by the few in great
estates, without any financial responsibility to encourage efficient
use. You see landlord and tax collector confiscating so much of the
reward of labor and capital that incentives to work and accumulate
tools are strangled. You see rich and poor a gulf apart, class against
class, and the stage ever set for demagog and tyrant.
This question of who should pay taxes is a moral question at bottom,
and the only spirit in which it can be justly solved is that spirit
expressed seventy years ago by a wise and good and fearless citizen of
this city: "I am for men."
Critique on Single Tax and Increased Property Taxes
Raymond D. Smith, Realtor Appraiser
I DON'T believe I have ever heard a taxpayer object to paying a
property tax in a proper ratio of his holdings, nor an owner object to
paying a reasonable tax upon his land and his improvements based upon
the benefits that owner receives in police and fire protection and all
the things that go with urban ownership.
It becomes then a matter of equalization of the relationships between
land and improvements. Most people feel that land alone should not
carry the entire load. It should carry as fair a proportion of the
load as the tax assessor may determine.
Tax Assessments Go Up - Seldom Down
The tax assessor assesses upwards but he seldom assesses downwards.
In a deflated dollar market like that of today, the assessed valuation
goes sharply up. But when the assessor gets ready to cut assessed
valuations, he makes a blanket reduction of $100, $500, usually in
those areas where the most votes exist. In San Francisco in 1946 or
1947, assessments of downtown industrial or commercial properties were
drastically increased. There are few votes in those areas.
But in the residential district, a blanket decrease of $100 was made,
irrespective of the value of land and building.
If the assessors could reassess every year (which would be
prohibitive in cost), I don't believe there would be much criticism of
the property tax.
"Single Tax" Not a Tax Problem Primarily
I look at the "single tax" - placing a tax purely upon the
land - not as a taxation problem but as a social problem - a matter of
trying to establish a new social order. I am a practical man, and I
don't believe it will work because of practical limitations on
Our big question in today's discussion is municipal revenue. But I
don't believe people are interested one bit in taxes.
For ten years I have gone to the San Francisco City Hall to appear
before the Finance Committee of the Board of Supervisors, and I have
analyzed our annual budget, item by item, not once but three times.
During Mayor Lapham's administration he called some five of us into
his office during formation of the budget, and the reports from the
heads of the various departments were thrown on the table. Al Smith of
the Bureau of Governmental Research and myself were asked to criticize
every item. We spent days there.
Taxpayers Net Interested
When the budget went to the Board of Supervisors and was referred to
the Finance Committee, I went over that budget with several others,
item by item, line by line. When it went on to the floor of the Board
of Supervisors, the same thing occurred again.
At none of those meetings did anyone ever appear to protest. Al Smith
and I were the only ones there. We were paid to be there. But there
were no taxpayers there. You can't tell me that real property taxes
are onerous when the people won't appear to oppose them.
Look Closely at Non-Governmental Spending
If we are to cut taxes and spending, we must look critically at
nongovernmental services. How much should the ordinary citizen expect
to receive from government outside of actual governmental service?
Take our school system. Some friends are attending a free class on
the study of old china. They learn about dishes and how to read what's
on the back. This class has a paid instructor under the Board of
Education. Is the study of old china a function of government which
should be paid for out of the school budget? I don't think it is. They
have classes in aesthetic dancing. I don't think aesthetic dancing is
a fit subject for public funds.
I am a photographic "bug." There is a large amount in the
recreation budget covering an excellent laboratory at which they teach
photography free and supply chemicals and other things to adults who
want education in photography.
They have a real estate class and offered me a salary once for
teaching there. If a man wants to learn real estate, he shouldn't be
entitled to get it out of my tax dollar.
Welfare Money in Every Budget
There isn't a department in the San Francisco City Hall that does not
have some "welfare" in it. The police department has a boys'
club, and it is a fine thing, and some support may come from police
contributions. But things like that belong to the welfare department,
not the police department.
Your Board of Health budget is loaded with welfare matters of all
kinds: hospitalization, child care. Your recreation department budget
is loaded with free lunch programs. True, they get a subsidy. Is that
a function of government to be paid for out of the taxpayer's dollar?
We must know whether we are paying for governmental functions or
Public employment must be regulated. We must have some sort of Hoover
plan. Employments are created to increase the importance of the head
of a department and get him more money.
We Need Budget Criteria
Because a budget was X dollars last year, doesn't mean X dollars plus
or minus this year is a proper budget. We must eliminate the
philosophy of building a budget on this sort of basis. We must have
some criteria of measurement.
I don't think real property taxes have reached a maximum, for this
reason. Some years ago I thought of organizing a taxpayers'
association in San Francisco. We need one badly. I spoke to several
influential, large property owners. Without exception those fellows
said, "Well, I am friendly with the Assessor and I like the
Mayor. Besides, these items are deductible."
U. S. Pays the Bill
So long as real property taxes are deductible from the Federal income
tax and the Federal Government is paying from thirty to seventy
percent of them, you are not going to have much opposition to the ad
valorem tax bill.
Some day incomes from these properties will diminish, and taxpayers
will wake up and say, "Look at our tax rate, it is $6.29. Where
have I been all this time?" They've been asleep, but the day of
reckoning will come.
I think the solution to our tax problem lies in a critical analysis
of the operation of our municipal budgets.
Discussion From the Floor
Remarks by J. Rupert Mason
President, International Union for Land Value Taxation and Free Trade
MR. MASON: I've never heard a more able support of the need for the
principles of Henry George than has just been given us by Mr. Smith. I
could easily trace each bad effect he enumerated to a primary cause.
Mr. Kroeger commented about people voting who don't pay taxes. Public
schools have been traditionally supported by means of an ad valorem
real property tax. If a man held half the land values in a school
district, he paid half the school costs regardless of the number of
his children. The question of voting rights irrespective of land
holding is as old as this Republic. I thought that issue had been
Those who oppose raising public revenue by ad valorem land taxes are
putting themselves in bed with Socialists. They are unwittingly
advocating the socialization of earned incomes and the fruit of man's
work by taxation.
I believe it is possible for people to live and work together in a
community, state or nation and enjoy the full fruit of their industry,
Remarks by Joseph S. Thompson
President, Pacific Electric Manufacturing Corporation
MR. THOMPSON: For forty years or more I have advocated the principle
that Mr. Tideman so speedily put before you.
Each of us knows what his own personal and private earned income is.
Did we ever think that there is also a public earned income, a
creation of all of us as a mass for which no one of us is responsible?
So much so that each individual that adds himself to Skid Row, each
baby picked up and slapped to start him crying, raises land value?
Land value is the public earned income.
It sounds socialistic, let us say communistic, to say people as a
mass and not as individuals create land
rental,/i> value - not land value (if you want land,
you can get hundreds of acres in Nevada for $3 an acre) - but land
rental is location value. We created this value - we should collect
If we knew we were justified in taking what we create as the people,
we would not collect from those who create, who labor, who organize,
that return which should stay in their pockets. A tax on industry is a
fine. When we tax an industry, we drive it out of the city.
Remarks by F. B. Magrader
Tax Commissioner, Southern Pacific Company
MR. MAGRUDER: When this Section selected a subject, "Tax
Problems of Cities," it was thought that we would stick to the
subject and come up with a final report that would be informative. But
the subject has been so distorted that its own mother cannot recognize
Too much time has been given to the Henry George single tax theory.
The question has become: Should the single tax be adopted?
The single tax theory should not have been considered in this study.
If it was desired that it be given consideration, it should have been
done in a separate study.
Remarks by E. R. Ben
MR. ZION: I'd like to ask Mr. Smith if he attended the San Francisco
City budget meeting where $4,400,000 was appropriated to build a
juvenile home for two hundred juvenile delinquents?
MR. SMITH: I was there and opposed it every step of the way.
MR. ZION: Expenses like that give us our problem in taxation. That is
$22,000 for every child. Can you beat that for outright waste or
You ask single tax advocates to tell why land should pay a little
more taxes, maybe. You should first give one reason why personal
property should pay any tax.
It's like the difference between Ford and Rockefeller. Rockefeller
got his vast fortune from natural resources. He deprived the rest of
us, disinherited us, from a share of these. But Ford added to the
world's wealth. Should the two be taxed the same?
We have too many tax exemptions. Everybody likes to get exemptions,
but when they get exempted they don't come to meetings on tax problems
any more. It used to be, when the San Francisco Board of Supervisors
met on tax problems, the Archbishop had a representative present, and
the gas, water and telephone companies; the railroad and other
companies had their representatives - because their property would
have to pay the taxes.
Then you exempt them, and you lose not only the value of the
exemption, but you lose the careful attention of these citizens to tax
and expenditure problems.
Veterans are another big group that are exempt - and just recently
schools, hospitals and many others. And so it's no longer to their
interest to attend tax meetings.
Adam Smith, John Stuart Mills, Walker, Ricardo - all agreed "rent"
is the excess profit over no-rent land. Henry George was the only one
who followed this up. If this statement is true, every new
labor-saving machine, every new chemical process, increases rent. And
it does. None of the economists will deny it. This is the
justification for more land taxes.
Remarks by Monte Dernham
MR. DERNHAM: Mr. Magruder, if I understood him correctly, told us the
single tax should be the issue of a distinct study. It has been the
subject of a distinct study in this Club-fourteen years ago. In the
fall of 1938 there was a proposed Constitutional amendment,
Proposition 20, providing in general for a state-wide single tax.
The matter was studied by this Section. The Club in its entirety
voted against the single tax, 693 to 66.
The question has been dealt with by this Club. It is behind us and
should remain behind us.
MR. MAGRUDER: I didn't say the single tax should be given a separate
study. I said the single tax theory should not have been considered in
this study and if it was desired that it be given consideration, it
should have been done in a separate study.
Remarks by Assemblyman Edward M. Gaffney
MR. GAFFNEY: School tax exemptions have been attacked. In the case of
the parochial and other non-profit private schools, we of the
Legislature looked at tax exemption from a business-like viewpoint.
We found that there are approximately 170,000 children attending the
non-public schools, and that these schools are over-burdened with
taxation. Through a new interpretation in Los Angeles county, this
taxation has been multiplied three-fold and in some parts of the
If all the non-public schools were to close their doors because of
oppressive taxation, the State would have to provide public education
for some 170,000 children at a cost the first year of at least $120
per average daily attendance, totaling $25,000,000. In capital outlay,
unless we leased the present buildings of the non-public schools (in
addition to the almost $300,000,000 already spent by the State
Allocation Board of recent bond issue funds voted by the people), it
would cost at least $600,000,000 more to build schools for children
now attending private non-profit schools.
Even now our public schools are over-crowded. In some areas children
go to school on half-day shifts; in Eureka, it has been reported,
there are three shifts daily. It should be borne in mind also
California is the only state that taxes non-public schools whereas we
should encourage all schools devoted to the education of children.
JUSTICE A. F. BRAY: I can't stand by and have Contra Costa County
outdone. Assemblyman Gaffney said in Eureka there are three school
shifts a day. For a while during the war in Contra Costa County, we
Remarks by Robert Tldeman
Director, Henry George School of Social Sciences
MR. TIDEMAN: When I joined the Club a first draft of the Section's
report was being considered, telling how increased population was a "calamity"
to the property owner, and about the dire predicament of our
landholders. I pointed out additional facts and soon realized I was
playing with dynamite. And soon, in reply, came not arguments but
labels - "single tax," "Henry George theory," a "new
social order," and so on.
But the taxation of land values is "old hat" in this State.
The writers of the State Constitution provided for it, and its
advantages are obvious to anyone who studies the subject impartially.
It is certainly not wise or fair to approach the subject as if it were
the mere doctrine of a nineteenth century economist. It has immediate
significance. If we are to get new revenues will we get them from
sales taxes or from land value taxes?
We are asked to believe that, because some men have proposed
collecting all revenue from land value, we must therefore adopt new
sales taxes. That is hardly logical. It is only by giving doctrinaire
associations to perfectly sensible 'principles that they get fenced
into a separate compartment of the mind. Insanity is just that:
keeping things in different compartments of the mind where they cannot
interact - avoiding painful integration.
Remarks by Raymond D. Smith
MR. SMITH: I don't favor the extension of the tax base in sales taxes
or the other taxes. Governments will spend whatever they can get. The
more tax sources, the more they spend.
We should put our tax eggs in one basket but watch that basket.
One thing that would benefit San Francisco would be for citizens to
organize a budget examination committee like that in Los Angeles.
CHAIRMAN BRAY: The meeting is adjourned.