Community Land Tax Negates True Ownership
…and Indirectly Reinforces State Capitalism

Fred begins by denying that occupancy and use is relevant to legitimate appropriation, so long as the “person has title to land, and pays its economic rent to the relevant community”; meeting such criteria amounts, “in effect, [to] occupying the land.” So in the case of someone acquiring wilderness land and paying land value tax on it, “[o]ccupancy would not require developing the land and reducing its value to society by ruining its wildlife.” Likewise holding undeveloped land out of use:

If the title holder is keeping the land vacant awaiting a best time for development, and is paying the community rent, then he too is occupying the land. Requiring him to build immediately could impose a social cost of inefficient use. People other than the owner do not have any better wisdom about the timing of development than the title holder who is paying the carrying cost of the land and will profit later from the development.

Fred goes on to argue, from a Proviso Lockean standpoint, that Henry George filled in the “missing link” as to how an appropriator would compensate the the rest of the community for land taken out of the common, if there were not “enough and as good” land left for everyone else.

I admit I’ve long admired the theoretical elegance of George’s solution because what Locke meant by “enough and as good,” and how he intended this to be remedied, were indeed — as Fred says — not entirely clear. In fact it’s always struck me that, favorably situated locations being finite, any appropriation of more fertile or favorably situated land will to some extent leave a remainder that is at least not quite as good in its location and fertility — else it would have been appropriated first in preference to the rest. And as I’ve seen others argue (notably Bill Grennon, who I used to encounter in Georgist venues online), the market rental value attaching to a location is the exact measure of the extent to which the location and other qualities of a given parcel are rival goods and to which others have been excluded from them.

All that being said, I’m afraid I can’t share Fred’s certitude in outlining the payment of rent as the “moral” response to the problems presented by the finite supply of land. Given the difficulties I referred to at the outset of this symposium — the inelastic supply of land, and the impossibility of physically unmixing one’s labor from it when one moves — I don’t think any particular set of rules is logically deducible as the one correct solution. All have some advantages and some drawbacks, and some I think are better than others. But choice between them is a prudential matter rather than an a priori application of first principles.

And I tend to see land value tax, in many regards, as a way of achieving the same goals as occupancy-and-use while doing an end-run around all the epistemological problems of looking into the justice of the origins of title.

But morally I don’t think Georgism is as agnostic as Fred’s argument would make it seem, on the issues of justice in acquisition. It may be true, given the existence of land value taxation or community rent collection, that it “doesn’t matter” whether unoccupied and undeveloped land is being enclosed and held out of use. That’s not the same thing, however, as saying without qualification that it “doesn’t matter” to justice in title whether someone holds vacant land out of use. One of the practical selling points of Georgism, among most of the Georgists I’ve seen arguing for its economic benefits, is that it increases the cost of holding land out of use, and thus increases the amount of favorably situated land that is developed and thereby increases the demand for labor and lowers the price of land. If anything, I see the moral significance Georgists attach to taxing the rental value of vacant land as a recognition that holding undeveloped land out of use and excluding others from access to it, when there is a limited supply and it’s necessary for life, is immoral. At base, even if it’s implicit, Georgism places just as much of a negative judgement on taking land out of the common as Lockeanism does; it’s just that rather than directly prohibiting it, it aims for the moral equivalent of prohibiting it through land value taxation.

Kevin Carson writes that “under a Lockean system a tenant who cultivates land on a rental property must abandon whatever improvements they make to the soil during their time of tenancy.” The status of improvements depends on the contract between tenant and landlord. The contract could specify that the market value of the improvements be paid to the departing tenant.

It “could,” indeed. A wide variety of contracts “could” be drafted, if structural power differentials weren’t a consideration. But given the differences in bargaining power between landlords and tenants, when the former are able under the law to engross vacant land and hold it out of use, and land is concentrated in a few hands relative to those competing to rent it, it is highly unlikely that that’s the actual form the contract will take. Most aspects of life — not only in regard to landlord-tenant relations, but also employer-worker relations, corporate-consumer relations, etc. — are characterized by “contracts of adhesion” where the terms of the contract are boilerplate pre-written by the party with the most power, and presented to the other party on a take-it-or-leave-it basis.

Carson also critiques the Georgist payment of community rent as putting land users in a “precarious position,” lacking security of possession. Georgists have three responses. First, a guaranteed title to the current user, without the payment of community rent, endows those with better lands a superior status. They get richer by capturing the greater implicit rent due to the growth and development of the economy. Georgism puts everyone in an equal status with respect to natural opportunities. Moreover, if the current occupant is not putting the land to its highest and best use, he is wasting a scarce resources and making others poorer.

This is an example of my general point that each system of property rules in land has some advantages, and some disadvantages, over others. No less an advocate of occupancy-and-use than Benjamin Tucker admitted that unearned rents from land fertility or location were an unfair and bad thing, everything else being equal. Nevertheless he considered the portion of gross rent that resulted from differential site rent to be a relatively minor evil, compared to the portion resulting from absentee ownership and the holding of vacant land out of use. And he didn’t consider the benefit of taxing away differential rent to be worth the evils of doing so — any more than taxing people for the economic rents attached to other unearned qualities like superior innate skill.

Now as I see it, precarity in possession by the average person is very much an evil. A tax on one’s land means that no one ever really owns their living space free and clear, no matter what they do. So long as a person lives, their occupancy of their shelter and access to whatever additional sustenance they derive from the land depends on their continued employment, or other ability to bring in money income.

My lifelong dream was to have enough money to buy a place, no matter how run down or where it was, and to know absolutely and beyond doubt that I would have a secure roof over my head for the rest of my life, independent of the whim of any employer and regardless of whether I had a job. Now, I only paid $30,000 for this old trailer on a piece of acreage, and I figure the land itself amounts to about $20,000 of that price. So I figure a tax on the full rental value would probably come to about a thousand a year, or $80 a month. Not a whole lot, admittedly, but considering my writing income right now averages around $450 a month, a pretty big chunk of change — and a source of worry should my income decrease to where I can’t make the rent.

Now, bear in mind that taxes in money in the past have been imposed by colonial governments and other class states with the conscious intent of destroying the possibility of subsistence outside the cash nexus. That was the thinking behind the poll tax, used by the colonial authorities in British East Africa to force former peasant subsistence producers to sell themselves as agricultural wage laborers on the settlers’ terms. More generally, as recounted by David Graeber in Debt, one of the main forces behind the creation of modern capitalism, with its cash nexus economy based primarily on specie exchange, was the early modern absolute states’ practice of demanding taxation in currency and thereby destroying the old moneyless customary economies.

I know that’s the furthest thing possible from the Georgists’ actual intent, but it’s exactly the practical effect. And I believe that evil effect far outweighs the evil of a piece of land fully occupied and used by the owner being more productive than that occupied and used by another.

Secondly, for special cases such as retired folks who have little income and face an increase in the land rent, a humane application of Georgism would allow for a postponement of the extra rent payment until the property is transferred.

This — or even better, a homestead exemption on the average value of residential parcels — would at least make it far less of a hardship and a potential disaster for those without a reliable or steady source of income.

Even so, a number of questions remain about the nature of the authority collecting rent. I have no fundamental philosophical problem with the idea of the community having some residual collective property claim on the land, reflected in a right of compensation for taking it out of the common. After all, I have argued in the past for — and still defend — the near-universal practice of communal land ownership in the agrarian world since neolithic times, almost up to the present in some areas.

But the institutions governing that communal ownership, in the open field villages and Mirs of the world, were rooted in the custom of actual social units that had existed time out of mind. In contrast to this, I’m not sure what Fred’s idea of the “relevant community” actually attaches to — whether it would be coextensive with actually functioning non-state social units, whether it would require the imposition of authority by some administrative structure over and above such social units, etc. To a large extent, such social units — civil society itself — has atrophied and become atomized under centuries of rule by the state, such that it will have to gradually reconstitute itself from the multiple-household or neighborhood level up to fill the vacuum left by the retreat of the state and the large corporation. So even though I am sympathetic to Georgism and its motives, and am open to a panarchy in which it is one of the choices among which communities choose in setting their land tenure rules, I would feel far better with assurances that it can be implemented as part of an organic social collectivity without recourse to a statelike enforcement mechanism.

Carson advocates “funding freeways and public transit entirely with cost-based user fees.” If a transit services charges users the average per-person cost, the price of transit becomes greater than the marginal cost, the cost of the extra energy needed to carry one more person. Average-cost may reduce ridership so much that the transit would have a large loss. The efficient price for transit, as well as road use and parking, is the marginal cost, which is so close to zero that the optimal price for these services is to make them free when they are not crowded, and to otherwise charge just enough to eliminate congestion. The other costs are then efficiently financed from the land rent generated by the transit, streets, and parking. It is not clear why Carson believes that “the use of land value taxation to eliminate this residual amount of rent, in my opinion, would be a cure worse than the disease.”

I’m not sure why Fred attaches my comment quoted at the end of this paragraph in a passage specifically on the funding of infrastructure, or why he sees it as something applying specifically to that issue. My argument that “the use of land value taxation to eliminate this residual amount of rent … would be a cure worse than the disease” was a general statement about the residuum of unearned differential rent under occupancy-and-use compared to land value taxation in general, not a comment especially directed at infrastructure funding.

In any case, funding infrastructure out of general revenues in my opinion totally works against the advantages of market prices as a mechanism for cost internalization. When the roads one uses are funded from general revenues, arising from land value taxation, there is no direct link between using the roads and the cost of providing them. When the link between how much of something we consume and the cost of providing it is broken, we no longer have a rational guide to how much we consume. Subsidized inputs — highways for long-distance shipping, freeways to suburban developments and strip malls — create a positive feedback loop where consumption of the subsidized good increases irrationally.

As to the issue of marginal vs. average cost, I can see the sense in (say) including a congestion price component in the user fee along with weight-based taxation. But total usage needs to be governed by a cost structure reflecting the per-user cost of amortizing the actual construction, as well as ongoing maintenance. And in the case of heavy trucks, which cause the overwhelming majority of roadbed damage on the Interstates, the marginal cost — the actual share the truck adds to the cumulative stress on the roadbed — is basically equivalent to it’s share of average ongoing damage.

To conclude: I see Georgism (perhaps combined with Pigouvian taxation of negative externalities, and a Basic Income) as a possible intermediate step — and certainly a vast improvement over the existing model of taxation and welfare. And to repeat, even if I consider occupancy-and-use preferable, I consider Georgism very much an ally in spirit and would gladly coexist with communities which choose it as the basis for their land rules.