Rent As Public Revenue

Robert Schalkenbach Foundation Henry George Institute Rent as Public Revenue: Issues and Methods Rent as Public Revenue: Issues and Methods Edited and designed by Lindy Davies isbn 978-0-9905043-3-7 Copyright © 2018 by the Robert Schalkenbach Foundation www.schalkenbach.org and the Henry George Institute www.henrygeorge.org both headquartered at: 211 East 43rd Sreet, Suite 400 New York NY 10017 All rights reserved. Contents Rent as Public Revenue: Issues and Methods Introduction: The COLT Project Preface: Rent As Revenue Implementing the Georgist Remedy: Loads of Challenges Assessment of Land Values Transport’s Hidden Reward Introducing Land Value Taxation at the Municipal Level Community Land Trusts as a Strategy for Community Collection of Economic Rent How Should Forests Be Taxed? The Alaska Permanent Fund: A Model of Resource Rents for Public Investment and Citizen Dividends Tax Treatment of Land Income Global Resources Appendix: Excerpts from the original COLT Manual (1971) Works Cited Contributors Introduction: The COLT Project by Gilbert Herman In 1968 Bob Clancy, who was Director of the Henry George School in New York City at that time, conceived of the idea to create a manual that would explain the practical application of George’s ideas. He felt there lacked a comprehensive guide that would assist Georgists in demonstrating how the theory can be put into real world implementation and also show non- Georgists how practical his theory is. Also, many Georgists at that time were not aware of the relevance of George’s ideas to broader applications of land value taxation to special uses — air rights, franchises, easements and the electromagnetic spectrum. Bob devised the acronym COLT to stand for two meanings. The first and obvious one was the Committee On Land Taxation. The other meaning was that COLT would be just a start on developing a comprehensive guide to the practical implementation of LVT – just as a colt develops into an adult horse, so this committee would grow into a wider effort to expand the information contained in this beginning guide. The committee was informal and part-time. I was honored to be a participant in this effort. The work entailed a lot of research, reading and learning about some topics that were new to all of us. None of us were experts in the topics we wrote about. The Internet didn’t exist and we relied on books, journals, magazines, newspapers, encyclopedias (remember them?) and files that the school had. The school had great collections of this material in its library — which Bob had played a key role in amassing. There were only four “members” of this committee. Bob Clancy, of course, was the guiding force behind it. Peter Patsakos worked for the school — I believe he managed the International Division — and also taught courses. (Unfortunately, he has since passed away). Charles Leonard was a medical student and a student at HGS and did the bulk of the work. I was working at the time in private industry. Unfortunately, Bob’s vision of an expanded COLT never materialized. So I am pleased that this effort is being undertaken today — especially in the difficult and contentious times we live in now, when these ideas are more needed than ever. Bob would certainly be overjoyed. EDITOR’S NOTE: Special thanks are due to Carl Shaw, who got this project started by hiring a typist to digitize the entire 1971 COLT manual, which will be made available online. NOTE ON DOCUMENTATION: Aiming to maximize readability, I have chosen to eschew inline citations. Sources mentioned in the text or in footnotes are listed, alphabetically by author (or organization) in the Works Cited. — L. D. Preface: Rent As Revenue by Lindy Davies In the late 1960s a group of alumni of the Henry George School of New York, led by the school’s Director, Robert Clancy, set out to “gather together relevant material on ways and means of putting land value taxation into practice.” The group envisioned the publication as the first in what would ideally become a continually-updated annual series. There was need for such an effort: over the years the Henry George Schools had acquainted many thousands of students with the principles of Georgist political economy, but there were precious few “on the ground” campaigns. The COLT group believed that a broad, factual discussion of how it can be done would stimulate efforts to get it done in real jurisdictions. But, alas, support for the Committee’s activities evaporated, and the only version of the manual that ever appeared was the limited, mimeographed edition. There is still a need for this work. Its audience is more important than it is large (but it will likely continue to grow). This anthology’s goal is not to make the case for the Georgist remedy. We assume that readers already understand the basic ideas of Georgist political economy, and we endeavor to explain how that remedy can be applied in the real world. We start by assuming that the rent of land is the natural source of revenue for the community’s needs. We also start by assuming that “broad-based tax policy” is fundamentally misguided, because taxation that falls on the production of goods and services imposes unnecessary, unjust deadweight losses on society. Readers who wish to know more about these ideas have not far to search: the Henry George Institute offers a a free, introductory online course at its website (www.henrygeorge.org). Over the years since 1970 it became evident that the term “land value taxation” is less than ideal. Some argued (correctly in theory) that the public collection of land rent isn’t “taxation” at all, but simply the community’s recovery of a value that the community itself has created. Others noted that “land” is not an opportune term with which to make our case — calling to mind, as it does, bucolic vistas of valleys and hills, far removed from today’s complex economic problems. In literal terms, this isn’t a problem; we can recall that Henry George defined “economic land” not as the mere surface of the earth, but rather as “the entire material universe, except for human beings and their products.” We hasten to remind folks that the most valuable natural resource in any modern economy is not water, oil fields or diamond mines, but the ground under the center of any great city, which is often worth many thousands of dollars per square foot. Nevertheless, because land — the set of all natural opportunities — encompasses more than many people realize, it seems clear that a more inclusive term like “natural resources” works better. And, when we’re talking about the income that society ought to gain from allowing exclusive access to these natural resources, it seems a good idea to call it what it is: rent. Hence the title of this volume. What, then, is rent? This is often made to seem more complicated than it really is. Of course, the conversational sense of “rent” as in when one rents a car, or rents an apartment, differs from the precise economic sense. Following from the classical economists, Henry George defined “economic rent” as the share of aggregate wealth that is taken by the owners of land — the economic factor that is fixed in supply, and not produced by human labor. This is primarily a term of political economy, which focuses on the “wealth of nations” — aggregate, society-wide production and distribution. Mainstream Economics texts tend to define “economic rent” in a way that seems quite different at first glance, but in fact is not so different at all. The standard definition is “Any payment to a factor of production in excess of the cost needed to bring that factor into production.” Thus, economic rent is a pure surplus. Since land is not produced and has no cost of production, all the income it generates is economic rent. To be sure, there are other forms of unearned income. Income attributable to patents or to exclusive licenses is a privilege granted by government, not created by the recipients. Subsidies, of course, are unearned, as are payments attributable to graft or corruption. It can even be argued that pay increases enjoyed by members of labor unions, or even minimum-wage recipients, are unearned, to the extent that they are surpluses above market wage for that form of labor. However, Georgists argue that all such privileges are fundamentally different from the rent of land, for a simple reason. They are all granted, in some way or other, by society, and they can all be taken away by society. Production can go on without them. However, production cannot go on without land; access to natural opportunities is a requirement of any form of production. Henry George referred to those various non-land monopolies as “lesser robbers.” If they were all removed, society’s wealth-producers would be beset with a strengthened land monopoly, “the robber that takes all that is left.” That is why, when we refer to “rent as revenue,” we insist on the rent of natural resources and opportunites. Other forms of monopoly can be dealt with through other reforms; we are concerned with “the robber that takes all that is left.” Implementing the Georgist Remedy: Loads of Challenges by Lindy Davies Many readers finish Henry George’s classic Progress and Poverty and start rubbing their hands, eager to get to work. The book offers a compelling vision that combines justice (equity) and freedom (efficiency). At first glance, the path to implementing Henry George’s remedy seems clear. His statement “We must make land common property” frightened people when taken out of context, but George immediately offered a practical means for achieving that end.

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